Source: https://law.justia.com/cases/federal/appellate-courts/F3/169/409/491078/
Timestamp: 2019-05-23 02:37:34
Document Index: 624387774

Matched Legal Cases: ['§ 1090', '§ 566', '§ 566', '§ 566', '§ 566', '§ 566']

Apostolic Pentecostal Church, Plaintiff-appellee/cross-appellant, v. Clyde L. Colbert, Sr.; Emanuel Missionary Temple D/b/a C &l Builders, Inc.; and C & L Builders Andinvestors, Defendants,huntington Banks of Michigan, Intervenor-appellant/cross-appellee, 169 F.3d 409 (6th Cir. 1999) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Sixth Circuit › 1999 › Apostolic Pentecostal Church, Plaintiff-appellee/cross-appellant, v. Clyde L. Colbert, Sr.; Emanuel...
Apostolic Pentecostal Church, Plaintiff-appellee/cross-appellant, v. Clyde L. Colbert, Sr.; Emanuel Missionary Temple D/b/a C &l Builders, Inc.; and C & L Builders Andinvestors, Defendants,huntington Banks of Michigan, Intervenor-appellant/cross-appellee, 169 F.3d 409 (6th Cir. 1999)
US Court of Appeals for the Sixth Circuit - 169 F.3d 409 (6th Cir. 1999)
Argued Dec. 8, 1998. Decided March 3, 1999. Rehearing and Suggestion for Rehearing En Banc Denied April 9, 1999
Finally, and most importantly, Apostolic made a motion for default judgment on February 23, 1996. In the motion, Apostolic sought $200,000 (for the two CDs) pursuant to MICH. CT. R . 3.101(G) (2) (the garnishee liability section of Michigan's garnishment rule), plus monetary sanctions against Huntington's attorneys and attorney's fees. Huntington countered with a motion for summary judgment on May 7, 1997. On May 29, 1997, a magistrate judge issued a report and recommendation that construed Apostolic's motion for default judgment as a motion for summary judgment and granted summary judgment for Apostolic with respect to the NBAT CD, noting that "once the bank discovered the existence of the NBAT CD, it had a duty to disclose its existence." In doing so, he rejected arguments by Huntington that (1) Apostolic had no right to garnish NBAT and (2) under MICH. CT. R . 3.101(M) (2), Apostolic was precluded from challenging the garnishee disclosure because it failed to serve discovery on Huntington within fourteen days of receiving the garnishee disclosure. The magistrate judge, however, recommended granting summary judgment for Huntington on the Focus CD, noting that Colbert's name did not appear on the face of the Focus CD, and was "not persuaded that the garnishment rules require a bank to search for all authorized signatories when it receives a writ of garnishment."
We review de novo the district court's grant of summary judgment. See McKay v. Toyota Motor Mfg., U.S.A., Inc., 110 F.3d 369, 372 (6th Cir. 1997). Summary judgment is appropriate when there is no dispute as to a material question of fact and one party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56. We must view all facts and inferences drawn therefrom in the light most favorable to the nonmoving party. See LaPointe v. United Autoworkers Local 600, 8 F.3d 376, 378 (6th Cir. 1993). If, after reviewing the record as a whole, a rational factfinder could not find for the nonmoving party, summary judgment is appropriate since there is no genuine issue for trial. See Matsushita Elec. Indus. Co., Ltd., v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986).
Huntington's primary argument on appeal is that it was not properly served process, because it was served the writ of garnishment by an agent of Apostolic, not a United States Marshal. Fed. R. Civ. P. 69(a) states, in pertinent part:
(Emphasis added.) MICH. CT. R. 3.101(F) (1) states:
Huntington does not dispute Apostolic's contention that service was proper under Michigan law, i.e., in accordance with the practice and procedure of the state in which the district court is held. Rather, it argues that Fed. R. Civ. P. 4.1(a) either controls over Fed. R. Civ. P. 69(a) or constitutes a "statute of the United States [that] governs to the extent that it is applicable" under Rule 69(a). Rule 4.l(a) states:
Process other than a summons as provided in Rule 4 or subpoena as provided in Rule 45 shall be served by a United States marshal, a deputy United States marshal, or a person specially appointed for that purpose, who shall make proof of service as provided in Rule 4(l) .
