Petition — McFadden v. G. H. McShane Co.
Supreme Court brief1977
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Supreme Court, U. Sa ag
am FEL ED Be
JUL 13 1877
IN THE
SU PREME COURT OF THE UNITED {rt GHA RODAK, JRy CLERK |
= . ere oe
October Term, 1977
No. w7-78 2
WARREN A. McFADDEN,
Petitioner,
v.
G. H. McSHANE CO., INC.,
Respondent.
PETITION FOR WRIT OF CERTIORARI TO
THE U NITED STATES COU RT OF APPEALS
FOR THE THIRD CIRCUIT
and
APPENDICES
Edmund K. Trent
Attorney for Petitioner
747 Union Trust Building
P. O. Box 2009
Pittsburgh, Pennsylvania 15230
Reed Smith Shaw & McClay
of counsel
TABLE OF CONTENTS
Page
Petition for Writ of Certiorari i
Opinions below and in companion case 2
Jurisdiction 3
Question presented 4
Statutory and constitutional
provisions involved 4
Statement of the case
Reasons for granting the writ
I. The decision below is contrary
to prior decisions of four three-
judge courts, one of which was
affirmed by the Supreme Court
of the United States 9
Il. The decision below denies to a
successful litigant the fruits
of his victory, contrary to the
prevailing rule in the Supreme
Court of the United States 13
Conclusion 18
ii ; a
lll
Appendices Page Page
I. Opinions and Orders below la Bhs B. Opinions and Orders in companion case
(C.A. 74-1090) 65a
A. Opinions and Orders in this a
ease (C.A. 74-1046) la 1. Opinion and Order of District
Court, Gourley, J., dismissing
complaint, December 2, 1974
1. Opinion and Order of
(not reported) 66a
District Court, Gourley, J.,
dismissing petitioner's it
counterclaim, January 31, 2. Opinion and Judgment of Court
1975 (not reported) la of Appeals reversing dismissal
of complaint, July 14, 1975
(at No. 75-1092, not reported,
2. Opinion and Order of District
noted at 519 F.2d 1398) 68a
Court, Snyder, J., entering
judgment on the merits in ae
favor of petitioner, March 15, 3. Opinion and Order of three-judge
1976 (414 F. Supp. 720 and District Court, February 2 and
124 P.L.J. 150) de 18, 1976 (not reported) 74a
II. Statutory and Constitutional
3. Opinion and Order of District ts
provisions involved 80a
Court, Synder, J., denying
petitioner's motion to vacate
dismissal of counterclaim, A. Pennsylvania rules of civil
May 19, 1976 (414 F. Supp. procedure 80a
730 and 124 P.L.J. 191) 34a Rule 1252 (1) sie
4. Opinion and Judgment of Court
of Appeals affirming order denying Rule 1255 80a
motion to vacate dismissal of Rule 1257
counterclaim, April 26, 1977 (at e 8la
No. 76-1954, not yet
reported) 54a Rule 1258 82a
Rule 1260 (ce) 82a
Rule 1262 83a
iv
Rule 1272
(a)
(b)
(c)
(g)
B. Constitution of the United States,
Amendment XIV, section 1
Page
83a
83a
83a
83a
84a
84a
i.
TABLE OF AUTHORITIES
Cases
Page
Balter v. Bato Company, Inc., 385 F. Supp.
690 (WE. Pe. TG] . ee ses 12, 13
Chevron Oil Co. v. Huson, 404 U. S. 97 (1971) 18
Fuentes v. Shevin, 407 U.S. 67 (1972) . 9, 10,11,
12, 13,
14, 18
Gray v. Creamer, 465 F 2d 179 (3d Cir. 1972) 16, 17
Gunter v. Merchants Warren National Bank,
360 F. Supp. 1085 (D.Me. 1973) . 10
Higley Hill, Ine. v. Knight, 360 F. Supp. 203
ee eee 10
Jonnet v. Dollar Sav. Bank of City of
New York, 392 F. Supp. 1385 (W.D. Pa.
1975), aff'd, 530 F. 2d 1123 (3d Cir.
ee er eae a 14, 15
17, 18
Kacher v. Pittsburgh Nat. Bank, 545 F.2d 842
(36 Cle. VEPs ct etc et es ll, 12
Lebowitz v. Forbes Leasing & Finance Corp.,
456 F.2d 979 (3d Cir. 1972), cert. den.
409 U.S. 843, reh. den. 409 U.S. 1049 12, 13
Linkletter v. Walker, 381 U.S. 618 (1965). . . 16
vi
McClellan v. Commercial Credit Corp., 350
F. Supp. 1013 (D.R.I. 1972), aff'd mem.
sub nom. Georges v. McClellan, 409
Fe fee ee ee
Mitchell v. W. T. Grant Co., 416 U. S. 600
Schneider v. Margossian, 349 F. Supp. 741
fs . eee
Sniadach v. Family Finance Corp., 395 U.S.
eee ee
Simpson v. Union Oil Co., 396 U.S. 13 (1969).
Stovall v. Denno, 388 U.S. 293 (1967). .
Trapper Brown Construction Co., Inc. v.
Electromech, Inc. 358 F. Supp. 105
FF Seer eee
United States ex rel. Jones v. Rundle, 358 F.
Supp. 939 (E.D. Pa. 1973)... .
United States ex rel. Tyrrell v. Speaker,
471 F. 2d 1197 (3d Cir. 1973). . .
SOU BC. SIGE. « c's eee ees
28 U.S.C. $1332. . . 2. 2 2 ew wo
Rules
Pa. R.C.P. 1251-1271 (42 Pa. C.S.A.) . .
ll
17
16, 17
4,6,9
eo cnyer gHN a ie
Constitution
U.S. Constitution, amendment XIV,
§1(1U. S.C. p. xlix)
vii
IN THE
SU PREME COU RT OF THE UNITED STATES
October Term, 1977
No.
WARREN A. McFADDEN,
Petitioner
V.
G. H. McSHANE CoO., INC.,
Respondent.
PETITION FOR WRIT OF CeRTIORARI TO
THE U NITED STATES COU RT OF APPEALS
FOR THE THIRD CIRCUIT
Petitioner, Warren A. McFadden, respectfully
prays that a writ of certiorari issue to review the
judgment and opinion of the United States Court of
Appeals for the Third Circuit entered in this
proceeding on April 26, 1977.
lee
2 Opinions Opinions; Jurisdiction 3
OPINIONS BELOW AND
IN COMPANION CASE
The following opinions in a companion case
(Civil action No. 74-1090) are set forth in Appendix I
The following opinions in the case at bar (Civil B hereto:
action No. 74-1046) are set forth in Appendix I A
Opinion of the District Court, Gourley,
J., dismissing petitioner's counterclaim,
hereto: l.
Opinion of the District Court, Gourley,
J., dismissing the action, December 7,
1974, not reported (65a).
January 31, 1975, not reported (la). 2. Opinion of the Court of Appeals revers-
ing the dismissal of the action, July 14,
Opinion of the District Court, Snyder, 1975 (No. 75-1092), not reported but
J., for judgment on the merits in favor noted in 519 F.2d 1398 (68a).
of petitioner, March 15, 1976, reported
in 414 F.Supp. 720 and in 124 Pittsburgh 3. Opinion of the three-judge District
Legal Journal 150 (4a).
Opinion of the District Court, Snyder,
J., denying petitioner's motion to va-
cate the dismissal of his counterclaim,
May 19, 1976, reported in 414 F.Supp.
730 and in 124 Pittsburgh Legal Journal
191 (34a).
Opinion of the Court of Appeals affirm-
ing the denial of petitioner's motion to
vacate the dismissal of his counter-
claim, April 26, 1977 (No. 76-1954), not
yet reported (54a).
Court, February 2, 1976, not reported
(74a).
JU RISDICTION
The judgment of the Court of Appeals for the
Third Circuit was dated and entered on April 26, 1977,
and this petition for certiorari was filed within 90
days of that date. This court's jurisdiction is invoked
under 28 U.S.C. § 1254(I).
4 Question; Statutory Provisions
QU ESTION PRESENTED
Whether the counterclaiming defendant may
recover damages from the plaintiff who has subjected
defendant's property to prejudgment seizure, without
notice, opportunity for prompt hearing or even ex
parte judicial approval, pursuant to a writ entitled
"writ of foreign attachment," long after similar
prejudgment seizure had been held unconstitutional
when the writ was entitled "writ of replevin."
STATU TORY AND CONSTITU TIONAL
PROVISIONS INVOLVED
The Pennsylvania Rules of Civil Procedure
governing writs of foreign attachment, rules 1251-1279
(Pa. R.C.P. 1251-1271, 42 Pa. C.S.A.!). Those applica-
ble to the present controversy, rules 1252(1), 1255,
1257, 1258, 1260(c), 1262 and 1272(a), (b), (c), and (g),
are set forth in an appendix hereto (80a).
Purdon's Pennsylvania Consolidated Statutes
Annotated, Title 42, Rules of Civil Procedure,
not to be confused with Purdon's Pennsylvania
Statutes Annotated, Title 42, Justices of the
Peace.
Constitutional Provision 5
Amendment XIV to the Constitution of the
United States, section 1 (1 U.S.C. p. xlix), set forth in
an appendix hereto (84a).
6 Statement of Case
STATEMENT OF THE CASE”
Respondent, plaintiff below, sued petitioner,
defendant below, in a Pennsylvania state court to
collect a real estate broker's commission of $150,000,
beginning the action by attaching petitioner's rents
from an office building in Pittsburgh pursuant to a
writ of foreign attachment issued on praecipe filed in
the office of the Prothonotary by respondent's coun-
sel without notice, hearing or even ex parte judicial
approval. The Pennsylvania foreign attachment
procedure made (and still makes) no provision for
prompt hearing, and it permitted the defendant to
secure the dissolution of the attachment and the
return of his property only by posting a surety bond in
double the amount of plaintiff's claim (or cash in the
amount of plaintiff's claim, including probable inter-
est and costs), conditioned for the payment of such
judgment as plaintiff might recover, including inter-
est and costs. Petitioner was unable to obtain such a
surety bond or cash.
The facts, undisputed, are recited in Judge
Snyder's opinion in the District Court, appen-
dix I A 3, pp. 34a-37a.
LR RG ee
Statement of Case 7
Petitioner removed the case to the federal
district court on the ground of diversity of citizenship
(28 U.S.C. § 1332), entered a general appearance
subjecting himself to jurisdiction in personam, and
demanded that respondent release the attachments.
On respondent's refusal, petitioner filed suit in the
district court? to enjoin the continuance of the
attachments, on the ground that they deprived him of
his property without due process of law, and moved
for a three-judge statutory court to pass on the
constitutional question thus raised. He also filed an
answer on the merits to respondent's complaint for
the broker's commission, and he filed a counterclaim
for the unlawful attachment of his rents, alleging
that the deprivation of his rents might result in his
inability to make the payments on his mortgage
necessary to prevent foreclosure and the ultimate
loss of his investment. This later occurred (58a, fn.
8), causing a $2,000,000 loss to petitioner.
The District Court (Judge Gourley) dismissed
the second action (seeking an injunction) (67a), and
The statement in the opinion of the court
below that this suit was instituted in the state
court (57a) was in error.
* Statement of Case
the counterclaim in the first (la), holding in both that
the Pennsylvania foreign attachment procedure was
not unconstitutional. On petitioner's appeal from the
dismissal of the injunction action, the Court of
Appeals vacated the order and remanded the cause
for hearing before a three-judge court (72a). The
three-judge court, after hearing argument on 4
stipulated record, filed an opinion (74a) and entered
an order (77a) enjoining the continued attachment of
petitioner's rents, on the ground that the Pennsyl-
vania foreign attachment procedure was unconstitu-
tional under the fourteenth amendment.
Shortly thereafter, Judge Snyder, before whom
the action for broker's commission had been tried
non-jury (by stipulation after original demand for
trial by jury), handed down an opinion (4a) and
entered a judgment (32a) in favor of petitioner on the
merits. Petitioner then moved to vacate Judge
Gourley's earlier order (which was not appealable)
dismissing the counterclaim. When Judge Snyder
denied the motion to vacate (53a), petitioner ap-
pealed. After affirmance by the Third Circuit (64a),
petitioner filed the instant petition for certiorar'.
Reasons for Granting the Writ 3
REASONS FOR GRANTING THE WRIT
I. THE DECISION BELOW IS CONTRARY
TO THE PRIOR DECISIONS OF FOUR
THREE-JUDGE COURTS, ONE OF
WHICH WAS AFFIRMED BY THE SU-
PREME COURT OF THE UNITED
STATES.
The Pennsylvania foreign attachment proce-
dure contained all the constitutionally objectionable
features which had caused the Pennsylvania replevin
procedure to be held unconstitutional in Fuentes v.
Shevin, 407 U.S. 67, on June 12, 1972, and none of the
saving features which had caused the Louisiana
sequestration procedure to be upheld in Mitchell | _v.
W.T. Grant Co., 416 U.S. 600, on May 13, 1974.
Indeed, the Pennsylvania foreign attachment rules
lacked even the two replevin requirements beneficial
to defendants: an affidavit and a bond from the
plaintiff. The modifications of Fuentes made by
Mitchell are immaterial to the present controversy,
because the Pennsylvania foreign attachment rules
did not comply with even the Mitchell requirements.
