North Georgia Finishing, Inc. v. Di-Chem, Inc.

Facts

Di-Chem (P) filed suit against North Georgia Finishing (D) alleging a debt due for goods sold and delivered in the amount of $51,279.17. Before North Georgia received the complaint Di-Chem filed an affidavit and bond for process of garnishment naming the First National Bank of Dalton as garnishee. The Clerk issued summons of garnishment to the bank, which was served that day. North Georgia filed a bond three days later in Superior Court conditioned to pay any final judgment and the court discharged the bank as garnishee. North Georgia then filed a motion to dismiss the writ of garnishment and to discharge its bond on grounds that the garnishment procedure was unconstitutional and violated due process. North Georgia contends that the statute failed to provide for notice and a hearing prior to garnishment. The statute was sustained and the Supreme Court granted certiorari.

Issue

  1. Before property may be seized in prejudgment, must there be notice and opportunity to be heard?
  2. Is the private use of state procedures that are violative of due process with the help of state officials a state action for purposes of the Fourteenth Amendment?

Holding and Rule of Law (White)

  1. Yes. Before property may be seized in prejudgment, there must be notice and opportunity to be heard.
  2. Yes. The private use of state procedures that are violative of due process with the help of state officials is a state action for purposes of the Fourteenth Amendment.

Property may not be attached without notice and a hearing and without other procedural safeguards. The statute provides for an attachment of property upon a filing of an affidavit with the clerk of the court, and the posting of a bond for twice the amount due. The Georgia Supreme Court declared the statute valid despite the Sniadach case noting that it only applied to a narrow exception relating to wage earners.

The state court seems to ignore Fuentes v. Shevin in which the Court held that a writ of garnishment issued by a court clerk without notice or opportunity to be heard violates due process. Furthermore this statute is not saved by the Mitchell v. W. T. Grant Co. case. There we held that a statute that allows for attachment or sequestration without a prior adversarial hearing does not violate due process if procedural safeguards exist. Louisiana required the application to be made to a judge upon a verified petition and only to be issued upon a clear showing to the judge. The debtor was allowed to seek dissolution of the writ with the creditor having the burden of proof of validity. The debtor was also allowed to regain possession by the mere posting of a bond. Under the Louisiana statute the facts relevant to obtaining the writ were narrowly confined. The Georgia statute has none of these safeguards. The write in Georgia can be issued upon the affidavit of the creditor, without a requirement of clear proof and the clerk of the court can issue the writ.

There is no provision for an early hearing and a requirement for the creditor to demonstrate probable cause. Under these facts, a bank account was impounded and put totally beyond the use of North Georgia during the pendency of the litigation on an alleged debt. This was done by a writ of garnishment issued by a court clerk without notice or opportunity to be heard for an early hearing and without participation by a judicial officer. The fact that Di-Chem must post a double bond will not save this statute from due process violations. Furthermore, while Fuentes and Mitchell involved consumers and herein we deal with a commercial contract, we see no reason to distinguish among different types of property or circumstances in the application of due process.

Disposition

Reversed.

Concurring (Stewart)

The demise of Fuentes v. Shevin seems to have been greatly exaggerated.

Concurring (Powell)

I continue to doubt whether Fuentes strikes a proper balance especially in cases when the creditor’s interest in the property may be as significant as or even greater than that of the debtor.

Dissent (Blackmun)

This is a commercial transaction; there is little explanation as to why the Georgia statute is being held invalid. North Georgia is not a wage earner. The statute places upon the plaintiff the burden of initiating a lawsuit or of obtaining a judgment, and the posting of a double bond based on plaintiff’s affidavit of apprehension of loss. This was not a contract of adhesion or a contract of basic unfairness, imbalance, or inequality. The fact that process is issued by a clerk is of no importance so long as the clerk is not an agent of the creditor.


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