North Georgia Finishing, Inc. v. Di-Chem, Inc.
419 U.S. 601 (1975)
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Rule of Law:
A state statute that allows for the prejudgment garnishment of property without providing for notice, an opportunity for a prompt hearing, and the participation of a judicial officer violates the Due Process Clause of the Fourteenth Amendment.
Facts:
- Di-Chem, Inc. alleged that North Georgia Finishing, Inc. owed it $51,279.17 for goods sold and delivered.
- In conjunction with filing a lawsuit, Di-Chem's president submitted an affidavit to a court clerk, asserting the debt and that he had 'reason to apprehend the loss of said sum' unless a garnishment was issued.
- Based solely on this conclusory affidavit from a non-lawyer, the court clerk issued a writ of garnishment against North Georgia Finishing's account at the First National Bank of Dalton.
- The writ was served on the bank, which effectively froze North Georgia Finishing's corporate bank account, preventing its use.
- The Georgia statute required the plaintiff (Di-Chem) to file a bond for double the amount of the debt.
- Under the Georgia statute, the only method for the defendant (North Georgia Finishing) to dissolve the garnishment and regain use of its funds was to file its own bond for the amount claimed by the plaintiff.
Procedural Posture:
- Di-Chem, Inc. filed a lawsuit against North Georgia Finishing, Inc. in the Superior Court of Whitfield County, Georgia, a state trial court.
- Simultaneously with the complaint, Di-Chem obtained a writ of garnishment which was served on North Georgia Finishing's bank.
- North Georgia Finishing filed a bond to dissolve the garnishment and then filed a motion in the trial court to dismiss the writ, arguing the Georgia garnishment statute was unconstitutional.
- The trial court overruled the motion.
- North Georgia Finishing appealed to the Georgia Supreme Court, which transferred the case to the Georgia Court of Appeals.
- After an opinion by the Court of Appeals, the Georgia Supreme Court granted certiorari.
- The Georgia Supreme Court, the state's highest court, affirmed the trial court's decision, holding that the garnishment statute was constitutional.
- The U.S. Supreme Court granted certiorari to review the decision of the Georgia Supreme Court.
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Issue:
Does a state statute that permits a writ of garnishment to be issued by a court clerk in a commercial lawsuit, freezing a defendant's bank account based on a conclusory affidavit without prior notice, an opportunity for a prompt hearing, or participation by a judge, violate the Due Process Clause of the Fourteenth Amendment?
Opinions:
Majority - Mr. Justice White
Yes, the Georgia statute violates the Due Process Clause of the Fourteenth Amendment. The Court held that the statute is constitutionally vulnerable because a bank account, a form of property, was impounded and put beyond use during the pendency of litigation by a writ issued by a court clerk without notice, an opportunity for an early hearing, or participation by a judicial officer. The Court distinguished this case from Mitchell v. W. T. Grant Co., where a Louisiana statute was upheld because it had saving characteristics absent in the Georgia law: the writ was issuable only by a judge, based on a specific factual affidavit, and the debtor was entitled to an immediate post-seizure hearing. The Court rejected the argument that due process protections are less stringent in a commercial context between parties of equal bargaining power, reiterating the principle from Fuentes v. Shevin that the Due Process Clause does not distinguish among different kinds of property.
Concurrence - Mr. Justice Stewart
Yes, the Georgia statute is unconstitutional. The author humorously noted that his prior opinion, which suggested that the precedent of Fuentes v. Shevin had been overruled by Mitchell, was an exaggeration, as the majority opinion clearly relies on Fuentes.
Concurrence - Mr. Justice Powell
Yes, the Georgia statute is unconstitutional, but the majority's opinion sweeps too broadly and appears to resuscitate the full scope of Fuentes v. Shevin, which he believes was properly narrowed by Mitchell. Due process in this context does not necessarily require a pre-garnishment hearing but should require the creditor to establish a factual basis before a neutral officer and provide the debtor with a prompt post-garnishment judicial hearing. The Georgia statute is deficient because it allows garnishment based on a conclusory affidavit and, most critically, fails to provide for a prompt and adequate post-garnishment hearing for the debtor to challenge the seizure.
Dissenting - Mr. Justice Blackmun
No, the Georgia statute does not violate the Due Process Clause. The dissent argued that the Court's decision creates confusion by wavering between the precedents of Fuentes and Mitchell. It contended that Sniadach v. Family Finance Corp. should be confined to its facts regarding wage garnishment, and that the Georgia statute provides adequate protection for commercial entities like North Georgia Finishing, which are not vulnerable consumers. The protections, including the requirement of a pending lawsuit, a double bond from the plaintiff, and an affidavit of apprehension of loss, satisfy due process in a commercial setting.
Analysis:
This decision significantly clarifies that the procedural due process requirements for prejudgment seizure of property apply not just to consumer goods but also to commercial assets like corporate bank accounts. The Court solidified the framework from Fuentes and Mitchell, emphasizing that state procedures must include key safeguards against erroneous deprivation, such as judicial oversight and a prompt post-seizure hearing. By striking down the Georgia statute, the Court signaled that conclusory affidavits and ministerial actions by court clerks are insufficient to justify freezing a party's assets, thereby strengthening protections for all property owners against summary seizure before a judgment is rendered.
