Garrison Memorial Hosp. v. Rayer

• Decision Date: 27 March 1990
• Docket Number: No. 890286,890286
• Citation: 453 N.W.2d 787
• Parties: GARRISON MEMORIAL HOSPITAL, a North Dakota nonprofit corporation, Petitioner, v. Anthony RAYER, M.D., Respondent. Civ.
• Court: North Dakota Supreme Court

Page 787

453 N.W.2d 787

GARRISON MEMORIAL HOSPITAL, a North Dakota nonprofit corporation, Petitioner, v. Anthony RAYER, M.D., Respondent.

Civ. No. 890286.

Supreme Court of North Dakota.

March 27, 1990.

Lawrence R. Klemin, P.C. (argued), Bismarck, for petitioner.

Ackre & Baer Chartered, Cando, and Rosenberg Law Firm, Bismarck, for respondent; argued by Larry M. Baer.

Kent M. Morrow (argued), Asst. Atty. Gen., Bismarck, for intervenor State of N.D.

ERICKSTAD, Chief Justice.

Garrison Memorial Hospital (the Hospital) appealed an order holding that the North Dakota attachment statute is unconstitutional and dissolving a writ of attachment. We ordered that the appeal be treated as a petition for exercise of our supervisory jurisdiction. We conclude that Chapter 32-08.1, N.D.C.C., is unconstitutional and deny a supervisory writ.

On October 28, 1987, Dr. Anthony L. Rayer entered into a 5-year Community Service Agreement with the Hospital. The Hospital agreed to make certain financial commitments, payments and guarantees in order to assist Rayer in establishing a medical practice in Garrison. Commencing with the second year of the agreement, Rayer agreed to pay for, or reimburse the Hospital for, certain expenses.

On June 9, 1989, the Hospital sued Rayer for failing to pay or reimburse the Hospital for "clinic space, services and supplies as agreed beginning November 1, 1988." Shortly after service of the summons and complaint, Rayer executed a letter stating that he was resigning his position and that he anticipated having his "personal medical equipment and office supplies ... out of the hospital by 11 PM on Friday June 16, 1989." On June 14, a letter demanding security for Rayer's debt to the Hospital was served on Rayer.

On June 16, 1989, the Hospital amended its complaint and submitted to the district court an application for a writ of attachment accompanied by a $500 bond and an affidavit asserting that Rayer owed the Hospital $420,588.66 and that:

"6. This affiant knows or has good reason to believe that Anthony Rayer, M.D., is about to remove his residence from McLean County, where he presently resides, with the intention of permanently changing the same. The Defendant is either moving to another county in North Dakota, is returning to the State of Minnesota where he formerly resided, or is moving to some other state. The Defendant fails or neglects on demand to give security for the debt upon which the action is commenced." ¹

Without notice to Rayer, the district court ² issued a writ of attachment on June 16, commanding the McLean County Sheriff to "seize and attach all of the property ... of the Defendant, Anthony Rayer, M.D., that may be located within McLean County, North Dakota, or so much thereof as may be sufficient to satisfy the Plaintiff's demand in the amount of $420,588.66." The sheriff immediately seized Rayer's property, including a bank account.

Rayer answered the amended complaint on June 28, 1989. On August 10, Rayer moved that the writ of attachment be dissolved. In ordering that the writ of attachment be dissolved, the district court ³ ruled:

"I am of the opinion that Ch. 32-08.1, as applied to this case, does not pass constitutional muster because

"(1) An allegation that a debtor is about to remove himself from the county (as distinguished from the state), without more, is not a sufficiently compelling reason to justify constitutionally the drastic remedy of ex parte prejudgment attachment of all the alleged debtor's assets.

"(2) Procedural due process requires that the alleged debtor be notified by the creditor that his right to immediate hearing will be lost if not demanded within the time specified by law, and that his right to claim exemptions from process will likewise be lost if not exercised."

The Hospital appealed. We ordered that the appeal be treated as a petition for exercise of our supervisory jurisdiction. We also granted the Attorney General's motion to intervene on behalf of the State of North Dakota.

The Hospital and the State contend that the provisions of our attachment statute, Ch. 32-08.1, N.D.C.C., are constitutional in all respects. Rayer contends, among other things:

"North Dakota Ex Parte Prejudgment Attachment Under Sec. 32-08.1-03(1)(i), N.D.C.C., does not Comport to Constitutionally Mandated Procedural Due Process

"A. North Dakota law does not require proof of exigent circumstances necessitating extraordinary action to protect creditor proprietary interest

"B. The Role of the Judiciary as assigned by our statute is too limited to comport to procedural due process

"C. Opportunity for hearing is not immediate or prompt

"D. The hearing afforded is not a 'full hearing'

"E. Post-Seizure review under Section 32-08.1-16, N.D.C.C., is too limited in scope."

