Long Island Trust Co. v. Porta Aluminum Corp.

• Decision Date: 01 April 1974
• Parties: , 14 UCC Rep.Serv. 833 LONG ISLAND TRUST COMPANY, Respondent, v. PORTA ALUMINUM CORP. et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 134

354 N.Y.S.2d 134

44 A.D.2d 118, 14 UCC Rep.Serv. 833

LONG ISLAND TRUST COMPANY, Respondent, v. PORTA ALUMINUM CORP. et al., Appellants.

Supreme Court, Appellate Division, Second Department.

April 1, 1974.

Norman L. Rosenthal, Old Bethpage, for appellants.

Cullen & Dykman, Garden City (Peter J. Mastaglio, Garden City, of counsel), for respondent.

Before GULOTTA, P.J., and HOPKINS, MARTUSCELLO, SHAPIRO and COHALAN, JJ.

SHAPIRO, Justice.

In an action in replevin under article 71 of the CPLR, the Special Term, on notice to the defendants, granted the plaintiff's motion for an order of seizure (CPLR 7102) on the giving of undertakings in specified amounts. The defendants seek a reversal, upon the ground, among others, that the statute is unconstitutional.

THE FACTS.

The plaintiff made a loan to Gilbalstan, Inc. (the debtor), a party unconnected with this lawsuit. In connection therewith the debtor gave the plaintiff its promissory note in the sum of $23,952.24 payable in 36 monthly installments. As collateral for the payment of the note, the debtor executed and delivered to the plaintiff a security agreement, dated March 22, 1972, with a schedule annexed thereto (Schedule A) which, among other things, specifically enumerated three tractors and six trailers owned by the debtor. ¹ As permitted by the statute, the plaintiff filed a financing statement with the County Clerk of Nassau County and the Secretary of State of the State of New York (U.C.C., § 9--401). As permitted by the agreement and the applicable statute (U.C.C., § 9--402, subd. (2), par. (c)), the financing statement was signed by the plaintiff alone and stated in pertinent part:

'5. This Financing Statement covers the following types (or items) of property: all motor vehicles & attachments now owned or hereafter acquired. (X) Proceeds.'

Thereafter and on or about May 26, 1972 appellant Porta Aluminum Corp. (Porta) purchased one tractor and six trailers from the debtor for $16,000 which vehicles the latter in writing represented to be 'completely paid for' and without liens of any kind, with the exception of an Internal Revenue Service levy. Except for a Dorsey semi-trailer, they were part of the vehicles listed in the security agreement. Appellant Alwinseal, Inc. (Alwinseal) purchased one tractor and one trailer (listed in the security agreement) from the debtor and again the latter represented that there were no liens affecting the vehicles. ²

The debtor failed to pay the instalment due on December 30, 1972. The accelerated balance owed by it on the promissory note on that day was $20,635,88. Thereafter, the plaintiff commenced this action and simultaneously with the service of the complaint in the action ³ it served the defendants with an order directing them to show cause why the court should not issue an order of seizure for the vehicles in the defendants' possession. The Special Term granted the plaintiff's motion and by its order, Inter alia, directed the sheriff to seize not only the vehicles specifically mentioned in Schedule A of the security agreement but also the aforementioned Dorsey semi-trailer.

THE ISSUES.

The principal issues urged by the appellants on this appeal are (1) whether the seizure statute (CPLR 7102) is unconstitutional, because it does not provide, according to them, for an opportunity to be heard Before the seizure, (2) whether the plaintiff agreed to look solely to the 'proceeds' if the chattels were sold, thereby waiving its lien on the chattels, and (3) whether the after-acquired goods and chattels clause in the security agreement covers tractors and trailers other than those listed in Schedule A of the security agreement.

THE LAW.

CPLR 7102 was enacted in its present form (L.1971, ch. 1051, § 1, eff. July 2, 1971) to overcome the effect of a three-judge United States District Court decision in Laprease v. Raymours Furniture Co., 315 F.Supp. 716 (dec. July 29, 1970). In invalidating the prior statutory procedure, which did not require a court order to effect a seizure, the District Court said:

'Procedural due process requires that notice and an opportunity to be heard be provided the alleged debtor Before his property is seized pursuant to Article 71, or at least that the creditor present to a judicial officer the circumstances allegedly justifying summary action' (p. 724; emphasis in original).

In its present form CPLR 7102, so far as is here relevant, provides:

' § 7102. Seizure of chattel on behalf of plaintiff.