However, it is a traditional maxim of interpretation that specific rules control over general rules. See, e.g., Bulova Watch Co. v. United States, 365 U.S. 753, 758, 81 S. Ct. 864, 6 L. Ed. 2d 72 (1961); United States v. Paddack, 825 F.2d 504, 514 (D.C. Cir. 1987). If Rule 4.1(a) were to control the "process to enforce a judgment for the payment of money" described in Rule 69(a), Rule 69(a) would be rendered totally meaningless. There would have been no reason for the drafters of the Federal Rules to have created Rule 69(a) if Rule 4.1(a) was intended to cover, under all circumstances, the service of process to enforce a judgment for the payment of money. "Rule 69(a) states that the procedure for service 'shall be in accordance with the practice and procedure of the state in which the district court is held....' Consequently, the manner of service on in-state defendants in such proceedings must be derived ... from the applicable federal or state statute." 4A CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 1090 (1997) (footnotes omitted).
Huntington also contends that Rule 4.1(c) constitutes a "statute of the United States [that] governs to the extent that it is applicable" under Rule 69(a). This argument is equally meritless, not only because it would also render Rule 69(a) meaningless, but also because the Federal Rules are not a statute. They are issued by the Supreme Court under rulemaking powers delegated by Congress. Although proposed rules may be rejected by Congress, they are usually not affirmatively adopted by the legislature, as all statutes must be. See Founding Church of Scientology v. Bell, 603 F.2d 945, 951-52 (D.C. Cir. 1979); see also Senate of Puerto Rico v. United States Dep't of Justice, 823 F.2d 574, 582 (D.C. Cir. 1987) ("rules of procedure promulgated by the Supreme Court generally do not qualify as 'statutes'...."). Further, even if Rule 4.1 were "applicable," so as to provide an alternative means to serve process, it does not, by any terms that "govern," forbid service under state law.
28 U.S.C. § 566(c) is, indeed, an applicable statute. However, it in no way "governs" the service of process of a writ of garnishment under Rule 69, for two reasons. First, 28 U.S.C. § 566(c) states that marshals must execute all writs " [e]xcept as otherwise provided by law or Rule of Procedure...." It would require an absurd interpretation of Rule 69 for this court to hold that a statute which makes a specific exception for the Federal Rules of Civil Procedure nonetheless "governs" over a Federal Rule. Second, the statute at issue simply describes the "power and duties" of the United States Marshals Service. For example, 28 U.S.C. § 566(a) states that " [i]t is the primary role and mission of the United States Marshals Service to provide for the security and to obey, execute, and enforce all orders of the United States District Courts, the United States Courts of Appeals and the Court of International Trade." Congress clearly did not intend to create a new rule of civil procedure by passing the statute, which is evidenced by the fact that 28 U.S.C. § 566(c) makes a specific exception for the Federal Rules of Civil Procedure.4
The court extended discovery pursuant to MICH. CT. R. 3.101(T), entitled "Judicial Discretion," which states that " [o]n motion the court may by order extend the time for ... the plaintiff's filing of written interrogatories...." Huntington claims that this was improper, because MICH. CT. R. 3.101 (M) (2) states that
[t]he facts stated in the disclosure must be accepted as true unless the plaintiff has served interrogatories or noticed a deposition within the time allowed by subrule (L) (1) [fourteen days] or another party has filed a pleading or motion denying the accuracy of the disclosure.
Huntington argues that Rule 3.101(M) (2) is a mandatory rule that required the court to accept the facts in the disclosure as true. At first blush, a reading of the plain language of the rule seems to imply this result. However, Rule 3.101(T) allows the court to "extend the time for ... the plaintiff's filing of written interrogatories ...," which logically implies that the court has the discretion to extend the deadline in Rule 3.101(M) (2). In other words, although Rule 3.101(M) (2) may, in fact, be mandatory, the fourteen-day limit outlined in the rule can apparently be increased at the court's discretion under Rule 3.101(T). Although at some point in time the facts in the disclosure must be taken as true, the court appears to have the discretion to alter when, in fact, that point in time occurs.
We note that there is simply no prior Michigan court precedent that addresses how to navigate the "intersection" between Rules 3.101(M) (2) and 3.101(T). However, it seems both manifestly absurd and extremely unjust to require a plaintiff to object (via written interrogatories or the noticing of a deposition) to a patently false disclosure statement sent by a garnishee when the plaintiff would have no reason to believe that the disclosure was patently false. Rule 3.101(T) was likely enacted in order to give the court the discretion to deal with extreme situations, such as that presented in the instant case. Because the scope of discovery is a matter usually committed to the district court's sound discretion, see Theunissen v. Matthews, 935 F.2d 1454, 1465 (6th Cir. 1991), we hold that the trial court's decision to extend discovery was not erroneous.
