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Timestamp: 2019-04-20 16:15:56+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 419 › North Georgia Finishing, Inc. v. Di-Chem, Inc.
Georgia statutes permitting a writ of garnishment to be issued by an officer authorized to issue an attachment or a court clerk in pending suits on an affidavit of the plaintiff or his attorney containing only conclusory allegations, prescribing filing of a bond as the only method of dissolving the garnishment, which deprives the defendant of the use of the property in the garnishee's hands pending the litigation, and making no provision for an early hearing, violate the Due Process Clause of the Fourteenth Amendment, Sniadach v. Family Finance Corp., 395 U. S. 337; Fuentes v. Shevin, 407 U. S. 67. Mitchell v. W. T. Grant Co., 416 U. S. 600, distinguished. That this case involved garnishment of a corporation's sizable bank account, rather than a consumer's household necessities, is immaterial, since the probability of irreparable injury if the garnishment proves unjustified is sufficiently great to require some procedure to guard against initial error. Pp. 419 U. S. 605-608.
231 Ga. 260, 201 S.E.2d 321, reversed and remanded.
WHITE, J., delivered the opinion of the Court, in which DOUGLAS, BRENNAN, STEWART, and MARSHALL, JJ., joined. STEWART, J., filed a concurring statement, post, p. 419 U. S. 608. POWELL, J., filed an opinion concurring in the judgment, post, p. 419 U. S. 609. BLACKMUN, J., filed a dissenting opinion, in which REHNQUIST, J., joined, and in numbered paragraph 5 of which BURGER, C.J., joined, post, p. 419 U. S. 614.
Under the statutes of the State of Georgia, plaintiffs in pending suits are "entitled to the process of garnishment."
or some part thereof unless process of garnishment shall issue."
§ 46-102. To protect defendant against loss or damage in the event plaintiff fails to recover, that section also requires plaintiff to file a bond in a sum double the amount sworn to be due. Section 46-401 permits the defendant to dissolve the garnishment by filing a bond "conditioned for the payment of any judgment that shall be rendered on said garnishment." Whether these provisions satisfy the Due Process Clause of the Fourteenth Amendment is the issue before us in this case.
United States and the Constitution of the State of Georgia."
App. 11. The motion was heard and overruled on November 29. The Georgia Supreme Court, [Footnote 3] finding that the issue of the constitutionality of the statutory garnishment procedure was properly before it, sustained the statute and rejected petitioner's claims that the statute was invalid for failure to provide notice and hearing in connection with the issuance of the writ of garnishment. 231 Ga. 260, 201 S.E.2d 321 (1973). [Footnote 4] We granted certiorari. 417 U.S. 907 (1974). We reverse.
The Georgia court recognized that Sniadach v. Family Finance Corp., 395 U. S. 337 (1969), had invalidated a statute permitting the garnishment of wages without notice and opportunity for hearing, but considered that case to have done nothing more than to carve out an exception, in favor of wage earners, "to the general rule of legality of garnishment statutes." 231 Ga. at 264, 201 S.E.2d at 323. The garnishment of other assets or properties pending the outcome of the main action, although the effect was to "impound [them] in the hands of the garnishee,'" id. at 263, 201 S.E.2d at 323, was apparently thought not to implicate the Due Process Clause.
more than a year prior to the Georgia court's decision. There, the Court held invalid the Florida and Pennsylvania replevin statutes which permitted a secured installment seller to repossess the goods sold, without notice or hearing and without judicial order or supervision, but with the help of the sheriff operating under a writ issued by the clerk of the court at the behest of the seller. That the debtor was deprived of only the use and possession of the property, and perhaps only temporarily, did not put the seizure beyond scrutiny under the Due Process Clause.
"The Fourteenth Amendment draws no bright lines around three-day, 10-day, or 50-day deprivations of property. Any significant taking of property by the State is within the purview of the Due Process Clause."
