Rocky B. Fisheries, Inc. v. North Bend Fabrication & Mach., Inc.

• Decision Date: 09 March 1984
• Docket Number: No. A8110-06552,A8110-06552
• Citation: 66 Or.App. 625,676 P.2d 319
• Parties: , 1984 A.M.C. 2594 ROCKY B. FISHERIES, INC., an Oregon corporation, Johnnie Brown and David Brown, Appellants, v. NORTH BEND FABRICATION & MACHINE, INC., an Oregon corporation; John Dudrey with his law firm partners Floyd A. Fredrickson, Lloyd W. Weisensee, Peter C. McCord and Jay M. Fountain; Lawrence F. Finneran with his law firm partners Jerry O. Lesan and Kirk Johansen, Respondents. ; CA A25230.
• Court: Oregon Court of Appeals

Page 319

676 P.2d 319

66 Or.App. 625, 1984 A.M.C. 2594

ROCKY B. FISHERIES, INC., an Oregon corporation, Johnnie Brown and David Brown, Appellants, v. NORTH BEND FABRICATION & MACHINE, INC., an Oregon corporation; John Dudrey with his law firm partners Floyd A. Fredrickson, Lloyd W. Weisensee, Peter C. McCord and Jay M. Fountain; Lawrence F. Finneran with his law firm partners Jerry O. Lesan and Kirk Johansen, Respondents.

No. A8110-06552; CA A25230.

Court of Appeals of Oregon.

Argued and Submitted July 8, 1983.

Decided Jan. 25, 1984.

Reconsideration Denied March 9, 1984.

Barbara J. Gazeley, Portland, argued the cause for appellants. With her on the briefs were John L. Langslet and Martin, Bischoff, Templeton, Biggs & Ericsson, Portland.

J.P. Graff, Portland, argued the cause for respondents. With him on the brief was Schwabe, Williamson, Wyatt, Moore & Roberts, Portland.

Before BUTTLER, P.J., and WARREN and ROSSMAN, JJ.

BUTTLER, Presiding Judge.

This action at law for damages arose out of the in rem seizure of a fishing vessel the Rocky B, pursuant to ORS 783.010 et seq. Plaintiffs contend that defendants are liable under 42 U.S.C. § 1983, because the seizure was accomplished without due process of law, and are also liable for failure to comply with the requirements for issuance of provisional process specified in ORS 29.020 et seq. (now codified in ORCP 81-85). They also seek recovery under theories of conversion, abuse of process and interference with contractual relations. The trial court granted defendant North Bend's motion for summary judgment and the individual defendants' motion to dismiss; plaintiffs appeal from the resulting judgment dismissing all claims except one, which was added as a separate claim after the court had ruled on the motions. ¹

In May, 1979, plaintiffs Brown, now the sole shareholders of plaintiff Rocky B. Fisheries, Inc., began construction of a fishing vessel, the Rocky B. Construction was financed by Southern Oregon Production Credit Association (PCA), which secured its loan of more than $427,000 with what plaintiffs characterize as "preferred ship's mortgages." Defendant North Bend supplied services and materials on an open account for the construction, fitting, furnishing and equipping of the vessel. An outstanding balance of $5,410.04 was due when North Bend, through its attorneys, defendants Finneran and Dudrey, claimed a nonmaritime lien on the vessel in that amount pursuant to ORS 783.010(2).

On August 1, 1980, North Bend filed an action against the Rocky B, seeking a judgment against it for the balance due, and moved for an order authorizing the arrest of the Rocky B. On August 5, 1980, after requiring North Bend to post a bond, a circuit court judge ordered the clerk of the court to issue a warrant for the seizure of the vessel. The warrant was issued by the clerk, and the vessel was seized by the sheriff. Plaintiffs learned of the seizure immediately and demanded that defendants release it. Because the seizure of the vessel constituted a default on the mortgage, PCA commenced an action in federal district court to foreclose its mortgage. The marshal, acting pursuant to an order of that court, seized the vessel and currently holds it under arrest.

Under ORS 783.010, every boat or vessel used ² in the waters of, or constructed in, the state is liable and subject to a lien, so far as relevant:

"(1) For wages due to persons employed, for work done or services rendered on board such boat or vessel.

"(2) For all debts due to persons by virtue of a contract, expressed or implied, with the owners of a boat or vessel, or with the agents, contractors or subcontractors of such owner, or with any person having them employed to construct, repair or launch such boat or vessel, on account of labor done or materials furnished by mechanics, tradesmen or others in the building, repairing, fitting and furnishing or equipping such boat or vessel, or on account of stores and supplies furnished for the use thereof, or on account of premiums for insurance placed on or with respect to such boat or vessel, or on account of launchways constructed for the launching of such boat or vessel."

