Scott v. Danaher

• Decision Date: 31 May 1972
• Docket Number: No. 71 C 458.,71 C 458.
• Parties: William L. SCOTT, and Lula J. Scott, individually and on behalf of all other persons similarly situated, Plaintiffs, v. Matthew J. DANAHER, Clerk of the Circuit Court of Cook County, on behalf of himself individually and in his official capacity, and on behalf of all others similarly situated, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

343 F. Supp. 1272

William L. SCOTT, and Lula J. Scott, individually and on behalf of all other persons similarly situated, Plaintiffs, v. Matthew J. DANAHER, Clerk of the Circuit Court of Cook County, on behalf of himself individually and in his official capacity, and on behalf of all others similarly situated, et al., Defendants.

No. 71 C 458.

United States District Court, N. D. Illinois, E. D.

May 31, 1972.

John P. Foster and Peter Apostal, Marthe C. Purmal, Legal Aid Bureau, Chicago, Ill., for plaintiffs.

Leonard M. Cohen, and Melvin Cohen, Edward V. Hanrahan, State's Atty., Chicago, for defendants.

Before SWYGERT, Chief Judge and PARSONS and LYNCH, District Judges.

MEMORANDUM OF DECISION

PER CURIAM.

The above cause comes before this three-judge district court for determination of whether or not the operation of Section 1 of the Illinois Garnishment Act, Ch. 62, Ill.Rev.Stat. § 33 (1969) in conjunction with judgments obtained by confession in accordance with Ch. 110, Ill.Rev.Stat. Sec. 50(3) (1969) violates the due process and equal protection clauses of the 14th Amendment of the United States Constitution. Jurisdiction of the above cause is grounded upon 28 U.S.C. Sec. 1343 and 42 U.S.C. Sec. 1983. See Lynch v. Household Finance Corp., 405 U.S. 538, 92 S.Ct. 1113, 31 L.Ed.2d 424 (1972).

The named plaintiffs have filed suit on their own behalf and seek a declaration of this Court pursuant to Rule 23, Federal Rules of Civil Procedure, to proceed on behalf of all persons who have executed notes or other forms of indebtedness which contain a clause which authorizes the entry of judgment by confession and who are, therefore, subject to garnishment on their non-wage assets without notice.

In 1968 William L. Scott and Lula J. Scott, executed an installment sales contract and judgment note for the purchase of a vacuum cleaner from Custom King System. The contract and note contained a "cognovit" clause which purported to authorize the holder of the note to confess and enter judgment against the obligor without service of process. After the plaintiffs ceased payment on the note, the defendant here, Puritan Thrift Plan, Inc., which subsequently obtained possession of the "paper", confessed judgment against the plaintiffs in the Circuit Court of Cook County. The judgment, in accordance with the applicable state statute, was obtained without notice to the plaintiffs.

On September 25, 1970, the defendant, Puritan Thrift, on the basis of the cognovit judgment directed defendant Danaher to issue a non-wage garnishment summons against the plaintiffs' bank. The first notice plaintiffs received of the garnishment action against them occurred when their bank advised them that a garnishment summons had been served upon the bank and that the funds of their account would be "frozen" pending disposition by court order.

Subsequently plaintiffs filed the complaint in the instant cause of action seeking various forms of relief on behalf of themselves and all other persons similarly situated. The plaintiffs successfully moved that a three-judge district court be convened in accordance with 28 U.S.C. Sec. 2281 et. seq.

The crux of plaintiffs' contention is that the invocation of Section 1 of the Illinois Garnishment Act, Ch. 62, Ill. Rev.Stat. § 33 et seq. (1969) to satisfy judgments obtained by confession in accordance with Ch. 110, Ill.Rev.Stat. Sec. 50(3) (1969) violates both the due process and the equal protection clauses of the 14th Amendment. The gravamen of plaintiffs' argument is that the procedure encompassed by the Illinois garnishment procedure permits expropriation of property from a debtor without prior notice or an opportunity to be heard on the merits of the claim either at the time that judgment is confessed or at the time that the garnishment summons is issued.

For reasons set forth below we hold that the Illinois garnishment statute when invoked to satisfy a judgment obtained by confession pursuant to Ch. 110, Ill.Rev.Stat. § 50(3) violates the due process clause of the 14th Amendment because of the failure of the statute to provide a means of determining whether or not the debtor has "knowingly and voluntarily" waived his right to notice and hearing at the time that the garnishment summons issued. Accordingly, we do not reach the issues raised by defendants' equal protection argument.