Id. at 407 U. S. 86. Although the length or severity of a deprivation of use or possession would be another factor to weigh in determining the appropriate form of hearing, it was not deemed to be determinative of the right to a hearing of some sort. Because the official seizures had been carried out without notice and without opportunity for a hearing or other safeguard against mistaken repossession, they were held to be in violation of the Fourteenth Amendment.
The Georgia statute is vulnerable for the same reasons. Here, a bank account, surely a form of property, was impounded and, absent a bond, put totally beyond use during the pendency of the litigation on the alleged debt, all by a writ of garnishment issued by a court clerk without notice or opportunity for an early hearing and without participation by a judicial officer.
the seller-creditor holding a vendor's lien to secure a writ of sequestration and, having filed a bond, to cause the sheriff to take possession of the property at issue. The writ, however, was issuable only by a judge upon the filing of an affidavit going beyond mere conclusory allegations and clearly setting out the facts entitling the creditor to sequestration. The Louisiana law also expressly entitled the debtor to an immediate hearing after seizure and to dissolution of the writ absent proof by the creditor of the grounds on which the writ was issued.
Respondent also argues that neither Fuentes nor Mitchell is apposite here, because each of those cases dealt with the application of due process protections to consumers who are victims of contracts of adhesion and who might be irreparably damaged by temporary deprivation of household necessities, whereas this case deals with its application in the commercial setting to a case involving parties of equal bargaining power. See also Sniadach v. Family Finance Corp., 395 U. S. 337 (1969). It is asserted in addition that the double bond posted here gives assurance to petitioner that it will be made whole in the event the garnishment turns out to be unjustified. It may be that consumers deprived of household appliances will more likely suffer irreparably than corporations deprived of bank accounts, but the probability of irreparable injury in the latter case is sufficiently great so that some procedures are necessary to guard against the risk of initial error. We are no more inclined now than we have been in the past to distinguish among different kinds of property in applying the Due Process Clause. Fuentes v. Shevin, 407 U.S. at 407 U. S. 89-90.
Enough has been said, we think, to require the reversal of the judgment of the Georgia Supreme Court. The case is remanded to that court for further proceedings not inconsistent with this opinion.
"Right to writ; wages exempt until after final judgment"
"In cases where suit shall be pending, or where judgment shall have been obtained, the plaintiff shall be entitled to the process of garnishment under the following regulations: Provided, however, no garnishment shall issue against the daily, weekly or monthly wages of any person residing in this State until after final judgment shall have been had against said defendant: Provided, further, that the wages of a share cropper shall also be exempt from garnishment until after final judgment shall have been had against said share cropper: Provided, further, that nothing in this section shall be construed as abridging the right of garnishment in attachment before judgment is obtained."
"Affidavit; necessity and contents. Bond"
"The plaintiff, his agent, or attorney at law shall make affidavit before some officer authorized to issue an attachment, or the clerk of any court of record in which the said garnishment is being filed or in which the main case is filed, stating the amount claimed to be due in such action, or on such judgment, and that he has reason to apprehend the loss of the same or some part thereof unless process of garnishment shall issue, and shall give bond, with good security, in a sum at least equal to double the amount sworn to be due, payable to the defendant in the suit or judgment, as the case may be, conditioned to pay said defendant all costs and damages that he may sustain in consequence of suing out said garnishment, in the event that the plaintiff shall fail to recover in the suit, or it shall appear that the amount sworn to be due on such judgment was not due, or that the property or money sought to be garnished was not subject to process of garnishment. No person shall be taken as security on the bond who is an attorney for the plaintiff or a nonresident unless the nonresident is possessed of real estate in the county where the garnishment issues of the value of the amount of such bond."
"Affidavit by agent or attorney"
"When the affidavit shall be made by the agent or attorney at law of the plaintiff, he may swear according to the best of his knowledge and belief, and may sign the name of the plaintiff to the bond, who shall be bound thereby in the same manner as though he had signed it himself."