The Fuentes decision (as modified by Mitchell)
outlawed all prejudgment seizure without prior notice
(or prior ex parte judicial approval as in Mitchell) and
10 Reasons for Granting the Writ
hearing (or opportunity for prompt post-seizure hear-
ing, as in Mitchell), as Circuit Judge Campbell stated
in Higley Hill, Inc. v. Knight, 360 F.Supp. 203, 205
(D.Mass. 1973):
"After Fuentes, the bar, the legislature and
the courts were on notice that the long-estab-
lished Massachusetts pre-judgment attachment
rules were, at very least, suspect. They knew,
or should have known, that attachments made
without notice and hearing opportunity were
governed by principles spelled out in Fuentes.
Accordingly, state plaintiffs generally can
have little compliant if such later attachments
are invalidated."
The Massachusetts statute discussed by Judge
Campbell was of the type commonly available in all
the New England states to acquire jurisdiction over
defendants, resident as well as non-resident, at the
commencement of any action, whether in contract,
tort or equity. After the Fuentes decision such
statutes were speedily held unconstitutional by three-
4 5
judge courts in Massachusetts, Maine, New Hamp-
. Schneider v. Margossian, 349 F.Supp. 741, Sept.
22, 1972.
5
Gunter v. Merchants Warren National Bank,
360 F.Supp. 1085, June 25, 1973.
Reasons for Granting the Writ ll
6 7
and Rhode Island. None of those cases
involved writs of replevin. The decision of the three-
judge District Court in Rhode Island, rendered
exactly three weeks after that of the Supreme Court
shire
in the Fuentes case, was summarily affirmed by the
Supreme Court even before briefs were filed, under
the name of Georges v. McClellan, 409 U.S. 1120, on
January 15, 1973.
The court below, without mentioning the Su-
preme Court's decision in Georges McClellan or
answering any of petitioner's other arguments made
above, relied on their own decision in Kacher v.
Pittsburgh Nat. Bank, 545 F.2d 842 (3d Cir. 1976),
refusing to allow the plaintiff to recover damages
from the defendant, which had replevied his property
before the Fuentes decision had been handed down.
Kacher's claim relied on Sniadach v. Family Finance
Corp., 395 U.S. 337 (1969), which involved a prejudg-
ment attachment of wages in the amount of $63.18.
The basis of Mr. Justice Douglas’ opinion invalidating
6 Trapper Brown Construction Co., Inc. v. Elec-
tromech, Inc., 358 F.Supp. 105, May 14, 1973.
McClellan v. Commercial Credit Corp., 350
F.Supp. 1013, July 3, 1972.
12 Reasons for Granting the Writ
the attachment there was that wages were "a special-
ized type of property presenting distinct problems in
our economic system." (p. 340). Thus the Sniadach
ease did not clearly foreshadow the subsequent in-
validity of prejudgment attachment of property other
than wages, whereas Fuentes gave unmistakable
notice of the invalidity of all prejudgment attach-
ments regardless of the type of property involved and
regardless of the name of the writ used to make the
seizure. The immateriality of the nature of the
property was made clear in Mr. Justice Stewart's
opinion (407 U.S. at pp. 89-90).°
The court below mentions (58a-59a) two cases
decided subsequent to Fuentes, Lebowitz v. Forbes
Leasing and Finance Corporation? and Balter v. Bato
10
Company, Inc. The court was in error in stating
S Although perhaps not crucial, another differ-
ence between Kacher and McFadden is that
Kacher did owe money to Pittsburgh National
Bank, whereas McFadden owed none to
McShane Co. Kacher was deprived of his
property for a short time; McFadden, forever.
9 456 F.2d 979 (3d Cir. 1972), cert. den. 409 U.S.
893.
10 385 F.Supp. 420 (W.D. Pa. 1974).
Reasons for Granting the Writ 13
(57a) that the Lebowitz case was decided subsequent
to Fuentes v. Shevin. The Lebowitz opinion was
handed down on February 24, 1972, more than three
months prior to Fuentes. While the Balter decision
was subsequent, it was clearly wrong and would have
been reversed if an appeal had been taken. Counsel
for Bato had failed to call Judge Rosenberg's atten-
tion to the Supreme Court's decision in Georges v.
McClellan, supra ll (p. 1).
II. THE DECISION BELOW DENIES TO A
SUCCESSFUL LITIGANT THE FRUITS
OF HIS VICTORY, CONTRARY TO
THE PREVAILING RULE IN THE SU-
PREME COURT OF THE UNITED
STATES.
When a court departs from stare decisis and
adopts a new principle of law, overruling existing
precedents, the new principle is often made appli-
cable prospectively only, except as to the parties in
the case before the court. The successful party in
the case changing the law is never denied the fruits
of his victory, regardless of the resulting hardship on
the loser, who relied on prior, until then viable,
Ul
As shown by a copy of the brief for Bato
furnished to the undersigned by Bato's counsel,
Sanford M. Lampl, Esquire.
14 Reasons for Granting the Writ
decisions: Simpson v. Union Oil Co., 396 U.S. 13
(1969); Stovall v. Denno, 388 U.S. 293, 301 (1967).
The court below denied petitioner the fruits of
his victory over respondent in setting aside the
attachment on February 2, 1976, on the ground that to
permit recovery would result in retroactive appli-
cation of their decision less than a week earlier in
Jonnet v. Dollar Sav. Bank of City of New York, 530
F.2d 1123, January 27, 1976, affirming a decision of
the District Court for the Western District of
Pennsylvania (392 F.Supp. 1385) which had dismissed
for want of jurisdiction over defendant's person an
action begun by writ of foreign attachment, on the
ground that the Pennsylvania foreign attachment
procedure was unconstitutional under the Fuentes
case.
If the decision which changed the law relating
to the validity of prejudgment attachments by writ of
foreign attachment was not Fuentes but Jonnet, then
petitioner should not be denied the benefit of the
change in the law merely because the three-judge
court which heard his case waited for the Court of
Appeals' decision in the Jonnet case. Argument in
petitioner's case was heard by the three-judge court
Reasons for Granting the Writ 15
on October 21, 1975. Argument in the Jonnet case
was heard by the Court of Appeals seven weekaglater,
on December 9, 1975.
The purpose of the rule that decisions over-
ruling prior law should be applied prospectively only,
except in the overruling decision itself, is to prevent
outside late comers from jumping on the bandwagon
and receiving a free ride after they see that they will
be sure to win without exertion or risk of time and
money. This purpose is inapplicable to a litigant who
expends his time and money attempting to change the
law, but whose case happens to be decided after that
of another litigant simultaneously engaged in the
same effort. It would be most unfair to award the
fruits of victory to one and deny them to the other
merely on the basis of which case happened to be
decided first. This is especially pertinent in the case
at bar, where McFadden took the first successful
appeal (69a). His efforts may well have contributed
to the court's decision in the Jonnet case.
The decisive factor in determining whether a
decision should have only prospective application
should be the date when the other suits were filed.
All suits which were pending on the date of the
decision changing the law should be given the benefit
16 Reasons for Granting the Writ
of the change. Suits previously filed which have been
completely concluded and closed, and suits thereafter
filed seeking recovery based upon events which
occurred before the change should not be given
retroactive benefit from the change. This appears to
be the general rule followed by the Supreme Court of
the United States (subject io exceptions in certain
situations): Linkletter v. Walker, 381 U.S. 618, 622
(1965).
The rule advocated above has, at least until
the decision of which review is now sought, also been
the rule in the Third Circuit, as exemplified by
United States ex rel. Tyrrell v. Speaker, 471 F.2d 1197
(3d Cir. 1973), and Gray v. Creamer, 465 F.2d 179 (3d
Cir. 1972). When the Gray case, changing the law,
was decided, the Tyrrell case was pending. The court
then gave Tyrrell the benefit of the new rule
announced in Gray, and remanded Tyrrell's cause to
permit him to seek damages.
The decision in Tyrrell is to be contrasted with
that in United States ex rel. Jones v. Rundle, 358 F.
Supp. 939 (E.D. Pa. 1973). Jones, also deprived of his
constitutional rights, brought suit after the Gray
decision had been rendered. In denying recovery to
Jones, Judge Body said (p. 952):
Reasons for Granting the Writ 17
"We conclude that to the extent that
Gray makes new law in this circuit it should
not be made retroactive with regard’to mone-
tary damages, and we so hold."
In the case at bar the two suits involving
petitioner were filed in October and November, 1974,
prior to even the decision of the District Court in the
Jonnet case, handed down on April 7, 1975. Petitioner
should be denied no right available to the Dollar
Savings Bank of New York. Petitioner should be
denied no right granted to a convicted criminal.
The question involved in the case at bar is also
present in another case pending in the Western
District of Pennsylvania, Reliance Electric Company
v. McFadden, Civil Action No. 75-598. This question,
insofar as it relates to a claim for damages, has never
been passed upon by the Supreme Court. In view of
the unsettled state of the law governing the subject
of retroactive application of decisions changing the
law, it would be most beneficial to litigants and to
the public to have the question authoritatively de-
cided. This will eliminate the need for filing future
suits which ultimately turn out to be futile or
unnecessary. The Court should complete the revision
of the law governing prejudgment attachments begun
with the Sniadach and Fuentes decisions, and not
18 Reasons for Granting the Writ
leave an important facet of it hanging in doubt. The
importance to the public of the issue here involved
would appear to be at least on a level with that which
the court accepted for review in Chevron Oil Co. v.
Huson, 404 U.S. 97 (1971).
CONCLUSION
If the decision which changed the law covering
the validity of prejudgment attachments was Fuentes
v. Shevin, petitioner is entitled to recover from
respondent, who made use of such unlawful process
long after the Fuentes decision had been handed
down.
If the decision which changed the law was
Jonnet v. Dollar Sav. Bank of City of New York,
petitioner is entitled to recover because his claim
was pending at the time the Jonnet decision was
handed down. The decision of the court below causes
the right of recovery to turn upon which of two (or
more) pending cases happens to be decided before the
other. This is unjust to the winning litigant in the
delayed case, because although he wins, his victory is
empty. He does not recover his damages. The result
is the same as if he had lost. This should not be the
law of the land.
Conclusion 19
The petition for certiorari should be granted
on either of the above grounds.
Respectfully submitted,
Edmund K. Trent
747 Union Trust Building
P.O. Box 2009
Pittsburgh, Pa. 15230
Attorney for Petitioner
Of counsel:
Reed Smith Shaw & McClay
June 30, 1977.
Appendix I Al la
IN THE UNITED STATES DISTRICT COU RT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
G. H. McSHANE
COMPANY, INC. ,
Vv. Civil Action No. 74-1046
WARREN A.
McFADDEN
ee ee ee ee ee ee ee”
MEMORANDU M ORDER
In this proceeding the Court, after hearing
held December 30, 1974, entered an Order dismissing
defendant's counterclaim. Although counsel for the
plaintiff attended said hearing, counsel for defendant
advised the Court that notice of the scheduling of
said hearing was never received. Subsequent thereto,
the Court granted defendant's motion to vacate the
dismissal of the counterclaim and to permit the filing
of a brief in opposition to piaintiff's motion to dismiss
defendant's counterclaim.
The Court has considered the briefs of counsel
and must conclude that there is no basis to permit the
counterclaim to stand. Essentially, the defendant's
2a Appendix [Al
theory in filing said counterclaim is that the foreign
attachment issued by the plaintiff violated the pro-
visions of the Constitution of the United States and,
moreover, is invalid under statutory law as well as
the rules of the Superior Court of Pennsylvania. The
Court has previously considered defendant's conten-
tions in the companion case of McFadden v. McShane,
Civil Action No. 74-1090, in which a motion to dismiss
said proceeding was granted.
Very simply stated, the challenge to Pennsyl-
vania's foreign attachment procedure is, as a matter
of law, without merit. In a very well reasoned
Opinion, the Honorable Louis Rosenberg has upheld
this procedure as satisfying federal constitutional
requirements. See Balter v. The Bato Company, Ltd.,
Civil Action No. 74-206 (W.D. Pa., Sept. 6, 1974).
Moreover, the United States Court of Appeals for the
Third Circuit has specifically upheld the Pennsylvania
foreign attachment procedure. Lebowitz v. Forbes
Leasing and Finance Corp., 456 F.2d 976 (3d Cir.
1972).
In view of the foregoing, it is the considered
judgment of the Court that plaintiff's motion to
dismiss defendant's counterclaim should be granted.
ls | NET G e ag mers RE
Appendix I Al 3a
AND NOW, this 3lst day of January, 1975, the
motion of plaintiff to dismiss defendant's counter-
claim is hereby granted.
s/ Wallace S. Gourley, SDJ
Senior District Judge
ee: Kirkpatrick, Lockhart, Johnson
& Hutchison
1500 Oliver Building 15222
Edmund K. Trent, Esq.
747 Union Trust Building 15230
James E. McLaughlin, Esq.
618 Frick Building 15219
4a Appen@ix I A 2
IN THE UNITED STATES DISTRICT COU RT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
G. H. McSHANE CoO., INC.,:
Plaintiff
vs. ' Civil Action 74-1046
WARREN A. McFADDEN, :
Defendant
OPINION
SNYDER, J.
This is a diversity action tried te the Court in
which the Plaintiff Real Estate Agency seeks a
commission from Warren A. McFadden for the efforts
it expended in connection with McFadden's acquisi-
tion of two properties in the Pittsburgh area. Judg-
ment will be entered in favor of the Defendant.
I. HISTORY.
The Methodist Church Union (MCU) is a non-
profit Pennsylvania corporation which carries out
charitable activities in the Pittsburgh area under the
auspices of the Methodist Church. In 1969, MCU
Appendix I A 2 5a
decided to raze one of its church buildings, located at
the corner of Smithfield Street and Seventh Avenue
in the City of Pittsburgh, and to erect in its place a
large office building in the hope that proceeds from
such an operation would support further philanthropic
activities.
