The opinion of the court was delivered by: KNAPP
Defendant Banque Romande, a Geneva, Switzerland-based bank, moves to dismiss the above-entitled action, including both the complaint and cross-complaint, or in lieu thereof to quash the return of service of the Order of Attachment, on the ground that New York's attachment statute -- Section 6201 of the New York Civil Practice Law and Rules
-- is unconstitutional. In the alternative, defendant seeks a more definite statement pursuant to Rule 12(e) of the Federal Rules of Civil Procedure. For the reasons stated herein, these motions are denied.
Plaintiff, the trustee in bankruptcy for Tulsa Crude Oil Purchasing Company (Tulsa) filed its complaint in February, 1974 against both defendants. The complaint alleges that in 1971 Tulsa sought to obtain a loan of money from Banque Romande. As part of the negotiations, Tulsa deposited $80,000 with Manufacturers Hanover Trust (MHT) for the account of Romande. This deposit, it is alleged, was made on condition that the $80,000 would be paid to Banque Romande if the loan was subsequently made, but would otherwise be returned to Tulsa. The complaint further alleges that the loan was not made, and the $80,000 was not returned.
After the filing of the action, MHT, which is a New York bank, was personally served in this jurisdiction; Banque Romande, however, could not be found or served within this district. Accordingly, in September, 1974, plaintiff applied for a writ of attachment against the property of Romande on the ground that Romande was a foreign corporation within the meaning of CPLR § 6201(1) and that the attachment was thus necessary to secure quasi in rem jurisdiction against Romande. The writ was granted and a levy was subsequently made upon the sum of $100,000 belonging to Romande on deposit at MHT.
In its cross-complaint, MHT alleges that to the extent it participated in the transaction involving the $80,000, it participated only as a paying and collecting agent, pursuant to the instructions from Romande. MHT seeks to recover from Romande the full amount of any recovery, together with all costs and disbursements. Like the plaintiff, MHT opposes the motions of defendant Romande.
II. The Motion to Dismiss
The motion to dismiss or to quash the return of service of the Order of Attachment is grounded on the claim that CPLR § 6201 is unconstitutional. Romande's argument rests entirely upon the recent decision of Sugar v. Curtis Circulation Company (S.D.N.Y. 1974) 383 F. Supp. 643, in which a three-judge federal court held that the New York attachment statute, as applied to plaintiff in that action, was constitutionally defective.
In Sugar, the court examined the New York attachment statute in the light of recent Supreme Court decisions dealing with similar statutes in other jurisdictions. See, Mitchell v. W. T. Grant (1974) 416 U.S. 600, 40 L. Ed. 2d 406, 94 S. Ct. 1895; Fuentes v. Shevin (1972) 407 U.S. 67, 32 L. Ed. 2d 556, 92 S. Ct. 1983; and Sniadach v. Family Finance Corp. (1969) 395 U.S. 337, 23 L. Ed. 2d 349, 89 S. Ct. 1820. The court interpreted the Mitchell decision to require five constitutional requisites, 383 F. Supp. at 647, and found that the New York statute failed to satisfy one of them, namely the right of a debtor-defendant to an immediate post-seizure hearing, "at which the creditor - plaintiff must prove the grounds 'upon which the writ issued'." 383 F. Supp. at 648.
Although this court has been urged by defendant MHT to reject Sugar's reasoning, it is clear that in this case the question of the correctness of the Sugar rationale need not be reached. By its own terms, Sugar does not apply to the facts of this action.
The parties in the Sugar case were apparently New York residents and were adversaries in an ongoing state court proceeding in Westchester. Subsequently, Curtis made an ex parte application in the Supreme Court, New York County for a writ of attachment based upon allegations of fraud on the part of Sugar. Specifically, the grounds for this writ were the fraudulent disposition of property under CPLR § 6201(4), fraud in formation of a contract under CPLR § 6201(5) and fraud and deceit in general under CPLR § 6201(8).
As is thus apparent, Sugar dealt exclusively with the situation where a writ of attachment was obtained against a New York domiciliary on grounds of fraud. In these circumstances, Sugar held that a post-attachment hearing was necessary so that the creditor would be forced to prove the grounds "upon which the writ issued." The reasons for requiring such a procedure in fraud cases was stated by the court as follows (at 649):
"Here . . . the issue before the state court considering the issuance of the attachment order was whether Sugar . . . had defrauded Curtis. The Supreme Court itself has emphasized that such issues, which involve determination of subjective elements of motive and intent, are notably unsuitable to determination on documentary proof alone . . . . A similar conclusion is mandated here. The questions of fraud alleged by Curtis in its motion for attachment are equally 'ill-suited' for preliminary ex parte ...