Warren E. Burger: We will hear argument next in No. 5039, Fuentes against Shevin and others. Mr. Abbott you may proceed whenever you are ready. Mr. Abbott.
C. Michael Abbott: Mr. Chief Justice and may it please the Court. And may Your Honor, I would like to reserve five minutes of my time for rebuttal. The nature of the case before the Court now is a challenge to the Florida prejudgment replevin statute on procedural due process and Fourth Amendments search and seizure grounds. The issues are two-fold. Simply stated, whether the Florida prejudgment replevin procedure in which a writ is issued without notice or prior hearing violates the procedural due process and the Fourteenth Amendment and sectioning whether the same procedure insofar that commands the state officer to enter a private ruling by force if necessary violates the search and seizure provisions the Fourth Amendment as applied to the States to the Fourteenth. The lower court held with one judge dissenting that the Florida prejudgment replevin statutes were constitutional. The facts of the case can be briefly stated, the appellant Margarita Fuentes separately purchased a stove and a stereo from the appellee Firestone Tire and Rubber Company in 1967 under retained title contracts. These contracts were then consolidated into one agreement. Margarita Fuentes has complained to Firestone on a number of occasions about mechanical difficulties with her stove. Appellee Firestone indicates that those difficulties have been repaired. Margarita Fuentes alleges that they have not. For that reason she began withholding payments on her contract on April of 1969. In May of that year Firestone sent her telegram for repossession. Four-and-a-half months later, on September 15, they filed an affidavit and a bond pursuant to the Florida statute in replevin to her property. The execution writ was executed on the same day on September 15 by Deputy Sheriff of Dade County over her protest and a protest of her relatives. The appellant then filed the instant action in the court below in November, 1969. The Dade County Small Claims Court on our motion agreed to state that action pursuant to the conclusion of this action and on August 24, a Three-Judge Court below held that neither of the -- that this statutory procedure did not violate either the Fourth or Fourteenth Amendment. Now with regards to the issue of procedural due process, our position can be stated very simply. If you look over the breadth of the due process cases that had come before this Court, conceding that it is a flexible concept, nevertheless, one rule has emerged that is that absent special circumstances involving a compelling governmental interest, that no one may be deprived of a significant property interest prior to having a chance to contest the taking. That is what this Court said in Sniadach and reaffirmed it in Boddie versus Connecticut. Mr. Justice Brennan said again in Bell versus Burson. Now if you look at the Florida procedure, usually an affidavit is filed, although it is not now required in the Florida statue but was filed in this case. It is the usual procedure to file an affidavit in the case. The claimant is lawfully entitled to the property. That is the only allegation that you must make. He files a complaint, a bond in double the value of the property and the clerk issues the writ without any judicial interposition. Simply a ministerial act, he issues the writ, while notes in a hearing, he gives it to the sheriff, sheriff takes it the home and executes on a property.
Potter Stewart: He files a bond in double the amount of the value of the property?
C. Michael Abbott: That is correct Your Honor.
Potter Stewart: And he is the one who asserts the value of the property?
C. Michael Abbott: That is correct. And there is no examination whether this is true or not. Now we submit that the Florida procedure displays the same types of constitutional deficiencies that this Court file lacking is Sniadach versus Family Finance Corporation. There is no evidence indicating the validity or the probability of the claim prior to the part of the taking. The statute is not nearly drawn to certain circumstances that maybe have extreme interest to the creditor. There is no need for the credit to allege a particular state interest that is of concern to him, and it is the use of the property here as it was in Sniadach, it is of concern. It is use of the property itself. There is a property under the Fourteenth Amendment we are talking about. I mean in fact the contract between Margarita Fuentes and Firestone Stores is simply this that she said, I will pay you more money than the cash price of these goods over period of time, in order that I might have the goods immediately as exactly what I am paying for, I am paying for the use of those goods. I agree you to pay you a finance charge so that I may have them now. And it is the use of the goods that she is entitled to until she defaults. But here under this procedure there is no need for Firestone to prove that she has in fact default in this procedure. They come and get it anytime they think they want it back for whatever reason.
Warren E. Burger: What is the bond for and under what circumstances can the purchaser --
C. Michael Abbott: The bond is under the condition that Firestone should be proven wrong. She can thereafter reach that bond and collect on it. Of course, the bond has nothing to establish the validity of the claim. The bond does nothing to mitigate the deprivation between the taking of the trial.
Speaker: But does it indicate at all that what Firestone’s claim is that there is a default?
C. Michael Abbott: No, I do not think so. I mean there is no indication of the claim itself. Nobody makes the examination of whether there is or there is not a default. One can argue that by filing a bond, you cannot deter privilege claims. That if one has to file bond you will deter those people who do not have a proper claim.
Byron R. White: Did Firestone have to file anything in Court prior to taking the goods that in any way indicated that there was a default?
C. Michael Abbott: No, all they have to file is something in the case they are lawfully entitled to, not to the extent one brief that as anything default. I suppose yes, but there is no examination.
Speaker: What is the condition of the bond though that if Firestone does not prove what?
C. Michael Abbott: If Firestone then does not prove at the this comes to trial that they are lawfully entitled to it, Mrs. Fuentes raised defenses that show that Firestone is not, then if she can show damages she can reach the bond. But in the first instance they have to show nothing, all they have to do is file an affidavit that is all pre written and said, I am lawfully entitled to property. It seems to me that what we have to focus on this case are what are the state interests here that are compelling that require Firestone to need this kind of summary procedure.
Warren E. Burger: Well, is it possible that the perishable nature of the merchandise and fact that it is rather rapidly wasting asset has something to do with that?
C. Michael Abbott: If they could show that, then I think that might be significant Your Honor. In fact, it is interesting to note here, that in April when she withheld her first payment they sent her a notice. In May they sent a telegram saying, we are going to repossess within 24 hours if you do not start paying. Then they waited for four-and-a-half months before they actually issued the writ.
Warren E. Burger: You are not complaining about that, are you?
C. Michael Abbott: No, the only point I am trying to make is that if they are actually interested in getting the property because of the deteriorating value, why then did they wait this length of time before going after it. I think what they really want is they want the money. By taking the property first, they gained an additional bit of leverage over that period of time to try to coerce her to pay whether she may have all defenses or not, I think that is the point to be made. It seems to me though that if one looks at the interest that the appellees before, it is compelling this procedure, there is simply no indication that it is necessary for them to do this. The State of Florida says that it is the protection of property of Florida citizens that is of compelling interest here. But of course our position would be there emphasizing the rights of one class such as creditors over another class such as debtors. They also say, well, it is the economic life of the community that is at stake here. As a matter of fact though there is no evidence at all indicating that there is any relationship between attachment type remedies and the availability of credit. The California Supreme Court was recently faced with the same issue just last month in Randone versus Appellate Department. They reject and they said, there is no evidence here that there is any relationship between attachment of property like this and the availability of credit. And further, we note that there are some prevalent studies that indicate that there is no relationship between these two factors. So, if in fact Firestone is restricted, what is going to happen? Well, the only evidence before this Court indicating that there is going to be any damage to Firestone at all, it is an affidavit by Firestone’s own national manager of retail credit in Akron, Ohio. The lower court re-indicated the counter affidavit by Professor William F. Willauer (ph) of the National Consumer Law Center in Boston. We did not even submit that to the record on this Court because we do not feel that either of these affidavits gives the Court the kind of hard data on which you could comfortably rely and say yes, in fact, there is gong to be an economic depravation to elect the community here. But let us go one step further. Let us assume that replevin is essential to consumer credit. It seems to me that one can make the argument that to the extent that you give debtors or creditors relatively inexpensive and expeditious remedies such as we have here, to that extent, they just encourage them to over extend. I mean maybe they are giving credit to people that should not have credit. Now is that in the interest of the citizens of Florida? I do not think so. Our research shows that one out of five people simply default on this thing. They just never show up once their property is taken, they think it is gone. I think that is significant one of the every five people. I suspect that is low over the national average, I suspect it is much higher, and then if you look that studies of Dr. Castlewich (ph) who has mentioned this morning (Inaudible) find you will that nationally that the default rate is much higher but in Florida every one out of five. So I do not think they can show that even if assume that they are going to be hurt, I do not think they can show that consumer credit itself is related to public interest. The amici in this case say that, in addition to this, there is a public interest in the conservation of state resources. Well that may be true. They are assuming that a pre-hearing procedure is going to take more resources than there is now. There is going to be a trial in this case, there is supposed to be a trial. So, simply by having the hearing first that is not necessary indicate that you are going to have to spend more state money. Think only in those few cases where you have a really compelling interest, where you can show for example that the debtors about to take the property of the jurisdiction or he is going probably convey that third person or that is rapidly deteriorating the value. Those are types of cases where you might want to have some kind of summary procedure. But even then, you can still do it on probability, you do not just have give it to him and say we believe you, you can say, what is the evidence that you have the right to this property? What is the compelling situation that you need it now? Then okay, we will let you take it.
Warren E. Burger: Is it a criminal offense to move this type of property without notice to the legal owner?
