decided: July 8, 1977.
HARRY SCHREIBER, SCHREIBER TRANSPORT, INC., AND SULLIVAN LINES, INC., APPELLANTS,
REPUBLIC INTERMODAL CORPORATION AND LAZARD FRERES, APPELLEES, AND UNION NATIONAL BANK OF PITTSBURGH, GARNISHEE. SULLIVAN LINES, INC., APPELLANT, V. DORIS LEASING COMPANY, INC., AND REPUBLIC INTERMODAL CORPORATION, APPELLEES, AND UNION NATIONAL BANK OF PITTSBURGH, GARNISHEE
Judd N. Poffinberger, Jr., David H. Ehrenwerth, Daniel D. Dinur, Kirkpatrick, Lockhart, Johnson & Hutchinson, Marvin Schreiber, Schreiber & Schreiber, Pittsburgh, for appellants.
Marcus Aaron II, John P. Edgar, Berkman, Ruslander, Pohl Lieber & Engel, Pittsburgh, Michael T. Sullivan, Bartel, Engelman & Fishman, New York City, for Republic Intermodal Corporation, appellee.
M. Bruce McCullough, Buchanan, Ingersoll, Rodewald, Kyle & Buerger, Pittsburgh, for garnishee.
Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy and Manderino, JJ. Jones, former C. J., did not participate in the decision of this case. Nix, J., did not participate in the consideration or decision of this case.
[ 473 Pa. Page 616]
OPINION OF THE COURT
Appellants Harry Schreiber, Schreiber Transport, Inc. (Schreiber Transport), and Sullivan Lines, Inc. (Sullivan Lines), obtained writs of foreign attachment directing
[ 473 Pa. Page 617]
the sheriff to sequester an irrevocable letter of credit in favor of appellee, Republic Intermodal Corporation (R.I.C.), held by Union National Bank (Union Bank) at its Pittsburgh office. On February 10, 1976, Judge Smith of the Court of Common Pleas of Allegheny County dissolved the two writs of attachment, holding that the procedures governing foreign attachment in Pennsylvania*fn1 violate constitutional due process. U.S. Const. amend. XIV.
The same day appellants presented to Judge Louik of the same court a petition for an order for a writ of foreign attachment conditioned upon following procedures which would meet the requirements of due process. Judge Louik refused to grant the petition. Appellants have appealed the orders of Judge Smith and Judge Louik. We affirm.*fn2
Appellants assert that Judge Smith erred in dissolving the attachments because he gave retroactive effect to Jonnet v. Dollar Savings Bank, 530 F.2d 1123 (3d Cir.1976), which declared Pennsylvania's Rules of Civil Procedure relating to writs of foreign attachment unconstitutional. Alternatively, they argue that Judge Louik
[ 473 Pa. Page 618]
erred in refusing to issue an order for a writ of foreign attachment which would avoid the procedural flaws in the existing rules. We hold that: (1) Jonnet did not establish a new principle of law which might be given nonretrospective effect; and (2) in the absence of any statute or rules of court which satisfy constitutional standards, foreign attachment is not presently available in Pennsylvania. Therefore, Judge Smith properly dissolved appellants' writs of foreign attachment and Judge Louik properly denied their petition for the writ.
This dispute arises from a contract, entered into on August 15, 1975, by appellant Harry Schreiber, an individual and Pennsylvania resident, and appellee, R.I.C., a New York corporation not registered in Pennsylvania. Schreiber agreed to pay $1,465,000 for all the capital stock of R.I.C.'s wholly-owned subsidiary Sullivan Lines. Schreiber subsequently assigned his rights under the contract to Schreiber Transport, a Pennsylvania corporation.
At the closing, Schreiber paid $615,000 to R.I.C. with $550,000 of the balance secured by an irrevocable letter of credit in favor of R.I.C. The letter of credit was held by garnishee, Union Bank, at its Pittsburgh office.
After an audit, appellants alleged that R.I.C. had breached the contract. Appellants also alleged that R.I.C. was contemplating liquidation to defraud appellants. In September, 1975, appellants filed suit in New York against R.I.C., seeking rescission or reformation of the contract and damages. In October, 1975, the New York trial court enjoined R.I.C. from drawing upon the letter of credit, pending trial. After a two month trial, the court held that appellants were entitled to $42,124.00 in damages, but denied rescission or reformation. The court vacated the preliminary injunction which enjoined R.I.C.'s resort to the letter of credit. Before the court's
[ 473 Pa. Page 619]
decision was reduced to a formal judgment, appellants instituted the present actions in Pennsylvania.*fn3
On December 18, 1975, appellants filed a praecipe for a writ of foreign attachment, which directed the Sheriff of Allegheny County to seize the letter of credit held by Union Bank. The complaint in assumpsit, filed December 22, 1975, named R.I.C. as defendant, alleged fraud and breach of warranties, and requested damages in the amount of $1,829,413. Appellants amended the complaint to name as a defendant appellee Lazard Freres, a New York investment banking company. Appellants alleged that R.I.C. was an "alter ego" of Lazard Freres.
