Guzman v. Western State Bank of Devils Lake, North Dakota, 74-1740

• Decision Date: 11 March 1975
• Docket Number: No. 74-1740,74-1740
• Parties: Richard and Mary GUZMAN, Appellants, v. WESTERN STATE BANK OF DEVILS LAKE, NORTH DAKOTA, a North Dakota Corporation, et al., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 125

516 F.2d 125

Richard and Mary GUZMAN, Appellants, v. WESTERN STATE BANK OF DEVILS LAKE, NORTH DAKOTA, a North

Dakota Corporation, et al., Appellees.

No. 74-1740.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 9, 1975.

Decided March 11, 1975.

David R. Bossart, Fargo, N. D., for appellants.

Evan F. Heustis, Devils Lake, N. D., and Kermit Edward Bye, Fargo, N. D., for appellees.

Before MATTHES, Senior Circuit Judge, and STEPHENSON and WEBSTER, Circuit Judges.

MATTHES, Senior Circuit Judge.

The appeal in this action for declaratory and monetary relief presents for our review the question whether North Dakota's prejudgment attachment statute, North Dakota Century Code (N.D.C.C.) Chapter 32-08, is unconstitutional on its face or as applied in the attachment proceeding giving rise to this federal action. Plaintiff-appellants contend that the ex parte attachment and seizure by defendants of a mobile home in which plaintiffs had property rights and in which they resided and the seizure of plaintiffs' automobile denied plaintiffs due process of law as guaranteed by the Fourteenth Amendment to the United States Constitution.

In addition to Western State Bank of Devils Lake, North Dakota, defendants named in the amended complaint were Lyle Fering, individually and as President of the bank; James Kuchar, individually and as Vice-President of the bank; Bill Johnson, d/b/a Bill's Mobile Homes in Devils Lake, North Dakota; and LeRoy Ouellette, individually and as Sheriff of Rolette County, North Dakota.

The United States District Court for the District of North Dakota, on the pleadings, interrogatories, depositions, and other documents, granted the defendants' motion for a summary judgment and dismissed plaintiffs' action. Plaintiffs have appealed. We reverse and remand.

A resume of the relevant facts antedating and contemporaneous with the seizure of plaintiffs' property by attachment will place the issue before us in proper perspective. In September of 1970, the Guzmans purchased a 1970 Medallion Mobile Home from Bill Johnson of Bill's Mobile Homes. The Guzmans executed a retail installment contract and security agreement in the amount of $8,900.25, which included physical damage and credit life insurance, with an additional $3,773 to be paid as finance charges. The financing contract was sold by Johnson to Western State Bank with recourse. Under the financing contract, the plaintiffs were obligated to make monthly installments to Western of $150.75, commencing October 14, 1970.

On January 28, 1972, the Guzmans borrowed another $310.98 from Western and executed a note under which they agreed to pay Western an additional $51.83 per month, commencing March 15, 1972. Western added the Chevrolet automobile to its previous financing statement and security agreement covering the Medallion Mobile Home. Between October 14, 1970, and March 5, 1973, the Guzmans paid Western approximately $4,075.

Numerous complaints were made by the Guzmans to both Johnson and Western in regard to claimed defects in the trailer. The problems related to defective windows and doors and the heating system. The defects, which permitted the cold air to penetrate the interior of the mobile home, caused Mr. Guzman to purchase an inordinate amount of propane fuel. This, in turn, rendered it difficult for the Guzmans to maintain their payments to the bank. After considerable correspondence relating to the Guzmans' delinquency on the payments, Western filed an action on March 5, 1973 against the Guzmans in a North Dakota state court seeking a money judgment for the balance due on the mobile home contract and the automobile note.

On the same day, Kuchar, Vice-President of the bank, acting pursuant to N.D.C.C. § 32-08-05, filed the following affidavit: ¹

James Kuchar, being first duly sworn, deposes and says; that he is a Vice President of the Western State Bank of Devils Lake, North Dakota; that the verified Complaint in the above entitled action is brought to recover purchase money for personal property sold to the defendants and that the amounts set out in the complaint is now due and owing to the plaintiff.