G. H. McShane, the President and principal
stockholder in G. H. McShane Company, Ine., a
Pennsylvania corporation engaged in the real estate
brokerage business, voluntarily sought out the D. D.
Davis Construction Company of Youngstown, Ohio
(Davis) and MCU thereafter engaged Davis to con-
struct the building, secure the necessary financing,
and look after the leasing of the building. Davis was
successful in arranging for a construction loan
through Mellon Bank, N.A., and in making arrange-
ments with Prudential Insurance Company for a
mortgage to take over the permanent financing if the
building was completed by September 30, '971.
MCU repeatedly encountered financial prob-
lems during the course of construction, so that it was
unable to meet its commitments to the contractor as
they fell due. There also developed a _ serious
cunstruction problem requiring extensive reworking
6a Appendix I A 2
of some of the structural steel when it was found that
the building was sixteen inches shorter than called for
in the plans. Thus by the summer of 1971, it became
apparent that Davis would not be able to complete
construction within the time limitations set forth in
the Prudential Take-Out Agreement. It was also
apparent that a sufficient number of tenants had not
been secured to provide adequate rent to meet the
carrying charges of the building.
MCU recognized the danger that Prudential
might not be bound by its commitment, and that
MCU's investment in the property would be jeopar-
dized if foreclosure of the construction mortgage
occurred. MCU thus began to exert considerable
efforts to sell Smithfield Plaza at a price which
would allow it to recoup its equity in the property;
such efforts, however, proved unsuccessful.
At this point, Dr. Allan J. Howes, Executive
Director of MCU, proposed combining Smithfield
Plaza with an undeveloped tract of approximately 360
acres (Epworth Woods) located some distance from
the City of Pittsburgh, which was capable of conver-
sion into a housing development. He envisioned the
production of sufficient cash from Epworth Woods to
Appendix I A 2 7a
sustain Smithfield Plaza until it would become self-
financing. This idea was communicated to many real
estate people, including G. H. McShane.
In September of 1971, G. H. McShane teie-
phoned Warren A. McFadden, a real estate investor
and developer in Fort Lauderdale, Florida with whom
McShane had become acquainted in an earlier real
estate transaction. He told McFadden about the
Smithfield Plaza and Epworth Woods properties in
some detail and explained the financial problems
MCU had encountered in attempting to complete the
development of Smithfield Plaza. McShane further
informed McFadden that under the circumstances,
MCU would probably accept substantially less than
they already had invested in Smithfield Plaza but that
as a result, MCU should not be expected to pay any
real estate commission. In addition, McShane told
McFadden of the various offers made for Smithfield
Plaza, including one by the United Steel Workers of
America to purchase for six million dollars. (There
was also pending an offer for Epworth Woods for one
million dollars.) McShane at this point told McFadden
that a real estate commission of $282,000 would
normally be payable on these two sales, but if
McFadden were to acquire the properties, McShane
8a Appendix I A 2
would be willing to bring about the transaction for a
$150,000 commission. McFadden agreed that this was
a reasonable amount in view of the selling price of
the properties (which at the time were not producing
any monies) but suggested that payment of the
commission should be deferred until such time as
either property yielded "sufficient revenue", to insure
that such payment would not be a deterrent to the
proposed transaction.
On October 4, 1971, McFadden and McShane
had another discussion and McFadden decided to
come to Pittsburgh to personally inspect the proper-
ties. McFadden arrived on October 5, 1971 and toured
both properties in company with Dr. Howes, G. H.
McShane and his brother, Hugh McShane, who was
also employed by the McShane Agency. Later at
dinner, McFadden outlined a rough proposal for the
acquisition of both properties under a long term lease
with options to purchase at various times during the
term of the lease. In response to Dr. Howes' stated
concern that MCU could not afford to pay any
commission on the transaction, McFadden assured
him that he (McFadden) and McShane "had an
arrangement". At that time, McFadden also stated to
Hugh McShane that he (McFadden) would be the one
nee ae
OE ae ete oe
Appendix I A 2 9a
who would be paying the real estate commission.
MCU's Executive Committee on October 19,
1971, received McFadden's proposal to take a ninety-
nine year lease on Smithfield Plaza and to pay MCU
rentals, to be determined after deducting expenses
from rents received. The proposal also included the
purchase of Epworth Woods for one million dollars,
which sum would be applied to the upkeep and
maintenance of Smithfield Plaza until it became self-
sustaining; and options to purchase Smithfield Plaza.
When the Executive Committee expressed interest,
McFadden presented a formal written proposal em-
bodying the above terms on October 21, 1971, and
following its presentation, when McFadden was not in
the room, Dr. Howes informed the Committee that
the proposal did not provide for payment of a reai
estate commission by MCU, as none was to be
payable by them.
Between October and December of 1971,
McFadden frequently visited Pittsburgh and Hugh
McShane continued to perform many services for him.
G. H. McShane, who at this time was living in
Sarasota, Florida, also made many trips to Pittsburgh
in connection with this transaction. On December 28,
10a Appendix I A 2
1971, Prudential bought out the Mellon construction
loan and McFadden took over Smithfield Plaza under
the lease. On August 25, 1972, McFadden acquired
title to Epworth Woods for the purchase price of one
million dollars, payable on or before December 3l,
1972. At this same time, MCU transferred the
Smithfield Plaza land to McFadden's nominee, Con-
Dev Dairy Corporation, for no additional considera-
tion under an option to purchase for two and a haif
million dollars during the first twenty-five years of
the ninety-nine year lease.
Not long afterward, on November 4, 1972,
McFadden obtained a loan of $2,300,000.00 from
Great American Mortgage Investors (GAMI) for the
development of Epworth Woods. Of that loan,
$1,000,000.00 was used to pay the purchase price of
Epworth Woods; $594,300.00 was used to replenish
McFadden's line of credit at the Chase Manhattan
Bank in New York City; $118,000.00 went for a small
piece of land and dwelling adjacent to Epworth Woods
(the Dessecker property); $109,371.72 was placed in a
bank account entitled, "Warren A. McFadden, Escrow
Account Epworth Woods"; and the remaining
$478,328.28 was used to pay interest on the GAMI
loan, or was not accounted for. Interest on the GAMI
- COLI ET —
oe SZ
Appendix I A 2 lla
loan was paid through April of 1974, and the unpaid
interest thereon from May 1, 1974 through November
30, 1975 (the Hearing date) amounted to $543,087.08.
Con-Dev received formal title to Smithfield
Plaza, land and building, on April 19, 1973, and on May
8 and 9, 1974, McFadden transferred title to Epw orth
Woods to Schriber Deed Security, Incorporated, as
there was an option agreement between McFadden
and 4 third party to purchase approximately one-third
of Epworth Woods. These transfers were made
without the knowledge of G. H. McShane, and when
he became aware of them, he called McFadden to
request payment of his commission. McFadden
denied there was any agreement regarding a real
estate commission, refused to discuss the matter, and
directed McShane to his lawyer. Shortly thereafter
this action was brought. °
It is noted that Epworth Woods at the time of
Hearing had produced no income, except for about
$3,000 rental from the Dessecker Property. Smith-
field Plaza sustained a net deficit in expenses over
income through August 31, 1975 of $3,590,816.25, so
that on September 8, 1975, Prudential foreclosed on
its mortgage on Smithfield Plaza and purchased the
premises.
12a Appendix I A 2
Il. DISCUSSION.
There is little dispute that McShane brought
together a willing buyer and a willing seller, and that
no commission was to be paid by MCU. Nor is it
controverted that G. H. McShane Co., Inc. through G.
H. McShane and Hugh McShane, was the moving force
in finding a buyer who had previously known nothing
about the properties and who purchased them under
terms and conditions which were satisfactory to
MC. But MeFadden denies the existence of an
enforceable contract.
During his first trip to Pittsburgh on October
5, 1971, McFadden assured Dr. Howes that MCU would
not be responsible for payment of any commission by
making it clear that there was an “arrangement" for
the commission with McShane. This was reiterated
by his statement to Hugh McShane that he
(McFadden) "would pay Mickey's (G. H. MeShene)
commission". On December 20, 1971, G. H. McShane
presented McFadden with a letter which set forth the
terms of the commission agreement as follows:
a Re
Appendix I A 2
"December 20, 1971
Mr. Warren McFadden
512 Intra Coastal Drive
Ft. Lauderdale, Fla. 33304
Dear Warren:
Jim Sweeny has advised me that it
would be to each of our best interests to have
a short memo of our agreement relating to my
commission on the sale of the Methodist
Church Union building in downtown Pittsburgh
and the related conveyance of the Church
Union's North Hills property.
As I recall, our understanding was that
the total McShane Agency's commission on
both of these transactions was to be
$150,000.00, should you or your nominee even-
tually acquire ownership of the downtown
building (but not necessarily the land beneath
it) and the North Hills property. In order that
this project will not be burdened with front-
end expenses which it can searce afford, I have
also agreed that this amount need not be paid
unless and until sufficient revenues are avail-
able to you out of the development in North
Hills or building operation downtown to pay
the fees. I do not believe that we have
reached an exact agreement as to what
amount of revenues should be considered
'sufficient', but I am happy to leave this to
your reasonable judgment. I would hope that
sometime we might be able to set an outside
limit on the time within which that
commission would be payable.
13a
14a Appendix I A 2
If the above, accurately reflects our
understanding, please sign and return the
enclosed copy of this letter.
Yours very truly,
/s/
G. H. McShane
Accepted: —
Date:
The testimony varies considerably from this
point. McShane says he handed the letter to
McFadden in an envelope which McFadden put into
his coat pocket and never returned. McFadden
recalls receiving and reading the document, but says
he immediately returned it to McShane, telling him
there was no commission agreement and that
McShane "must be crazy”.
There is no dispute that G. H. McShane con-
tinued to render service by meeting with McFadden in
Pittsburgh on numerous occasions, with McFadden's
architect, and with engineers and planners to secure
additional tenants for Smithfield Plaza. This conduct
Appendix I A 2 15a
is consistent with McShane's, and not McFadden's,
testimony as to what happened to the letter, and we
therefore give credence to the explanation given by
G. H. McShane.
Hugh McShane testified that for approximately
two years, beginning October 5, 1971, he spent an
average to two to three days a week on McFadden's
behalf, long after McFadden's alleged rejection of any
commission agreement. McFadden admitted having
dinner with Hugh McShane and his wife after the
letter incident, and he did not deny acknowledging at
that time that he owed McShane Company a com-
mission on the acquisition of the two properties.
Moreover, McFadden gave the fact that he owed
McShane Company a real estate commission as one of
the reason he could not accomodate a later request
by Dr. Howes for an increase in his salary as a
Developing Agent for McFadden. McFadden repeated
his obligation to G. H. McShane in the early spring of
1973, and again to Hugh McShane that summer.
Under the testimony, we find that when G. H.
McShane called McFadden in September of 1971 and
described the property in detail, McFadden agreed
that he would pay a commission of $150,000.00. The
16a Appendix I A 2
subsequent events, including the incident of Decem-
ber 20, 1971, corroborate the agreement as made and
as reflected in the December 20, 1971 letter quoted
above. -:/
A. THE TERMS OF THE AGREEMENT.
We must then determine whether or not 4
commission in the amount of $150,000.00 which was
not to be paid unless and until "sufficient revenues"
were available out of the development of Epworth
do not have a question here of possible
Be Any of the commission contract by yg it
connection with the incident of December 20, nome
but see Baum's Estate, 274 Pa. 283, ll7 A. 684 — "
Or a case in which it may be epgued that McFadden,
under the circumstances, can be said to be ——
to deny acceptance. See Restatement contracts ;
Sum.Pa.Jur. Contracts § §203-204 (1955); Gum :, v.
Felton, 341 Pa. 96, 17 A.2d 386 (1941). Ti stead, ™
contract was created in the parties' initial discuss pe
of September 1971; and the subsequent —_ °
McFadden in accepting the benefits of oo ~~
efforts, the letter incident, and McFadden's . _—
edgment of his indebtedness to McShane stan i.
an acceptance of the contract or as elements roe ing
to establish an estoppel, but rather serve as evidenc
of an already existing contractual obligation .
Appendix I A 2
Woods or the operation of Smithfield Plaza, is an
enforceable agreement. The commission was to be
paid out of "revenues" generated from either Smith-
field Plaza's operations or development of Epworth
Woods which were over and above those necessary to
make Smithfield Plaza self-sustaining. We find that
McFadden was to pay the commission only when these
revenues were "sufficient", and the determination of
such sufficiency was left to McFadden's "reasonable
judgment". We observe that this is not a situation
where the promisor is given an unlimited and
unfettered right to determine the time for perfor-
mance and, thus, an unenforceable promise: see
D'Orazio v. Masciantonio, 345 Pa. 428, 29A. 2d 43
(1942); Nelson v. Von Bonnhorst, 29 Pa. 352 (1857).
Cf. Field v. Goldern Triangle Broadcasting, Inc., 45]
Pa. 410, 305 A.2d 689 (1973), cert. denied 414 U.S.
1158, 94 S. Ct. 916, 39 L.Ed.2d 110 (1974). McFadden
was obligated to perform when in the exercise of a
reasonable judgment there were sufficient revenues.