"Affidavit and bond by one of firm, etc."
"When the debt for recovery of which garnishment is sought shall be due to partners or several persons jointly, any one of said partners or joint creditors may make the affidavit and give bond in the name of the plaintiff, as prescribed in cases of attachment."
"Dissolution of garnishments; bond; judgment on bond"
"When garnishment shall have been issued, the defendant may dissolve such garnishment upon filing in the clerk's office of the court, or with the justice of the peace, where suit is pending or judgment was obtained, a bond with good security, payable to the plaintiff, conditioned for the payment of any judgment that shall be rendered on said garnishment. The plaintiff may enter up judgment upon such bond against the principal and securities, as judgment may be entered against securities upon appeal, whenever said plaintiff shall obtain the judgment of the court against the property or funds against which garnishment shall have been issued."
"SUPERIOR COURT OF Whitfield COUNTY GEORGIA, Whitfield COUNTY."
"Personally appeared R. L. Foster, President of Di-Chem, Inc., who on oath says that he is President of Di-Chem, Inc., plaintiff herein and that North Georgia Finishing, Inc., defendant, is indebted to said plaintiff in the sum of $51,279.17 DOLLARS, principal, $___, interest, $___ attorney's fees, and $___ cost and that said plaintiff has -- a suit pending -- returnable to the Superior Court of Whitfield County, and that affiant has reason to apprehend the loss of said sum or some part thereof unless process of Garnishment issues."
"Sworn to and subscribed before me, this August 20, 1971."
/s/ R. L. Foster, Affiant.
"Superior Court of Whitfield County."
Appeal was taken in the first instance to the Georgia Supreme Court. That court, without opinion, transferred the case to the Georgia Court of Appeals. The latter court issued an opinion, 127 Ga.App. 593, 194 S.E.2d 508 (1972). The Georgia Supreme Court then issued certiorari, 230 Ga. 623, 198 S.E.2d 284 (1973).
Subsequent to the Georgia Supreme Court's decision in this case, a three-judge federal court, sitting in the Northern District of Georgia declared these same statutory provisions unconstitutional. Morrow Electric Co. v. Cruse, 370 F.Supp. 639 (1974).
Petitioner so asserts, relying on Jackson v. Barksdale, 17 Ga.App. 461, 87 S.E. 691 (1916); Powell v. Powell, 95 Ga.App. 122, 97 S.E.2d 193 (1957). Respondent, without citation of authority states that "[c]ounsel could have attacked the garnishment in other ways either in the State or Federal Courts. . . ." Brief for Respondent 5.
It is gratifying to note that my report of the demise of Fuentes v. Shevin, 407 U. S. 67, see Mitchell v. W. T. Grant Co., 416 U. S. 600, 416 U. S. 629-636 (dissenting opinion), seems to have been greatly exaggerated. Cf. S. Clemens, cable from Europe to the Associated Press, quoted in 2 A. Paine, Mark Twain: A Biography 1039 (1912).
"The Court's decision today withdraws significantly from the full reach of [Fuentes'] principle, and, to this extent, I think it fair to say that the Fuentes opinion is overruled."
"[T]he Court today has unmistakably overruled a considered decision of this Court that is barely two years old, without pointing to any change . . . that might justify this total disregard of stare decisis."
416 U.S. at 416 U. S. 635 (STEWART, J., joined by DOUGLAS and MARSHALL, JJ., dissenting). The Court's opinion in this case, relying substantially on Fuentes, suggests that that decision will again be read as calling into question much of the previously settled law governing commercial transactions. I continue to doubt whether Fuentes strikes a proper balance, especially in cases where the creditor's interest in the property may be as significant or even greater than that of the debtor. Nor do I find it necessary to relegate Mitchell to its narrow factual setting in order to determine that the Georgia garnishment statutes fail to satisfy the requirements of procedural due process.
property rights are involved, mere postponement of the judicial enquiry is not a denial of due process if the opportunity given for ultimate judicial determination of liability is adequate.'"