C. Michael Abbott: I suspect it probably is Your Honor, although that relates somewhat to the consuming of property under lien statute of order, which has Firestone has pointed out in the opinion of the Attorney General of that state is no longer valid aside from that particular statute, I am not just sure if there are other statutes indicating it is a misdemeanor to move the property, I just do not know.
Warren E. Burger: Well, the movability of this property -- portability perhaps I should say, does that have some relationship to the right to a summary remedy, is that in large the need for summary proceeding?
C. Michael Abbott: It seems to me it might. It seems to me it might if you could show that in fact you had that fear. Then in fact they thought Margarita Fuentes was one want to move the property.
Warren E. Burger: Well, Do you make that kind of decision on an ad hoc basis or do you make that on basis of the generality?
C. Michael Abbott: But, if you have evidence to show that there was some reason to make that evidence that you know on the broad basis I think, you know, there will be a point there. The whole point that we make that there is no evidence indicating that a large number of that is expect, what Firestone says, in their own brief at page 18, they say, in the vast majority of these cases, and that is their language not mine, in the vast majority of this case statute that is voluntarily relinquished the property, give it up freely. They also point out that default rate in all consumer installment contract of this kind is 1.76%. Way below the types of defaults that the consumers are having, when they just do not show up. I mean, we are talking about a very narrow portion of the total consumer contract. And there is no evident even indicating that small portion. There is going to be a large number if we are going abscond at the property. In fact, if they are the ones to abscond, it seems to me he has a lot of opportunity to do so prior to the time of the hearing. I mean, Firestone just like any other creditor begins to go to this debt collection process once they think there is a default. You know, they sent Margarita Fuentes a letter, they sent her a telegram and she really wants to get rid of the property it seems to me she is going to do it then and she knows eventually, that they may come and get it, it seems to me. But, if she had the default she still simply not, if she thinks she has not defaulted, she is simply not going to give it up. I mean, if it is her property, why should she? But, there is no evidence over the broad basis to indicate that the Firestone needs this kind of protection that they can not just provide it, and they have not provided it.
Byron R. White: So, you would not be satisfied if Firestone before repossession was required to go before a judicial officer and establish what we might, with a better language call “probable cause”, for reasonable grounds to believe that there has been a default. Exhibit the contract or the note or whatever it is and an affidavit that there has been a default and you would not be satisfied if a judicial officer will require to sign the writ of replevin?
C. Michael Abbott: I would not Your Honor because I think what would happen is that it would quickly become a rubber stamp procedure.
Byron R. White: Now you say that there must be cannot be done ex parte in any way?
C. Michael Abbott: Only in narrow circumstances where they can tell proper with the compelling reason. But these are sometimes very complex issues. If you take a look at the brief of National Consumer Law Center, one of the things that is interesting in this case that it is here that the security interest that Firestone had in the stove had expired at the time they got it. That is to say that in any rational allocation of payments between the stereo and the stove, Mrs. Fuentes had paid off that stove when they came and took it. And, that is not, not a type of defense that the judge looking at the contract, see. She has got to have a chance to commend and say you know, I paid for that stove already, Firestone has breached their warranty of repair. A judge just by himself not makes that kind of determination. Finally it seems to me, I would like to look briefly at the Fourth Amendment issue. Under the Florida procedure, the writ commanded the officer, state officer, the Deputy Sheriff in our case, to enter by force if necessary and to make a reasonable exploration of the dwelling in order to find the property. The problem we have with that is again, what is the compelling state interest that Firestone has in allowing the Deputy Sheriff not only to enter but to enter by force if necessary. Now, if you look at the balancing test which this Court has done in the past, it seems to me you have to weigh the interest of Firestone against the invasion which that entails, and if we agree with Mr. Justice White said in Camara that you are going to have as much of a disturbance in a civil seizure as you are in criminal procedure. It seems to me that you have to allege a very substantial state interest before you can go in to that home. Again, the statute is not nearly drawn, there is no advance notice that they are coming here, I think it appears in with Wyman versus James, resistance with misdemeanor compares to Mr. Wyman where if the welfare is different, wanted to refuse she could. There is no way to refuse here; the sheriff is going to go in whether you refuse or not. If you look at the back of this case Margarita Fuentes did everything, one could expect of a private citizen to do. Short of actually physically obstructing the sheriff, she told him, she stopped him at the door, she called her son-in-law, the son of son-in-law who speaks English which she does not, explained to the Sheriff that he could not take the property. The sheriff comes back and says I have got to take your property that it is my obligation; only at that point did she let him enter the house.
Speaker: Would your case be any different if the stereo are not kept at her home but in a little grocery store that she run?
C. Michael Abbott: I do not think so Your Honor, unless there was some evidence to indicate that she was attempting to conceal it. If Firestone indicates we do not know where it is, we cannot find and she refuses to indicate that she still has it in order to make her feel secure and then they may have an interest. But the Court is not this case.
Speaker: Well, you are giving so much emphasis to the home as such and I wondered if that factor is influential in your case?
C. Michael Abbott: Simply the fact it is in the home. But to the extent that the property is located in a public dwelling where they may have a chance to enter anyway, it seems to me that one can make a less concurring claim. Of course, that is not the statute and the statute does not cover special situations like that.
Speaker: Now you are assuming that the standard is applicable here, is that a compelling state interest, is this established?
C. Michael Abbott: It seems to me under the due process cases of this Court, it is established. Switching back the procedures of due process issue for example, if you look at the cases that were cited, Sniadach, all of those cases dealt with the compelling state interest, you know, Fahey versus Mallonee.
Speaker: These are definitely facts which are -- and I am asking whether this one comes within the factual range of those cases, they must, in your view I take it.
C. Michael Abbott: It seems to me it comes within the general principle, yes. It seems to me as far as they have to show some reason why they need this procedure.
Speaker: Maybe your opposition would not agree to that?
C. Michael Abbott: I suspect they will not Your Honor.
Warren E. Burger: If the statute permitted the counterband that is present in one of the other cases we are hearing, would you say that --
C. Michael Abbott: The statute does have a counterbond Your Honor.
Warren E. Burger: It does?
C. Michael Abbott: Yes, it does.
Warren E. Burger: Well, then the process can be stop by the complete --
C. Michael Abbott: As a matter of fact I think, one of the things that is also interesting. If you look at the record here it appears that in fact what the Sheriff was supposed to do was he was supposed to take this property in hold for three days and give Mrs. Fuentes a chance to post a counterbond. But in the first place there is no notice to her that she has that opportunity. I mean, only if she has a lawyer who can tell her within 72 hours that exist would she ever be likely to do it. We examined 442 cases in fact in County Small Claims Court and we found that nobody ever in that entire year ever posted a counterbond.
Potter Stewart: I did not -- I heard what you just said now, that you would examine well over 400 cases and found nobody did it. I did not hear what you said a little earlier, was there any notice to the debtor, to the vendor that he has this opportunity of filing a bond?
C. Michael Abbott: To the debtor? There is no --
Potter Stewart: To Mrs. Fuentes?
C. Michael Abbott: No, there is no notice to Mrs. Fuentes that she has the opportunity. Well, one of the other interesting things is even though the sheriff is supposed to hold her property for three days, it appears from the record below that actually the property went directly to Firestone. I mean, Firestone accompanied the sheriff in their truck; Firestone took the property not the sheriff. They took it immediately, but, in way three days --
Potter Stewart: What are the, what were the remedies of Mrs. Fuentes? One was to file a bond in the same amount that had been filed by Firestone?
C. Michael Abbott: That is correct, that is correct.
Potter Stewart: And then what would happen?
C. Michael Abbott: If she had filed the bond and if the sheriff was still holding the property then she has the chance to get it back until the trial. Of course, one of the other things we found is that --
Potter Stewart: Until the trial -- so far there is no complaint then filed?
C. Michael Abbott: Yes, there is a complaint in the Florida procedure. There is none in the Pennsylvania.
Potter Stewart: So where is the complaint (Inaudible).
C. Michael Abbott: There is a complaint in under the Florida procedure, they do file a complaint.
Potter Stewart: I see.
C. Michael Abbott: They do not in Pennsylvania.
Potter Stewart: Right. So a complaint has been filed?
C. Michael Abbott: That is correct.
Potter Stewart: And it is a complaint, was it a subsequent, is that what you are saying?
C. Michael Abbott: That is right, that is right.
Potter Stewart: And, that is the condition preceding to the --
C. Michael Abbott: It is; it is.
Potter Stewart: -- that procedure?
C. Michael Abbott: The affidavit that they are entitled to it or not, and nobody ever looks to see what the complaint says. But they do have to file one.
Potter Stewart: And then, there is a copy of the complaint served on Mrs. Fuentes?
C. Michael Abbott: It is at the time the property is taken. There is no previous notice. The same time, the sheriff takes the property, he says here is the affidavit, and here is the complaint.
Potter Stewart: And then, is she filed a bond in an amount equal to that filed by Firestone in this case, by the plaintiff. Then the sheriff continues to hold the property, does he?
C. Michael Abbott: Well, he is supposed to. I do not think he did in this case.
Potter Stewart: What does the law provide?
C. Michael Abbott: He is supposed to hold the property for three days, give her the chance to file her bond. But, what we have found is that --
Potter Stewart: File her bond and then how long does she has to make an answer to the complaint?