"Prejudgment seizure of a defendant's property before there has been a determination of the underlying claim and before the defendant has had an opportunity to be heard on the merits of the underlying claim, is a drastic remedy the granting of which demands the utmost caution and sensitivity." Production Credit Ass'n v. Halverson, 386 N.W.2d 905, 910 (N.D.1986). We must examine the validity of the ex parte prejudgment attachment procedures afforded by Chapter 32-08.1, N.D.C.C., in light of four decisions by the United States Supreme Court: Sniadach v. Family Finance Corp. 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969); Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Mitchell v. W.T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974); and North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975).

In Sniadach, the Supreme Court held that Wisconsin's wage garnishment procedures, under which the clerk of court issued a summons at the request of a creditor's lawyer, thereby freezing a wage earner's wages without an opportunity to be heard, violated due process. The Court observed that "[s]uch summary procedure may well meet the requirements of due process in extraordinary situations," but found that the case presented "no situation requiring special protection to a state or creditor interest," that the statute was not "narrowly drawn to meet any such unusual condition," and that "in personam jurisdiction was readily obtainable." 395 U.S. at 339, 89 S.Ct. at 1821.

In Fuentes, the Supreme Court struck down Florida and Pennsylvania ex parte prejudgment replevin statutes which did not "limit the summary seizure of goods to special situations demanding prompt action" and under which "no state official reviews the basis for the claim to repossession; and no state official evaluates the need for immediate seizure." 407 U.S. at 93, 92 S.Ct. at 2001. The Court noted that "[t]here are 'extraordinary situations' that justify postponing notice and opportunity for a hearing" but that such situations "must be truly unusual" (407 U.S. at 90, 92 S.Ct. at 1999) and that "[t]here may be cases in which a creditor could make a showing of immediate danger that a debtor will destroy or conceal disputed goods." 407 U.S. at 93, 92 S.Ct. at 2001. The Court held, 407 U.S. at 96-97, 92 S.Ct. at 2002-03:

"We hold that the Florida and Pennsylvania prejudgment replevin provisions work a deprivation of property without due process of law insofar as they deny the right to a prior opportunity to be heard before chattels are taken from their possessor.... We do not question the power of a State to seize goods before a final judgment in order to protect the security interests of creditors so long as those creditors have tested their claim to the goods through the process of a fair prior hearing.... Since the essential reason for the requirement of a prior hearing is to prevent unfair and mistaken deprivations of property, however, it is axiomatic that the hearing must provide a real test. '[D]ue process is afforded only by the kinds of "notice" and "hearing" that are aimed at establishing the validity, or at least the probable validity, of the underlying claim against the alleged debtor before he can be deprived of his property....' Sniadach v. Family Finance Corp., supra, 395 U.S. at 343, 89 S.Ct. at 1823 (Harlan, J., concurring)."

In Mitchell v. W.T. Grant Co., Grant alleged that it sold household goods to Mitchell, that it had an unpaid balance, that it had a vendor's lien, and requested sequestration of the goods. The accompanying affidavit "asserted that Grant had reason to believe [Mitchell] would 'encumber, alienate or otherwise dispose of the merchandise ... during the pendency of these proceedings.' " 416 U.S. at 602, 94 S.Ct. at 1897. Under Louisiana law, a vendor's lien expired if the buyer transferred possession. The Supreme Court held that Louisiana's statutory ex parte prejudgment sequestration procedure "effects a constitutional accommodation of the conflicting interests of the parties." 416 U.S. at 607, 94 S.Ct. at 1900.

Under the statutory procedure upheld in Mitchell, (1) a writ of sequestration "will not issue on the conclusory allegation of ownership or possessory rights" [416 U.S. at 605, 94 S.Ct. at 1899]; (2) a writ "shall issue 'only when the nature of the claim and the amount thereof, if any, and the grounds relied upon for the issuance of the writ clearly appear from specific facts' shown by verified petition or affidavit" [416 U.S. at 605, 94 S.Ct. at 1899]; (3) "the clear showing required must be made to a judge" ⁴ [416 U.S. at 606, 94 S.Ct. at 1899]; (4) a debtor was entitled "immediately to seek dissolution of the writ, which must be ordered unless the creditor 'proves the grounds upon which the writ was issued,' ... the existence of the debt, lien, and delinquency" [416 U.S. at 606, 94 S.Ct. at 1899]; and (5) there was "judicial control of the process from beginning to end. This control is one of the measures adopted by the State to minimize the risk that the ex parte procedure will lead to a wrongful taking." 416...