The facts here presented are analogous to those
before the Court in Schleicher v. United Security Life
Ins. & Trust Co., 191 Pa. 477, 43A. 380 (1899), where
under the terms of the agreement an elevator was to
be paid for when it was working to the satisfaction of
the owner. The Court held that the time to satisfy
17a
18a Appendix I A 2
the owner would be construed as being a "reasonable"
time and left to the jury the determination of
whether or not the plaintiff had such a "reasonable"
time. Thus in McFeathers v. Pattison, 188 Pa. 270, 41
A. 609 (1898), a contract provided that a son receive
"reasonable" compensation for caring for his father
and the Court held the agreement to be enforceable,
leaving the question of amount to the jury.
Particularly instructive is Pillois v. Billingsley,
179 F. 2d 205 (2d Cir. 1950), where plaintiff travelled
to France on behalf of the defendant and there
secured a contract for defendant under an agreement
drafted by defendant's attorneys and signed by the
plaintiff, which stated (at p. 207):
"This will confirm our understanding in
connection wi.h the exclusive representation
of the S. A. Le Galion trade mark under
contracts of March 20, 1946 and July 25, 1946,
now being held by Cigogne, Inc., a New York
corporation by assignment from Chapman &
Keane, as follows:
'My compensation for such services as I
may render in this connection shall be such
sum as you, in your sole judgment, may decide
is reasonable. .. .'"
Appendix I A 2
Defendant failed to pay plaintiff under the terms of
the agreement, and in an action brought by the
plaintiff, the Court held ( Id.):
"This letter, as the trial judge held,
shows an eement which is not too iridefinite
to be enforced, the appellee having performed
his part of it. It entitled him to have the
appellant in good faith determine the reason-
able value of his services and to pay him that
amount. Cf. Ake v. Chancey, 5 Cir., 149 F.2d
310. See 1 Williston on Contracts, § 43. And
when the appellant failed to make any deter-
mination whatever as to what such services
were reasonably worth the appellee became
entitled to recover as on a quantum meruit
basis. Von Reitzenstein v. Tomlinson, 249
N.Y. 60, 162 N.E. 584; Varney v. Ditmars, 217
N.Y. 223, lll N.E. 822, 823, 825, Ann. Cas.
1916B, 758; Canet v. Smith, 173 App.Div. 241,
159 N.Y.S. 593 (ist Dep't).
We are here dealing with the legal
results which flow from the performance by
one party to a contract and not with what
legal obligations, if any, are created by a
wholly executory contract. See 1 Williston on
Contracts §49. It may be acknowledged that
the appellant was not satisfied with the terms
of the contract procured from the French
manufacturer because, among other things, the
territory embraced in the former contract was
diminished, but the fact remains that Cigogne,
Inc., did accept it, as both its answer admits
and the evidence clearly shows." [Emphasis
added]
19a
20a Appendix 1 A 2
While the amount of compensation was not
fixed in Pillois under a contract which called for
reasonable compensation without stating an amount,
the Court held as noted above that the party valuing
compensation must make such a determination in
good faith, pointing up the principle that in a case of
a contract fully performed on one side, as is the
situation in the instant case, the failure of the
contract to set forth an element such as time of
payment or amount with exactness will not make the
contract void.
Similarly instructive is the language of the
Sixth Circuit Court of Appeals in Hogan v. Wright,
356 F.2d 595 (1966), where Wright retained Hogan as
his lawyer in settling a construction contract dispute.
Hogan billed Wright $15,000.00 for his services and, in
addition, offered to prepare a claim for Wright on a
related matter before a State Board, stating, "Out of
any recovery in your claim, you are to pay me a
percentage figure acceptable to you." Wright re-
ceived $137,314.81 and determined that $2,000.00
would be adequate payment, although the Court found
additional services to have a reasonable value of
$27,468.36.
Appendix I A 2
The Court stated (at pp. 597-598):
"As a general rule, a wholly executory
agreement which reserves to the will and
discretion of one party the unlimited right to
determine the extent of compensation he will
make is too indefinite to be enforceable. I
Corbin on Contracts, Section 98; 17 Am.Jur.2d,
Contracts, Section 83. Here, however, is a
contract where the promisor has fully per-
formed, the promisee has the unlimited right
to determine the amount of compensation he
will pay the promisor for the services ren-
dered. The cases are in conflict as to the
manner of measuring the adequacy of the
compensation rendered by the one party. The
facts of each case generally suggest the
appropriate rule. Recovery has been allowed
for the reasonable value of such services
where the facts disclose that this was the
intention of the parties or where the express
reservation to one party to determine the fee
is coupled with the provision that the payment
to be made shall be ‘reasonable’, 'fair', 'right',
or 'good'. Foster v. Yo 172 Cal. 317, 156 P.
476; Corthell v. Summit Thread Co., 132 Me.
94, 167 A.79, 92 A.L.R. 1391; Pillois v.
Billingsley, 179 F.2d 205 (C.A.2, 1949); Millar v.
uddy, Mich. 273, 5 N.W. 316, 92 A.L.R.
. Other cases have held that where the
promisor has determined the amount to be
paid, no more can be recovered. This is
especially true where the promisor has acted
in good faith, although the compensation is
considerably less than the reasonable value of
the services. Lee's Appeal, 53 Conn. 363, 2 A.
758 (1886); Butler v. Winona Mills Co., 28 Minn.
2la
22a Appendix I A 2
205, 9 N.W. 697 (1881); Tennant v. Fawcett, 94
Tex. lll, 58 S.W. 824 (1900).
No arbitrary formula can be applied.
The facts of each case must be considered to
determine the intentions of the parties. Their
intent should suggest whether the compensa-
tion to be paid will be measured in terms of
reasonable value or in terms of good faith .
Since Hogan drafted the contract, he
was in a position to state exactly what his
terms of employment were. If he wanted a
definite percentage of the recovery he could
have so stated. If he wanted a reasonable fee,
he could have so stated. Where a party
competent to contract and skilled in the art of
drafting contracts recites therein conditions of
his own choosing, in language of his own
choosing, he cannot complain when the other
party to the contract exercises his rights in
good faith."
We conclude that in the matter sub judice
there was an enforceable contract. The parties
agreed, and the Court finds, that the contract
provided that McFadden would pay McShane a real
estate commission of $150,000.00 when sufficient
revenues existed, and that determination was to be
made using a standard of objective reasonableness.
Appendix I A 2
McFadden does not claim that he has made any
assessment as to whether or not sufficient revenues
exist; however, he now offers evidence that there
never were any "revenues".
B. THE MEANING OF "SU FFICIENT REVENU ES".
In determining the intention of the parties
with respect to the meaning of the term "sufficient
revenues", we are reminded by Judge Becker in BBCI,
Inc. v. Canada Dry Delaware Val. Bottling Co., 393
F.Supp. 299 (E.D.Pa. 1975) (at p.301):
®, . If [a contract's] provisions are
ambiguous or obscure, then its interpretation
becomes a question of fact for the jury, and
parole evidence is admissible to aid in this
interpretation. If its provisions are unambigu-
ous and clear, then its interpretation becomes
a question of law for the Judge, and parole
evidence is not admissible. The question of
whether its provisions are ambiguous or ob-
scure on the one hand, or unambiguous and
clear on the other hand, is a question of law
for the Judge. [Citations omitted] "
From a reading of the contract it is unclear
whether the parties used the term "revenues" to
indicate that payment would be made only out of an
excess of the difference between receipts and ex-
penses, or whether payment was to be made out of
23a
24a Appendix I A 2
any monies which might be generated from the
properties, regardless of the means of such genera-
tion (i.e., by mortgage, selling of options, or only by
rental incomes).
Instances can be found where "revenue",
because of the particular context in which the word is
used, has an easily determined meaning. Thus, in
George v. City of Asheville, N.C., 80 F.2d 50 (4th
Cir. 1935), in determining whether a municipal water
and sewer system was "revenue" producing, revenues
were held to mean any income without a determina-
tion of net profit.
The American Institute of Certified Public
Accountants has stated:
"Revenue under present generally accepted
accounting principles is derived from three
general activities: (a) selling products, (b)
rendering services and permitting others to use
enterprise resources, which result in interest,
rent, royalties, fees, and the like, and (c)
disposing of resources other than products —
for example, plant and equipment or invest-
ments in other entities. Revenue does not
include receipt of assets purchased, proceeds
of borrowing, investments by owners, or
adjustments of revenue of prior periods."
[Emphasis added] Statement, The Accounti
Principles Board 45148 (1970), CCH 3 ie
Appendix I A 2
fessional Standards §1026.12 (1974).
Consistent with this statement is the language
of People v. New York Central R.Co., 24 N.Y. 485
(1862), wherein it was noted (at pp. 489-490):
", . » Revenue, when used of individuals [as
opposed to governments], is equivalent to
income, which is the true sense generally used
to designate the annual receipts, and includes
receipts from all sources—at least, all perma-
nent sources of profits or rent.
. « » ‘Revenue’ is a return for capital invested
or labor bestowed. In a general sense, it is the
annual rents, profits, interests or issues of any
species of property, real or personal, belonging
to an individual or the public. . . It is not the
money _borrowed by the owner... ."
[Emphasis added]
But in Willoughby v. Willoughby, 66 R.I. 430, 19 A.2d
857 (1941), decedent's will contained a provision that
his wife, during her life or widowhvod, should receive
all of the revenues of his estate. In determining
testator's intentions, the Court stated (19 A.2d at p.
860):
"In Webster's New International Dictio-
nary, 2d. Ed., p. 2132, the word ‘revenue’, in
beth singular and plural forms, is defined as
"Return; yield, as of land; profit. * * * That
25a
26a Appendix I A 2
which returns, or comes back, from an invest-
ment; the annual or periodical rents, profits,
interest, or issues, of any species of property,
real or personal; income.' See also People v.
New York Central R.R. Co., 24 N.Y. 485, 490;
Bates v. Porter, 74 Cal. 224, 15 P. 732. There
being nothing in the will before us to indicate
that the word ‘revenues' was used by the
testator with any special meaning, it is clear
to us that it was testator's intention to devise
and bequeath to his wife for her life, provided
she remained his widow, the 'net income' from
all his property, . . ." [Emphasis added]
Webster's Third New International Dictionary
(1971) defines revenue (as here relevant) as, "the
income that comes back from an investment", "the
annual or periodical rents, profits, interest, or
issues", "investment income as distinguished from
salary, wages, or donations", "an item of income",
"the total income produced by a given source".
We conclude that while the term revenue has
no legally definable meaning, the term under the
circumstances of this case does not include the
proceeds of loans such as the GAMI loan here.
C. REVENUE AS PROFIT.
The record here reveals that gross rental
income from Smithfield Plaza from September, 1972
~
Appendix I A 2
through August, 1975, was $1,066,361.65. The sale of
an option in connection with the Epworth Woods
operations generated cash in the amount of
$51,068.00. However, the net loss on the operations
of Smithfield Plaza was $3,590,816.00 and the net
operating loss on Epworth Woods was $492,019.00.
Smithfield Plaza, because of its low occupancy rate,
was at least a short term money loser. This was
precisely why MCU combined Smithfield Plaza with
Epworth Woods into one package. It was hoped that
Epworth Woods would develop quickly and generate
funds large enough to equalize the losses from Smith-
field Plaza until its occupancy reached a self-
sustaining level of income. Apparently, this was the
reason the commission was made payable only when,
by reasonable judgment, funds were found to be
sufficient to pay the commission from either (I)
Smithfield Plaza's net funds, or (2) those of Epworth
Woods. Neither of the parties contemplated that
gross receipts would be the basis for calculation of
"sufficient revenues".
G. H. McShane initially stated in his deposition
that he understood "revenues" to include only income
in excess of the operational costs of the properties.
When questioned further, he then amplified and
refined his statement, as follows:
27a
28a Appendix I A 2
"Q By revenues, you would mean to include
money that was raised by way of a
loan?
A Sale, loan, anything, as long as it is
cash, yes, sir."
That position was adopted again by McShane at the
trial. However, the Court finds it highly significant
that counsel for McShane did not urge the Court to
weigh the gross rentals from Smithfield Plaza in
determining whether "sufficient revenues" had been
accumulated, claiming only that we should look to the
$1,300,000.00 excess of the GAMI loan.2:/
2./ We have already noted that the GAMI loan
proceeds are not properly includable as "revenues";
we thus cannot say that McFadden should have paid
the McShane Company commission directly out of
those proceeds. However, even if we were to find
that McFadden improperly applied the loan proceeds
and thereby acted in derrogation of the contract, it
would be highly speculative and therefore improper
for this Court to hold under the evidence that the
GAMI loan proceeds, spent on the development of
Epworth Woods, would have generated enough reve-
nue to sustain Smithfield Plaza until it became self-
sufficient, much less hold that those revenues would
have been sufficient to sustain Smithfield Plaza with
revenues remaining. [See note 3, infra.]
Appendix I A 2
Ill. CONCLUSION.
We find that the contract's "sufficient reve-
nues" provision did not include the proceeds of loans.
We further conclude that the term was used to cover
gross profit, and that a determination of the
existence of such gross profit was to be made based
on the occurrence of one of two alternatives, =’
detailed above. Given these findings, it is clear to
this Court that although McFadden did not make the
3./ Counsel have vigorously argued their respective
positions as to the effect of McFadden's sale of
Epworth Woods. Counsel for McShane Co. urges that
these actions constituted an anticipatory breach of
the commission contract and that such a breach gives
rise to an action for the reasonable value of the
services provided. Cameron v. Eynon, 332 Pa. 529, 3
A.2d 423 (1939). Defendant on the other hand claims
that the doctrine of anticipatory breach has no
application to situations such as this where the
contract is fully performed on one side, citing inter
alia Mack v. Revicki, 47 N.J. Super. 185, 135 A.2d 569
(1957). See Smyth v. United States, 302 U.S.