C. Michael Abbott: Then she has the normal time to make an answer.
Speaker: But if she files the bond, she gets the properties of it?
C. Michael Abbott: Assuming that sheriff has that is correct.
Speaker: She gets it back?
C. Michael Abbott: She gets the property back totally --
Speaker: You told me, it remained in the custody of the sheriff?
C. Michael Abbott: No, no, no. I am sorry Your Honor. The Sheriff is supposed to hold it for three days before he gets it to Firestone. Now, if she does not file a bond he then gives it to Firestone.
Speaker: What if she does?
C. Michael Abbott: If she does file a bond he then gets it back to Margarita Fuentes. Of course our research shows that nobody ever have filed a bond.
Speaker: Well, we are talking about the law of Florida.
C. Michael Abbott: That is right, that there is a provision there. It is also interesting to know I think though that in order to file this type of a bond, you got to put forward the full amount, full cash value of the property. And Firestone can file their bond for about 1% of the total of their charges, say $200.00 here. Mrs. Fuentes, on the forth coming bond is going to have to file the full cash value, $200.00 plus a premium. If Mrs. Fuentes were a plaintiff, they would make no distinction, she could then file 1% bond, it is not a question of we know, we think Firestone is more reputable than Mrs. Fuentes. It is just simply a question of are you a plaintiff or are you a defendant, if you are a defendant, you file a full bond, if you are a plaintiff, the bonding companies are willing to, let us say, file 1%.
Speaker: If she does not file bond, she is still as perfectly as the property delivered to Firestone that she is still perfectly free to file an answer to the question?
C. Michael Abbott: She is Your Honor, she is.
Speaker: And if she can get judgment she can judge?
C. Michael Abbott: That is correct. Of course in the meantime she is about --
Speaker: She gets the judgment as she, I guess, gets the property back in order to what happens, so, what else does she gets?
C. Michael Abbott: If she can show damages, she then gets damages. I think it would be very difficult --
Speaker: After the bond filed by Firestone.
C. Michael Abbott: That is right.
Speaker: That is the purpose of its filing.
C. Michael Abbott: That is right. But assume for example, it is not this case, but assume she is about out of stove that she was using for six weeks prior to trial, how do you show those types of damages? The types of damages one is liable to be, one is liable to suffer are not the type that you can show in terms of money and that is our point, it is the taking of the property that is a deprivation of itself, it is the significant interest. Now, we are talking about property worth about $600.00. She has got the right to hold on that, now they show she defaults that is the contract.
Speaker: She may file the bond, she must file it within three days --
C. Michael Abbott: She must file it in three days.
Speaker: Must file?
Potter Stewart: In order to get the property back.
C. Michael Abbott: Prior to trial.
Thurgood Marshall: In that hearing can she plead breach of warranty?
C. Michael Abbott: The Florida Law is a little bit uncertain. We believe she can. There are cases which indicate that she cannot.
Thurgood Marshall: Well, let us point this way, she can put the same defenses that as if Firestone has recently sued her?
C. Michael Abbott: That is right. That is our position, yes.
Thurgood Marshall: She can. She is not denying any of the defenses, right?
C. Michael Abbott: No.
Speaker: And in Florida, must Firestone proceed to bring that action instituted by the complaint to a conclusion, is it required to do so?
C. Michael Abbott: I think it is unlike the Pennsylvania procedure where there is no requirement that you file a complaint at all.
Speaker: So, within Florida they are compelled to bring it to a conclusion?
C. Michael Abbott: Well, they did not I suppose that if they did not show for the hearing, it would just be just be a moot, but ordinarily, yes. I mean, in the normal course of events one would normally conclude a complaint.
Speaker: Not if there is an answer filed?
C. Michael Abbott: Yes, if there is an answer filed then you are going to have your trial.
Speaker: There is not one, as the default?
C. Michael Abbott: On the part of the debtor, correct.
Speaker: Incidentally, I think, did you say that the debtor is not informed by Firestone at least or by the sheriff’s office that she may get the property back by posting the bond within three days?
C. Michael Abbott: No, she is not informed.
Speaker: And she -- so she has to know that she had a motion from some source or because the lawyers so advised to her?
C. Michael Abbott: That is correct, that is correct Your Honor. I briefly just like to run over what the lower court held. I mean, one of the things they said is it seems to them that Firestone, that Mrs. Fuentes may have wage her rights. It is a little unclear from the opinion but it appears that they are saying that since the contract reads that in the event of default of any payments, since Mrs. Fuentes has admitted that she withheld payments, therefore, that gives Firestone the right to the property. I think that is an incorrect assertion of Florida Law. Our whole position during the whole litigation has been that ‘default’ is a technical word. Default indicates breach of legal obligation. Now, if Firestone has breached the warranty as she says they have, under the Uniform Commercial Code in Florida, she has a right to suspend her payments; that is her right. Therefore, she has a right to suspend payments, she cannot be in default. If the contracts said, in the event of an omission of payment, Firestone is entitled to repossession. Then they would have a stronger case, but it did not say that, it says in the event of default in payment, there can be no default unless one proves that there is a technical default and that has not been proved here. Likewise, the court below said that we are here dealing with a peaceable entry into her home. It seems to me that with due difference to the lower court that is misleading, I think the question has to be asked, are we dealing with an entry that is coerced? And did Mrs. Fuentes say, Sheriff come on in and take my property, it is alright, or did she stop them at the door and say you cannot have it. What happened --
Speaker: A prior consent (Inaudible)
C. Michael Abbott: I think there was no prior consent in the taking?
Speaker: What does the contract say?
C. Michael Abbott: The contract says, in the event of default of any payment or payments --
Speaker: -- the property may be repossessed?
C. Michael Abbott: That is correct.
Speaker: Do you say that does not mean that they may repossess it from her home although that is where this kind of property all exist?
C. Michael Abbott: Not unless they can show some compelling reason that they need to break the sanctity of the home.
Speaker: I know, but well, I suppose -- you say you cannot send in advance to repossess it from her home?
C. Michael Abbott: I think maybe she could, I do not think she did --
Speaker: I thought you said, she did say you may repossess it?
C. Michael Abbott: In the event of default --
Speaker: Yes.
C. Michael Abbott: Of course there had been no default in our opinion.
Speaker: Well, that is a different point. You state that even if there has been a default, there is no grounds for entering the home.
C. Michael Abbott: No, assuming that there --
Speaker: But your position is --
C. Michael Abbott: Now assuming there had been a default, it still seems to me that that she ought to have a chance to comply first. I mean, they give her no notice they are coming. If they --
Speaker: But assume the default was what she said in the contract sufficient to give consent then to enter the home?
C. Michael Abbott: No, I do not believe it is. It seems to me there has got to be --
Speaker: (Inaudible) Fourth Amendment.
C. Michael Abbott: She has got to have a knowing waiver. It seems to me it is their burden to show that she has knowingly waived it. I think she could knowingly but perhaps under proper circumstances. I do not think that the contract here indicates that she did or even has the kind of language indicating that we have the right to enter your home.
Warren E. Burger: You do not think that a written waiver is prima facie evidence of a waiver?
C. Michael Abbott: If the written waiver indicated what Firestone contends it indicates? I do not think it does; I do not think if you read the contract you glean from it an indication or an inference that Firestone has a right to enter their home. That is not in there. If it were then it is to be a more difficult case. I would like to reserve more of my time for rebuttal. Thank you.
Warren E. Burger: Very well. Mr. Schwartz.
Herbert T. Schwartz: Mr. Chief Justice and may it please the Court. I am Herbert Schwartz, the Deputy Attorney General of the State of Florida. I represent the appellee Robert L. Shevin, the Attorney General of Florida, Mr. George Wright, my co counsel who would be representing appellee Firestone, and he and I will equally divide the argument. I should first like to address some remarks to the comments of the appellant as to the facts. There is a stipulated set of facts in the appendix, which indicate that the Deputy Sheriff may or may not have an refused entry. The appellees and the testimony that was taken at the hearing before the Three-Judge Court indicated that the Deputy Sheriff was admitted to the home peaceably and he did not force his way in at all, nor was this a type of entry that comes under the sheriff appearing in the doorway and the force of law behind them idea as in previous case before this Court. Indeed, the Deputy Sheriff was in civilian clothes. Apart from that the facts --
Thurgood Marshall: Was the Deputy Sheriff armed?
Herbert T. Schwartz: There were no arms on the Deputy Sheriff that were showing. I do not know whether he had to conceal it.
Thurgood Marshall: Did the record can show that?
Herbert T. Schwartz: I am not sure Your Honor, I really cannot --
Thurgood Marshall: Although, the record did not say he was the Deputy Sheriff?
Herbert T. Schwartz: That is correct Your Honor, he did.
Thurgood Marshall: And that meant to anybody with any reasonable sense that he has the whole power of State of Florida behind him?