Id. at 416 U. S. 611, quoting Phillips v. Commissioner, 283 U. S. 589, 283 U. S. 596-597 (1931). Consistent with this view, the Court in the past unanimously approved prejudgment attachment liens similar to those at issue in this case. McKay v. McInnes, 279 U.S. 820 (1929); Coffin Bros. v. Bennett, 277 U. S. 29 (1928); Ownbey v. Morgan, 256 U. S. 94 (1921). See generally Mitchell, supra, at 416 U. S. 613-614. But the recent expansion of concepts of procedural due process requires a more careful assessment of the nature of the governmental function served by the challenged procedure and of the costs the procedure exacts of private interests. See, e.g., Goldberg v. Kelly, 397 U. S. 254, 397 U. S. 263-266 (1970); Cafeteria Workers v. McElroy, 367 U. S. 886, 367 U. S. 895 (1961). Under this analysis, the Georgia provisions cannot stand.
Garnishment and attachment remedies afford the actual or potential judgment creditor a means of assuring, under appropriate circumstances, that the debtor will not remove from the jurisdiction, encumber, or otherwise dispose of certain assets then available to satisfy the creditor's claim. [Footnote 2/1] Garnishment may have a seriously adverse impact on the debtor, depriving him of the use of his assets during the period that it applies. But this fact alone does not give rise to constitutional objection. The State's legitimate interest in facilitating creditor recovery through the provision of garnishment remedies has never been seriously questioned.
Pre-garnishment notice and a prior hearing have not been constitutionally mandated in the past. Despite the ambiguity engendered by the Court's reliance on Fuentes, I do not interpret its opinion today as imposing these requirements for the future. [Footnote 2/2] Such restrictions, antithetical to the very purpose of the remedy, would leave little efficacy to the garnishment and attachment laws of the 50 States.
the burden of showing probable cause to believe there is a need to continue the garnishment for a sufficient period of time to allow proof and satisfaction of the alleged debt. Since the garnished assets may bear no relation to the controversy giving rise to the alleged debt, the State also should provide the debtor an opportunity to free those assets by posting adequate security in their place.
The most compelling deficiency in the Georgia procedure is its failure to provide a prompt and adequate post-garnishment hearing. Under Georgia law, garnishment is a separate proceeding between the garnishor and the garnishee. The debtor is not a party, and can intervene only by filing a dissolution bond and substituting himself for the garnishee. Leake v. Tyner, 112 Ga. 919, 38 S.E. 343 (1901); Powell v. Powell, 95 Ga.App. 122, 97 S.E.2d 193 (1957). As noted above, the issuance of the garnishment may impose serious hardship on the debtor. In this context, due process precludes imposing the additional burden of conditioning the debtor's ability to question the validity of its issuance or continuation on the filing of a bond. Moreover, the Georgia statute contains no provision enabling the debtor to obtain prompt dissolution of the garnishment upon a showing of fact, [Footnote 2/6] nor any indication that the garnishor bears the burden of proving entitlement to the garnishment.
provisions fail to afford fundamental fairness in their accommodation of the respective interests of creditor and debtor. For these reasons, I join in the judgment of the Court.
Garnishment and attachment remedies also serve to insure that the State will retain jurisdiction to adjudicate the underlying controversy. The advent of the more liberal interpretation of the States' power to exert jurisdiction over nonresidents who are not present in the State, International Shoe Co. v. Washington, 326 U. S. 310 (1945), diminishes the importance of this function.
The Court also cites Sniadach v. Family Finance Corp., 395 U. S. 337 (1969), which established an exception for garnishment of an individual's wages. In such cases, the Due Process Clause requires notice and a hearing prior to application of the garnishment remedy. As the opinion itself indicates, however, the Sniadach rule is limited to wages, "a specialized type of property presenting distinct problems in our economic system." Id. at 395 U. S. 340. The Court did not purport to impose requirements of pre-garnishment notice and hearing in other instances. Ibid. I therefore do not consider Sniadach to be more than peripherally relevant to the present case.