On January 20, 1975, appellant Sullivan Lines, as sole plaintiff, filed another praecipe for a writ of foreign attachment, again directing seizure of the same letter of credit. The complaint, filed January 22, 1976, named as defendants R.I.C. and its wholly-owned subsidiary, appellee Doris Leasing Company, a New York corporation. Appellant Sullivan Lines alleged breach of a January, 1975, lease agreement between Sullivan Lines and Doris Leasing Company, and requested damages of $524,885.
Appellees filed petitions to dissolve the attachments. The petitions were granted on February 10, 1976, by Judge Smith, who found that Pennsylvania rules for obtaining writs of foreign attachment violated the due process clause of the fourteenth amendment of the United States Constitution. Appellants then prepared a petition for a writ of foreign attachment which they presented to Judge Louik the same day. The petition requested that writs of foreign attachment be issued in a manner consistent with the strictures of the due process clause. After indicating that he would not grant the requested
[ 473 Pa. Page 620]
writs, Judge Louik granted a temporary restraining order enjoining Union Bank from honoring any drafts on the letter of credit. Judge Louik treated appellants' petition as a request for a preliminary injunction. On February 13, 1976, he refused to issue a preliminary injunction and vacated the temporary restraining order. These appeals followed.*fn4
Appellants first claim that Judge Smith erred by giving retroactive application to Jonnet v. Dollar Savings Bank, supra. Appellants concede that any attachment issued pursuant to the Pennsylvania rules after January 27, 1976, the filing date of Jonnet, must be dissolved.*fn5 As the instant attachments were issued December 18, 1975 and January 20, 1976, appellants insist that Judge Smith's reliance on Jonnet amounts to an erroneous retrospective application of that decision. We cannot agree.
Under the Pennsylvania rules, a foreign attachment permitted attachment of a non-resident defendant's non-exempt property upon any cause of action in which relief sought included a judgment or decree for the payment of money. Pa.R.C.P. 1252. Upon filing of a praecipe, the
[ 473 Pa. Page 621]
prothonotary automatically issued the writ. Pa.R.C.P. 1255. The attachment could precede the filing of the complaint by as much as five days. Pa.R.C.P. 1265. There was no requirement that the plaintiff notify the defendant of either the attachment or the complaint; this responsibility was delegated to the garnishee. Pa.R.C.P. 1267. Once issued, the attachment was not dissolved by the general appearance of the defendant. Pa.R.C.P. 1272. Rather, the attachment could be dissolved prior to judgment only if the defendant posted an adequate bond or other security, or if the plaintiff failed to prosecute the case with due diligence. Id.
In Jonnet, the United States Court of Appeals for the Third Circuit held that these rules violated procedural due process for the following reasons: (1) there was no requirement that a plaintiff file a sworn document stating facts upon which the cause of action was predicated; (2) the seizure process was entirely ministerial with no exercise of judgment by an official competent to determine whether there were facts justifying attachment or whether a valid claim had been stated; (3) the rules provided no machinery to indemnify a defendant for damages caused by wrongful attachment; (4) there were no means for a defendant to promptly contest the attachment; and (5) there were no procedures to allow the defendant to dissolve the attachment when the defendant made provision to protect the plaintiff's interest. 530 F.2d at 1129-30. See North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975); Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974); Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Note, "Specifying the Procedure Required by Due Process Toward Limits on the Use of Interest Balancing," 88 Harv.L.Rev. 1510 (1975); Note, "Quasi in Rem Jurisdiction and Due Process Requirements," 82 Yale L.J. 1023 (1973).
[ 473 Pa. Page 622]
In dissolving appellants' writs of attachment, Judge Smith announced that he was relying upon the reasoning of Jonnet and the decisions in McFadden v. McShane, Inc., (W.D.Pa. No. 74-1090, filed February 2, 1976), and Radakovich v. Weisman, 124 P.L.J. 63 (C.P.1975), which also held Pennsylvania's foreign attachment procedures unconstitutional.
Appellants' claim must fail. The decision in Jonnet holding that Pennsylvania's rules governing foreign attachment are unconstitutional did not establish a new principle of law which might be applied prospectively only; i.e., to writs issued after the date of decision. In Chevron Oil Company v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971), the United States Supreme Court stated that the threshold test in deciding whether a new decision might be given prospective application only is whether the decision establishes a new principle of law, either by overruling clear past precedent or by deciding an issue of first impression whose resolution was not clearly foreshadowed. 404 U.S. at 106, 92 S.Ct. at 355.*fn6 Only such a new principle of law may qualify for nonretrospective application. The decision in Jonnet does not meet this initial test, for the constitutional defects in Pennsylvania's rules governing foreign attachment were patent in light of recent precedents of the United States Supreme Court.