Herbert T. Schwartz: I would say yes Your Honor that is a reasonable sense I guess. The State of Florida is a real party in interest in this case and the State does assert a real value to this statute. It is more than the State of Florida, merely siding with a credit because in the proper circumstances we would take which ever side were just inequitable in defending our statute. But we do have a viable interest in keeping creditor and debtor peace between the two. It is to the interest of the State of Florida that we prevent and provide ways to keep people from resorting to self-help, such as breaking in and seizing the property and perhaps altercation is over. So the reason for the replevin statute in the State of Florida is simply stated in our brief to take the property and to custodial end to let the two, the debtor and the creditor have it out in Court. Because I hope the Court has got the distinct impression because it would be true impression that everything that is done in Florida in the replevin statute must be done by a Court. There is no profanatory doing anything. There are only officers of the Circuit Court or the Court that has jurisdiction doing the issuing of papers and the hearing, only a judge.
Byron R. White: Well who (Inaudible)?
Herbert T. Schwartz: An officer of the Court, a clerk does all of this.
Byron R. White: Judge can decide?
Herbert T. Schwartz: No, not decide, but before a default can be entered or judgment entered on the default.
Byron R. White: Well, I understand that but the writ of replevin was not issued by a judge and the judge never see the need of the basis for this?
Herbert T. Schwartz: No, Your Honor. But ultimately the manner is disposed of by Court before anybody gets the property. And indeed the clerk must be satisfied and in our State, clerks are officers of the Court. I am not sure how they are in another states, but he must be satisfied that the bond in proper form and that the complaint is in proper form and that the papers are in quite direct order and that is the last thing the ministerial officer the Court has to do with it. From then on it is before the Court and no disposition of the case can be held without the Court doing something. I think there is a very real interest in the conservation of judicial time and energy to be held in the statute envisions, and that it would take a great deal of judicial time and energy for a party to come before the Court of competent jurisdiction to get the writ of replevy, especially as Mr. Abbott says in an advisory hearing. Certainly that would consume even more time than the ex parte type of hearing suggested about the Court in question. And I think the State of Florida does have a very appropriate interest in preserving the economic viability of the installment credit system. So, they really, State of Florida sees two major concepts involved here one is, the very basic underlying question that the State posts and that is our right to legislate in this statutory scheme of replevin, a writ is over 700 years old and somehow the appellant would have you believe that the viability and vitality of the writ of replevin somehow ended when the Deputy Sheriff stepped on the front porch of Mrs. Fuentes’ house.
Thurgood Marshall: This is what (Inaudible), it was ex parte, was it not with replevin?
Herbert T. Schwartz: Yes Your Honor, it was.
Thurgood Marshall: It was strictly ex parte, and then you add it was a writ of a vendor return (ph) or something filed upon, if you want it back. It was all ex parte, was it not?
Herbert T. Schwartz: It evolved to that, your Honor, Yes. Yes, Your Honor, that is correct. The common law history of the writ is well-known to this Court and it is detailed in our brief that this is a viable common law institution that has been engrafted on our constitutional scheme of law and one that it stood the test of time. It is not to be abandoned, the State of Florida feel simply because it is old. Certainly, the older the law the more firmly rooted it is in our jurisprudence.
Byron R. White: Could under Florida Law, Firestone can repossess without getting a writ of replevin at all, just use self help, if it would end up peacefully?
Herbert T. Schwartz: That would not be satisfactory to the State, Your Honor.
Byron R. White: Well, not to the state, But how about under the Florida statute?
Herbert T. Schwartz: No, your Honor that would not satisfy the statute.
Byron R. White: A secured creditor cannot, there cannot be wholly private repossessions by a secured creditor in Florida?
Herbert T. Schwartz: Not under the statute Your Honor. There cannot be. I am sure, as sure as I am standing here that automobile lending institutions do it when they find the car in the street, they take it. I am not saying that we sanction it. I am sure that goes on we are not involved in any type of case like that, nor would we be. This is purely and simply our statutory replevin action that we are seeking to defend. I think there is another fair amount in overriding issue that it is before the Court and that is just how far reaching is the doctrine of Sniadach or Goldberg. I think the appellant in this case tries to view and characterized this case in a vacuum, separately in a part from its operative facts. The facts are that Firestone, under our replevin statute and under its contract, had an absolute right to possess the exact same specific property that they then engrafted. It does not sound ethereal or abstract right of judgment that they are seeking to execute on and therefore garnish Mrs. Sniadach’s wages or stop Mr. Kelly’s welfare payments, those things that are peculiar type of property, those things that are needed for the life blood of a family. But, the appellant speaks here in conclusionary terms without any real facts to support those conclusions, he is speaking this case is one of abstraction really in regard to Mrs. Fuentes because the factual basis is one that wholly supports the reasonableness and the rationality of the Florida statute. It was a peaceful repossession she has all the defenses available to her at the time and place when they reasonably can be presented and the appellant here would have this Court engraft on our law exactly what this Court has said it will not do at many times and that is make due process of law of some fix mechanistic principles without regard to the facts under which it is operating in a given case. And I believe the attack on the Florida statute is a very broad brush treatment of storm and fury that really in a real sense attacks the very system of which Mrs. Fuentes is at beneficiary. Because the system is orderly, it has a great deal rationality to it. She, Mrs. Fuentes, upon repossession could have a quick hearing on the merits, she could post the bond, and also if this statute were abused at the hearing and she laid the predicate to establish the abuse of the procedure, she has her civil recourses to misuse of process, the civil actions for harassing predator techniques and tactics. She could take Firestone in the Court and get damages from them for this harassment and for misuse of process if she could establish that this was indeed the case. So, the fact that the statute has not been abused, speaks of its rationality. And, I think also the fact that people know when they buy something on an installment basis that they are obliged to pay for it and they know that if they do not pay for it, it is going to be taken back rather by the seller. So Mrs. Fuentes is not in a precarious position. Indeed, the record shows that she had been a credit and installment purchaser of this very same Firestone Store several times before over period of years, she had established a credit rating with them, and that if she really have some defense to raise as to breach of warranty, the place to do it was before the court in a proper manner, in a proper case, and the forum was there for her to use. Certainly, Mrs. Sniadach’s wages cannot be made analogous to Mrs. Fuentes stereo set. Mrs. Sniadach’s wages were the life blood of her family, they were that suppose this Court specialized type of property presenting distinct problems in our society, without Mrs. Sniadach’s wages her family could not exist. Without Mr. Kelly’s welfare payments being cutoff his family could not have existed. Money represent those things that is a specialized type of property, certainly one cannot say that a stereo set and unused electric range sitting out on the back porch of a home are those specialized type of property.
Speaker: Well, I presumably I gathered from just reading the stipulation that the reason it was unused in sitting on the back porch was that Firestone -- that it was a defective?
Herbert T. Schwartz: This is a --
Speaker: Firestone has breached its warranty, is it not? There had been controversy between Firestone and Mrs. Fuentes about the stove and as I got it Firestone supplied a new burners and what not? But it still it did not work. Is that right?
Herbert T. Schwartz: That that is correct, Your Honor. There had been some dispute about the stove. Firestone said it was fixed but Mrs. Fuentes said it was not. Nevertheless, the operative facts are this was a stove sitting out in the back porch. She had another one and a stereo set. That partly can be called the life blood of the family. As the lower Federal Court said in Pennsylvania this was really the garden variety of personal property in a footnote to the abstract case.
Speaker: Mr. Schwartz, I supposed it is hard to conceive of it but, suppose this installment purchase instead of being for stereo and a range, had been for car pitches or foods stuff or something, then would we be closer to Sniadach and Kelly?
Herbert T. Schwartz: This is precisely the point Your Honor you would become very close to those specialized types of property that was the subject matter of Sniadach and Kelly. In those cases, I would certainly say they might very well be the light blood of the family.
Speaker: You would have us draw the line of half then between these types of cases.
Herbert T. Schwartz: Your Honor, the State of Florida says that if you do not, if you do not what this Court would be doing would be deciding replevin cases add in for (Inaudible) as to precise property, which property does come under Sniadach and Kelly and which property does not in a case to case basis. The operative facts, I think in summary. The operative facts show that the state’s interest is to get the debtor and the creditor, and at this process, which is set up by the Florida statutes does need those rudimentary standards to fairness and due process that have been so often enunciated by this Court. And that to change the Florida Statute’s in effect would be to throw a monkey range into the works of an orderly state process and an economic process in which both parties are eminently aware of their rights and duties. Thank you, Your Honor.
Warren E. Burger: Very well, Mr. Schwartz. Mr. Wright.
