The Challenges Of Obtaining Prejudgment Attachment
November 20, 2023
Lesson. Indiana recognizes the remedy of prejudgment attachment, but the hoops through which plaintiffs must jump are challenging.
Case cite. Vukadinovich v. Posner, 2023 U.S. Dist. LEXIS 114854 (N.D. Ind. 2023)
Legal issue. Whether a plaintiff’s motion for prejudgment attachment should be granted or denied.
Vital facts. Plaintiff sought damages of $170,000 from Defendant. Plaintiff felt his ability to ultimately recover the money after judgment was at risk due to the passage of time and alleged efforts by Defendant to shield or otherwise insulate his assets from collection.
Procedural history. Plaintiff filed a motion to freeze Defendant’s assets while the underlying lawsuit was pending.
Key rules. “Attachment” is a proceeding, incidental to the underlying action, in which the defendant’s property “is taken [or, frozen] to secure the payment of any judgment that may be rendered in the main action.” In Indiana, prejudgment attachment is authorized by Trial Rule 64 and Indiana Code § 34-25-2-1 (click on the lengthy statute to study its elements).
A 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.” Thus, the remedy is not designed to seize all of a defendant’s assets.
Procedurally, § 34-25-2-1, as well as § 34-25-2-4 and § 34-25-2-5, mandates that plaintiffs file an affidavit showing:
(1) the nature of the plaintiff's claim;
(2) that the plaintiff's claim is just;
(3) the amount that the plaintiff ought to recover; and
(4) that one (1) of the grounds for an attachment enumerated in [§ 34-25-2-1] is present.
Furthermore, I.C. § 34-25-2-5 provides that prejudgment attachment motions must include a bond or written undertaking … payable to the defendant, to the effect that the plaintiff will: (1) duly prosecute the proceeding in attachment and (2) pay all damages that may be sustained by the defendant if the proceedings of the plaintiff are wrongful and oppressive.
Also, the only property that may be attached under subsection (b)(6) is "the defendant's property subject to execution." I.C. § 34-25-2-1(b)(6). Some property may be exempt from execution under the law, and only "the goods and chattels of the person within the jurisdiction of the [executing] officer" may be executed on. I.C. § 34-55-1-12(a).
Holding. The Court denied Plaintiff’s motion. Magistrate Judge Kolar’s opinion is thorough and educational.
Policy/rationale. First, Plaintiff did not post a bond or otherwise stipulate to depositing $170,000 of his own money into court to cover Defendant’s potential damages.
Second, Plaintiff did not establish by a preponderance of the evidence the necessary facts required by subsection (b)(6)(A) of § 34-25-2-1: that Defendant was “about to sell, convey, or otherwise dispose of defendant’s property subject to execution with the fraudulent intent to cheat, hinder, or delay … defendant’s creditors.” Note there are two key hurdles to overcome: (a) whether the Defendant is about to transfer property and (b) whether the Defendant has acted, or is acting, with fraudulent intent. The Court found that Plaintiff’s evidence was speculative on both accounts and thus “insufficient to justify the extraordinary remedy of prejudgment attachment.”
Third, the Plaintiff failed to show a likelihood of success on the merits of the underlying case. A guiding principle for the Court in Posner surrounded constitutional due process, as the Unites States Supreme Court explained in a 1991 case:
Permitting a court to authorize attachment merely because the plaintiff believes the defendant is liable, or because the plaintiff can make out a facially valid complaint, would permit the deprivation of the defendant's property when the claim would fail to convince a jury, when it rested on factual allegations that were sufficient to state a cause of action but which the defendant would dispute, or in the case of a mere good-faith standard, even when the complaint failed to state a claim upon which relief could be granted. The potential for unwarranted attachment in these situations is self-evident and too great to satisfy the requirements of due process absent any countervailing consideration.
Fourth, the Court found that Plaintiff’s request to attach all of Defendant’s property “without a showing that all of Defendant’s property is subject to execution is improper.” Moreover, Plaintiff failed to show that Defendant even owned property in Indiana. The opinion suggested that Defendant owned property in Illinois, but the Court questioned whether it could attach property outside of Indiana even if it wanted to.
Lenders sometimes fear that guarantors may be moving assets during a foreclosure case to avoid collection of a deficiency. Posner reminds us that the procedural requirements to prevent alleged fraudulent transfers are steep. Even if a lender were willing to post a bond, producing admissible evidence of the transfers plus the requisite fraudulent intent can be a challenge.
Related posts.
- In Indiana, Prejudgment Attachment Requires A Bond
- Pre-Judgment Seizure of Property: Attachment Fundamentals
- More On Prejudgment Attachment And Garnishment
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Part of my practice involves representing parties in secured collection proceedings. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.