A cursory sketch of the theory which supports this conclusion is as follows. The statutory plan here involves the State of Illinois in a procedure which results in the deprivation of a debtor's property. The procedural safeguards of the due process clause are thereby invoked. A fundamental principle of procedural due process mandates notice and hearing before a person may be deprived of property. The right to notice and hearing may be waived. However, where as here the rights in question flow from a constitutional base there arises a presumption against waiver which must be overcome before such waiver is valid. Failure of the statutory scheme to provide a means of judicially determining whether or not the debtor has executed a "voluntary and understanding" waiver violates the due process clause.

It needs no extended discussion to establish that in the instant case the debtor is deprived of the use of his property. The fact that the judgment may be reopened and the property returned to the plaintiffs does not mitigate against the fact that the plaintiffs here are precluded from the use of their property for some length of time. Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969); Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Boddie v. Connecticut, 401 U.S. 371, 91 S.Ct. 780, 28 L. Ed.2d 113 (1971); Osmond v. Spence, 327 F.Supp. 1349, 1356 (D.C.1971). Having established that a deprivation of property is implemented by the state statute, it becomes clear that the protection afforded by the due process clause attaches to the procedural issue.

A rudimentary principle of procedural due process requires that before a person may be deprived of his property he must first be notified of the proceeding instituted against him and further be provided with an opportunity to be heard on his own behalf. Boddie v. Connecticut, 401 U.S. 371, 378, 91 S.Ct. 780, 28 L.Ed.2d 113 (1971); Sniadach v. Family Finance Corp., 395 U.S. 337, 339-340, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969); Armstrong v. Manzo, 380 U.S. 545, 550, 85 S.Ct. 1187, 14 L.Ed.2d 62 (1965); Coe v. Armour Fertilizer Works, 237 U.S. 413, 422-426, 35 S.Ct. 625, 59 L.Ed. 1027 (1915).

A succinct statement of this principle is found in the case of Mullane v. Central Hanover Bank & Trust Company, where Mr. Justice Jackson, speaking for the Court, stated:

"Many controversies have raged about the cryptic and abstract words of the Due Process Clause but there can be no doubt that at a minimum they require that deprivation of life, liberty or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case." 339 U.S. 306, 313, 70 S.Ct. 652, 656, 94 L.Ed. 865 (1950).

In the same opinion, at 314, 70 S.Ct. at 657, the Court further said:

"An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."

Absent other considerations (viz. waiver), it is clear that the due process clause requires notice and hearing prior to the deprivation of a property right.

It is equally clear that the statutory scheme before this court fails to provide the fundamental safeguards of notice and hearing at two distinct stages of the proceedings. First, notice and hearing are not required by statute at the time that the confession of judgment is entered by the creditor. The pertinent provision of Ch. 110, Ill.Rev.Stat. § 50(3) (1969) provides that: "Any person for a debt bona fide due may confess judgment by himself or attorney duly authorized, without process." Secondly, the judgment creditor, having obtained judgment against the debtor without notice and without opportunity for the debtor to be heard, may then, in accordance with Sec. 1 of the Illinois Garnishment Act, Ch. 62, Ill.Rev.Stat. § 33, (1969), petition the Clerk of the Court in which the confession of judgment was entered to "issue summons against any person having non-wage assets of the debtor in his possession commanding him to appear before the court as garnishee . . ."

Again, upon issuance of the summons against the garnishee there is neither notice nor an opportunity to be heard afforded to the judgment debtor. An example of the result of such a statutory scheme is provided by the named plaintiffs in the instant case. The first notice that the Scotts received that a judgment had been entered against them and that their funds had been garnisheed was provided by the Pullman Bank and Trust Company when it informed them that their account had been frozen in accordance with a Court order.

The garnishment statute at issue before this Court is derived from a former section of the Illinois Garnishment Act, Ch. 62, Ill.Rev.Stat. § 1 et seq. (1937). Provisions for the issuance of notice to the judgment debtor at the time of garnishment are absent from both the old and new statute, and they are identical for our purposes. In Zimek v. Illinois National Casualty Company, 370 Ill. 572, 19 N.E.2d 620 (1939), the predecessor garnishment provision was attacked on the grounds that its failure to provide notice to the judgment debtor of pending garnishment proceedings rendered the statute violative of the due process clause.

In that case, Mabel Fieldcamp secured a judgment against Theodore Zimek in the amount of $5,000.00 for injuries received when a vehicle driven by Zimek collided with the car in which plaintiff was a...