In arguing that Jonnet established a new principle of law, appellants rely on Lebowitz v. Forbes Leasing and Finance Corporation, 456 F.2d 979 (3d Cir. 1972), cert. denied, 409 U.S. 843, 93 S.Ct. 42, 34 L.Ed.2d 82 (1972), which upheld the constitutionality of Pennsylvania's foreign attachment procedures. Shortly after the decision
[ 473 Pa. Page 623]
in Lebowitz, however, the United States Supreme Court invalidated Pennsylvania's and Florida's prejudgment replevin statutes on due process grounds. Fuentes v. Shevin, supra. In Fuentes, Mr. Justice Stewart, writing for the Court, noted that seizure of property without notice and hearing had been permitted only in "extraordinary situations" in which three factors were present: (1) seizure was directly necessary to secure an important governmental or general public interest; (2) there has been a special need for prompt action; and (3) "the State has kept strict control over its monopoly of legitimate force; the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance." 407 U.S. at 90-91, 92 S.Ct. at 2000. Two years later, in Mitchell v. W. T. Grant Co., supra, the Court further delineated due process requirements in sustaining a Louisiana sequestration statute. The Louisiana statute authorized prejudgment seizure of property in which the attaching creditor possessed a security interest. The statute was upheld because it contained procedural safeguards distinguishing it from the replevin statutes considered in Fuentes: judicial approval of the sequestration order was required, based upon clearly demonstrated grounds, contained in an affidavit supporting the writ; the attaching creditor was required to post bond; the defendant could regain possession of the property by posting bond; and the defendant had a right to an immediate post-seizure hearing at which he could challenge the grounds for attachment and if successful, secure return of the property and obtain damages, including attorneys fees. 416 U.S. at 606, 94 S.Ct. at 1899. Finally, in North Georgia Finishing, Inc. v. Di-Chem, supra, the Court struck down a Georgia garnishment statute which permitted impoundment of a defendant's property prior to judgment, based on a conclusory affidavit signed by the plaintiff or his counsel. Mr.
[ 473 Pa. Page 624]
Justice White, writing for the Court, held the statute invalid for the same reasons as the replevin statutes considered in Fuentes. The Georgia statute impermissibly authorized the seizure of property without notice or hearing. After the seizure, issued by the clerk based only on a conclusory affidavit, the owner was deprived of the property through the course of the litigation. Unlike the Louisiana statute upheld in Mitchell, it did not require a bond by the attaching party, the writ was issued by a clerk based on conclusory allegations, rather than by a judicial officer after review of an affidavit clearly setting forth facts justifying the attachment, and it failed to provide for an immediate hearing after seizure at which the defendant could challenge the grounds on which the writ was issued. 419 U.S. at 608, 95 S.Ct. at 722.
It is apparent that the Pennsylvania rules authorizing writs of foreign attachment could not withstand the due process scrutiny required by the decisions of the United States Supreme Court beginning with Fuentes, in 1972, and followed by Mitchell in 1974, and Di-Chem in 1975. Assuming that prejudgment seizure for the purpose of obtaining jurisdiction over a nonresident defendant "secures an important governmental or general public interest," the first test in Fuentes,*fn7 it is clear that the Pennsylvania rules failed to provide adequate judicial control
[ 473 Pa. Page 625]
over the use of the attachment process. Moreover, as the Jonnet court recognized, the rules have none of the procedural safeguards required by Fuentes, Mitchell and Di-Chem. Although the decision in Lebowitz had not been expressly overruled at the time appellants filed their writs of foreign attachment, the decisions in Fuentes, Mitchell and Di-Chem sapped it of any precedential value.*fn8 The result in Jonnet was clearly foreshadowed.*fn9
We next consider appellants' claim that Judge Louik erred in refusing to issue an order for a writ of foreign attachment which would meet the requirements of procedural due process.
A. Appellees contend that this issue is not properly before the Court because appellants consented to having their petition for a writ of foreign attachment treated as a request for injunctive relief.*fn10 However, it appears
[ 473 Pa. Page 626]
from the record that appellants sought injunctive relief in the alternative, after Judge Louik indicated that he intended to deny their petition. These circumstances do not establish consent by appellants to withdraw or abandon their original petition.
No transcript was made of the arguments before Judge Louik, but counsel for appellee, by affidavit, provides the following account:
"And Now Comes Marcus Aaron II, who, being duly sworn according to law, deposes and says that he is Counsel for Republic Intermodal Corporation, and that in such capacity he appeared before Judge Louik of the Court of Common Pleas of Allegheny County at oral argument on February 11, 1976 pursuant to notice the previous day on Plaintiffs' Motion for a Writ of Foreign Attachmment. After Judge Louik indicated orally that he would deny the petition, the judge commented that a restraining order might be the only possible remedy. Whereupon Marvin Schreiber, Esq., Attorney for Plaintiff-Appellants orally moved the Court to issue a Temporary Restraining Order and Preliminary Injunction. In issuing the Temporary Restraining Order of February 11, 1976, Judge Louik acted in response to the oral motion of Marvin Schreiber."
