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BELGIAN AMERICAN MERCANTILE CORP. v. DE GROEVE-MAR

July 8, 1977.

BELGIAN AMERICAN MERCANTILE CORPORATION, Plaintiff,
v.
DE GROEVE-MARCOTTE & FILS, Defendant.



The opinion of the court was delivered by: TENNEY

TENNEY, District Judge.

This is an action by Belgian American Mercantile Corporation ("Belgian American") to recover unpaid commissions for services allegedly performed on behalf of the defendant, De Groeve-Marcotte & Fils, a Belgian textile company now said to be bankrupt. On October 12, 1976 the plaintiff sought and obtained an order of attachment against certain debts allegedly owed to the defendant by Hamilton Adams Imports Ltd. The attachment served the dual purposes of obtaining quasi in rem jurisdiction over the defendant and of securing satisfaction of a judgment ultimately to be entered against the defendant.The plaintiff was awarded a default judgment on December 8, 1976, the defendant not having appeared, answered or moved with respect to the complaint, and the matter was referred to a magistrate for an inquest on damages. Shortly thereafter, FNB Financial Company ("FNB") appeared in the action and obtained an order to show cause why the attachment should not be vacated on the ground that the debts alleged to be owing to the defendant were in fact owing to FNB, the debts having been assigned by the defendant to FNB for valuable consideration. For the reasons stated below, FNB's motion to vacate the attachment is granted, and the default judgment entered by this Court is vacated.

The plaintiff opposes FNB's motion on two grounds. First, the plaintiff argues that FNB has no standing to make its motion since FNB has not sought intervention under Rule 24 of the Federal Rules of Civil Procedure ("Rules"). Second, the plaintiff contends that FNB has failed to sustain its burden of proving that the debts in question were owing to it rather than to the defendant.

 FNB's Standing

 The plaintiff's procedural objection raises an interesting question of the relation between federal and state law in the area of attachments. It is clear that with respect both to attachments to obtain quasi in rem jurisdiction and to attachments to secure satisfaction of a judgment, this federal district court must look to the law of the state of New York. Regarding quasi in rem jurisdiction, Rule 4(e) provides:

 "Whenever a statute or rule of court of the state in which the district court is held provides... (2) for service upon or notice to [a party not an inhabitant of or found within the state] to appear and respond or defend in an action by reason of the attachment or garnishment or similar seizure of his property located within the state, service may... be made under the circumstances and in the manner prescribed in the statute or rule."

 The Advisory Committee on Rules stated that the purpose of this language was to "permit the institution of original Federal actions against nonresidents through the use of familiar State procedures by which property of these defendants is brought within the custody of the court and some appropriate service is made upon them." Notes of Advisory Committee on Rules, Rule 4(e), 28 U.S.C.A. 98 (Supp.1977).

 Rule 64, which governs attachment for security purposes, states in pertinent part:

 "At the commencement of and during the course of an action, all remedies providing for seizure of person or property for the purpose of securing satisfaction of the judgment ultimately to be entered in the action are available under the circumstances and in the manner provided by the law of the state in which the district court is held, existing at the time the remedy is sought, subject to the following qualifications: (1) any existing statute of the United States governs to the extent to which it is applicable; (2) the action in which any of the foregoing remedies is used shall be commenced and prosecuted or, if removed from a state court, shall be prosecuted after removal, pursuant to these rules...."

 In this case, the plaintiff obtained its attachment under Section 6201 of the Civil Practice Law and Rules of New York ("N.Y.C.P.L.R."). Similarly, FNB also has been proceeding under a related section of the same state law, specifically N.Y.C.P.L.R. ยง 6223, which provides in part:

 "Prior to the application of property or debt to the satisfaction of a judgment, the defendant, the garnishee or any person having an interest in the property or debt may move, on notice to each party and the sheriff, for an order vacating or modifying the order of attachment...." (Emphasis added).

 The question presented is whether that part of the state procedure which allows nonparties to move with respect to the attachment should be excised from the state attachment procedure otherwise used by the federal court in favor of requiring more formal intervention under Rule 24. This Court concludes that, under the circumstances of this case, adherence to the state procedure is sufficient to bring the motion to vacate before the Court.

 The purpose of the total incorporation of state attachment procedure into federal law was, as stated above by the Advisory Committee, to permit the use of "familiar State procedures" with respect to attachment. Thus, most federal courts faced with an ostensible conflict between state procedure and the Federal Rules of Civil Procedure have held that the state law should govern. See, e.g., Carroll v. Manufacturers Trust Co., 202 F.2d 714, 715 (2d Cir. 1953) (New York law found to control over Rule 6(b) with respect to extensions of time); Edner v. Mathews, 44 F. Supp. 873, 874 (W.D.Pa.1942) (attachment found to have been extinguished upon death of defendant by virtue of continued application of Pennsylvania law to the attachment notwithstanding Rule 25(a)(1) concerning substitution).

 Moreover, this Court will be required to look to section 6223 of the N.Y.C.P.L.R. and to New York cases interpreting it to determine whether the attachment should be vacated. As the United States Court of Appeals for the Second Circuit stated in Bernstein v. Van Heyghen Freres S.A., 163 F.2d 246, 248 (2d Cir.), cert. denied, 332 U.S. 772, 68 S. Ct. 88, 92 L. Ed. 357 (1947), "it is the New York law which determines the validity of attachments in the district court." District courts have looked specifically to section 6223 or cases thereunder for the applicable standard. Kend v. Chroma-Glo, Inc., 51 F.R.D. 547, 548 (D.Minn.1970), aff'd, 478 F.2d 198 (8th Cir. 1973) (transferee court applying New York law); B. B. Weit Printing Co. v. Frances Denney, Inc., 300 F. Supp. 405, 408 (S.D.N.Y.1969) (citing New York case decided under section 6223). ...


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