Huntington next argues that the district court erred in determining that it should have disclosed the NBAT CD and in entering judgment against it. The magistrate judge's report, which the district court adopted, recommended holding Huntington liable because the bank "should have disclosed the existence of the NBAT CD." Under MICH. CT. R. 3.101(G) (1), a garnishee is liable for "all tangible or intangible property belonging to the defendant in the garnishee's possession or control when the writ is served on the garnishee ...." and "all tangible or intangible property of the defendant" that the "garnishee holds by conveyance, transfer, or title that is void as to creditors of the defendant...."5 MICH. CT. R. 3.101(G) (2) states that " [t]he garnishee is liable for no more than the amount of the unpaid judgment, interest, and costs as stated in the verified statement requesting the writ of garnishment."
We hold that no rational factfinder could find that Huntington properly chose not to disclose the existence of the NBAT CD. On the disclosure form, Huntington indicated that it "does not possess or control defendant's property, money, etc." The bank nonetheless knew that it had in its control a CD with defendant Colbert's name on the CD's face. In fact, the bank informed NBAT (which was controlled by Colbert) about the writ of garnishment almost immediately after the writ was served. The magistrate judge properly observed that " [i]t is not the province of the bank to determine whether Plaintiff had a right to garnish an account, or to determine whether the corporate status of its account holder will ultimately defeat the garnishment effort." The grant of summary judgment for Apostolic on the NBAT CD was proper.
Apostolic questions the district court's decisions not to impose sanctions on Huntington and to deny Apostolic attorney's fees. Under Michigan law, the decision whether to award attorney's fees is within the trial court's discretion and will be reviewed on appeal for an abuse of discretion. See Phinney v. Perlmutter, 222 Mich.App. 513, 564 N.W.2d 532, 557 (1997). Additionally, the appellate standard of review for a district court's Rule 11 determination is also abuse of discretion. Davis v. Crush, 862 F.2d 84, 88 (6th Cir. 1988). An abuse of discretion exists if the district court based its ruling on an erroneous view of the law or a clearly erroneous assessment of the evidence. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S. Ct. 2447, 110 L. Ed. 2d 359 (1990).
We believe, however, that the district court abused its discretion in refusing Apostolic's request for sanctions under Fed. R. Civ. P. 11. The court, by adopting the recommendation of the magistrate judge, rejected the request on the grounds that (1) Huntington's conduct was "not unmistakably taken in bad faith" and (2) the bank's legal arguments were not frivolous. In so ruling, it appears that the district court did not inquire specifically into Huntington's conduct in actually filing the disclosure with the court. For example, it did not evaluate under Rule 11 whether "the allegations and other factual contentions [in the disclosure] ha [d] evidentiary support or, if specifically so identified, [we]re likely to have evidentiary support after a reasonable opportunity for further investigation or discovery...."
This was not the proper inquiry under Rule 11. In considering sanctions under the rule, a court inquires into whether the litigant's conduct was reasonable under the circumstances. See Davis, 862 F.2d at 88. It seems clear that the garnishee disclosure filed by Huntington was a "paper ... signed by the party" under Rule 11(a). Since this "paper" was presented to the court, the district court should have considered, inter alia, whether Huntington and its attorneys behaved reasonably in certifying that "the allegations and other factual contentions [in the disclosure] ha [d] evidentiary support or ... [we]re likely to have evidentiary support after a reasonable opportunity for further investigation or discovery," as outlined under Rule 11(b). Since the district court did not even consider the reasonableness of Huntington's conduct as it related to the filing of its garnishee disclosure, we must remand this action to the district court to determine whether Rule 11 sanctions are warranted.III
The judgment of the district court, insofar as it failed to impose sanctions on Huntington Banks of Michigan under Fed. R. Civ. P. 11, is REVERSED and REMANDED for further proceedings consistent with this opinion. The court's judgment is AFFIRMED in all other respects.
It should be noted that we today expressly reject the reasoning of United States v. Pauly, 725 F. Supp. 923, 927 (W.D. Mich. 1989). Pauly held that "Rule 4(c) and 28 U.S.C. § 566(c) govern service of writs of garnishment ... because subchapter 2.100 of the Michigan Court Rules relates to service of process in general and does not apply specifically to supplementary proceedings." Id. at 927. The district court in the instant case correctly found that Pauly was "flatly inconsistent with the clear language of Rule 69(a) and [was] premised upon ... fundamentally flawed conclusions...."