George W. Wright, Jr.: Mr. Chief Justice and may it please the Court. Before proceeding to discuss the appellant’s due process complaints as they relate to this case, I would like to clarify one or two matters that have been here before discussed by counsel for appellant. He has asserted in argument before the Court that there were complaints about the performance of the stove in question, and has asserted here in all argument that that was the reason for Mrs. Fuentes withholding payment on the installment contract. When we were requested by the Three-Judge Federal Court below to confer it for the purpose of stipulating to as many facts as we could to ease the burden of that Court in resolving this case, Mr. Abbott, counsel for the plaintiff asserted and it reflected in this stipulation that he made a contention that there was some difficulty with the stove and that his client was not satisfied with the repairs that were made by Firestone. Because of the fact that such assertion was made by counsel in that stipulation, the Three-Judge Federal Court below set down an evidentiary hearing for the purpose of allowing either or both parties to this cause to adduce before that Court evidence on any matters on which they may not be able to be stipulated. At that evidentiary hearing despite inquiry by that Court of Mr. Abbott, he declined to adduce any evidence to support his unsupported contentions that the stove was in fact defective or have not been properly repaired. There is nothing in this record to reflect in one order that the reason for Mrs. Fuentes withholding payment for the stove or for the merchandise purchase was because of a defect or a failure to properly repair. The next point I would like to mention in respect to a factual statement and that is as to the Fourth Amendment contention. Counsel for appellate implies and has throughout his brief implied that there may have been some forcible entry in the service of the particular replevin writ here involved. That is a far cry from the undisputed facts here. Not only was a peaceable repossession, the Deputy himself was invited in to the Fuentes home. There is only a dispute as to the time of the invitation of the Deputy into the home but there is no dispute and it is conceded that prior to the actual service of the writ, the Deputy was invited in to the Fuentes home. There was no objection by Mrs. Fuentes herself; there was a question raised by her daughter-in-law, who happened to be in the home with her about the right of the sheriff to repossess the merchandise. The sheriff awaited the daughter-in-law’s call to Mrs. Fuentes’ son-in-law who then sought the advice of counsel and the sheriff stood there during this period of time which must have been some 30 minutes or so when all of these was going on and the son-in-law came to the home and advice the sheriff that he had talked with his counsel and that his counsel said he could not take back merchandise unless there was an actual court proceeding pending. At which point, of course the deputy explained that there was a Court proceeding pending at which point all parties involved retracted and failed to raise any objection to the repossession of the merchandise. One matter I would also like to clarify --
Byron R. White: Was the complain in replevin --
George W. Wright, Jr.: There was a complain --
Byron R. White: -- given to her then?
George W. Wright, Jr.: Yes sir. And the complain in replevin, Mr. Justice White, is stated the basis of the claim that she had defaulted on the installment contract for the purchase of the stove and it was asserted what her default was in the balance owed upon that obligation as reflected by the contract --
Byron R. White: Was that complaint filed in connection of getting the bond, the replevin bond?
George W. Wright, Jr.: Yes, the complaint had to be filed under our statute in order for the clerk to issue a writ of replevin.
Byron R. White: Together with an affidavit?
George W. Wright, Jr.: Our statute no longer as Mr. Abbott pointed out requires an affidavit but in fact one was filed with this complaint. But our statute does require the filing of a complaint at that is the actual institution of a lawsuit before the clerk is empowered to issue a writ of replevin, and of course the replevin party must file with the clerk a bond in twice the value of the property sought to be repossessed.
Speaker: What does Mr. Abbott mean by 1 or 2% under your practice?
George W. Wright, Jr.: I think he has referenced to the fact he filed an affidavit in the court below to the fact that, I think most of the practice or the practice of most bonding companies in Florida require the defendants who post forth coming bonds to actually collateralize the bond by putting up the value of the bond itself as security where they apparently do not require full collateralization of the replevin bond itself. That is a matter of practice.
Speaker: The face amount of a bond is the same as indicated?
George W. Wright, Jr.: Yes, the face amount of the bond is exactly the same. If there are abuses in the bonding company’s procedures or charges we of course would submit that would be matter for legislative direction and not for a constitutional strike down of this statute on the basis of the Fourth Amendment violation. I would like to mention the fact that in our brief before this Court we have dealt somewhat with the economic aspects of the secured sales transaction. Our purpose in doing so is not because I purport to be an expert in the field of economics which is somewhat a complicated field, but to point out I think significantly that the property interest in the collateral sale, collateral which forms subject matter of the installment sale, is vitally different from those involved in wage garnishments which were involved in Sniadach and welfare termination payments which were involved in the Goldberg-Kelly case. And secondly, because the impact of altering or in fact eliminating some repossession remedies is conceivably so great that it should not be done by constitutional sweeping, constitutional attacks upon a long acquiesced in and honored remedy such as replevin certainly in absence of compelling judicial precedent. We submit that there is no compelling judicial precedent of this Court that would require a constitutional strike down of this statute on the basis of due process contentions. The times when this Court has had before, the question and the validity of the remedies or prejudgment attachments generally such as in McKay against McInnes, this Court has approved them and only in Sniadach has the Court disapproved any prejudgment attachment remedy or general attachment remedy and that of course dealt with the question of garnishment. The basis there being of course as Mr. Schwartz has emphasized that involved as the Court stated a specialize type of property wages in which the Court has describe there and in Goldberg as the very means by which to live. Both in the economic and legal aspects of the secured sales transaction we submit bear consideration in considering the due process contentions asserted here by the appellant. The respected property rights of course of the secured seller and purchaser are vitality different from those involved in a prejudgment garnishment. For example, family finance has no contractual interest or legal interest in the wages of Mrs. Sniadach. It has none certainly until after judgment is entered upon the debt if there be a judgment ever entered upon a debt. Of course, there is no contractual relationship involved in the Goldberg situation, but in the secured sales transaction there is a contractual relationship involved which gives the creditor, we submit, certainly and equally if not greater property right in the collateral as the debtor, and it is for the protection of the creditor and the debtor that replevin remedies have been approved, have been enacted, and have been followed, and have been acquiesced in for centuries of time.
Potter Stewart: This remedy would be available I suppose if let us assume that the personal property would cost a thousand dollars and after $999.00 have been paid and then it was default on the last dollar, the remedy would be available to the vendor.
George W. Wright, Jr.: The remedy Mr. Justice Stewart would be legally available on the Florida Statute, yes sir.
Potter Stewart: So you cannot say that in every case there is more property right in the plaintiff than in the defendant?
George W. Wright, Jr.: No sir, you cannot say that in every conceivable factual situation that that would be the case. We have adduced in our brief and appendix to our brief, statistics reflecting in so many instances that for -- particularly in automobiles for example that for the greater proportion of the ordinary automobile, the term of the automobile loan that the value of the collateral itself or the resale value of the collateral itself is much less than the balance owed on the debt. For example, if I recall correctly and if it is reflected in our brief that on a 36-month automobile loan that for the first 22 months, the wholesale or resale value of the automobile is less than the balance due on the 36-month loan debt.
Potter Stewart: Now, there are two reasons for that. One is the fast appreciation on automobile in the first few months in its life and the other is that for the first few months the buyer is paying mostly interest and almost no principle, is that correct?
George W. Wright, Jr.: That is correct. I would assume that if the contract provide the course that interest is being -- payments are being applied first to interest and then the principal which I trust is probably case in most such transaction. We submit further that the Sniadach situation or Sniadach ruling should not be extended to all types of tangible personal property and to the replevin of the counsel for appellate would here assert. Indeed, I think that this Court expressly recognized in Sniadach that it was not intended to extend its doctrine to all of prejudgment attachments in general. The Court stated there that a procedural rule that may suit due process or satisfy due process or attachments in general citing its prior decision in the McKay versus McInnes which upheld on due process claims constitutionality of prejudgment attachments statutes of Maine does not necessarily satisfy procedural due process in every case. And every case in Sniadach involved of course the specialized type of property that the Court recognized warranted a specific conclusion breached in that decision. The same holds true in an essence we submit for the Court’s holding in the Goldberg decision. The new property concept there recognized as embracing those dependent upon the sovereign for their very existence, that is the persons being all welfare and when they are deprived of their welfare payments, they are denied of their very means by which to live, we submit is peculiar to that situation and should not be extended to cover the situation of replevy of all types of tangible personal property. I think perhaps counsel --
William J. Brennan, Jr.: What about the Bell and Burson?
George W. Wright, Jr.: Excuse me?
William J. Brennan, Jr.: What about Bell and Burson?
George W. Wright, Jr.: Bell and Burson, if my memory assures me correctly Mr. Justice Brennan involves of course the situation of the driver’s license of the Georgia Minister. My understanding or reading of the Bell and Burson decision was essentially based on the entitlement concept that this Court recognized in Goldberg that once the government undertakes to give you something even though they are not obliged to give you something then that person has acquired such a property right in that entitlement that he should have an opportunity to be heard. Of course, in Bell and Burson there was a provision for hearing but not on the question of liability of fault. But I think that Bell and Burson were closely fits the specialized situation in Goldberg because the Court did observe in Bell and Burson, if my memory serves me correctly, that the driver’s license himself might well constitute the very means by which to live virtually speaking as or analogous to the Goldberg-Kelly situation. Certainly, we submit that that cannot be applied categorically to all types of tangible personal and it should not be implied to a tangible person be at all. I think there is one interesting statistics that we have cited in our brief from a publication often cited by the appellants themselves in their brief, entitled “The Poor Pay More”, and it demonstrates that people, while they may not be able to do without wages, can do without things. The statistics show that insofar as consumer durable goods including such things as washing machines, furniture, carpeting, sawing machines that in families earning a annual income of less than $3,000.00 almost anywhere from 30 to 40% of those families, and this Court’s -- there is a sampling, it is about 300 families sampling. But, it reflects that of the family sample, the 300 family sample earning $3,000.00 annually or less that who have these particular items the washing machine, the TV, the sawing machines and so forth that they had paid cash for them. They had waited until they could save enough cash to pay cash for these articles, and I think it demonstrates that whether we are talking about rich or poor that people can do without things were they cannot do without wages or welfare benefits. I think it is important to mention also that there is a vast distinction and a consideration to be given to the contractual property right that is involved in this particular decision or in this particular case, which is not existence in the decisions of this Court that counsel for appellant rely upon. I did want to mention to clarify in response to a question asked Mr. Schwartz by of Mr. Justice White, that Florida does have the Uniform Commercial Code and under Provisions of Section 679.9-503 Florida statutes, it has the self-help repossession feature --
Byron R. White: But Firestone has repossessed this without getting replevin bond under the Florida Statute and under the Uniform Commercial Code.