These facts establish only that, when advised that their petition was going to be denied, appellants sought relief in the alternative based upon a different legal theory. This is explicitly permitted by the Rules of Civil Procedure. Pa.R.Civ.P. 1020(c) provides that "Causes of action and defenses may be pleaded in the alternative." Rule 1021 states: "Relief in the alternative or of several different types . . . may be demanded." Pa.R.Civ.P. 1021. These rules reflect the general principle that plaintiffs should not be forced to elect a particular theory in pursuing a claim, and avoids the attendant possibility that meritorious claims will fail because the wrong legal theory was chosen. Goodrich-Amram,
[ 473 Pa. Page 627]
Procedural Rules Service 2d § 1020(c), at 185 (1976).
Appellants' request for alternate relief cannot constitute consent to abandon or withdraw their petition, absent any showing of such intent on the record. Judge Louik's statement that he would deny the petition and his subsequent opinion in which he said he had treated the petition as a request for injunctive relief constituted a denial of the petition. That issue has properly been preserved for appeal.
B. Appellants' challenge of the denial of their petition for an order for a writ of foreign attachment rests on a single premise: that despite the constitutional invalidity of Pennsylvania's rules authorizing foreign attachment, a writ of foreign attachment is still a viable remedy in this Commonwealth. This premise is incorrect. The Third Circuit in Jonnet did not merely invalidate a particular aspect of Pennsylvania's foreign attachment procedures, severable from the basic remedy itself. Rather, it determined that the entire scheme provided in the Rules of Civil Procedure, violated constitutional due process. By invalidating our foreign attachment rules, the Jonnet court struck down the only mechanism in Pennsylvania for obtaining a writ of foreign attachment.
Appellants contend that Judge Louik should have scrutinized the procedural history of the present case to determine whether, regardless of the invalidity of the rules, appellee's due process rights had been violated. Alternatively, they argue that Judge Louik should have granted them a hearing in response to their petition to allow them to establish grounds for a writ of foreign attachment, despite the absence of constitutional rules. After such a hearing, they assert that the court should have issued the writ, subject to conditions, not provided for in the rules, which would satisfy the due process rights of appellee.
[ 473 Pa. Page 628]
In support of these arguments, appellants point out that the Jonnet court explicitly limited its holding:
"In conclusion, we must emphasize that our decision today does not hold foreign attachment procedures unconstitutional per se. Our concerns are with ex parte procedures which summarily deprive a party of an interest in property, even though temporarily, without notice, an opportunity for a prompt hearing, or other essential safeguards against wrongful seizure. We require only that Pennsylvania provide procedures consistent with fundamental fairness for the respective interests of creditor and debtor alike."
530 F.2d at 1130. Because the court did not rule that foreign attachment was unconstitutional per se, appellants urge us to conclude that foreign attachment has not been abolished as a legal remedy in Pennsylvania, despite the constitutional infirmities of the rules.
The difficulty with this argument is that the "ex parte procedures" invalidated in Jonnet were the only procedures which authorized foreign attachment in Pennsylvania.*fn11 Appellants' argument rests on the assumption that, even in the absence of a valid statute or rules, Pennsylvania trial courts have inherent power to issue writs of foreign attachment. This assumption is incorrect. Historically, the writ of foreign attachment has been a creature of statute (or, in modern times, a subject of judicial rule-making power) for which strict compliance with the statutory provisions was essential.
[ 473 Pa. Page 629]
See Goodrich-Amram, Procedural Rules Service 2d § 1251:2 at 15 (1976). Foreign attachment is not an independent cause of action entertained by the courts; it is solely a form of process, provided by statute or rule. Id. § 1251:5 at 20-21. The distinction appellants urge us to make between the procedures for obtaining a writ of foreign attachment, and foreign attachment, as an independent, substantive form of action, does not exist.
In limiting the scope of its holding, the Jonnet court was not suggesting that foreign attachments be issued on an ad hoc basis by trial courts. That court held that due process requires that Pennsylvania provide procedures consistent with fundamental fairness, if foreign attachment is to be an available constitutional procedure.
Determining the nature and form of new procedures for obtaining writs of foreign attachment involves policy considerations more appropriately resolved through the exercise of this Court's constitutionally granted rule-making power, Pa.Const. art. V, § 10, than through ad hoc trial court determinations. Hence, in the absence of rules meeting constitutional standards, foreign attachment is not an available form of process in Pennsylvania.*fn12