329, 58 S.Ct. 24% SRY LEA 364, 705 1837 ); Annot.,
105 A.L.R. 460. Although we agree with Defendant's
general statement of the law, we note that the cases
he cites are distinguishable from the case at bar. For
example, Mack did not involve, as here, a situation
wherein the defendant sold the land which was the
basis for calculating the sufficiency of revenues.
[continued]
30a Appendix I A 2
required good faith, reasonable evaluation of the
existence of sufficient revenues, such revenues did
not in fact exist. The Plaintiff has therefore failed
to prove an essential element of his case, namely,
that the contingency provided for in the contract
occurred. Judgment will be entered in favor of the
Defendant and against the Plaintiff, without
Footnote 3 continued /
This Court views the problem of McFadden's
sale of Epworth Woods as covered by §295 of the
Restatement of Contracts, which provides:
"If a promisor prevents or hinders the
occurrence of a condition, or the performance
of a return promise, and the condition would
have occurred or the performance of the
return promise been rendered except for such
prevention or hindrance, the condition is ex-
cused, and the actual or threatened non-
performance of the return promise does not
discharge the promisor's duty, unless
(a) the prevention or hindrance by the
promisor is caused or justified by the
conduct or pecuniary circumstances of
the other party; or
(b) the terms of the contract are such that
the risk of such prevention or hindrance
as occurs is assumed by the other
party."
As this Court reads §295, McShane Co., the
party asserting excuse of a condition imposed by the
contract, is bound to come forward with proof
tending to show that the condition, to-wit, sufficient
revenue would have occurred but for McFadden's sale
of Epworth Woods. Hartman v. Meighan, 171 Pa. 46,
Appendix I A 2
prejudice to the rights of the Plaintiff from showing
in another case that the contingency has been
satisfied.
The foregoing constitutes the Court's Findings
of Fact and Conclusions of Law, as required by hule
52(a), Federal Rules of Civil Procedure, and an ap-
propriate Order will be entered.
_S/ Daniel J. Snyder, Jr.
United States District Judge
Dated: March 15, 1976
Footnote 3 continued /
33A.123 (1895), although standing for the proposition
that a party who fails to perform on the basis that he
was prevented from doing so must prove that he was
so prevented, also supports, in our view, the conclu-
sion that McShane here was obligated to prove by a
fair preponderance of the evidence that the condition
was not met because of the breach. We further
believe that in this case the credible evidence
indicates that McFadden's sale of Epworth Woods did
not affect the fact that there did not exist sufficient
revenues (as we have determined that term to be) for
the payment of the commission contract. Thus,
because it has not been proven that "the condition
[the existence of sufficient revenues] would have
occurred... except for such prevention or hin-
drance" [McFadden's sale of Epworth Woods], and
MecShane's claim on this ground, which was not the
subject of a contract provision, must accordingly fail.
3la
32a Appendix I A 2
IN THE UNITED STATES DISTRICT COU RT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
G.H. McSHANE CoO., INC.,
Plaintiff
vs. Civil Action 74-1046
WARREN A. McFADDEN,
Defendant
JU DGMENT ORDER
AND NOW, to-wit, this 15th day of March,
1976, after due consideration of the Claim of the
Plaintiff, G. H. McShane Co., Inc. against the Defen-
dant, Warren A. McFadden, after Non-Jury Trial,
and in accordance with the Opinion of this Court
filed simultaneously herewith,
IT IS ORDERED that judgment be and the
same is hereby entered in favor of the Defendant,
Warren A. McFadden, and against the Plaintiff,
G. H. MeShane Co., Inc.
IT IS FURTHER ORDERED that this judg-
ment is entered without prejudice to the rights of
Appendix I A 2
the Plaintiff G. H. McShane Co., Inc., to claim in
another action that sufficient revenues exist to pay
his claim.
s/ Daniel J. Snyder, Jr.
United States District Judge
ec David L. McClenahan, Esq.
1500 Oliver Building 15222
Edmund K. Trent, Esq.
747 Union Trust Building 15219
33a
34a Appendix I A 3
IN THE UNITED STATES DISTRICT COU RT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
G. H. McSHANE CoO., INC.,
a corporation,
Plaintiff
No. 74—1046
WARREN A. McFADDEN,
)
)
)
)
)
vs. ) Civil Action
)
)
an individual,
)
Defendant
OPINION AND ORDER
SNYDER, J.
The Defendant has filed a Motion to Vacate
Dismissal of his Counterclaim. The Plaintiff, a
Pennsylvania corporation, filed suit in assumpsit on
October 1, 1974 in the Court of Common Pleas of
Allegheny County to collect a real estate broker's
commission and began its action with writs of foreign
attachment seizing Defendant's rents from certain
Appendix 1 A 3 35a
property located in the City of Pittsburgh!:/ The
Defendant being a resident of Florida, removed the
case to Federal Court here, entered a general
appearance, and demanded the Plaintiff release the
attachment. When the Plaintiff refused to do so, the
Defendant filed suit to enjoin continuance of the
attachment on the grounds that the Pennsylvania
foreign attachment procedure was unconstitutional.
Defendant filed an Answer to the Complaint in the
foreign attachment proceedings denying the indebted-
1./ Pennsylvania Rule of Civil Procedure 1252
provides:
"A foreign attachment may be issued to attach
property of a defendant not exempt from execution
upon any cause of action at law or in equity, other
than an action ex delicto arising from acts commited
outside the Commonwealth which is not required to
be joined with an action of assumpsit under Rule
1020(d)(1), in which the relief sought includes a
judgment or decree for the payment of money when
(1) the defendant is an individual who is a
nonresident of the Commonwealth, even though he is
present in the Commonwealth;
(2) the defendant is a partnership or an unin-
corporated association without a regular place of
business in the Commonwealth and the action is
against the defendant in its firm or association name,
even though one or more members of the partnership
or association are present in or are residents of the
Commonwealth;
(3) the defendant is a foreign corporation or
Similar entity which is not registered in the Com-
monw ealth." (Emphasis added.)
ness and counterclaiming for damages caused by the
alleged unlawful attachment which Plaintiff MeShane
had obtained by use of Pennsylvania's Rules of Civil
Procedure. £:/
Upon consolidation of the two actions, the
Honorable Wallace S. Gourley of this Court dismissed
the MeFadden injunction suit and dismi ' the
McFadden Counterclaim in the matter sub judice,
holding in both cases that the Pennsy'vania foreign
attacnment procedure was not unconstitutional.
McFadden appealed from the dismissal of the
injunction suit and tne Court of Appeals vacated the
order and remanded the cause for hearing before a
Three Judge Court (519 F.2d 1398), After argument
on the stipulated record, the Three Judge Court filed
an opinion on February 2, 1976, finding Pennsylvania's
foreign attachment procedure unconstitutional, and
on February 18, 1976, enjoined the attachment of
MeFadden's rents.
Vieanwt els yo ther estate
ie Foreign 1enmer n of process not a
es ‘ > : " i> _" 4 ~~ > wr jc i >. ea 900
type of action, STi vy Sneridan, 4091 Pa. 931, 299
A(2d) 309 (1973), quoting rich-Amra
pest COPY AV AILABLE
Appendix I A 3 37a
commission had been tried on its merits to the Court
and on March 15, 1976, judgment was entered for the
Defendant. On March 25, 1976, the Defendant filed
the instant Motion to Vacate Dismissal of his Coun-
terclaim setting forth that the Order of Dismissal
entered December 2, 1974 did not contain direction
for the entry of final judgment under Rule 54(b) of
the Federal Rules of Civil Procedure, was therefore
not appealable, and was proper for consideration at
this time.2:/ Defendant's Motion will be denied.
I. THE PROCEDURAL ASPECT.
Defendant McFadden contends that his Coun-
terclaim was dismissed solely on the ground that
Pennsylvania's foreign attachment procedure was not
unconstitutional and that that ground has been con-
clusively heid to be incorrect. Initially, the Defen-
dant claimed that the dismissal should be vacated,
the Counterclaim reinstated, and the Plaintiff or-
dered to plead to it. However, counsel has now filed
3./_— Plaintiff does not contend otherwise.
38a Appendix I A 3
a Stipulatio: that:
", . . the Court may consider and determine
the broad question of whether said counter-
claim fails to state a claim upon which relief
can be granted because it calls for the retro-
active application of a new principle of law,
rather than limit its consideration to the
narrower question of whether the basis for this
Court's dismissal of defendant's counterclaim
in its Order dated January 31, 1975, was
incorrect."
Fuentes v Shevin and its companion, Parham v.
Cortese, 407 U.S. 67, 92 S. Ct. 1983, 32 L.Ed.2d 556,
reh. denied 409 U.S. 902, 93 S. Ct. 177, 34 L.Ed.2d 165
(hereinafter Fuentes), were argued before the
Supreme Court on November 9, 1971 and decided on
June 12, 1972. In an opinion by Justice Stewart,
expressing the views of four members of the Court,
the replevin laws of both Florida and Pennsylvania
were declared as violative of the Due Process Clause
of the Fourteenth Amendment as they denied the
right to prior opportunity to be heard before chattels
were taken from their possessor, notwithstanding that
possession could be regained by posting security bend,
and holding that such replevin laws served no such
important governmental or general public interest as
would justify postponement of the due process right
to an opportunity for hearing until after the seizure
Appendix I A 3 39a
of property. Justices Powell and Rehnquist did not
participate in the decision, and Justice White was
joined by Chief Justice Burger and Justice Blackmun
in dissenting, on the grounds that when the Federal
actions were filed, replevin proceedings were in
progress in State Court at which time the constitu-
tional objections to the replevin laws could have been
raised, there being no allegations in the Federal
Courts of bad faith, harassment, or irreparable injury.
Counsel for the Defendant argues on the basis
of Fuentes, that the Plaintiff in the case sub judice
seized the Defendant's property two years after
Fuentes by resorting to a writ even more objection-
able than the writ of replevin used in Fuentes. He
contends the foreign attachment in this case did not
afford the Defendant protection of a surety bond and,
since Plaintiff resorted to such a writ after Fuentes,
it did so knowing that the writ of foreign attachment
was a fortiori unconstitutional since it lacked even
the replevin bond requirement. He cites Highley Hill,
Inc. v. Knight, 360 F.Sup. (D. Mass. 1973), where the
plaintiffs filed suit in Federal Court to enjoin
attachment of their property in the State Court, on
the ground that Fuentes outlawed the use of the
Massachusetts attachment procedure available in the
40a Appendix I A 3
filing of a bill in equity, the attachments having been
authorized in advance by the State Court Judge ex
parte. The Three Judge Court denied plaintiff's
motion for a preliminary injunction permitting the
question to be considered by the State Court Judge at
a new hearing scheduled for the day following that on
which the opinion was handed down. With respect to
the retroactivity of Fuentes, the District Court
pointed out that the Supreme Court's opinion gave
notice not merely that writs of replevin were illegal
but that all prejudgment attachments were suspect,
saying through Circuit Judge Campbell (at p. 205):
", . . After Fuentes, the bar. the legislature
and the courts were on notice that the long-
established Massachusetts pre-judgment at-
tachments rules were, at very least, suspect.
They knew, or should have known, that attach-
ments made without notice and hearing oppor-
tunity were governed by principles spelled out
in Fuentes. Accordingly, state plaintiffs gen-
erally can have little complaint if such later
attachments are invalidated."
There is, however, a long step to be taken
between a process being "suspect" and liability for
damages if such suspect process is used. It would
serve no useful purpose to recite the rather tortured
history of the constitutional attacks upon the writ of
foreign attachment which were engaged in unsuccess-
Appendix I A 3 4la
fully in Pennsylvania for about one hundred and forty
years.4:/ Suffice it, at this point, to mention that
Judge Teitelbaum of this Court first held the Penn-
sylvania foreign attachment procedures to be uncon-
stitutional by his opinion filed April 7, 1975 in the
case of Jonnet v. Dollar Savings Bank of City of New
York, 392 F.2d 1385, affirmed Third Circuit Court of
Appeals, Slip Opinion filed January 27, 1976, relying
heavily on the Supreme Court opinion in North
Georgia Finishing, Inc. v. Di-chem, Inc., 419 U.S. 601,
95 S. Ct. 719, 42 L.Ed.2d 751 (1975), involving the
constitutionality of a Georgia statute under which the
4./ In 1972 the Third Circuit expressly upheld the
constitutionality of the Pennsylvania foreign
attachment rules in Lebowitz v. Forbes Leas-
ing and Finance Corporation, 456 F.2d 979 (ad
Cir. ), cert. denied 409 U.S. 843, 93 S.Ct.
42, 34 L.Ed.2d 82 (1972), rehearing denied 409
U.S. 1049, 93 S.Ct. 509, 34 L.Ed.2d 502 (1972).
Judge Rosenberg of this Court found that the
Pennsylvania foreign attachment rules were not
violative of the Constitution in an opinion issued
September 6, 1974, less than a month before plain-
tiff's praecipe for writ of attachment in the present
case was filed, Balter v. Bato Co., 385 F.Supp. 420
(W.D.Pa. 1974).
_ Judge Gourley of this Court upheld the foreign
attachment rules in his Opinion dated December 2,
1974, in the case of McFadden v. G. H. McShane Co.,
supra.
[Continued on next page.]
42a Appendix I A 3
plaintiff corporation had garnished defendant's bank
account by issuance of a writ of garnishment on the
affidavit of the plaintiff without participation of a
judge, upon the posting of bond for double the amount
sworn to be due. Thus, it is noted that the
Pennsylvania Rule of Civil Procedure regarding for-
eign attachments had not been declared invalid in
October of 1974 when the Plaintiff brought the
instant action and sought to make use of the Rules.