George W. Wright, Jr.: Yes sir, it could have so long it does not invoke a breach of the peace, but we submit certainly if that is reasonable and valid and we submit of course that it is that it should not be justification for striking down the replevin statute which does provide for of course the intervention of the state to assure a no breach of the peace. Thank you, sir.
Warren E. Burger: Thank you. You have two minutes left Mr. Abbott.
C. Michael Abbott: Mr. Chief Justice and may it please the Court. Briefly with regard to the facts the only point I want to make is that to the extent that the appellee Firestone continues to say that the sheriff was invited in to the home I think it is essentially misleading. I would also like to note one error --
Warren E. Burger: It is then stipulated there or it is not?
C. Michael Abbott: No, it is not stipulated Your Honor.
Warren E. Burger: It is not covered by the stipulation?
C. Michael Abbott: What happened is that Mrs. Fuentes allowed the sheriff to enter after he had made clear his position that he has the obligation to execute the writ. She did not say you come on in to my home to say that he was actually invited. I think what happened was he, Mrs. Fuentes acquiesced. In fact Mr. Leon (ph) acquiesced in speaking for Mrs. Fuentes who does not speak English. But one thing I did want to note is that both the lower court in our own brief made an error in indicating that Mrs. Delgado called the son-in-law to come to the house because Firestone continues to contend that Mrs. Fuentes herself made no protest. I think that is not true but in fact --
Warren E. Burger: Do these factual matters really make any difference here on the constitutional issue?
C. Michael Abbott: I do not think they do. The Firestone contends that Mrs. Fuentes did not make any objection. The only point I want to make is that the record on Page 28 would show that actually Mrs. Fuentes who called Mr. Leon and not her daughter-in-law and the lower court in their own brief including lower court were in error on that point. The only point I want to emphasize is to say as Mr. Wright does that they have more property right than Mrs. Fuentes has or she gets more property right. The Firestone has I think missed the point. My whole point has been that what Mrs. Fuentes was paying for is the use of these goods and that is why she pays a higher price in the cash sale price. In fact, we can show in this case I think, that they did not have any security interest in the stove at all when they took, I do not think that is particularly important I think the situation would be exactly the same if she had made only one payment at the time they came to take it. That they have security interest in both items. The point to be made is that she is paying more for this so that she can have their use immediately.
Speaker: Well, if she continues to pay more for them, she has their use, does she not?
C. Michael Abbott: That is correct Your Honor.
Speaker: This only arises when she stop paying.
C. Michael Abbott: That is right. But of course Uniform Commercial Code and Florida says that our situation in which she has a right to suspend payment. That is crux of our thrust, and it seems to me that Firestone ought to establish that she has violated or is someone in default. I mean, if the Florida gives her a right to suspend payments, is it then fair to give Firestone a right to take their property before they prove they are entitled to it, and that is our thrust. It seems to me to the extent that the appellee’s rest on the specialized property that they are ignoring the vast history that the due process cases in this Court. This Court has always looked first to the state interest involved and then if there is a compelling state interest they look to see whether the property is significant. Here, the very little talk coming from the appellees on the significance of the interest on why they need this procedure, why is it compelling that they have, what interest did they show that they needed or as required that they are going to settle without it. They just have not shown that and that is the thrust of the past case in this Court, you look first to the State interest.
Potter Stewart: But do you think -- Do you think this could be true every time that somebody wants to attack the case law or the statutory law of contracts of a particular state saying that it is unconstitutional, but all of a sudden the burden passes to the state to show a compelling state interest for this particular rule of contract law?
C. Michael Abbott: It seems to me if they are violating the fundamental rule --
Potter Stewart: But that is the question before us.
C. Michael Abbott: That is right, if you look to the cases -- Mr. Justice Stewart, if you look at the case that have decided is Sniadach, all of those cases have a compelling state interest except for two, Ownbey versus Morgan and McInnes versus McKay about which Mr. Wright speaks. Now those two cases at least Ownbey is clear involve a non-resident defendant. So, they needed that kind of prejudgment attachment in order to bring them into Court. McInnes versus McKay which is the per curiam decision appears to indicate that also there was non-resident defendant there too to extent the Court speaks of the defendant of making a special appearance. Those are the only two cases cited by the Court in Sniadach in which there is not a compelling state interest in terms of the statute at hand in which a private creditor initiated procedure to only two cases, and both of those cases are distinguishable and that you needed the statute in order to bring that defense in Court. All the rest of those cases involve compelling state interest.
Warren E. Burger: The time is up now Mr. Abbott.
C. Michael Abbott: I thank you.
Warren E. Burger: Thank you gentlemen. The case is submitted.


Earl Warren: Number 335, Sunray Mid-Continent Oil Company, Petitioner, versus Federal Power Commission.
Melvin Richter: May it --
Earl Warren: Mr. Richter.
Melvin Richter: May it please the Court. This is case is here on certiorari to the Court of Appeals for the Tenth Circuit. It involves the question which is similar to one of the issues which was discussed in the Sun Oil case in which argument has just been concluded. The question here relates to the Commission's authority under Section 7 (e) of the Natural Gas Act, generally, to issue certificates of unlimited duration where the applicant has explicitly sought a certificate, coextensive in duration with the term of his gas sales contract. There is no question in this case as there was in Sun Oil as to rates whether initial rates, the rates changes. Nor there is any question here, again if there was in Sun Oil, as to the scope of a certificate that was issued earlier or the propriety of issuing a second certificate. In this case, there's been no previous sale of the gas involved in interstate commerce. If here, Sunray applied for certificate to sell the gas in interstate commerce for the first time, its application unequivocally requested that the certificate be coextensive with the term of his gas sales contract.
Felix Frankfurter: And what was that, Mr. Richter?
Melvin Richter: 20 years.
Felix Frankfurter: 20 years.
Melvin Richter: Basic term to 20 years. And the Commission clearly so understood. Briefly, the facts in this case are these. Sun Ray is an integrated company engaged in virtually all spaces of the oil business. In addition at present, it is producing and selling natural gas under about a 160 long term contracts, most of which offer terms of 20 years or more. And I might add by the way at this point that about 85% of the gap produces contracts in the industry offer terms of 20 years or more. Sun Ray also produces substantial qualities of crude oil and frequently in conjunction with natural gas. Sun Ray refines the crude oil into fuel oil, to gasoline and other products and sell these various products to the public and to the Government. By contract dated February -- January 1, 1957, Sunray agreed to sell United Gas Pipeline Company gas produced from certain lands and acreage owned by it in Lafayette and Vermilion Parishes in Louisiana. At present, Sunray is only known of proving gas reserves in this area are in a small portion thereof known as the “Ridge Field,” and this is in Lafayette Parish. The total area involved here that's dedicated to this contract about 33 square miles of which Sunray owns about 7000 acres. A very small proportion of those 7 --- 7000 acres have been developed and have proven to have gas reserves. Under the contract, Sunray is to deliver in United's tank annual minimum quantities about 4.5% of the estimated reserves. The United in addition is to have a further right, annually to take up to an additional 50% of this, amounted about 6 close to 7%, just right 7%. That's the maximum take of United. As I mentioned before, this acreage is in the haul of a ballistic gas fields in South Louisiana and it's expected for the great deal of confidence that additional gas will be discovered in this dedicated area. Subject to certain conditions not here relevant, these additional reserves are to be included under the contract. However, such inclusion is only for the remainder of the 20-year term from the time when these additional reserves are discovered. In other words, if a -- if an additional reserve is discovered, say 10 years from now, that reserve goes into under the contract only perspectively. And under the term of the contract will definitely be gas left at the end of the 20-year period. These specific quantities of gas as -- are to be sold and delivered for a basic term of 20 years. Highlighting the fact that the contract is for the specific quantity of gas, is the provision that of Sunray should use any of the gas for re-pressuring or recycling operations so that it cannot deliver the fourth or annual minimum to United in any specific year, the contract is to be extended for a sufficient period of time to make up to deficiency. In other words, United has a guarantee, they will get the annual minimum for 20 years and it can take up to 50% additional. That is the range under with -- of gas that's sold and under this contract. On March 11, 1957, Sunray applied to the Commission for authority to sell this gas under this contract to United under Section 7 (a) of the Natural Gas Act. That Section provides impertinent power set out on page 12 of our brief, among other places, in full it's set out on page 57 and 58 of our brief but the pertinent language with which we're concerned here is set out on page 12. And that provides that a certificate shall be issued to any qualified applicant, authorizing the whole or any part of the sale, on the leading language we cluster out as the sales service operation, construction etcetera, but the -- we're -- we're concerned with the hearsay. Covered by the application if it is found that the applicant is willing -- is able and willing properly to do the acts and to perform the service proposed and that the proposed sale and again I'm leading some words, to the extent required by the certificate is or will be required by the present of future public convenience necessity. And then this -- it goes on, “Otherwise, such application shall be denied.” The Commission can't make an affirmative finding that -- that the application is -- the terms and conditions of which the application is made accords with the public interest that has the authority absolutely to deny the application. There are further provisions in the statute in Section 7 (e) relating to a conditioning but it's not involved in this case with no rate condition problem here. The application as I mentioned initially, specifically requested a certificate coextensive in term with the contract. That as for the contract -- the certificate being for the basic term of 20 years. After hearing and which the only evidence introduced with regard to the duration of the certificate was by Sunray. The Commission, despite -- despite Sunray's specific request issued a certificate of unlimited duration. The Commission, with the approval of the court below, assumed that the act established a presumption that certificates are to be unlimited in duration. Based on this presumption, the Commission ruled that Sunray had not made out a case justifying the issuance of a limited certificate. In other words, so far as the Commission was concerned, all certificates are -- are to be of unlimited duration unless there is a showing of special circumstances justifying initial in service certificate of limited duration. It's our position that the -- that exactly the converse is true. This presumption --
Felix Frankfurter: Well, was this, Mr. Richter?