I am not in accord with the Court's suggestion that the Due Process Clause might require that a judicial officer issue the writ of garnishment. The basic protection required for the debtor is the assurance of a prompt post-garnishment hearing before a judge. Such a hearing affords an opportunity to rectify any error in the initial decision to issue the garnishment. When combined with the availability of the garnishor's bond to compensate for any harm caused, the possibility of prompt correction of possible error suffices to satisfy the requirements of procedural due process in this context. It thus should be sufficient for a clerk or other officer of the court to issue the original writ upon the filing of a proper affidavit.
The Georgia courts have not amplified the statutory affidavit requirement through the process of judicial construction. See Wilson v. Fulton Metal Bed Mfg. Co., 88 Ga.App. 884, 886, 78 S.E.2d 360, 362 (1953).
Since garnishment can issue in Georgia only in cases in which suit is pending or judgment has been rendered, see Ga.Code Ann. § 46-101, the issuing officer need not preliminarily inquire into the allegation of the existence of a debt. Nor do I contemplate that the initial showing of probable inability to collect the debt absent the issuance of the garnishment need be elaborate.
The facts of this case serve to illustrate the point. From the record and oral argument, it appears that the respondent feared that the only accessible and unencumbered assets of North Georgia Finishing were its bank accounts. At oral argument, counsel for petitioner indicated that North Georgia Finishing's holdings in real estate and tangible property in the State of Georgia were encumbered by mortgages and factoring contracts. It thus appears that respondent's apprehension of eventual inability to recover the debt may well have been entirely sufficient to justify the garnishment for the brief period required to conduct the post-garnishment hearing.
Bank accounts are readily susceptible to almost immediate transfer or dissipation, and this occurrence is often a likelihood where the debtor is a foreign corporation or a nonresident of the State. An affidavit in support of the garnishment or attachment of a nonresident's bank account would normally be sufficient for the writ if it averred that other less transitory assets were not available within the State to satisfy any prospective judgment.
Petitioner asserts, without contradiction by the respondent, that Georgia law does not authorize the alleged debtor to question the facts contained in the garnishor's affidavit or to make a contrary submission of fact indicating that the garnishor's apprehension of possible loss is misconceived or is insufficient to warrant the continuation of the writ of garnishment.
"We deal here with wages -- a specialized type of property presenting distinct problems in our economic system. We turn then to the nature of that property and problems of procedural due process."
395 U.S. at 395 U. S. 340. It goes on to speak of possible "tremendous hardship on wage earners with families to support," ibid., and the "enormous" leverage of the creditor "on the wage earner," id. at 395 U. S. 341. Sniadach should be allowed to remain in its natural environment -- wages -- and not be expanded to arm's-length relationships between business enterprises of such financial consequence as North Georgia Finishing and Di-Chem.
2. The Court, ante at 419 U. S. 606, regards the narrow limitations of Sniadach as affected by Fuentes. It also bows to Morrow Electric Co. v. Cruse, 370 F.Supp. 639 (ND Ga.1974), and the three-judge holding there that the Georgia statutes before us are unconstitutional. Ante at 419 U. S. 605 n. 4. Indeed, perhaps Sniadach for a time was so expanded (somewhat surprisingly, I am sure, to the Sniadach Court) by the implications and overtones of Fuentes. But Mitchell came along and Morrow was more than three months pre-Mitchell. Sniadach's expansion was surely less under Mitchell than it might have appeared to be under Fuentes.
to that, at issue in Fuentes, and the Court does not say otherwise."
416 U.S. at 416 U. S. 631.
"In short, this case is constitutionally indistinguishable from Fuentes v. Shevin, and the Court today has simply rejected the reasoning of that case and adopted instead the analysis of the Fuentes dissent."
Id. at 416 U. S. 634.
