SNIADACH v. FAMILY FINANCE CORP.

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Argument of Jack Greenber

Chief Justice Earl Warren: Number 130, Christine Sniadach, petitioner, versus Family Finance Corporation of Bay View.

Mr. Greenber.

Mr. Jack Greenber: Mr. Chief Justice and may it please the Court.

This case is here on certiorari to review a judgment of the Supreme Court of Wisconsin, two justices dissenting, upholding that state's prejudgment garnishment statutory scheme.

The case involves, we would like to emphasize at the outset, prejudgment garnishment, that is, the seizure of wages own -- owed by an employer to petitioner, or -- who was his employee, at the outset of legal action without a rule by a judge or a jury, not after judgment when judge and jury have ruled upon this, to collect moneys, a judge to be owed the validity of which prediction will ultimately be determined in an action to follow in which the merits of a claim will be tried.Petitioner was a $65.00 a week wage earner and the amount garnished under the statute was $31.59 or half of $63.18 which was one week's paycheck, the money owed to her for the period in question.

Justice Potter Stewart: And that's a one-shot proposition under Wisconsin law?

Mr. Jack Greenber: One pay period.

In her case, the pay period was a week.

It might be a month if the pay period is a month, but it's one week.

Justice Potter Stewart: But that's all?

It can't be done again, is that right?

Mr. Jack Greenber: That's right.

Justice Potter Stewart: Right under the same underlying claim?

Mr. Jack Greenber: That's right.

It cannot be done again in this action.

It could be done again in another action.

Justice Potter Stewart: Yes.

Mr. Jack Greenber: After the termination of the principal action.

Justice Potter Stewart: Well, the sum total is this $31.00 or $32.00.

Mr. Jack Greenber: That's correct.

Justice Byron R. White: You mean the employer is perfectly free to have paid them for the next pay period?

Mr. Jack Greenber: That's correct and indeed, the employer pays her a subsistence allowance which in this case, was also $31.59.

Justice Byron R. White: But if she goes on -- if the employee goes on working the next pay period --

Mr. Jack Greenber: She gets all $65.00.

Justice Byron R. White: She gets the whole and the creditor may not attach that also.

Mr. Jack Greenber: May not.

So, the remaining $31.59, as indicated, was paid to her as a subsistence allowance in according to Wisconsin law.

The wages were withheld merely upon the filing of a complaint in garnishment of the petitioner's employer which alleged only three things as required by statute.

These are mere allegations, but petitioner was indebted to respondent by virtue of an alleged contract that the amount due was $420.00 and that petitioner's employer owed her wages.

And on pages 3 and 7 of the record, the -- all that had to be alleged is set forth.

I'll just read an extract, that the complaint and garnishment served on the employer and said, "you are hereby --" summons rather, "you are hereby ordered to retain such property pending the further order of the Court and in case of your failure to do so, judgment will be rendered against you for the amount of plaintiff's judgment against said defendant," which would be the whole $420, “and cost of which the said defendant will take notice.”

The employer responded in the answer of the garnishee saying that he did, indeed, have money in his control and his possession of control belonging to Christine Sniadach in the sum of $63.18 and, further, that garnishee will pay from that amount, $31.59 as a subsistence allowance and will hold the balance of $31.59 for the further order of the Court.

Justice William O. Douglas: Does the Act of Congress last year affect, in any way, future cases of this kind?

Mr. Jack Greenber: Not on this issue, Mr. Justice Douglas.

First, the Act is not yet operative and, secondly, the Act merely says you may not --

Justice William O. Douglas: I know it doesn't apply here, but I was thinking of --

Mr. Jack Greenber: You may not be discharged for one garnishment and it limits the amount of pay to be garnished to 25%.

It doesn't affect the notice in hearing.

It doesn't address itself to that issue.

Justice William O. Douglas: But they wouldn't be, in the future, able to garnishee as much as they did here?

Mr. Jack Greenber: That's correct.

It's limited to 25%.

Then there are some rulings by the Secretary of Labor which may be pertinent, which had not yet been made, but it would not address itself to those in hearings.

Justice Potter Stewart: It's -- the new federal law is limited 25% of what?

Mr. Jack Greenber: 25% of --

Justice William J. Brennan: Weekly wages, isn't it?

Mr. Jack Greenber: 25% disposable income.

Justice Potter Stewart: That would be a great deal more than was the garnishee here, wouldn't it?

This was a total of $32.00.