It then becomes apparent that the sole basis for the
Defendant's Counterclaim in the case sub judice must
Footnote 4 continued /
In the case of Fuentes v. Shevin, 497 U.S. 67,
92 S.Ct. 1983, 32 L.Ed. 2d 556 (1972), the Supreme
Court expressly acknowledged that the State's need
to obtain immediate jurisdiction over nonresident
defendants in state courts was "clearly a most basic
and important public interest" which justified the
attachment of property without prior notice or hear-
ing. 32 L.Ed.2d at 576, n. 23.
In the case of Mitchell v. W. T. Grant Co., 416
U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974), decided
after Fuentes, the Supreme Court upheld the validity
of a Louisiana statute which permitted the sequestra-
tion of property upon the ex parte application of a
creditor without notice or hearing. In so holding the
Court clearly receded from the sweeping language set
forth in its Fuentes decision, to the extent that
Justice Stewart (who wrote the opinion in Fuentes)
concluded that Fuentes had been "unmistakably over-
ruled." 40 L.Ed. 2d at 429.
Appendix I A 3 43a
be that the Jonnet decision should be applied retro-
actively. Fuentes cannot be the basis for such suit
for there is an interest of the State involved in
jurisdiction over non-residents.
It is noted that in Fuentes, the Supreme Court
was concerned that the State did not have an
important governmental or general public interest to
justify the postponement of the due process rights to
an opportunity for hearing until after the seizure of
the property. Thus, Justice Stewart said (32 L. Ed.2d
556 at p. 576):
", .. First, in each case, the seizure has been
directly necessary to secure an important
governmental or general public interest. Sec-
ond, there has been a special need for very
prompt action. Third, the State has kept strict
eo:ncrol over its monopoly of legitimate force:
the person initiating the seizure has been a
government official responsible for determin-
ing, under the standards of a narrowly drawn
statute, that it was necessary and justified in
the particular instance. Thus, the Court has
allowed summary seizure of property to col-
lect the internal revenue of the United States,
to meet the needs of a national war effort, to
protect against the economic disaster of a
bank failure, and to protect the public from
misbranded drugs and contaminated food.
The Florida and Pennsylvania prejudg-
ment replevin statutes serve no such important
44a Appendix I A 3
n. 23):
governmental or general public interest. They
allow summary seizure of a person's posses-
sions when no more than private gain is
directly at stake. The replevin of chattels, as
in the present cases, may satisfy a debt ar
settle a score. But state intervention in a
private dispute hardly compares to state ac-
tion furthering a war effort or protecting the
public health.
Nor do the broadly drawn Florida and
Pennsylvania statutes limit the summary sei-
zure of goods to special situations demanding
prompt action. There may be cases in which a
creditor could make a showing of immediate
danger that a debtor will destroy or conceal
disputed goods. But the statutes before us are
not ‘narrowly drawn to meet any such unusual
condition.' Sniadach v Family Finance Corp.,
supra, at 339, 23 L Ed 2d st 352. And no such
unusual situation is presented by the facts of
these cases.
The statutes, moreover, abdicate effec-
tive state control over state power. Private
parties, serving their own private adva tage,
may unilaterally invoke state power tc replevy
goods from another. No state official partici-
pates in the decision to seek © writ; no state
official reviews the basis for the claim to
repossession; and no steie official evaluates
the need for immediate seizure. There is not
even a requirement that the plaintiff provide
any information to the court on these matters.
The State acts largely in the dark." [Footnotes
omitted.)
And in particular, the Court noted (at p. 576,
Appendix I A 3 45a
", .. In three cases, the Court has allowed the
attachment of property without a prior hear-
ing. In one, the attachment was necessary to
protect the public against the same sort of
immediate harm involved in the seizure cases -
a bank failure. Coffin Bros. & Co. v. Bennett,
277 US 29, 72 L Ed 768, 48 S Ct 422. Another
case involved attachment necessary to secure
jurisdiction in state court clearly a most basic
and important public interest. Ownbey v
Morgan, 256 US 94, 65 L Ed 837, 41 S Ct 133.
17 irk 873. It is much less clear what
interests were involved in the third case,
decided with an unexplicated per curiam opin-
ion simply citing Coffin Bros. and Ownbey.
McKay v Melinnes, 279 US 820, 73 L Ed 975, 49
Ct 344... ."
We must further consider the Supreme Court's
decision in Mitchell v. W. T. Grant Co., 416 U.S. 600,
94 S. Ct. 1895, 40 L.Ed.2d 406 (1974), which was
decided after Fuentes, supra, and less than five
months before the filing of the Plaintiff's writ of
foreign attachment in the present case. There,
Justice White in an opinion expressing the view of
five members of the Court, held that issuance of a
sequestration writ without notice and hearing did not
violate procedural due process since the Louisiana
system adequately protected the debtor's interest,
and that where only property rights are involved,
mere postponement of judicial inquiry is not a denial
of due process if the opportunity given for ultimate
46a Appendix I A 3
judicial determination of liability is adequate. The
Court held as follows (at pp.416417):
", . . The usual rule has been ‘[w] here only
property rights are involved, mere postpone-
ment of the judicial enquiry is not a denial of
due process, if the opportunity given for
ultimate judicial determination of liability is
adequate.’ Phillips v Commissioner, 283 US
589, 596-597, 75 L Ed 1289, 51 S Ct 608 (193)).
See also Scottish Union & National Ins Co. v.
Bow land, 196 U S 611, 632, 49 L Ed 619, 25S Ct
345 (1905); Springer v. United States, 1@2 US
586, 593-594, 26 L Ed 253 (1881). This
generality sufficed to decide relatively modern
cases. For example, in Ewing v. Mytinger &
Casselberry, 339 US 594, 94 L Ed 1088, 70SCt
870 (ED? the statute at issue permitted
multiple seizures of misbranded articles in
commerce "when the Administrator has prob-
able cause to believe from facts found, with-
out hearing, by him or any officer or employee
of the Agency that the misbranded article...
would be in a material respect misleading to
the injury or damage of the purchaser or
consumer." Id., at 595-596, 26 L Ed 253. The
specifie seizure challenged, made administra-
tively without prior notice or hearing,
concerned a concentrate of alfalfa, water-
cress, parsley, and synthetic vitamins, com-
bined in a package with mineral tablets. There
was no claim or suggestion of any possible
threat to health. The sole official claim was
that the labeling was misleading to the alleged
damage of the purchaser. The Court sustained
the ey parte seizure saying that ‘[w] e have re-
peatedly held that no hearing . . . is required
by due process so long as the requisite hearing
Appendix I A 3 47a
is held before the final administrative order
becomes effective.' Id., at 598, 26 L Ed 153.
‘It is sufficient, where only property rights are
concerned, that there is at some stage an
opportunity for a hearing and a judicial deter-
mination.' Id., at 599, 26 L Ed 253.
More precisely in point, the Court had
unanimously approved prejudgment attachment
liens effected by creditors, without notice,
hearing, or judicial order, saying that ‘nothing
is more common than to allow parties alleging
themselves to be creditors to establish in
advance by attachment a lien dependent for its
effect upon the result of the suit.' 'The fact
that the execution is issued in the first
instance by an agent of the State but not from
a Court, followed as it is by personal notice
and a right to take the case into court, is a
familiar method in Georgia and is open to no
objection.' Coffin Bros. v Bennet, 277 US 29,
31, 72 ' Ed 768, 48 S Ct 422 (1928). To the
same effect was the earlier case of Ownbey v.
Morgan, 256 US 94, 65 L Ed 837, 41 S Ct 433,
873 (1921). Furthermore, based on
Ownbey and Coffin, the Court later sustained
the constitutionality of the Maine attachment
statute. McKay v McInnes, 279 US 820, 73 L
Ed 975, 49 S Ct 344 (1929). In that case, a
nonresident of Maine sued i: the Maine courts
to collect a debt from a resident of the State.
As permitted by statute, and as an integral
part of instituting the suit, the creditor at-
tached the properties of the defendant, with-
out notice and without judicial process of any
kind. In sustaining the procedure, the Maine
Supreme Court, 127 Me 110, 141 A 699 (1928),
described the attachment as designed to
create a lien for the creditor at «he outset of
48a Appendix I A 3
the litigation. ‘Its purpose is simply to secure
to the creditor the property which the debtor
has at the time it is made so that it may >e
seized and levied upon in satisfaction of the
debt after judgment and execution may be
obtained.' Id., at 115, 141 A, at 762. The
attachment was deemed ‘part of the remeay
provided for the collection of the debt,’ ibid.
and represented a practice that ‘had become
fully established in Massachusetts, part of
which Maine was at the time of the adoption
of the Federal Constitution.’ Id., at 114, 141 A
at 702. The judgment of the Maine court was
affirmed without opinion, citing Ownbey and
Coffin." [Footnote omitted.]
In Mitchell, supra, Justice Stewart dissented
on the basis that the Court had rejected the reasoning
of the Fuentes case and had adopted instead the
analysis of the dissent. Justice Stewart went so far
as to say (at p. 429):
"I would add, however, a word of con-
cern. It seems to me that unless we respect
the constitutional decisions of this Court, we
ean hardly expect that others will do so. Cf.
Roofing Wholesale Co. v. Palmer, 108 Ariz 508,
502P2d 1327 (1972). A substantial departure
from precedent can only be justified, I had
thought, in the light of experience with the
application of the rule to be abandoned or in
the light of an altered historic environment.
Yet the Court today has unmistakably over-
ruled a considered decision of this Court that
is barely two years old, without pointing to any
change in either societal perceptions or basic
constitutional understandings that might jus-
tify this total disregard of stare decisis."
Appendix I A 3 49a
Defendant in this case would require the
Plaintiff not only to guess, but to guess right, on a
very important procedural matter. It is therefore
abundantly clear that Fuentes did not foreshadow an
end to the Pennsylvania foreign attachment pro-
cedures as indicated by the opinions of two members
of this Court, Judges Rosenberg and Gourley2:/
upholding the constitutionality of the foreign attach-
ment procedures of this State in late 1974.
Il. RETROACTIVITY.
Having disposed of the contention that Fuentes
clearly foreshadow ed an end to Pennsylvania's foreign
attachment procedures, we now turn to the conten-
tion that the decision in Jonnet, which found the
Pennsylvania rules on foreign attachment to be
unconstitutional, filed fifteen months after the De-
fendant MceFadden's Counterclaim, should be applied
retroactively sub judice.
There is very clear guidance in Chevron Oil
Co. v. Huson, 404 U. S. 97, 92 S.Ct. 349, 30 L.Ed.2d
296 (1971), which held that a Louisiana statute of
5./ See Footnote 1, supra.
50a Appendix I A 3
limitations she.id not be given retroactive applica-
tion under the Supreme Court decision in Rodrigue v.
Aetna Casualty & Surety Co., 395 U.S. 352, 89 S. Ct.
1835, 23 L.Ed.2d 360 (1969), because the case had been
first filed more than one year prior to the Rodrigue
decision and because Rodrigue resulted in an unfor-
seeable overturning of existing legal dectrine. The
Court stated as follows in Chevron, supra (30 L.Ed.2d
306):
"In our cases dealing with the non-
retroactivity question, we have generally con-
sidered three separate factors. First, the
decision to be applied nonretroactively must
establish a new principle of law, either by
overruling clear past precedent on which liti-
gants may have relied, see, e. g. Hanover Shoe
v. United Shoe Machinery Corp., supra, at 496,
20 L Ed 2d at 1243, or by deciding an issue of
first impression whose resolution was not
clearly foreshadowed, see e. g., Allen v State
Board of Elections, supra, at 572, 22 L Ed 2d
at 20. Second, it has been stressed that we
must... weigh the merits and demerits in
each case by looking to the prior history of the
rule in question, its purpose and effect, and
whether retrospective operation will further or
retard its operation,’ Linkletter v Walker,
supra, at 629, 14 L Ed 2d at 608. Finally, we
aed weighed the inequity imposed by retro-
active application, for ‘[w] here a decision of
this Court could produce substantial inequita-
ble results if applied retroactively, there is
ample basis in our cases for avoiding the
"injustice or hardship" by a holding of nonre-
troactivity.’ Cipriano v City of Houma, supra,
Appendix I A 3 Sla
at 706, 23 L Ed 2d at 652.
Upon consideration of each of these
factors, we conclude that the Louisiana one-
year statute of limitations should not be
applied retroactively in the present case.
Rodrigue was not only a case of first impres-
sion in this Court under the Lands Act, but it
also effectively overruled a long line of deci-
sions by the Court of Appeals for the Fifth
Circuit holding that admiralty law, including
the doctrine of laches, applies through the
Lands Act. See, e. g., Pure Oil Co. v. Sni
293 F2d 60; Movible Offshore Co. 7 Games ;
346 F2d 870; Loffland B Bros. Co. v Roberts,
386 F2d 540. When the respondent was
injured, for the next two years until he
instituted his lawsuit, and for the ensuing year
of pretrial proceedings, these Court of Appeals
decisions represented the law governing his
case. It cannot be assumed that he did or
could forsee that this consistent interpretation
of the Lands Act would be overturned. The
most he could do was to rely on the law as it
then was. 'We should not indulge in the fiction
that the law now announced has always been
the law and, therefore, that those who did not
avail themselves of it waived their rights,'
Griffin v Dlinois, 351 US 12, 26, 100 L Ed 891,
t , 55 ALR 2d 1055 (Frankfurter,
i concurring in judgment)."