"Yet the Court today has unmistakably overruled a considered decision of this Court that is barely two years old. . . . The only perceivable change that has occurred since the Fuentes case is in the makeup of this Court."
"The Court's decision today withdraws significantly from the full reach of [the Fuentes] principle, and to this extent I think it fair to say that the Fuentes opinion is overruled."
Id. at 416 U. S. 623.
I accept the views of these dissenting and concurring Justices in Mitchell that Fuentes at least was severely limited by Mitchell, and I cannot regard Fuentes as of much influence or precedent for the present case.
decision, with a four-Justice majority of a seven-Justice shorthanded Court, did violence to Mr. Chief Justice Marshall's wise assurance, in Briscoe v. Commonwealth's Bank of Kentucky, 8 Pet. 118, 33 U. S. 122 (1834), that the practice of the Court "except in cases of absolute necessity" is not to decide a constitutional question unless there is a majority "of the whole court."
The Court encountered the same situation a century ago with respect to the Legal Tender Cases; mishandled the decisional process similarly; and came to regret the error. Originally, in Hepburn v. Griswold, 8 Wall. 603 (1870), [Footnote 3/2] the Court, assertedly by a 5-3 vote, with one vacancy, held the Legal Tender Act of 1862, 12 Stat. 345, to be unconstitutional with respect to prior debts. Mr. Justice Grier, who was in failing health, was noted as concurring. 8 Wall. at 75 U. S. 626. It was stated that the case "was decided in conference" on November 27, 1869, and the opinion "directed to be read" on January 29, 1870. Ibid. Mr. Justice Grier, however, had submitted his resignation to the President in December, 1869, effective February 1, 1870, and it had been accepted on December 15. The Justice last sat on January 31. 8 Wall. at vii-viii. The opinion and judgment in Hepburn actually were rendered on February 7, when Mr. Justice Grier was no longer on the bench.
judges than the law then in existence provided this court shall have. . . . We have been in the habit of treating cases involving a consideration of constitutional power differently from those which concern merely private right [citing Briscoe v. Commonwealth's Bank of Kentucky]. We are not accustomed to hear them in the absence of a full court, if it can be avoided."
Fuentes was before us, and waited a brief time for reargument before a full Court, whatever its decision might have been, I venture to suggest that we would not be immersed in confusion, with Fuentes one way, Mitchell another, and now this case decided in a manner that leaves counsel and the commercial communities in other States uncertain as to whether their own established and long-accepted statutes pass constitutional muster with a wavering tribunal off in Washington, D.C. This Court surely fails in its intended purpose when confusing results of this kind are forthcoming, and are imposed upon those who owe and those who lend.
that is required by the Due Process Clause of the Fourteenth Amendment.
6. Despite its apparent disclaimer, the Court now has embarked on a case-by-case analysis (weighted heavily in favor of Fuentes and with little hope under Mitchell) of the respective state statutes in this area. That road is a long and unrewarding one, and provides no satisfactory answers to issues of constitutional magnitude.
MR. CHIEF JUSTICE BURGER dissents for the reasons stated in numbered paragraph 5 of the opinion of MR. JUSTICE BLACKMUN.
Fuentes was decided June 12, 1972. MR. JUSTICE POWELL and MR. JUSTICE REHNQUIST had taken their respective seats as Members of the Court five months before, on January 7. 404 U.S. xi-xvii. Fuentes had been argued November 9, 1971.
See also Broderick's Executor v. Magraw, 8 Wall. 639 (1870).
Mr. Chief Justice Hughes described the result in the Legal Tender Cases as one of "three notable instances [in which] the Court has suffered severely from self-inflicted wounds." C. Hughes, The Supreme Court of the United States 50 (1928). The others he named were the Dred Scott decision, Scott v. Sandford, 19 How. 393 (1857), and the Income Tax Case, Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 (1895), on rehearing, 158 U. S. 158 U.S. 601 (1895).

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