Melvin Richter: Sir.
Felix Frankfurter: Was this based on a general rule by the Commission or regarding the specific circumstances presented by your contract?
Melvin Richter: No, sir. It was the general presumption that the Commission indulges in presumably as Mr. Wahrenbrock has indicated in his argument in the Sun Oil case, the statute is a -- as a broad public utility ramifications and one of the necessary obligations under a public utility statute is a presumption of indefinite service.
Felix Frankfurter: When I indicated that the Commission has the power of not being bound by a specific contract, indicate that to my ignorance, he seem to not welcome that suggestion?
Melvin Richter: Well, I would assume not -- I -- for obvious reasons. It's Commissions with --
Felix Frankfurter: Well, I thought -- as you thought I -- as I gather from you, that's what the Commission did in this case.
Melvin Richter: Commission ignored the contract.
Felix Frankfurter: No, no, no. But the Commission here said, we don't -- we don't want a term contract -- a term certificate --
Melvin Richter: That's right.
Felix Frankfurter: -- we'll give you indefinite certificate.
Melvin Richter: We'll give you a -- presumptively, the certificates ought of be of an indefinite duration.
Felix Frankfurter: Perhaps that -- this is my talent, has come within but I got the impression that he was not welcome to that suggestion when I made it.
Melvin Richter: Well, maybe you might have --
Felix Frankfurter: Alright. I do it again.
Charles E. Whittaker: How then does that nature of language, the last three words forwards the application shall be denied?
Melvin Richter: They -- the Commission's view apparently is and I have limited time and I prefer trust of the addressed question, well, I'm quite -- as -- as I understand the Commission's view, I would like -- is that this nature of the statute inherent in the very nature of the statute. The mere fact that Congress in act of the Natural Gas Act with various rate provisions, certificate provisions etcetera that that carried with it a presumption that all certificates issued out of the -- of indefinite duration unless special circumstances were shown, justifying the issuance of a special certificate. We come back to Mobile. In Mobile, the Commission's position was some -- substantially the same. In Mobile they said, “Sure, the contracts are entitled to or preserved under the statute but the Act by virtue of public utility filed rate procedures,” the terminology they used. That -- that the -- that the statute permits the overriding freely of contracts and the Court rejected them then. And we think they ought to reject them here again. But basically this presumption which they have involved appears to be have founded upon three erroneous premises, that we understand it. One is an asserted purpose and policy of the Act to assure indefinite continuity of service. Second, a cargo of policy derived from the provisions of Section 7 (b) of the Act relating to abandonment. And third, an alleged the -- they're contrary result or enable applicants to “dictate” the terms on which they will sell their gas in interstate commerce. Now, in light of the limitations of time, I'm not going to be able to go in a great detail into the various ramifications of our position. I would like to just hit some of the highlights here. As I say, it's our position that where an applicant applies for authority to sell gas for a period coextensive with the sales contract, the Commission's authority is limited generally or I say generally, to issuing a certificate for that term. Section 7 (e) of the Act which I've just read expressly so states as we read it, as the Court recall, that Section provides for the issuance of a certificate authorizing the whole or any part of the sale covered by the application. When as in the case, such as we have here, the whole of the application is for a certificate of a -- for a limited period, the issuance of a certificate for longer period of time or if indefinite duration exceeds the bounds of the application and the contract enhances not within the Commission's authority under Section 7 (e). Now, this reading of Section 7 (e), we think does not mean that the applicant is able to dictate the terms and conditions under which he'll sell his gas in interstate commerce. This Court that latter in so called capital Atlantic Refining case last term, held flatly that there was nothing in the Natural Gas Act that precluded an applicant from standing firm on his terms and conditions from making a sale provided he haven't sold this gas yet, and this is that type of case. At the same time however, the Commission is not required to authorize a new sale unless it finds that the applicants proposed terms and conditions are in the public interest. If the Commission finds that they are on a public interest they issue us a certificate. If they find that is not, they deny the certificate. And in the course of making that determination, there's no reason why they cannot take into account the term for which the sale was being made. They do that everyday in the pipeline cases. One of the most important factor in the pipeline certificate case is the adequacy of reserves. And the Commission looks to the reserves and if its for less than of prescribed minimum, they'll deny the certificate. If it's for -- meets their standards for of minimum -- of minimum requirements, they'll grant it. And I might point out in addition that whereas here, we -- we're willing to sell the gas for 20 years. In the pipeline cases, the Commission is now accepting reserves down to 10 and 11 years as is being adequate as in the public interest. Now, we want to point out further that this reading of the Section 7 (e) is nowhere conflicts with Section 7 (b) of the Act. In order to create a conflict, Mr. Wahrenbrock in the Sun Oil case and he'll probably argue here again, seeks to read into Section 7 (b), a general congressional mandate to assure indefinite continuity of service. But Section 7 (b) is not that broad. The only abandonment authority granted by -- to the Commission by that Section is lower and I'm quoting. “Facilities subject to the jurisdiction of the Commission or any sale rendered by means of such facilities, it's limited to certain kind of service assuming that what Sunray is doing here is making a service. It's providing a service rather than just selling gas.” Now, we can go back in that point to 7 (e) which has -- says, sale common service and as Sunray applied for was authority to make a sale, not to render a service. But assuming that Sunray is engaged in providing a service, there would still be -- or even get to whether or not this is subject to 7 (b), it says facility subject to the jurisdiction of the Commission. That is the prerequisite, is that you stop there first and if you -- you find facilities, then you go on and service, but if you don't find facilities, you don't have any service. The same broad reading of Section 7 (b), I might add, that the Commission have the case here was advanced by it in the Panhandle case in 337 U.S. And with respect -- as -- as expressly rejected by this Court, properly read as far as we see it, Section 7 (b) is in complete harmony with our reading of Section 7 (e). As we see it, a certificate issued under Section 7 (e) defines the period definite or indefinite. But it defines the period that the sale is to be made of the service rendered. We applied for a certificate of limited duration and that defines the scope of the Commission's jurisdiction to issue a certificate. Section 7 (b) in turn applied only when there is an attempt to abandon service short of the period set out in the contract. In other words, assuming that Sunray is making a sale of serve -- providing a service here and it has jurisdictional facilities so it's subject to 7 (b). Then Sections -- sale we -- and we applied for a certificate of limited duration and we obtained it, the Commission gives it to us. Then Sunray cannot discontinue that self-service of sale within the period so it's covered by the certificate, i.e. for 20 years unless of course it has to get a Commission approval. It's in no way free to discontinue as it wishes. Now, apart from Section 7 (b), the Commission appoints that no provision in the Natural Gas Act vesting it the general responsibility to assure indefinite continuity of service. Section 7 (a) on which the court below rely is very limited in scope and indeed as the Commission concedes in it's brief in this case, does not reach sales of gas by a producer to a pipeline company. At this point, I'd like to pause for a moment. Mr. Wahrenbrock mentioned the legislative history in Sun Oil of Section 7 (b). And he referred to John -- Mr. Benton as being one of the most eminent authorities on that. If we pause for a minute and read the language of the amendment that Mr. Benton proposed which is set out on page 30, in the footnote of the Commission's brief. It says, “No gas company which is supplying gas to a public utility company engaged in distributing such gas to the public shall discontinue service to such public utility company without first obtaining from the Commission a certificate that probably convenient and necessity permits such abandonment. This on its -- this on its face, doesn't reach a -- a sale of gas by a producer but obviously was only intended to relay to a pipeline providing service to a distributing company. I might point out in that connection to that read in context, Mr. Benton was talking about 7 (a). And as I pointed out before, 7 (a) clearly, and the Commission concedes, does not apply to sales by a producer. In urging that the Natural Gas Act nevertheless should be construed as imposing such a broad responsibility upon the -- it -- the Commissioner asserts that this is necessary in order to protect the consumers. This argument however fails to give any effect to the provision of Section 1 (b) exempting from the Commission jurisdiction, language which Mr. Wahrenbrock in Sun Oil, were characterized as irrelevant, the production and gathering of natural gas. Section 1 (b), it has an affirmative grant of jurisdiction and goes on to exclude from the Commission's jurisdiction. Among those items excluded from the Commission's jurisdiction is the production and gathering of natural gas. This exemption as this Court has already recognized in Panhandle case and other cases, Mobile and Memphis, reflects a Congressional reconciliation of the interest of the consumers on the one end and those of natural gas companies on the other. To stress as the Commission does in this case, a need for an indefinite continuity of service is underway to the consumer's interest and results of invasion of a production in gathering exemption. In contrast, we believe that our position results from an a reasonable accommodation of the needs and legitimate interest of both the producers and the consumers as to this Congress had intended.