Mr. Jack Greenber: Yes, but they can only take 25% of the $65.00, assuming all 65.

Justice Potter Stewart: If they can keep taking it so far as the new federal law does.

Mr. Jack Greenber: I think for the --

Justice Potter Stewart: Yes.

Mr. Jack Greenber: Up to the amount --

Justice Potter Stewart: So, it should be a great deal more.

Yes, up to the amount of the debt.

Petitioner had no notice of hearing before the wages where garnishee does mention, and the co -- because the garnishment action and the principle action were commenced simultaneously by service upon her of the complaint in the principal action at her place of employment, at the same time the complaint in the garnishment action was served upon her employer.

In fact, while it did not occur under the statute, it would have been entirely possible to serve her 10 days later, and the first notice she might have received would've been after the sum of her pay had indeed been garnered.

This case is, therefore, unlike a post judgment garnishment case in which there has been an adjudication of the existence of the debt.

It's unlike a foreign attachment case in some of the cases relied on below and which funds are attached to effect jurisdiction or to assure payment by someone who is not in the jurisdiction.

Funds owing to petitioner here have been withheld by her employer upon order of the Court, and those funds will not paid either to her or to her employer until the termination of the principal action which has been, in this particular case, has been stayed and has not yet been heard and, indeed in any case, will be heard some considerable period of time after the wages have been attached.

In the trial court, petitioner made a motion to dismiss the garnishment proceeding on the ground of unconstitutionality under the Due Process Clause of the Constitution, asserting that there was neither notice nor hearing as required by the Constitution, and this claim was denied by all of the Wisconsin Courts.

In relating what occurred to the Court, I have outlined essentially the statutory scheme, but I'd like to set it forth somewhat more fully.

The way actions like this start is that, in an action upon contract, in action in tort, or an action upon a judgment, upon payment of $3-fee to the clerk of the Court, a complaint in garnishment -- summons in complaint in garnishment may be obtained by a creditor.

The garnishment complaint need allege merely that the cause is one of the three specified in the statute, contract tort or judgment, the amount of the plaintiff's claim against the defendant, and that the garnishee has a property owing to the defendant.

That's all.

The garnishment complaint and summons must be served upon the principal defendant no more than 10 days after service on the garnishee, and the garnishee then may either hold the money or may pay it into Court.

Under the statute, the garnishment action is not permitted to be tried until after judgment in the principal action.

And as I said, depending upon the outcome of the principal action, the moneys are then distributed.

Our principal claim here is based upon the Due Process Clause of the Constitution, which we assert and we submit needs no elaboration in this Court, requires notice and hearing before adverse judicial action may be taken against one to deprive that person of property.

But to demonstrate that in this case we are hardly speaking of empty ritual or formalism and that we're not addressing the Constitution to some procedural quirk, our brief contains a considerable quantity of material showing the well-recognized social and economic evils that this type of statute brings about.

Indeed, the opinion below acknowledges this and the respondent acknowledges it.

The current commission report takes special notice of it as a particularly unjust and abrasive factor in dealings between merchants and loan companies and the poor.

Prejudgment garnishment often, of course, is the paying of debts which may not be owed, which may be disputed.

It often encourages an employer to discharge someone rather than go through the bookkeeping trouble of going through the garnishment proceeding.

Justice Byron R. White: Would your case reach getting jurisdiction by attachment or garnishment, quasi in rem equity?

Mr. Jack Greenber: Well, our position --

Justice Byron R. White: Suppose your position would have to, wouldn't it?

Mr. Jack Greenber: Our position would go that far as to an entirely domestic situation.

As to a foreign attachment, we think that involves other considerations and indeed, in our brief, we do take the position that, if it were necessary to obtain jurisdiction over a foreign resident, that might be in different situation.

Justice Byron R. White: Even though it's settled without notice as his deprived of equality?

Mr. Jack Greenber: Well, I frankly would have some considerable -- Ownbey against Morgan never left me feeling very comfortable, Mr. Justice White.

But in any event, it's so different a situation and he rested upon such other indifferent considerations.

Justice Byron R. White: I don't think the due process argument you make would be difficult to distinguish.

Mr. Jack Greenber: I would say so, and -- but the justification given in Ownbey, that of the great antiquity of foreign attachment as giving some substance to -- that it's valid under the Due Process Clause, I think some weight has to be given to that.

There is no great antiquity to prejudgment wage garnishment.

