Opinion ID: 383805
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Heading: Analytical Background

Text: 31 (1) Supreme Court precedent 32 The Supreme Court addressed a similar issue over fifty years ago in Endicott-Johnson Corp. v. Encyclopedia Press, Inc., 266 U.S. 285, 45 S.Ct. 61, 69 L.Ed. 288 (1924). There the Court held that due process did not require notice and an opportunity to be heard before the issuance of a writ to garnish a judgment debtor's wages. The Court reasoned that the judgment debtor, who has had his day in court in the action on the merits must take notice of what will follow. Id. at 288, 45 S.Ct. at 62. However, the Court did not consider the possibility that the garnishment might deprive the judgment debtor of exempt property, which is critical to this case. 33 Moreover, a series of more recent decisions by the Supreme Court adopts a different line of reasoning. These decisions concern a creditor's use of process to seize or attach a debtor's property. They differ from the present case in that the creditor had not yet reduced its claim of indebtedness to judgment when it brought about the seizure. However, an examination of these cases will reveal that they govern the issue now before us, despite this distinction. 34 The first two decisions of this series established that a debtor's interest in the continued possession and use of property must receive strong protection against the creditor's use of process, in particular notice and an opportunity to be heard before a prejudgment seizure. Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), held unconstitutional a prejudgment garnishment procedure which allowed a creditor to freeze the wages of a debtor in the hands of an employer pending the outcome of the action on the creditor's claim of indebtedness. The Court ruled that due process required notice and an opportunity to be heard before imposition of the freeze. It announced a similar holding in Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), which involved procedures allowing a creditor to replevy goods in which he held a security interest before a final adjudication of the debtor's default or of the creditor's right to repossess the goods. 35 The Court subsequently explained that notice and hearing prior to attachment are not absolutely necessary. Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974), was, like Fuentes, a review of a prejudgment seizure of goods subject to a security interest. The procedures reviewed in Mitchell required no notice and opportunity to be heard prior to seizure but afforded a number of other procedural safeguards to the debtor. These included the requirement of a sworn affidavit showing the creditor's claim and right to repossession, issuance of a writ authorizing seizure by a judge rather than by a court clerk, the requirement that the creditor post a bond that would be used to compensate a debtor for damages caused by a wrongful seizure, and most important, notice and an opportunity for a hearing and dissolution of the writ immediately after the seizure. Id. at 605-06, 94 S.Ct. at 1899. 36 The Court held that these procedures satisfied the requirements of due process. It explained that the state has a legitimate interest in enabling the creditor to enforce his security interest in the debtor's property. The absence of notice and a hearing prior to a seizure serves the creditor's interest by preventing the debtor from concealing, transferring, or wasting the property. Id. at 608-09, 94 S.Ct. at 1900. At the same time, the harm that a wrongful seizure might cause was minimized by the provision for notice and hearing immediately after the seizure, and the risk of wrongful seizures in the first instance was minimized by the other procedures. Id. at 610, 94 S.Ct. at 1901. The Court concluded that with these procedures the State has reached a constitutional accommodation of the respective interests of the creditor and the debtor. Id. 37 In the final decision of this series, North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975), the Court made clear that it would not find a constitutional accommodation unless procedures afford substantial protection to a debtor's interest in continued use of property. This decision invalidated a prejudgment garnishment procedure that allowed the freezing of a corporation's bank account without either notice and a hearing before the freeze or alternative safeguards similar to those in Mitchell v. W. T. Grant Co. See also Jonnet v. Dollar Savings Bank, 530 F.2d 1123, 1128-30 (3d Cir. 1976). 38 The case before us now presents the same interests that the Supreme Court sought to accommodate in the four prejudgment seizure cases. The attachment of property held by a garnishee is, like a prejudgment seizure, a provisional measure serving the judgment creditor's interests by preventing transfer or concealment of the property before the creditor can execute a final seizure. The attachment affects the debtor's interest by depriving her of the continued use of her property. 39 The fact that in this case the creditor has obtained a judgment on its claim of indebtedness does not alter this basic similarity. Sterling's judgment represents only an adjudication of Mrs. Finberg's liability on a monetary debt, not a transfer to Sterling of title to any particular item of her property. Sterling could obtain a final adjudication of its right to seize her bank accounts only with the completion of the garnishment process. A debtor might still defeat that right with any of a number of defenses not adjudicated in the action on the merits, such as in the present case with a claim of exemption. Thus, the attachment remains a provisional measure, and the debtor retains a protectable interest in the use of her property during the pendency of the creditor's action. 40 We conclude that the four prejudgment seizure cases control the due process issue before us now. In relying on these cases, we take the same approach to a postjudgment garnishment case that the United States Court of Appeals for the Fifth Circuit took in Brown v. Liberty Loan Corp., 539 F.2d 1355, 1365 (5th Cir. 1976), cert. denied, 430 U.S. 949, 97 S.Ct. 1588, 51 L.Ed.2d 797 (1977). See also Betts v. Tom, 431 F.Supp. 1369, 1374 (D.Haw.1977). 41 The principles established in the controlling Supreme Court decisions, to summarize, are that notice and an opportunity to be heard before an attachment are not absolutely necessary. However, the available procedures must afford the debtor adequate protection against erroneous or arbitrary seizures. The procedural protection is adequate if it represents a fair accommodation of the respective interests of creditor and debtor. Thus, before turning to a review of the Pennsylvania procedures, we must examine these interests. 42 (2) Competing interests 43 The relevant interests, as noted, are the creditor's interest in enforcement of the judgment debt and the debtor's interest in continued use and possession of her property. The weight to be accorded these interests depends upon the facts of a particular case. 44 The fact that the creditor has obtained a judgment establishing the monetary liability of the debtor gives it a strong interest in a prompt and inexpensive satisfaction of the debt. The creditor has the right to seek recovery from the debtor or the debtor's property. Additional delay and expense can diminish the value of its ultimate recovery. 45 Another distinctive fact of this case is the type of property seized: the bank accounts of an individual. The ability to seize monetary assets advances the creditor's interests because an execution on such assets generally is faster and less expensive than a levy and judicial sale of nonmonetary assets. 46 However, the debtor's interests also assume greater weight in a seizure of an individual's bank accounts. A bank account may well contain the money that a person needs for food, shelter, health care, and other basic requirements of life. Many people have no other immediate sources of money. Additional income from a future paycheck, welfare benefit, or other source may not be available for two weeks or more, and that income may be insufficient to meet the person's immediate needs. When we consider the additional fact that the money in the accounts may, as here, be covered by exemptions designed to protect a debtor's means of purchasing basic necessities, the debtor's interest in access to a bank account becomes very compelling. 47 In determining whether the debtor's protection under the Pennsylvania rules represents a proper accommodation of these interests, we must consider the probable value, if any, of additional or substitute procedural safeguards and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976).