The bank also filed a bond as required by N.D.C.C. § 32-08-06. Thereupon a warrant of attachment was issued by the clerk of the court, as provided by § 32-08-04. Armed with the warrant of attachment, Sheriff Ouellette proceeded to the mobile home, which was occupied by the Guzmans and some of their children. Defendant Kuchar and defendant Johnson were at the mobile home when the sheriff arrived, or appeared shortly thereafter. Neither Mr. Guzman, a county social worker, nor Mrs. Guzman, a community health representative, was at the mobile home, although Mrs. Guzman arrived there shortly thereafter in response to a telephone call from Sheriff Ouellette. Her efforts to dissuade the sheriff and Kuchar from taking possession of and moving the mobile home were of no avail. After removing the stripping which surrounded the bottom of the mobile home unit, an attempt was made by Johnson or his representative to move the mobile unit with Johnson's truck. The attempt failed, however, because the wheels of the trailer were frozen in the ground. Arrangements were then made to secure a John Deere tractor. The tractor and the truck together were able to remove the home from its location. It was taken by the sheriff to Rolla, North Dakota, and subsequently removed to another location. It stands undisputed that about four and one-half hours were required to remove the mobile home unit. The automobile was also seized under the warrant of attachment. Mr. Guzman, who was on duty during all of this time, was completely unaware of what was taking place until he arrived at the site of his former home, at which time the sheriff served upon Guzman the warrant of attachment and other papers issued by the state court.

Thereafter this action was filed in the United States District Court and, by leave, plaintiffs were permitted to file an amended complaint on October 16, 1973. Jurisdiction was premised under 28 U.S.C. §§ 1331(a), 1343(3), 1343(4), 2201, 2202, and 42 U.S.C. § 1983. Plaintiffs sought a judgment declaring (a) that N.D.C.C. Chap. 32-08 was unconstitutional on its face and (b) that the seizure of plaintiffs' residence and automobile did not comport with the requirements of due process as guaranteed by the fourteenth amendment. Additionally, plaintiffs sought actual and punitive damages, but did not seek injunctive relief. The state court proceedings have been stayed pending the determination of this case.

Clearly, we must focus upon three recent Supreme Court decisions, 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); and Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974), particularly the Mitchell case.

The rights of prejudgment creditors were first significantly eroded in Sniadach v. Family Finance Corp., supra, where the Court overturned a Wisconsin statute which allowed a debtor's wages to be garnished by a court summons issued by the court clerk on the request of a creditor. The debtor was not accorded a hearing before the seizure and was unable to quash the garnishment suit. Mr. Justice Douglas held that there were no extraordinary circumstances justifying such a summary procedure, and that therefore the Wisconsin statute denied the debtor due process. ² He also emphasized the drastic consequences a wage garnishment may have upon the debtor, consequences which could "drive a wage-earning family to the wall." 395 U.S. at 341-342, 89 S.Ct. at 1823.

In Fuentes v. Shevin, supra, the Supreme Court extended the Sniadach reasoning to summary prejudgment remedies other than garnishment, overturning Florida and Pennsylvania replevin statutes. The Court in Fuentes pointed out that the Florida statute did not require the applicant to make a convincing showing before seizure that the goods were, in fact, "wrongfully detained." 407 U.S. at 73-74, 92 S.Ct. 1983. Rather, the writ of replevin issued upon the bare conclusory allegations of the creditor. Under the Pennsylvania statute, the creditor did not have to initiate court action for repossession or even allege that he was lawfully entitled to the property, and the debtor had to initiate legal proceedings himself to regain possession. 407 U.S. at 77-78, 92 S.Ct. 1983.

The Fuentes Court concluded that even a temporary taking of property was a deprivation of property rights, thereby invoking fourteenth amendment due process consideration. Thus, the broad ruling of Fuentes seemed to be that, except for a few "extraordinary situations," ³ there had to be an opportunity for a hearing for the debtor before there could be a prejudgment seizure of goods. See generally Note, Procedural Due Process The Prior Hearing Rule and the Demise of Ex Parte Remedies, 53 B.U.L.Rev. 41 (1973). Moreover, the Court explicitly declined to limit its holding in the case to replevin of items that were "necessities of life." 407 U.S. at 88-90, 92 S.Ct. 1983.

Obviously, under the reasoning of Fuentes the North Dakota Act in question is unconstitutional, since there is no hearing prior to seizure. But Fuentes was subsequently limited by Mitchell v. W. T. Grant, supra.

In Mitchell, the Court considered the provisions of Louisiana Code of Civil Procedure which made available to a mortgagor or lien holder a writ of sequestration to forestall waste or alienation of the encumbered property. The issue, similar to that in Sniadach and Fuentes, was whether the sequestration violated the Due Process Clause of the fourteenth amendment because it was ordered ex parte, without prior notice to the debtor or opportunity for a hearing. The majority, Mr. Justice Powell filing a concurring opinion, sustained the Louisiana Act.

In Fuentes, the majority had emphasized that the debtor had...