Source: https://casetext.com/case/baxter-v-united-forest-products-co
Timestamp: 2019-09-22 12:40:59
Document Index: 149582571

Matched Legal Cases: ['§ 2041', '§ 23', '§ 725', '§ 1292', '§ 639', '§ 639']

Baxter v. United Forest Products Co, 406 F.2d 1120 | Casetext
Baxter v. United Forest Products Co.
406 F.2d 1120 (8th Cir. 1969)
Baxterv.United Forest Products Co.
United States Court of Appeals, Eighth CircuitFeb 25, 1969
February 3, 1969. As Amended and Rehearing Denied February 25, 1969.
Donald A. Wine, of Thoma, Schoenthal, Davis, Hockenberg Wine, Des Moines, Iowa, for appellants; A. Arthur Davis and William J. Koehn, on the brief.
Eugene Davis, of Duncan, Jones, Riley Davis, Des Moines, Iowa, for appellee.
After an evidentiary hearing, the court determined that there existed evidence demonstrating misrepresentations of a substantial nature and, relying upon Fed.R.Civ.P. 67, ordered all monies due and payable under the contract to be deposited into the registry of the court. At the same time the court ordered plaintiff relieved from an attachment bond, but nevertheless required it to deposit an additional sum of $44,800 "which additional sum shall be held as security for such right of action, if any, as the individual Defendants might have under Iowa law for wrongful attachment * * *." (Emphasis ours.)
"In an action in which any part of the relief sought is a judgment for a sum of money or the disposition of a sum of money or the disposition of any other thing capable of delivery, a party, upon notice to every other party, and by leave of court, may deposit with the court all or any part of such sum or thing. Money paid into court under this rule shall be deposited and withdrawn in accordance with the provisions of Title 28, U.S.C. §§ 2041, and 2042; the Act of June 26, 1934, c. 756, § 23, as amended, ( 48 Stat. 1236, 58 Stat. 845), U.S.C. Title 31, § 725v; or any like statute. As amended Dec. 29, 1948, effective Oct. 20, 1949." (Emphasis ours.)
In November of 1967, defendants moved for disbursement of the funds. Plaintiff then requested leave of court to deposit the second installment, due December 31, 1968. After another hearing, the court held that the portion of the installment payments owed to three of the defendants would not be disbursed until decision of the case on the merits. The court also noted that since the plaintiff had made no direct allegations of fraud against the three other shareholders, they could not be charged with exemplary damages. He therefore ordered their shares of the first two installments to be disbursed, stating orally, however, that their shares of the last two installments would be held. At the time of appeal the total amount of money paid into court was $691,200.
This court was informed during the appellate argument that the total purchase price less the three shareholders' portions of the first two installments has now been paid into the court. This comes to a total of $1,791,200. No further security for a possible "wrongful attachment" other than the initial $44,800 has been required of the plaintiff. Additionally, the court ordered that all monies sequestered were to be deposited at the best interest rate obtainable.
Initially we must decide whether the district court's order is appropriate for appellate review. The district court properly refused to certify "that there is no just reason for delay" under Fed.R.Civ.P. 54(b). This rule applies only to multiple claims, wherein there has been an adjudication of less than all claims and a party desires "finality" for purposes of appeal. Procedure for interlocutory appeal under 28 U.S.C. § 1292(b), was not followed and is not applicable. Nor does the off-shoot, "irreparable injury" rule of the Forgay-Conrad case render the matter appealable. This rule relates only to the appealability of a partial adjudication of a single claim and is not applicable here.
Forgay v. Conrad, 47 U.S. 201, 6 How. 201, 12 L.Ed. 404(1848).
If the court's order is reviewable at all, our jurisdiction can only be premised upon the so-called "collateral order" doctrine which disposes of a right auxiliary to the merits of a claim filed. The United States Supreme Court in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546-547, 69 S.Ct. 1229, 93 L.Ed. 1528 (1949) stated that the appealability of a collateral order depends upon (1) whether the rights decided are collateral to the merits of the claim (cf. Western Steel Erection Co. v. C.H. Leavell Co., 384 F.2d 764 (8 Cir. 1967)), (2) whether the order is "too important to be denied review," (3) whether the order is "too independent of the cause itself" to defer appellate review until the whole case is decided, and (4) whether the order involves an adjudication of an important question of law or is only an exercise of the court's discretion. The above factors are to be weighed with Mr. Justice Frankfurter's statement in DiBella v. United States, 369 U.S. 121, 126, 82 S.Ct. 654, 7 L.Ed.2d 614 (1962), that under proper application the "collateral order" doctrine is applied "when the practical effect of the order will be irreparable by any subsequent appeal."
In focus is the specific question whether the court was correct in refusing to require plaintiff to post security under and otherwise adhere to the Iowa law of attachment pursuant to Fed.R.Civ.P. 64. If review of the court's authority to sequester funds were required to await appeal of the merits on protracted litigation, compliance with the Iowa law of attachment would come too late to assure protection of the defendants' property rights involved. In order to attach monies before judgment the Iowa Code requires (1) that in a non-contract action the amount attached must be approved by a court of competent jurisdiction, (2) that plaintiff demonstrate statutory grounds for such attachment, and (3) that a bond be required in an amount double the value of the property to be attached. The policy reasons behind these statutory provisions are self-evident. Under Iowa law the amount of the attachment bond was not left to the discretion of the trial judge. The legislature required a bond double the value of the property attached not only as protection to the property owner but undoubtedly as an added deterrent to those who seek to attach property upon a mere statement of a contingent claim. See discussion in n. 10, infra. Of particular significance is the prerequisite of judicial approval as to the amount to be attached in a tort action, as involved here. Under Iowa law a party cannot arbitrarily govern the amount attached by inflating the prayer for damages in the complaint. The value of the property attached must have some realistic relationship to the damages theoretically sustained.
