Can lenders seize property of a borrower or a guarantor to ensure its availability to satisfy a subsequent judgment? Rarely. I touched on this area of the law back on 3/6/07. Woodward v. Algie, 2014 U.S. Dist. LEXIS 52997 (S.D. Ind. 2014) is an excellent opinion detailing the nuts and bolts of the remedy of attachment.
The dispute. The heart of the Woodward case was the plaintiff’s breach of contract claim against the defendant. The contract involved the design and building of airplanes. The plaintiff funded the project, and the defendant was on the production side. The plaintiff alleged that the defendant failed to produce any planes, resulting in damages. Following the filing of the complaint, the plaintiff filed a petition for a pre-judgment writ of attachment under Ind. Code § § 34-25-2-1(b)(4)-(6) seeking the seizure of the defendant’s property connected to the airplane project.
Attachment law, generally. In Indiana, Trial Rule 64 and I.C. § 32-25-2-1 authorize pre-judgment attachment. The Woodward opinion dealt only with statutory attachment, however. Indiana’s statute requires plaintiffs to file an affidavit in support of any petition showing, (1) the nature of the claim, (2) that the claim is just, (3) the amount sought to be recovered and (4) one or more of the grounds for attachment in I.C. § 34-25-2-1(b). Indiana law also requires plaintiffs to post a bond “with sufficient surety payable to the defendant, that the plaintiff will duly prosecute the attachment proceeding and pay all damages suffered by the defendant if the attachment proceedings are both wrongful and oppressive.” See, I.C. § 34-25-2-5.
Grounds - § (b)(4) – asset movement. This statutory provision mandates that the plaintiff show the defendant was removing, or was about to remove, property outside of Indiana and was not leaving enough in Indiana to satisfy the plaintiff’s claim. Plaintiff’s supporting affidavit in Woodward did not meet this requirement. There was no basis for the Court to find that the defendant had or would have insufficient assets to satisfy the judgment sought by the plaintiff.
Grounds - § (b)(5)-(6) – fraudulent intent. These rules require the plaintiff to show that the defendant had sold, conveyed or otherwise disposed of, or was about to sell, convey or otherwise dispose of, executable property with the fraudulent intent to cheat, hinder, or delay the plaintiff. Again, the Court in Woodward concluded that there was insufficient evidence of the alleged fraudulent intent. “This Court cannot simply assume fraud on the part of the [defendant].” I discussed establishing fraudulent intent, through Indiana’s “8 badges of fraud,” in my post dated 12/14/06.
Property subject to attachment, and why. The plaintiff in Woodward sought a writ of attachment against essentially all of the defendant’s property. The Court viewed this as seeking an order for replevin, not attachment. The attachment remedy "is available in an action for the recovery of money.” Replevin actions, on the other hand, seek to recover property. “The plaintiff must aver the amount of damages that he ought to recover, and the sheriff seizes only the amount of property, by value, to satisfy the plaintiff’s averred claim, beginning with personal property.” One seeking a writ of attachment should not identify specific goods to be seized “because the purpose of attachment is only to ensure that property, any property, will be available to satisfy a money judgment; it is not to preserve the availability of specific items of property for recovery by the plaintiff.” Because the plaintiff made no claim for replevin, but only money damages, the proposed remedy of seizing specific property of the defendant’s was inappropriate.
Denied. The Court denied the petition for prejudgment writ of attachment. The plaintiff in Woodward failed to prove he was entitled to the relief. The plaintiff also lost because he proposed an inadequate bond of only $2,500 and submitted no explanation of the calculation, despite seeking a judgment for $475,000. A pre-judgment writ of attachment is very difficult to obtain in Indiana. Allegations will not be enough, and concrete proof will be needed. In my view, an evidentiary hearing, in contested cases, will be required before an Indiana judge will grant this extraordinary relief.