In the instant case we find the same factors
involved for the Jonnet decision rendered unconstitu-
tional a statute which had been in use in Pennsylvania
for one hundred and forty years. The Jonnet case will
be extended to retard future prejudgment attach-
52a Appendix I A 3
ments of property, as applied prospectively and not
punishing retrospectively. Clearly, to hold otherwise
would produce inequitable results. A consideration of
the three factors then leads this Court to the
conclusion that it should not be retroactively applied.
See also Kacher v. Pittsburgh National Bank, decided
by this Court (C.A. 75-610, October 20, 1975).
The Defendant strongly urges that the decision
changing the law was not Jonnet, but Fuentes.
However, we believe this to be clearly in error. It
cannot be argued, as Defendant would, that the
Plaintiff knew that seizure of Defendant's rents
without prior court approval was unlawful under
Fuentes and Mitchell, and a fortiori that its refusal
to release the attachments after Defendant had
entered a general appearance was completely without
justification. The Defendant in a rather emotional
appeal states that he could have used in his Counter-
claim the phrase long employed in pleading at
Common Law, that the Plaintiff's conduct was
"prompted by the devil". This appeals more to the
Court as being a clear indication that there is no
rationale in the Defendant's position. The Motion to
Vacate Dismissal of Counterclaim will therefore be
denied.
Appendix I A 3 53a
An appropriate Order will be entered.
AND NOW, to-wit, this 19th day of May, 1976,
after hearing and due consideration of the arguments
and briefs of counsel, and for the reasons set forth in
the foregoing Opinion,
IT IS HEREBY ORDERED that the Defend-
ant's Motion to Vacate Dismissal of his Counterclaim
be and the same is hereby denied.
s/ Daniel J. Snyder, Jr.
U NITED STATES DISTRICT JUDGE
ee: David L. McClenahan, Esq.
Kirkpatrick, Lockhart, Johnson & Hutchison
1500 Oliver Building
Pittsburgh, Pa. 15222
Edmund K. Trent, Esq.
Reed, Smith, Shaw & McClay
747 Union Trust Building
Pittsburgh, Pa. 15219
54a Appendix I A 4 Appendix I A 4 55a
UNITED STATES COURT OF APPEALS
For The Third Circuit , David L. MeClenahan, Esq. Edmund K. Trent, Esq.
Kirkpatrick, Lockhart, Russell W. Ayres, III, Esq.
Johnson & Hutchison Reed Smith Shaw & McClay
Pittsburgh, Pa. 15222 Pittsburgh, Pa. 15230
No. 76-1954
Attorneys for Appellee Attorneys for Appellant
G. H. MeSHANE COMPANY, INCORPORATED,
a corporation OPINION OF THE COURT
v. (Filed April 26, 1977)
WARREN A. McFADDEN, an individual,
Appellant.
Adams, Circuit Judge
On Appeal From The United States District Court
For The Western District of Pennsylvania This appeal presents two issues. The first is
whether an owner of property whose rents were
seized pursuant to the Pennsylvania foreign attach-
Civil No. 74-1046
EVE NO ment procedures! may recover damages when, at the
time of the seizure, there may have been some doubt
Argued February 23, 1977 concerning the constitutionality of such attachment
provisions. The second question, entwined with the
ar Savings Bank of the
City of New York,” yhich expressly invalidated
Before: Bi Adams and Hunter, Circuit Judges
BBS; ; og first, is whether Jonnet v.
l. Pa. R. Civ. P. 1251-1279.
2. 530 F.2d 1123 (3d Cir. 1976).
56a Appendix I A 4
Pennsylvania's foreign attachment procedures, should
be applied retroactively so as to permit damages ir
this case, an action pending when Jonnet was handed
down.
Since resolution of these matters is governed
by Kacher v. Pittsburgh National Bank,”
decided by this Court, we affirm the judgment of the
district court.
only recently
The procedural history of this litigation is
extraordinarily knotty. For purposes of this appeal,
we shall outline only its most salient aspects.
In October of 1974, plaintiff G. H. McShane
Company, a realty concern, brought an action in
assumpsit in state court against defendant Warren A.
McFadden. McShane initiated the suit by writ of
foreign attachment, seizing the rents from property
that was situated in Pittsburgh and owned by McFad-
den.4 The underlying claim asserted by McShane was
3. 545 F.2d 842 (3d Cir. 1976).
4. McShane was able to employ the foreign
attachment device because McFadden was a resident
of Florida.
Appendix I A°4 57a
for a real estate brokerage commission of $150,000,
purportedly due when McFadden purchased the at-
tached property and other real estate.
Although McFadden entered a general appear-
ance in a timely fashion, McShane refused to release
the attachments. Thereafter, McFadden denied the
indebtedness, and counterclaimed under 42 U.S.C. §
1983 for damages aliegedly caused when McShane
employed the attachment procedure that McFadden
maintains was unconstitutional. McFadden then
instituted his own suit in state court in which he
sought to enjoin further attachment of the rents,
reiterating his constitutional challenge to the foreign
attachment mechanism that McShane continued to
employ.
Both lawsuits were removed to federal court,
where they were consolidated. The district judge
dismissed McFadden's suit for injunctive relief and
also the counterclaim for damages in the action that
had been brought by McShane. In so doing, the trial
court relied on two cases decided in this Circuit
subsequent to Fuentes v. Shevin” — cases in which
the constitutionality of the Pennsylvania foreign
5. 407 U.S. 67 (1972).
58a Appendix I A 4
attachment statutes had been upheld.° McFadden
then appealed the dismissal of his injunctive suit,”
and, in July of 1975, this Court vacated that dismis-
sal. The case was remanded to a three-judge panel of
the district court, since the constitutionality of a
state-wide foreign attachment rule had been chal-
lengea.®
Subsequently, in January of 1976, this Court
held, in Jonnet, that the Pennsylvania foreign attach-
ment arrangement was unconstitutional as a denial of
due process. Six days later, on the basis of Jonnet,
the three-judge district court ruled favorably on
McFadden's constitutional claims in his suit for
injunctive relief, and further attachment of the rents
by McShane was enjoined.
6. Lebowitz v. Forbes Leasing & Finance
Corp., 456 F.2d 979 (3d Cir. 1972), cert. denied 409
U.S. 843, rehearing denied 409 U.S. 1049 (1972); Batter
v. Bato Co., Inc., 385 F. Supp. 420 (W.D. Pa. 1974).
7. No appeal could be taken, at that time,
from the dismissal of the counterclaim for damages,
since no final order had been entered by the district
court. See Fed. R. Civ. P. 54(b).
8. Shortly after the remand, it should be
noted, the mortgage on the subject property was
foreclosed because the attachment of the rents had
precluded McFadden from using such monies to meet
his obligations under the mortgage.
err eer
Appendix 1 A 4 59a
Several weeks following the disposition of the
injunction action, the district court, to which
McShane's original suit had been removed, determined
that McFadden was not liable on McShane's claim for
the brokerage commission. At that juncture, McFad-
den moved to vacate the previous dismissal of his
counterclaim for damages under § 1983. However,
the trial judge denied such motion on the ground that
Jonnet should not be applied retroactively. This
appeal then ensued.”
I.
McFadden asserts that the district court erred
when it dismissed, and then refused to reinstate, his
counterclaim for damages under § 1983. He argues,
first, that the Pennsylvania foreign attachment pro-
eedure employed by McShane had, in effect, been
declared unconstitutional two years earlier in
Fuentes, a landmark decision which forbade pre-
judgment seizure of a defendant's property without
notice or hearing. Alternatively, McFadden contends
9. The jurisdiction of this Court over the
present appeal is grounded on 28 U.S.C. § 1291.
60a Appendix I A 4
that, even if it did not strike down the foreigr
attachment provisions at issue here, Fuentes so
clearly foreshadowed their demise as to charge
McShane with knowledge of their invalidity and of his
potential liability in damages for utilizing such a
procedure.
In response, McShane contends that, even if
Fuentes did cast doubt on the constitutionality of the
Pennsylvania foreign attachment provisions, it had a
right to rely on their continued force until they were
expressly annulled by this Court or at least by one of
the district courts in this Circuit.
Whatever may have been the views of in-
dividual members of the present panel regarding
Kacher, that recent opinion by this Court is con-
trolling on the issue debated by the parties here. In
Kacher, the holder of a security interest had re-
plevied the secured property in the hands of the
debtor after the decision of the Supreme Court in
Shiadach v. Family Finance Corp.,!° but before
Fuentes was handed down. The argument of the
debtor in Kacher would have required the creditor to
predict the result in Fuentes on the basis of Sniadach.
10. 395 U.S. 337 (1969).
Settee: 5
a
Appendix I A 4 6la
But this Court held in Kacher that parties are
justified in relying on state procedures until such
procedures are specifically overturned, even though a
Supreme Court decision may have rendered their
vitality questionable. To do otherwise, the Kacher
Court indicated, would " ‘work an injustice on those
-++ Who acted in accordance with a time-honored
and court-tested proceeding.' nll
Ill.
McFadden tenders a second justification for a
recovery of damages under § 1983 for McShane's use
of the statutory attachment procedures. He main-
tains that the appeal in his injunctive suit may have
induced this Court to hold as it did in Jonnet, and
that he thus should be awarded, in his damage
counterclaim in McShane's action, the fruits of his
successful challenge. In essence, McFadden insists
that he is entitled to a retroactive application of
Jonnet.
It is clear that the constitutional question
regarding the foreign attachment provision was
ll. 545 F.2d at 846.
62a Appendix I A 4
adjudicated by this Court in Jonnet. And the three-
judge court properly bestowed the benefits of Jonnet
on McFadden when it enjoined the prospective at-
tachment of his rents. Yet it does not follow that
McFadden should prevail in his request that Jonnet be
applied retroactively to attachments made before
that decision was rendered — specifically, to secure
monetary damages from a potential creditor who
acted under a presumptively constitutional statutory
scheme. Presented with a parallel situation in
Kacher, this Court ruled that § 1983 does not
establish a right to recover damages from an individ-
ual who followed a statutory scheme that had not yet
been held unconstitutional when so utilizea.!?
It should be noted that Kacher suggested that
the damage issue could be viewed in terms of the
analogous common law tort of malicious prosecution.
This Court declared that, under the facts as they
existed in Kacher, the plaintiff would have to allege
and prove wrongful motive on the part of the creditor
12. In so doing, the Kacher Court relied, in
large part, on opinions of the Second and Tenth
Circuits that had reached a similar conclusion.
Tucker v. Maher, 497 F.2d 1309 (2d Cir. 1974); Rios v.
Cessna Finance Corp., 488 F.2d 25 (10th Cir. 1973).
TE.ae .
pt RG DAI pI
Appendix I A 4 63a
in order to hold him answerable in damages. While
there are some indications that McFadden may be
able to make out a case on the question of motive,
like the Court in Kacher, we do not reach that
question, since that issue is not before us, not having
been raised in the pleadings.
The judgment of the district court will be
affirmed.
A True Copy:
Teste:
Clerk of the United
States Court of Appeals
for the Third Circuit.
64a Appendix I A 4
U NITED STATES COU RT OF APPEALS
for the Third Circuit
No. 76-1954
G. H. McSHANE COMPANY, INCORPORATED
a corporation
vs.
WARREN A. MCFADDEN, an individual,
Appellant
(D. C Civil Action No. 74-1046)
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
Present: BIGGS, ADAMS and HU NTER, Circuit Judges,
JU DGMENT
This ¢ .use came on to be heard on the record
from the ' nited States District Court for the
Western District of Pennsylvania and was argued by
counsel February 23, 1977.
On consideration whereof, it is now here
ordered and adjudged by this Court that the judg-
ments of the said District Court, filed February 3,
1975, and May !9, 1976, be, and the same are hereby
affirmed. Costs taxed against the appellant.
ATTEST:
s/ M. Elizabeth Ferguson
Chief Deputy Clerk
April 26, 1977
Appendix IB 1 65a
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
WARREN A. McFADDEN )
)
Vv. ) Civil Action
) No. 74-1090
G. H. McSHANE CoO., INC., )
et al.
OPINION
By this proceeding, plaintiff seeks to have
declared unconstitutional Pennsylvania Rules of Civil
Procedure which pertain to the issuance of a writ of
foreign attachment and to that end has requested a
temporary restraining order and the appointment of a
three-judge court. In addition thereto, the immediate
matter before the Court is defendant's motion to
dismiss.
The Court has afforded the parties a complete
hearing and must conclude that there is no basis for
the granting of a temporary restraining order, nor
would the appointment of a three-judge court be
appropriate. Very simply stated, the Court cannot
conclude, based on a fair preponderance of all
66a Appendix IB 1
credible evidence, that plaintiff would ultimately
prevail on his complaint. A three-judge court should
not be convened where the federal constitutional
attack upon state law is insubstantial. Goosby v.
Osser, 409 U.S. 512 (1973). With respect to plaintiff's
foreign attachment proceeding, the Court is con-
vinced that said procedure satisfies federal constitu-
tional requirements. In Balter v. The Bato Company,
Ltd., Civil Action No. 74-206 (W.D. Pa., Sept. 6,
1974), a most well reasoned opinion of the Honorable
Louis Rosenberg, a similar attack on Pennsylvania's
foreign attachment procedure was found to be with-
out merit. In addition, Judge Rosenberg specifically
rejected one of plaintiff's contentions in this proceed-
ing that a general appearance by a non-resident
defendant removes any reason for the continuation of
an attachment. Moreover, the Court is satisfied that
the foreign attachment procedure in Pennsylvania
remains constitutionally viable and has not been in
any way undermined by Fuentes v. Shevin, 407 U.S. 67
(1972). The United States Court of Appeals for the
Third Circuit has specifically upheld the Pennsylvania
foreign attachment procedure while Fuentes did not
deal directly therewith. Lebowitz v. Forbes Leasing
and Finance Corp., 456 F.2d 976 (3d Cir. 1972).
