Strick Corp. v. Thai Teak Products Company, Ltd.

493 F. Supp. 1210, 31 Fed. R. Serv. 2d 496, 1980 U.S. Dist. LEXIS 12607
CourtDistrict Court, E.D. Pennsylvania
DecidedJune 30, 1980
DocketCiv. A. 74-1188
StatusPublished
Cited by19 cases

This text of 493 F. Supp. 1210 (Strick Corp. v. Thai Teak Products Company, Ltd.) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Strick Corp. v. Thai Teak Products Company, Ltd., 493 F. Supp. 1210, 31 Fed. R. Serv. 2d 496, 1980 U.S. Dist. LEXIS 12607 (E.D. Pa. 1980).

Opinion

MEMORANDUM OF DECISION

McGLYNN, District Judge.

Seeking to enforce a judgment entered against Thai Teak Products Company and Forest Products Company (judgment debtors), Strick Corporation (plaintiff-garnish- or) served a writ of execution and interrogatories upon garnishee, Bangkok Industries, Inc. Significantly, Strick attached 1 not only the property of the nominal defendants, but also the assets of Dumrong Trading Co. and Dumrong Phanich Sawmill Company, two companies Strick contends are “alter egos” of the judgment debtors. The garnishee (Bangkok) concedes that the writ of execution and interrogatories are proper with respect to its relations with the judgment debtors, but it challenges Strick’s authority to attach debts owed to the alleged “alter egos” and to compel answers to interrogatories directed to its relationships with those companies. Bangkok has raised preliminary objections challenging the procedures while Strick has requested sanctions against Bangkok for failure to answer the interrogatories.

Federal Rule of Civil Procedure 69 governs the procedures to enforce judgments in federal courts. Under Rule 69 the parties are referred to state practice for proceedings in aid of judgment. In addition, the judgment creditor may utilize either federal or state discovery rules. See generally, 7 Moore’s Federal Practice ¶ 69.05[1]. Of central concern in the present case is the method under Pennsylvania law for attaching the property of companies alleged to be “alter egos” of judgment debtors. The parties dispute what procedure is authorized and whether that procedure affords due process of law.

Under Pennsylvania practice, execution is commenced by filing a praecipe for a writ of execution with the prothonotary. Rule 3103. The prothonotary issues the writ and indexes it against the defendant in the judgment index. Rule 3104. Service of the writ upon the garnishee attaches all property of the defendant which is in the posses *1212 sion of the garnishee or which comes into its possession. Rule 3111. The garnishee is also restrained from paying any debt to defendant. Rule 3111(c). The garnishee must forward to the defendant a copy of the writ and its answers to interrogatories. Rule 3140. Thereafter, it is under no duty to resist the attachment or defend the action. Rule 3141.

Before submitting these procedures to constitutional scrutiny, we must first examine whether the writ was issued in accordance with Pennsylvania law. The garnishee notes that the rules provide only for garnishment of the property of “defendant”. Under a literal reading of the rule, attachment of the Dumrong companies’ property is not authorized since they were not nominally defendants in the original action. The garnishee contends that execution upon their property is permitted only if Strick proves prior to attachment that an alter ego relationship exists. Strick, on the contrary, argues that alleged alter egos are considered “defendants" under Pennsylvania rules for purposes of attachment. It also asserts that Bangkok may not challenge the attachment or the interrogatories by means of preliminary objections. 2

Pennsylvania cases provide support for both of Strick’s arguments. Under circumstances similar to those in the present case, Pennsylvania courts have permitted judgment creditors to attach the property of alleged alter egos before proving the existence of the alter ego relationship and have even limited the methods for contesting the attachment after it occurs. For example, in Fleming v. Quaid, 204 Pa.Super. 19, 201 A.2d 252 (1964), the Superior Court examined a writ of attachment execution directing the sheriff to attach the property of both a corporation (the alleged alter ego) and its sole shareholder (the judgment debt- or). Even though the corporation disputed the allegation that it was the shareholder’s alter ego, the court refused to permit the corporation to use either preliminary objections 3 or a petition to set aside the writ (Pa.R.Civ.Pro. 3121(d)) to raise the issue of ownership of the attached assets. It set forth the proper procedure as follows:

“The corporation’s remedy is to intervene formally under Pa.R.C.P. No. 2326 et seq,, and either (1) dissolve the attachment by giving security under Pa.R.C.P. No. 3143(b), after which the trustee will be in a position to pay the money to the corporation, leaving the issue of ownership as between the corporation and the judgment debtor to be determined in subsequent proceedings under the attachment; (2) file answers to the interrogatories stating that the property sought to be attached is the property of the corporation, not of the judgment debtor, and move for trial on this issue; or (3) move for trial upon the interrogatories and the garnishee’s answers.”

Id. at 255. In other cases, courts have followed the Fleming reasoning. See, e. g., Unity Mutual Life Insurance Co. v. DiDominico, - Pa.Super. -, 418 A.2d 397, (1980); Copeland v. Banks, 74 Pa. D&C 2d 348 (Phila.Co.), aff'd, 235 Pa.Super. 736, 345 A.2d 230 (1975); Lantzy v. Velest Coal Co., Inc., 45 Pa. D&C 2d 502, 504 (Cambria Co. 1968) (dicta). Although some question may remain as to the propriety of determining the ownership of the property at a post-attachment hearing on preliminary objections, 4 Pennsylvania law clearly authorizes *1213 without prior notice or hearing the attachment of property not nominally owned by the judgment debtors. Thus we must examine whether the procedures utilized comport with the Due Process Clause of the Fourteenth Amendment.

DUE PROCESS

A. The Precedent

In a series of cases concerning pre-judgment attachment, the Supreme Court defined the contours of due process requirements. The first of these cases, Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), invalidated a statute permitting the garnishment of wages without notice and opportunity for hearing. In Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), the Court extended its Sniadach reasoning, finding unconstitutional Pennsylvania and Florida replevin statutes which permitted a secured seller to repossess goods by obtaining a writ from the court clerk. By a 4-3 majority the Fuentes court set forth the requirement of notice and hearing in sweeping terms, stating: “[T]he Court has traditionally insisted that, whatever its form, opportunity for that hearing must be provided before the deprivation at issue takes effect.” 5 Id. at 82, 92 S.Ct. at 1995. The holding in

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Bluebook (online)
493 F. Supp. 1210, 31 Fed. R. Serv. 2d 496, 1980 U.S. Dist. LEXIS 12607, Counsel Stack Legal Research, https://law.counselstack.com/opinion/strick-corp-v-thai-teak-products-company-ltd-paed-1980.