Jones v. Marion County Small Claims Court
| Decision Date | 06 December 1988 |
| Docket Number | IP 88-346-C.,No. IP 88-312-C,IP 88-312-C |
| Parties | Elbert T. JONES v. MARION COUNTY SMALL CLAIMS COURT, LAWRENCE TOWNSHIP DIVISION. Charles F. LONG v. Lynda F. HUPPERT, Judge, Marion County Small Claims Court of Indiana, Washington Township Division, and Associates Financial Services Company of Indiana, Inc. |
| Court | U.S. District Court — Southern District of Indiana |
COPYRIGHT MATERIAL OMITTED
Kenneth J. Falk, Dennis K. Frick, Legal Services Organization of Indiana, Indianapolis, Ind., for plaintiff Elbert T. Jones.
Louis Rosenberg, Sally F. Zweig, UAW Legal Services Plan, Indianapolis, Ind., for plaintiff Charles P. Long.
Arthur Thaddeus Perry, Deputy Atty. Gen., Indianapolis, Ind., for Marion County Small Claims Court.
Charles B. Huppert, Huppert & Altman, Indianapolis, Ind., for Lynda F. Huppert.
Frederick F. Frosch, Frosch & Frosch, Indianapolis, Ind., for Associates Financial Services Co. of Indiana.
This matter was initially before the Court upon the motion of joint plaintiffs, Elbert T. Jones ("Jones") and Charles P. Long, ("Long") for summary judgment. Other motions before the Court in this case are:
In the midst of these motions, the defendants raised issues of the standing of plaintiffs to sue and mootness of the cause. These preliminary issues will be addressed before the motions because lack of standing or mootness of the case would preclude the Court from reaching the merits of the other motions or of the case itself.
This case concerns the constitutionality of post-judgment garnishment procedures involving financial institutions in Indiana. It raises the question of whether Indiana law provides adequate notice and opportunity for a hearing to a judgment debtor whose bank account is frozen subject to a judgment when the account contains funds exempt from garnishment by federal law.
This consolidated action of two judgment debtors is brought under 42 U.S.C. § 1983 seeking a preliminary injunction, a declaratory judgment that Ind.Code 28-1-20-1.1 (1986) is unconstitutional and attorney fees and costs. Plaintiff Long also seeks compensatory damages. The Court has jurisdiction pursuant to 28 U.S.C. § 1331 and can provide declaratory relief under 28 U.S. C. § 2201.
Ind.Code 28-1-20-1.1 replaced Ind.Code 28-1-20-1 through Acts, 1980, P.L. 40 § 10. The provision provides protection for a bank, trust company or savings bank when the financial institution receives notice of a money judgment against a depositor of the institution. The bank or other financial institution is permitted to disregard the notice and honor its depositor's instructions except in four situations. The relevant situation in this case is:
(4) When the adverse claimant is a money judgment creditor attempting to garnish a deposit, the money judgment creditor shall provide the bank or trust company notice of the garnishment proceeding, the unpaid amount of the judgment, and sufficient identifying information about the judgment defendant to enable the bank or trust company to reasonably verify the judgment defendant as its depositor and shall serve upon the bank or trust company an order issued by a court of competent jurisdiction pursuant to the laws authorizing proceedings supplementary to execution. Ind.Code 28-1-20-1.1(a)(4).
Ind.Code 28-1-20-1.1 was enacted, as was its predecessor, to "protect the financial institution, which, in good faith and prior to notice acts on the strength of the phraseology accompanying the deposit."1 There are no provisions for providing notice to the depositor of the action to freeze his account, nor that he can claim certain funds as exempt from garnishment. Finally, there is no provision for a prompt hearing on the issue of exempt funds.
Plaintiffs, Jones and Long, were judgment debtors for judgments taken against them in the Marion County Small Claims Courts of Lawrence Township and Washington Township respectively. Jones owed $352.78 and Long owed $1,841.48.
Jones' bank account contained Social Security benefits and Supplemental Security Income benefits. Both are exempt from attachment. 42 U.S.C. § 407 (1983). Long's account contained in part exempt Social Security funds. In addition it contained disability pension benefits which Long claims are also exempt from execution under 29 U.S.C. § 1056(d) (1985).
