Jones Press, Inc. v. Motor Travel Services, Inc., No. 42138

• Court: Supreme Court of Minnesota (US)
• Writing for the Court: Heard before KNUTSON; OTIS
• Citation: 286 Minn. 205,176 N.W.2d 87
• Parties: JONES PRESS, INC., Respondent, v. MOTOR TRAVEL SERVICES, INC., Appellant.
• Decision Date: 20 February 1970
• Docket Number: No. 42138

Page 87

176 N.W.2d 87 286 Minn. 205 JONES PRESS, INC., Respondent,
v.
MOTOR TRAVEL SERVICES, INC., Appellant. No. 42138. Supreme Court of Minnesota. Feb. 20, 1970.

Page 88

Syllabus by the Court

[286 MINN 205] Minn.St.1967, §§ 571.41, 571.42, and 571.60 (amended by L.1969, c. 1142), which authorize the garnishment and impounding of accounts receivable without prior notice or an opportunity to be heard, deny defendant due process of law, and on the authority of Sniadach v. Family Finance Corp. of Bay View, 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349, they are unconstitutional.

Gainsley & Gainsley, Minneapolis, for appellant.

Shandling, Phillips, Gross & Aaron, Minneapolis, for respondent.

Heard before KNUTSON, C.J., and NELSON, MURPHY, OTIS, and ROGOSHESKE, JJ.

OPINION

OTIS, Justice.

This matter is before the court on a discretionary appeal pursuant to Rule 105, Rules of Civil Appellate Procedure, to test the constitutionality of the garnishment statutes which were in effect at the time this action was commenced, Minn.St.1967, c. 571, more particularly, §§ 571.41, 571.42, and 571.60. ¹

Page 89

Plaintiff seeks to recover $100,000 in damages, alleging a [286 MINN 206] wrongful conversion of lithographic negatives by defendant. In a prior action defendant sued Graphic Art Services, Inc., for interference with this defendant's peaceable possession of premises it was occupying in Minneapolis. Graphic counterclaimed for the [286 MINN 207] sum of $65,000. Plaintiff in the instant case and the defendant in the prior action are companies operated by one Lowell F. Jones. In the previous litigation, Graphic garnished this defendant's customers and impounded some $85,000 in accounts receivable. Faced with garnishments of up to $130,000, this defendant sought a restraining order to prohibit further garnishments but was denied relief. Thereupon, it secured a bond of $130,000 to release the garnishments. To do so, however, it was obliged to deposit $65,000 with a bonding company.

The present action was begun about 14 months later. Sixteen of defendant's customers were garnished at the time the suit was instituted. Twenty-two thousand dollars was impounded, and further garnishments up to the sum of $100,000 were threatened. To secure a bond for the release of the garnishments, defendant posted a letter of credit which exhausted its credit. Defendant alleges: 'On this date, therefore, the use of $165,000.00 which defendant desperately needs is being denied it, and while the bonds remain in force, it has no source of money for its capital and current needs.' Defendant moved the trial court for an order canceling and terminating the garnishment bond. This appeal is from a denial of that motion.

The issue presented is whether the decision of the United States Supreme Court in Sniadach v. Family Finance Corp. of Bay View, 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349, applies only to the garnishment of wages, or whether it is more broadly based on the principle that any taking without prior notice and an opportunity to be heard is a denial of due process in violation of the Fourteenth Amendment.

In Sniadach, the Supreme Court struck down a Wisconsin statute which permitted a plaintiff to commence garnishment proceedings prior to the service of the summons and complaint. There, the plaintiff garnished the defendant's wages. The court held that this process deprived the wage earner of 'his enjoyment of earned wages without any opportunity to be heard and to tender any defense he may have, whether it be fraud or [286 MINN 208] otherwise.' 395 U.S. 339, 89 S.Ct. 1821, 23 L.Ed.2d 352. The court went on to say:

'* * * In this case the sole question is whether there has been a taking of property without that procedural due process that is required by the Fourteenth Amendment. * * * In the context of this case the question is whether the interim freezing of the wages without a chance to be heard violates procedural due process.'

The decision stressed the fact that a prejudgment garnishment is 'a taking which may impose tremendous hardship on wage earners with families to support' (395 U.S. 340, 89 S.Ct. 1822, 23 L.Ed.2d 353) and concluded by holding that in the absence of notice and a prior hearing such taking violates the fundamental principles of due process.

The...