- 2° REE PIN comme .
Appendix IB 1 67a
In view of the foregoing, plaintiff's request for
a temporary restraining order and the appointment of
a three-judge court should be denied, and defendant's
motion to dismiss should be granted.
An appropriate Order is entered.
ORDER
AND NOW, this 2nc day of December, 1974,
plaintiff's motion for a temporary restraining order
and for appointment of a three-judge court is hereby
denied. Defendant's motion to dismiss is hereby
granted, and this proceeding is terminated.
s/ Wallace S. Gourley, SDJ.
~ Senior District Judge
ce: Edmund K. Trent, Esq.
747 Union Trust Building 15230
David L. McClenahan, Esq.
1500 Oliver Building 15222
William C. O'Toole, Esq.
Assistant Attorney General
1824 Frick Building 15219
68a Appendix I B 2
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 75-1092
WARREN A. McFADDEN,
Appellant
V.
G. H. McSHANE, INC., HONORABLE HENRY
ELLENBOGEN, JOHN P. JOYCE, EUGENE L. COON
and BERNHARD SCHAFFLER,
Appellees
T COURT
APPEAL FROM THE UNITED STATES DISTRIC
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
(D.C. No. 74-1090)
Argued June 25, 1975
Before VAN DUSEN, ROSENN and WEIS,
Circuit Judges.
Appendix IB2 69a
Edmund K. Trent, Esquire
Reed, Smith, Shaw & McClay
747 Union Trust Building
Pittsburgh, Pa. 15219
Attorneys for Appellant
David L. McClenahan, Esquire
George M. Cheever, Esquire
Kirkpatrick, Lockhart, Johnson
& Hutchison
1500 Oliver Building
Pittsburgh, Pa. 15222
Attorneys for Appellee,
G. H. McShane Co., Inc.
OPINION OF THE COURT
(Filed Jul 14 1975)
PER CURIAM:
Plaintiff filed this suit in the district court to
enjoin the continued enforcement of an attachment
of his assets levied in accordance with the provisions
of the Pennsylvania Rules of Civil Procedure 125]-
1279 governing foreign attachments. A timely re-
quest was also made for the convocation of a
statutory Three-Judge Court as authorized by 28
U.S.C. §§ 2281 and 2284. The district court denied
the motion and dismissed the proceeding.
70a Appendix I B 2
In Lebowitz v. Forbes Leasing & Finance
Corp., 456 F.2d 979 (3d Cir.), cert. denied 409 U.S.
843 (1972), we reviewed the foreign attachment
procedures in the light of Sniadach v. Family Finance
Corp., 395 U.S. 337 (1969), and Ownbey v. Morgan,
256 U.S. 94 (1921). Our conclusion was that, under
existing precedent, the Pennsylvania rules were not
constitutionally objectionable. Since that time,
however, the Supreme Court has handed down a series
of decisions including Fuentes v. Shevin, 407 U.S. 67
(1972): Mitchell v. W. T. Grant Co., 416 U.S. 600
(1974); and North Georgia Finishing, Inc. v. DiChem,
Inc., 419 U.S. 601 (1975),/ where the issue was the
application of due process concepts to various types
of state seizure procedures.
We need not at this time decide whether these
later cases in effect overrule Lebowitz. Rather, the
question is whether a claim not constitutionally
insubstantial is presented by the instant case. Goosby
The opinion in North Georgia Finishing, Inc. v.
DiChem did not come down until after the
district court had entered its order in the case
sub judice. Hence, the district judge did not
have the benefit of the most recent pro-
nouncement of the Supreme Court on the
subject.
Im
Appendix I B 2 7la
v. Osser, 409 U.S. 512, 518 (1973). The more recent
cases of the Supreme Court do indicate a continuing
concern with the problem of prehearing attachments
— sufficiently so, we believe, as to preclude a finding
that the constitutional claim is insubstantial. Ac-
cordingly, we will remand the case so that the
district court may utilize the procedures for the
convocation of a Three-Judge Court.
Nothing in this opinion is to be construed in
any way as passing on the merits of the constitutional
question.
The order of the district court will be vacated
and the case will be remanded for further proceedings
consistent with this opinion.
TO THE CLERK:
Please file the foregoing opinion.
Circuit Judge
72a Appendix I B 2
UNITED STATES COURT OF APPEALS
For the Third Circuit
No. 75-1092
WARREN A. McFADDEN,
Appellant
vs.
G. H. McSHANE, INC., HON. HENRY
ELLENBOGEN, JOHN P. JOYCE, EUGENE L.
COON, BERNHARD SCHAFFLER
(D.C. Civil Action No. 74-1090)
ON APPEAL FROM THE UNITED STATES
DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
Present: VAN DUSEN, ROSENN and WEIS,
Circuit Judges
JUDGMENT
This cause came on to be heard on the record
from the United States District Court for the
Western District of Pennsylvania and was argued by
counsel.
On consideration whereof, it is now here
ordered and adjudged by this Court that the judgment
of the said District Court, filed December 2, 1974, be,
Appendix I B 2 73a
and the same is hereby vacated, and the cause is
remanded to the said District Court for further
proceedings consistent with the opinion of this Court.
Attest:
Clerk
July 14, 1975
74a Appendix I B 3 | Appendix I B 2 75a
For reasons set forth in Jonnet v. Dollar
Savings Bank, F.2d ss (3d Cir. No. 75-1529,
Jan. 27, 1976), which concluded "that Lebowitz is no
longer viable", we hold that the Pennsylvania foreign
attachment procedures are unconstitutional.
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ween SEE hae re ge y
WARREN A. McFADDEN,
Plaintiff,
Civil Action
vs.
No. 74-1090 The parties will submit a proposed order.
G. H. McSHANE, INC.,
HONORABLE HENRY
ELLENGOBEN, BY THE COURT,
JOHN P. JOYCE, EUGENE L.
COON and Dated: February 2, 1976 s/ Ruggero J. Aldisert
BERNHARD SCHAFFLER,
Ruggero J. Aldisert,
Circuit Judge
ed
Defendants.
s/ Wallace S. Gourle
Before: ALDISERT, Circuit Judge, and GOURLEY d
and TEITELBAUM, District Judges. Wallace S. Gourley,
District Judge
PINION OF THE COURT
OPINION O U s/ Hubert I. Teitelbaum
Hubert I. Teitelbaum,
PER CURIAM. District Judge
This three-judge court has been convened to
test the constitutionality of Pennsylvania foreign
attachment procedures, Rules 1241-1279, Pa. R. Civ.
P. The defendants rely essentially on Lebowitz v.
Forbes Leasing & Finance Corp., 456 F.2d 979 (3d
Cir.), cert. denied, 409 U.S. 843 (1972).
76a
ee:
Appendix I B 3
Reed, Smith, Shaw & McClay
747 Union Trust Bldg. 15230
David lL. MeClenahan, Esq.
Kirkpatrick, Lockhart, Johnson & Hutchison
1500 Oliver Bldg. 15222
William O'Toole, Esq.
Assistant Attorney General
1824 Frick Building 15219
Norman P. Wolken, Esq.
lll Court House 15219
James R. Fitzgerald, Esq.
1108 Law & Finance Bldg. 15219
_
Oe
Appendix I B 3 77a
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
WARREN A. McFADDEN,
Plaintiff,
Civil Action
No. 74-1090
V.
)
)
)
)
G. H. MecSHANE CoO., INC., )
HONORABLE HENRY )
ELLENBOGEN, )
JOHN P. JOYCE, EUGENE L. )
COON and BERNARD )
SCHAFFLER, .
)
Defendants.
ORDER OF COURT
NOW, February 18th, 1976, it is hereby
ORDERED, ADJUDGED and DECREED as follows:
l. That the Pennsylvania foreign attachment
procedures, Pa. R.C.P. 1251-1279, are declared to be
unconstitutional.
2. That defendants G. H. McShane Co., Inc.
and Bernhard Schaffler be, and they hereby are,
enjoined from further enforcing the writs of attach-
ment served upon the garnishees in civil action No.
74-1046, entitled G. H. McShane Co., Inc., plaintiff, v.
78a Appendix I B 3
Warren A. McFadden, defendant.
3. That the attachments made by said writs
be, and they hereby are, set aside, suspended and
dissolved.
4. That costs shall be borne by all parties.
5. That the operation of this order be, and it
hereby is, stayed for the sixty-day period for appeal
to the Supreme Court of the United States provided
by section 210l(b) of Title 28 of the United States
Code.
s/ Ruggiero J. Aldisert
United States Circuit Judge
s/ Wallace S. Gourley, SDJ
United States District Judge
s/ Hubert I. Teitelbaum
United States District Judge
~“s
TOE ate
.
Appendix I B 3
Approved as to form:
s/ David L. McClenahan
Attorney for G. H. McShane Co.
s/ William C. O'Toole
Attorney for Honorable
Henry Ellenbogen
s/ James R. Fitzgerald
Attorney for = P. Joyce
s/ Norman P. Wolken
Attorney for Eugene L. Coon
79a
80a Appendix II A
PENNSYLVANIA RU LES OF CIVIL PROCEDU RE
RU LE 1252
Scope
A foreign attachment may be issued to attach
property of a defendant not exempt from execution
upon any cause of action at law or in equity, other
than an action ex delicto arising from acts committed
outside the Commonwealth which is not required to
be joined with an action of assumpsit under Rule
1020(d)(1), in which relief sought includes a judgment
or cecree for the payment of money when
(i) The defendant is an individual who is
a nonresident of the Commonwealth, even
though he is present in the Commonwealth;
RU LE 1255
Commencement and Indexing
(a) The attachment shall be commenced by
filing with the prothonotary a praecipe for a writ
which shall direct the sheriff to attach such specific
items of property of the defendant as are set forth in
the praecipe and all other property of the defendant.
Appendix II A 8la
The praecipe shall state the amount of the plaintiff's
claim.
(b) The prothonotary shall immediately enter
the attachment against the defendant in the judgment
index.
(c) If the sheriff attaches real property, legal
title to which is held by the garnishee, the prothono-
tary on praecipe of the plaintiff, shall immediately
enter the attachment against the garnishee in the
judgment index.
RU LE 1257
Service of Writ upon Garnishee
or Person in Possession
The sheriff shall serve the writ in the same
manner as a writ of summons in assumpsit upon the
named garnishee and upon any person not named as
garnishee who is found in possession of property of
the defendant, and shall furnish the person served —
with an additional copy of the writ for each defen-
dant. Adopted April 12, 1954. Eff. Oct. 1, 1954.
82a Appendix II A
RU LE 1258
Attachment of Personal Property.
Disposition of Perishable Property
(a) Service of the writ upon the garnishee
shall attach all personal property of the defendant in
the possession of the garnishee at that time and, if
any property of the defendant is in his possession at
the time of service, shall also attach all personal
property which shall come into his possession until
judgment is entered against him.
(b) If no one is found in actual possession the
sheriff shall attach the property by manual seizure.
(c) When perishable property is attached, the
court may make such order relating to its pres-
ervation, sale or disposition as it shall deem proper.
Adopted April 12, 1954. Eff. Oct. 1, 1954.
RU LE 1260
Attachment of Real Property.
Liens and Rents
(ec) Service of the writ upon a tenant attaches
rent due by him at that time and also all rent which
shall thereafter become due by him until judgment is
entered against him.
Appendix II A
RU LE 1262
RU LE 1262. Bond not Required
No bond or security shall be required of the
plaintiff by the sheriff, except for the actual or
estimated cost of retaining possession of the attached
property. Adopted April 12, 1954. Eff. Oct. 1, 1954.
RU LE 1272
Dissolution of Attachment.
Release of Property. Bond
(a) An attachment is not dissolved by service
of the writ or complaint on the defendant nor by his
appearance.
(b) An attachment is not dissolved by the
death or dissolution of a defendant or garnishee.
(c) An attachment is dissolved when any
person or party
(1) files with the prothonotary a bond,
with security approved by the prothonotary, in
double the amount of the plaintiff's claim or in
such lesser amount as the court may direct,
naming the Commonwealth of Pennsylvania as
bligee, conditioned to pay the plaintiff, if
final judgment is entered in his favor, the
amount to which he is found entitled, including
interest and costs, or
83a
84a Appendix II B
(2) deposits with the prothonotary, or
with the sheriff for the prothonotary, to be
held by him upon the same condition as the
bond, security in the form of legal tender of
the United States in an amount equal to the
plaintiff's claim, including probable interest
and costs.
(g) Specific property is released without
dissolving the attacliment when any person or party
gives bond or security, as provided by Subdivision (ce)
of this rule, in an amount based upon the value of the
property to be determined by the court, and condi-
tioned to pay the plaintiff, if final judgment is
entered in his favor, the amount to which he is found
entitled or the value of the property released,
whichever is less.
CONSTITU TION OF THE UNITED STATES
AMENDMENT XIV
SECTION 1. All persons born or naturalized in
the United States, and subject to the jurisdiction
thereof, are citizens of the United States and of the
State wherein they reside. No State shall make or
enforce any law which shall abridge the privileges or
Appendix II B
immunities of citizens of the United States; nor shall
any State deprive any person of life, liberty, or
property, without due process of law; nor deny to any
person within its jurisdiction the equal protection of
the laws.
85a
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