Under ORS 783.030 and 783.040, a creditor claiming a lien under ORS 783.010 may commence an in rem state court action directly against a vessel by filing a complaint setting forth his demand in all its particulars in the circuit court of the county in which the vessel is located. ORS 783.050 provides that when the complaint is filed, the clerk of the court shall issue a warrant commanding the sheriff to seize the vessel named in the complaint. Seizure of the vessel under that statutory procedure is a prerequisite to the perfection of a lien under ORS 783.010. Paddack v. Rasmussen, 294 Or. 599, 604, 660 P.2d 677 (1983).

On return of the warrant for the arrest of the vessel, "proceedings shall be had in circuit court against the boat or vessel seized, in the same manner as if the action had been commenced against the person on whose account the demand accrued." ORS 783.060. The master, owner, agent or consignee of the vessel may appear and answer the complaint, ORS 783.070, but if no appearance is made, the plaintiff may obtain a default judgment against the vessel, which is the defendant. ORS 783.080. ORS 783.090 provides that the master or other interested person may have the vessel released prior to adjudication of the underlying claim by entering into an undertaking in favor of the plaintiff, with sufficient security to be approved by the judge or clerk of the court.

Plaintiffs contend that the prejudgment seizure of the Rocky B under chapter 783 violated their due process rights under the Fourteenth Amendment to the United States Constitution, giving rise to a claim under 42 U.S.C. § 1983. Their catalog of perceived constitutional defects in chapter 783 is drawn from the deficiencies exposed in four Supreme Court cases that dealt with the constitutionality of state laws governing the seizure of a debtor's property before judgment: 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 v. Family Finance Corp., supra, the Court invalidated a Wisconsin garnishment statute which allowed a creditor, without prior notice or hearing, to attach the wages of a debtor pending the outcome of the creditor's claim. Similarly, in Fuentes v. Shevin, supra, the Court struck down Florida and Pennsylvania prejudgment replevin procedures that allowed creditors to seize goods in which they claimed an interest without providing the debtor with prior notice or an opportunity to be heard. The general rule to be gleaned from these cases is that, except in "extraordinary situations," whenever an owner is to be deprived of the use of his property during the pendency of litigation, due process requires notice and opportunity for an early hearing before a judicial officer.

In Mitchell v. W.T. Grant Co., supra, and North Georgia Finishing, Inc. v. Di-Chem, Inc., supra, the Court expanded that rule by holding that official seizures without prior notice and hearing or other safeguards against mistake violate due process. Mitchell upheld a Louisiana sequestration statute which provided for the judicial issuance of a writ on the ex parte application of a creditor who claimed an interest in the property to be sequestered. Although no notice or opportunity for hearing was required prior to the issuance of the writ, the statute afforded other safeguards by requiring: (1) a sworn affidavit showing the creditor's claim and the right to repossession; (2) issuance of a writ authorizing the seizure by a judge rather than a court clerk; (3) a bond sufficient to compensate the debtor for damages caused by a wrongful seizure, and (4) an opportunity for the debtor to seek "immediate" dissolution of the writ, which must be ordered unless the creditor "proves the grounds upon which the writ was issued." 416 U.S. at 606, 94 S.Ct. at 1899. In North Georgia, the court relied mainly on Mitchell in invalidating a Georgia garnishment statute which authorized a court clerk to issue a writ of impoundment based on an affidavit containing only conclusory allegations. The statute attacked in North Georgia had none of the "saving" characteristics emphasized in Mitchell.

Relying on those precedents, plaintiffs here claim that the seizure of the Rocky B was deficient in several respects: (1) no pre-seizure notice or hearing was afforded plaintiffs; (2) the complaint filed by defendants consisted of bare conclusory allegations unsupported by an affidavit containing facts to support the claim; (3) there was no meaningful judicial participation in the issuance of the writ; (4) no "extraordinary situation" existed which would justify summary seizure, ³ and (5) no opportunity for a post-seizure hearing was provided.

The question is whether that line of cases applies to a chapter 783 proceeding, where the purpose of the statutory scheme is to permit the perfection of a statutory lien against a specific vessel and where any judgment that may be entered is against that vessel only and may be collected, if at all, from the sale of the vessel. ORS 783.110. The situation presented is somewhat analogous to a construction lien claimed by a materialman who provides material to a contractor in the construction of a commercial building. The owner may have paid the contractor in full, but the contractor may not have paid the laborers or materialmen. Those unpaid suppliers are entitled to a lien against the building, even though they have no claim against the owners. The lien may be perfected by a filing within the time permitted by ORS 87.035, and no notice is...