(a) Seizure of chattel. When the plaintiff delivers to a sheriff an affidavit, order of seizure and undertaking and, if an action to recover a chattel has not been commenced, a summons and complaint, he shall seize the chattel in accordance with the provisions of the order and without delay.

(b) Service. The sheriff shall serve upon the person from whose possession the chattel is seized a copy of the affidavit, order of seizure and undertaking delivered to him by the plaintiff. Unless the order of seizure provides otherwise, the papers delivered to him by the plaintiff, shall be personally served by the sheriff on each defendant not in default in the same manner as a summons or as provided in section 314; if a defendant has appeared he shall be served in the manner provided for service of papers generally.

(d) Order of seizure. 1. Upon presentation of the affidavit and undertaking and upon such terms as may be required to conform to the due process of law requirements of the fourteenth amendment to the constitution of the United States, the court shall grant an order directing the sheriff of any county where the chattel is found to seize the chattel described in the affidavit * * *.'

Subdivisions (a) and (b) would indicate that a defendant might be first made aware of a plaintiff's complaint at the very moment of the seizure. Clearly, such procedure would not give a defendant, as was said in Laprease (supra, p. 724), 'an opportunity to be heard * * * Before his property is seized,' but it would compel the plaintiff to 'present to a judicial officer the circumstances allegedly justifying summary action,' which would satisfy 'procedural due process' requirements.

After section 7102 was adopted to meet the conditions set forth in Laprease, the Supreme Court of the United States in Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (dec. June 12, 1972) ruled that statutes such as those in Pennsylvania and Florida upon which it was passing and which permitted a seizure of chattels, Without affording the possessor of the chattels a prior opportunity to be heard, did not comply with the due process provisions of the United States Constitution. Hence the defendants argue that under Fuentes the present CPLR 7102 is void for lack of due process requirements. Their arguments would compel acceptance if reliance were to be placed solely on the provisions of subdivisions (a) and (b), for, as the court said in Fuentes (pp. 80--81, 92 S.Ct. p. 1994):

'The issue is whether procedural due process in the context of these cases requires an opportunity for a hearing Before the State authorizes its agents to seize property in the possession of a person upon the application of another.

'The constitutional right to be heard is a basic aspect of the duty of government to follow a fair process of decision making when it acts to deprive a person of his possessions. The purpose of this requirement is not only to ensure abstract fair play to the individual. Its purpose, more particularly, is to protect his use and possession of property from arbitrary encroachment--to minimize substantively unfair or mistaken deprivations of property, a danger that is especially great when the State seizes goods simply upon the application of and for the benefit of a private party. So viewed, the prohibition against the deprivation of property without due process of law reflects the high value, embedded in our constitutional and political history, that we place on a person's right to enjoy what is his, free of governmental interference. See Lynch v. Household Finance Corp., 405 U.S. 538, 552, 92 S.Ct. 1113, 1122, 31 L.Ed.2d 424.'

However, in construing a statute, all of its provisions must be considered as a whole, with a reconciliation, if possible, of any apparently conflicting parts. See section 97 of Book 1 (Statutes) of McKinney's Consolidated Laws of New York, which declares:

'It is a fundamental rule of statutory construction that a statute or legislative act is to be construed as a whole, and that all parts of an act are to be read and construed together to determine the legislative intent. So, in construing a statute the court must take the entire act into consideration, or look to the act as a whole, and all sections of a law must be read together to determine its fair meaning.'

Furthermore, 'we are also obliged to construe statutes so as to avoid constitutional doubts' (People v. Lo Cicero, 14 N.Y.2d 374, 378, 251 N.Y.S.2d 953, 956, 200 N.E.2d 622). (See, also, People v. Heller, 33 N.Y.2d 314, 352 N.Y.S.2d 601, 307 N.E.2d 805; Miller v. California, 413 U.S. 15, 93 S.Ct. 2607, 37 L.Ed.2d 419; Thompson v. Wallin, 301 N.Y. 476, 95 N.E.2d 806, affd. sub nom. Adler v. Board of Education of City of N.Y., 342 U.S. 485, 496, 72 S.Ct. 380, 92 L.Ed. 517.)

In this case that reconciliation can be accomplished and the constitutionality of the statute maintained by reading subdivisions (a) and (b) together with paragraph 1 of subdivision (d), which provides that the due process requirements of the Constitution must be met before an order of seizure issues. ⁴

The real question here, therefore, is not the constitutionality of the statute but whether the defendants received due process when the plaintiff's application for an order of seizure was determined without the taking of testimony in open court. Under the facts in this record we answer that question in the affirmative, for as the court in Fuentes said (407...