Speaker: Could I ask you a question --
Melvin Richter: Yes, sir.
Speaker: -- born of curiosity? Why did you go to the precaution of applying for a limited certificate?
Melvin Richter: Because we -- that's been the practice of Sunray.
Speaker: Has it?
Melvin Richter: Yes, sir. Right -- Sunray has from the outset written, make sure that there was no question that -- as to what the scope of certificate there were applying for.
Speaker: In other words, you don't think it's as clear as you have here (Voice Overlap) --
Melvin Richter: Well, I'm not (Voice Overlap) take any position on that but Sunray left no question and it's cleared. Thus, as I say, the position that we're at -- we're just taking here provides in reasonable accommodation of the interest of all the consumers and the -- well, natural gas company.
William O. Douglas: I suppose, you would you say that the Commission couldn't deny then a certificated to you?
Melvin Richter: No, no. We say the Commission adopted the wrong standards and --
William O. Douglas: Well, but you -- I suppose you would say that the Commission couldn't deny you a certificate?
Melvin Richter: Well, we say -- we -- we --
William O. Douglas: And they -- they would have to give you one for --
Melvin Richter: We think, that the -- we are -- are -- application for a basic term of 20 years meets the standards, that should be applicable.
William O. Douglas: Yes. But suppose the Commission said, “We don't want any of these limited term certificates --
Melvin Richter: If they can --
William O. Douglas: And therefore, we'll --
Melvin Richter: If --
William O. Douglas: -- we'll deny your application.”
Melvin Richter: Presumably, if we could -- we could take that to the Court and if that's not an arbitrary and capricious action by the Commission. We would be forced off from selling the gas.
William O. Douglas: That's what -- you -- you maintain that they -- you maintain that -- that they have that one choice there and that is the -- to grant this (Voice Overlap) --
Melvin Richter: No. Not at -- at the present posture of the case, I think, the -- the Commission qualified the -- the wrong standard, that they assumed that there was a presumption and that -- that the certificates should be of definite duration and that on special circumstances justify this. They didn't apply the right standard and that is to look at the certificate application of the contract for a term of 20 years and look at that and say, “Does this meet the public interest?” They didn't do that, they did the other way around.
Felix Frankfurter: Well, suppose the -- suppose they set forth what they haven't set froth, I take it, reasons of the inadvisability of trying himself without perfect experience. Suppose they say --
Melvin Richter: Well, then --
Felix Frankfurter: -- and not this [Inaudible] of things whatever it is, 35 whatever it is.
Melvin Richter: Well, they haven't undertaken with -- just to issue any -- give any reasons why they think they -- while there is a presumption. They say it's a statutory -- they read into the statute basically and they don't have to give reasons because that's what the law provides as from -- from their point of view. I'd -- I'd like to just make one more point and I'd like to reserve the remaining remainder of my time. As I was just about to say that the -- our position results in a reasonable accommodation of interest of both the consumer and the producer, on the one hand, the 20 years gas supply of gas such as involved here, provides to the consumer a highly reasonable assurance of continuity of service. And I -- true, this is not a supply for an definite period but it barely -- very nearly approximate such a supply as far as the needs of most consumers are concerned. The Commission as I said, has never insisted upon a supply for longer period of time in the pipeline cases and indeed has been satisfied with very much less, down to 11 years. On the other hand, the producers, we think have the legitimate need, periodically to reappraise their gas commitments. Like Sunray, most producers of necessity are in the oil business as well as in the natural gas business. The oil business, I might point out, is not federally regulated. This is so because frequently, oil and natural gas are produced from a single well is a joint product. It's result of geological factor. In addition, in the drilling wells of new fields, it's frequently not known in advance what of anything will come out of the well. Now, not only as oil and gas joint products but they are competing products as well because the oil is used for feeding typically about 40% of the production of crude oil that goes into fuel oil and natural gas' major use is for each place heating.
Speaker: Has the Commission given you other limited certificates in other instances?
Melvin Richter: No, sir. They've turned us down consistently. We have other cases pending in Court.
Earl Warren: Have they issued any -- any limited certificates to anyone?
Melvin Richter: Oh, they have in long sense, in some pipe line cases, not in the producer cases.
Earl Warren: Not in the produces.
Melvin Richter: But they originally took the position, I might say, in the Oil Sunray case for instance, they had no authority and all the issuance of certificates on limited duration. Then Sunray took them to the Court of Appeals, the Court of Appeals held that they had authority to issue certificates to limited duration and Sunray and -- then when came up to this Court, the Commission then confessed that they had made a mistake, they can issue a certificates to limited duration. In language, which if I would have time, I would like very much to read to you. I'd like to reserve the remainder of my time --
Earl Warren: You may.
Melvin Richter: -- for rebuttal.
Earl Warren: You may. Mr. Wahrenbrock.
Howard E. Wahrenbrock: In the few minutes that remain today, I would like to address myself first to this question of the scope of the Commission's action here whether it regarded itself as bound by the statute not to do this or whether it exercised its jurist -- its discretion in deciding that it would not grant a limited term certificate.
Felix Frankfurter: Well, not granted ad hoc with reference to the particular situation or as a general guiding principal with.
Howard E. Wahrenbrock: The Commission has not been granting limited term certificates in the absence of a showing that the public convenience and necessity permit the limitation of the term.
Felix Frankfurter: And what were the criteria for determining whether the public interest does?
Howard E. Wahrenbrock: Well, it has not spelled out the general criteria. In the pipeline cases in which it has granted limited terms certificates there were as I attempted to say earlier, special circumstances which called for them, or conditions which -- which created an -- an -- a clearly temporary need for gas than to which are temporary supply was given.
Felix Frankfurter: Well even as the pipeline didn't have a general quality against term grant?
Howard E. Wahrenbrock: As indicated by the results and only as indicated by the results.
Felix Frankfurter: Not as an --
Howard E. Wahrenbrock: Yes.
Felix Frankfurter: -- explicit declaration of its doctrine.
Howard E. Wahrenbrock: That's right. It has not -- in here or any place, made an explicit determination were bound by this as a doctrine.
Felix Frankfurter: Not done but just this will guide us and will guide everybody to be equally treated like that.
Howard E. Wahrenbrock: But looking at the result, it has required in every case that there be a showing or that the claim of a right to stop shall have a support the effects will support. And the Commission has expressly said in some occasions that it -- it cannot speculate as to what the situation will be 20 years hence as to whether the public convenience and necessity will then permit. That it can now look at the need for gas and see that the gas is need. Regarding the need for the gas as now existing, it authorizes the content -- the starting of the service.
Felix Frankfurter: Well, in the Sun Oil case, there was a term certificate, wasn't it?
Howard E. Wahrenbrock: No, sir. In the one that was -- just our argument today?
Felix Frankfurter: Yes. Is there a 10-year contract?
Howard E. Wahrenbrock: There was a 10 year contract which the Commission -- but the Commission used only the standard language which it had used here, used the same language in granting this certificate as it used in the Sun case.
Felix Frankfurter: Well, then in response --
Howard E. Wahrenbrock: An indefinite term.
Felix Frankfurter: Then for the new contract, there's no need of asking for a certificate on -- is there? In the Sun case. If it's an undefined and none determinable --
Howard E. Wahrenbrock: That is our position.
Felix Frankfurter: Yes.
Howard E. Wahrenbrock: -- that there was -- there was an outstanding --
Felix Frankfurter: I don't mean to say that there couldn't be but there -- that to give the certificate. Why do you come us if you still have a certificate?
Howard E. Wahrenbrock: That was the Commission's position when it said it was duplication of an outstanding certificate which was of indefinite term. It used the same language there as it used here where there was before it a specific -- a request for a limited term. And here, the finding of the examiner was that there had been no showing in support of the request for that limitation on term which would warrant the -- would warrant a finding that the public convenience and necessity required that.
Felix Frankfurter: But in the Sun case, you also had an outstanding 10-year contract. I suppose people would assume that the certificate will last as long as the contract was operated?
Howard E. Wahrenbrock: In -- in practically every case, the Commission has an outstanding limited term contract that, I'd say, 999 out of a 1000, without having account of them. So, having that kind of a contract before it, it has always issued this what -- what we regard or we argue in the Sun Case, we argue here, is non-limited term certificate and which is here treated as an unlimited term certificate.
Earl Warren: We'll recess now.