In March, 1982, the Marion County Small Claims Courts of Lawrence and Washington Townships froze the bank accounts of both plaintiffs in accord with Ind.Code 28-1-20-1.1. The courts did not provide notice of the bank account freeze nor of plaintiffs' right to claim exemptions for Social Security or pension funds. No prompt hearing was scheduled for either plaintiff.
The banks lifted the freezes voluntarily within two and three weeks of the initial actions after being informed of the exempt nature of the funds.
Plaintiffs allege that Ind.Code 28-1-20-1.1 violates the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Plaintiffs point to similar statutes in other states which have been struck down as unconstitutional or altered significantly by the courts: Rhode Island (Dione v. Bouley, 757 F.2d 1344 (1st Cir.1985)); Pennsylvania (Finberg v. Sullivan, 634 F.2d 50 (3d Cir.1980)); Alabama (Green v. Harbin, 615 F.Supp. 719 (N.D. Ala.1985)); Maryland (Reigh v. Schleigh, 784 F.2d 1191 (4th Cir.1986)); Arizona (Neely v. Century Finance Company of Arizona, 606 F.Supp. 1453 (D.Az.1985)); Virginia (Harris v. Bailey, 574 F.Supp. 966 (W.D. Va.1983)); New York (Deary v. Guardian Loan Company, Inc., 534 F.Supp. 1178 (S.D.N.Y.1982)); and Hawaii (Betts v. Tom, 431 F.Supp. 1369 (D.Haw.1977)).
A duly enacted Indiana statute is presumed to be constitutional and the party attacking its constitutionality assumes the burden of demonstrating its unconstitutionality clearly and beyond a reasonable doubt. Perry Tp. Marion Co. v. Indianapolis Power and Light Co., 224 Ind. 59, 64 N.E.2d 296 (1946). However, a higher level of scrutiny is required when, as here, fundamental rights are at issue. Decatur Co. Rural Electric Membership Corp. v. Public Service Co. of Indiana, 261 Ind. 128, 301 N.E.2d 191 (1973). The Court does not approach its task lightly and, presuming the statute valid, will find it unconstitutional only if it violates the rights and safeguards secured by the Constitution. Kinnaird v. State, 251 Ind. 506, 242 N.E. 2d 500 (1968).
In a memorandum filed with the Court on August 24, 1988, defendants alleged for the first time that plaintiffs lack standing to sue and that their cases are now moot. Standing and mootness are distinct concepts and will be discussed separately.
Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982) (internal citations omitted).
Plaintiffs are indigent individuals who suffered the actual injury of having their only available funds frozen without notice or an opportunity to retain their exempt funds promptly. Their judgments remain unpaid so the threat of renewed garnishment exists. The Court's favorable decision would result in an injunction prohibiting the recurrence of the garnishment proceedings against these plaintiffs and a declaration that Ind.Code 28-1-20-1.1 is unconstitutional. The injury to plaintiffs would be redressed by such a court decision. Plaintiffs have standing to sue.
Mootness refers to the Article III requirement that federal courts adjudicate only actual, ongoing controversies. A case must be alive not only when it commences but also at every point in its progress toward trial. Steffel v. Thompson, 415 U.S. 452, 459, n. 10, 94 S.Ct. 1209, 1216, n. 10, 39 L.Ed.2d 505 (1974).
An exception to this traditional concept of mootness has been created by the Court for those cases "capable of repetition, yet evading review." Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911). See Moore v. Ogilvie, 394 U.S. 814, 816, 89 S.Ct. 1493, 1494, 23 L.Ed.2d 1 (1969); Carroll v. Princess Anne, 393 U.S. 175, 178-179, 89 S.Ct. 347, 350-351, 21 L.Ed.2d 325 (1968); United States v. W.T. Grant Co., 345 U.S. 629, 632-633, 73 S.Ct. 894, 897-898, 97 L.Ed. 1303 (1953). A case that cannot be resolved while the plaintiff is still injured should still be considered by the Court. Jones' and Long's claims to deprivation of due process with respect to their exempt funds fit the "capable of repetition yet evading review" exception to the mootness doctrine because plaintiffs' judgments remain unpaid. The exempt funds in their bank accounts remain subject to Ind.Code 28-1-20-1.1.
Accordingly, the Court rules that plaintiffs have standing and that the case is not moot. Therefore, dismissal for these reasons is denied.
Defendant Judge Lynda F. Huppert ("Huppert") moved the Court to dismiss the claim against her pursuant to Fed.R. Civ.P. 12(b)(6) and 19, arguing that:
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