This case was filed on August 7, 1967, and has yet to come to trial.
Iowa Code Ann. § 639.8 (1950). Under the Iowa law of attachment, if the suit is founded on a contract, the court will permit a levy upon property only fifty per cent greater in value than the amount alleged to be due. Iowa Code Ann. §§ 639.6 639.7 (1950).
The issue here is not one related to the proper exercise of the court's discretion as to the amount of security to be posted. The question which makes this matter reviewable is whether the law permits a trial court to circumvent the Iowa law of attachment altogether. A similar issue of review was involved in the Cohen case where the district court had refused to apply New Jersey law requiring security for costs in a stockholders derivative action. Cf., e.g., Swift Co. Packers v. Componia Columbiana Del Caribe, 339 U.S. 684, 70 S.Ct. 861, 94 L.Ed. 1206 (1950) (reviewed order vacating attachment); Phelps v. Burnham, 327 F.2d 812 (2 Cir. 1964) (reviewed order requiring the posting of security); McDonnell v. Birrell, 321 F.2d 946 (2 Cir. 1963) (reviewed order requiring party to make payments, to determine whether order conformed with requirements of state law).
The "existing law" refers to the Conformity Act of 1872 which provided that in all cases at common-law, the procedure as to "attachment or other process should conform to the state practice." See Big Vein Coal Co. v. Read, 229 U.S. 31, 36, 33 S.Ct. 694, 57 L.Ed. 1053 (1913). Thus, with respect to such provisional remedies the federal courts are required to apply state law. See, e.g., Bernstein v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246 (2 Cir. 1947); General Elec. Credit Corp. v. Waukesha Bldg. Corp., 259 F. Supp. 958 (W.D.Ark. 1966); Hisel v. Chrysler Corp., 90 F. Supp. 655 (W.D. Mo. 1950); 7 Moore, Fed.Practice ¶ 64.-01.-09 at 1501-1507 (2 ed. 1966). Rule 64, however, does make state law subject to any existing statute of the United States which might be applicable.
The question then is whether there exists any applicable federal statute which authorized the district court's action. The trial court relied upon the "literal" language of Rule 67. The history of Rule 67, however, demonstrates that it is not intended as an "equitable" alternative to the applicability of state law under Rule 64. Rule 67 was intended to apply only to a fund that is in dispute. See discussion in United States v. Balfour, Gutherie Co., 192 F. Supp. 60 (S.D.N.Y. 1961). When a disputed res or "sum of money" is deposited into the registry, the court holds the money in trust; it is "held for the benefit of whomsoever in the end it should be found to belong," Branch v. United States, 100 U.S. 673, 674, 25 L.Ed. 759 (1879). However, here the seized money is not in contest. Plaintiff's election to sue in tort and keep the bargain confirms this. The plaintiff seeks relief from material misrepresentation which has caused it damage since its bargain retained allegedly is less valuable than was represented. The damage, if any, arises out of the alleged excess consideration paid on the contract; the damage is not the consideration itself, since the bargain has been affirmed and rescission has not been elected. Plaintiff simply wants its bargain and its money too. At the same time it seeks to deprive defendants of their right to claim forfeiture or to sue for a breach of contract. Cf. General Pencil Co. v. George N. Kahn Co., 246 F. Supp. 60 (S.D.N.Y. 1965); Dinkins v. General Aniline Film Corp., 214 F. Supp. 281 (S.D.N.Y. 1963). Rule 67 was not intended for such a one-sided before-judgment consequence.
The plaintiff relies upon Fouch v. Rollins, 16 Alaska 545, 146 F. Supp. 87 (D.C. 1956). For the reasons stated in the opinion we do not accept the Fouch case in this Circuit.
The effect of plaintiff's action here is to obtain such a "so-called injunction" for an action at law. The situation is no different than if defendants were paid the monies directly and then were enjoined from "disposing" of them until the determination of the merits. Provisional remedies of attachment before judgment were not recognized at common law. They are statutory remedies in derogation of the common law and strict compliance with the statutory requirements is therefore necessary. However, even more cogent is the fact that before a person's property can be sequestered, basic principles of due process require adherence to recognized legal standards.
"`The late Justice DeGraff, speaking for this court in Edwards v. Tracy, 203 Iowa, 1083, at page 1084, 212 N.W. 317, 318, said: "Proceedings in attachment are ancillary or auxiliary to the main action and are statutory, being unknown to the common law. Curry v. Allen, 55 Iowa, 318, 7 N.W. 635; Eads v. Pitkin, 3 G. Greene, 77; Delaplain Co. v. Armstrong Ulrich, 21 W. Va. 211; Penoyar v. Kelsey, 150 N.Y. 77, 44 N.E. 788, 34 L.R.A. 248. An attachment is not the leading process. Its only office is to hold the property attached under it for the satisfaction of plaintiff's demand. In a sense, it is an execution by anticipation. It is in derogation of the common law, but, under our statute, the proceedings are to be liberally construed. Section 12143, Code 1924. A court, however, cannot proceed by attachment unless the power rests upon express statutory sanction."