It's around the turn of the century and, as I said, Ownbey does not leave me feeling very good, but I don't think that has to be reached in this particular case.

Justice John M. Harlan: How many states have gotten this?

Mr. Jack Greenber: Approximately 20.

Justice John M. Harlan: At the same tenor?

Mr. Jack Greenber: Pardon me?

Justice John M. Harlan: At the same tenor?

Mr. Jack Greenber: They vary somewhat as to amount and as to procedure, but approximately 20 states have prejudgment garnishment in one form or another.

Justice Byron R. White: Without notice?

Mr. Jack Greenber: Without notice, yes, sir.

Justice Byron R. White: And how about -- does your case here -- I know it doesn't involve -- it does not involve post-judgment garnishments.

Mr. Jack Greenber: No, it does not.

Justice Byron R. White: And I suppose the principal status may have some consequence to -- on post-judgment garnishment where you get a judgment and -- would you say that you had to have -- goes through another proceeding to be subjected to garnishment after judgment?

Mr. Jack Greenber: I wouldn't think so.

The essence of our case is there has not been any notice and hearing on the principal claim.

Post-judgment by definition is another case where, indeed, there has been notice and hearing and it's really a method of collection in a fully adjudicated claim.

I might find it difficult to think of reading this kind of claim in a post-judgment case.

Justice Potter Stewart: Well, unless it's a default judgment without notice, then you'd have the same problem.

Mr. Jack Greenber: Well, then you'd have other types of due process --

Justice Potter Stewart: Well, they're basically the same.

Mr. Jack Greenber: If it were default judgment, but you would have that as to perhaps any default judgment even without regard to --

Justice Potter Stewart: Do I understand you to say that there are 20 states that have the same kind of statute as this is one?

Mr. Jack Greenber: There are, I think, precisely 17 and Wisconsin limits it to one pay period by a recent amendment.

Justice Potter Stewart: Oh, I see.

Mr. Jack Greenber: The other states have it rather -- it is a continuous garnishment until --

Justice Potter Stewart: Because this particular statute, seems to me, to the subject to the argument you're making, that it's highly unfair to the debtor but also subject to the argument that it's highly inadequate to protect the creditor, this fraction of one pay period.

Mr. Jack Greenber: Well, the one pay period was put in by a recent amendment a number of years ago after, I think, the injustice of the law became so manifested.

It was put in as some sort of ameliorative measure.

I might say that our opponent makes, and this court below, makes some reference to pending legislation.

However, that legislation has been defeated in the last five sessions of the legislature and there's, as far as I can tell, no reason to believe it's going to pass.

Justice Potter Stewart: You're not suggesting then that the other -- that, as matter of fact, that the other 16 or 17 states, whatever they are, have the same features that the Wisconsin statute has --

Mr. Jack Greenber: The one with limiting --

Justice Potter Stewart: Limiting it to one pay period.

Mr. Jack Greenber: On the contrary, they do not limit it.

Justice Potter Stewart: That's rather peculiar about this statute, if not unique.

Mr. Jack Greenber: Well, that is but, as I said, that was put in by an amendment a few years ago.

Justice Potter Stewart: Recently, yes.

Justice Byron R. White: Mr. -- I suppose you're -- we're also involved here with any kind of attachment before judgment.

Mr. Jack Greenber: It's -- yes, that possibly would be involved.

Justice Byron R. White: Not only garnishing wages, or something like that, but attaching physical property prior to judgment.

Mr. Jack Greenber: Prejudgment, yes.

Justice Byron R. White: And -- I see.

Does Wisconsin permit the -- is this procedure available to attach bank accounts?

Mr. Jack Greenber: I believe that it is.

The garnishment statute is in a general section of the law called attachment and it refers to a variety of attachments, and it is not merely limited to wage garnishment.

Wage garnishment is a species of garnishment.

Justice Byron R. White: So, we're really talking about all prejudgment attachments without notice?

Mr. Jack Greenber: Absent special circumstances --

Justice Byron R. White: Like foreign --

Mr. Jack Greenber: Such as absconding debtors, foreign residence, and perhaps some special circumstances, that one might not think of at the moment but some good reason that this seems to have no basis and reason, and also denies notice and hearing.

Now, this was justified by the court below on two grounds, as far as we can tell.

The first ground is that, indeed, the property was not taken.

It was the $35 -- $31.19 -- the $31.59.

It was taken only temporarily, and the second is a reliance upon authority, essentially, the only line of cases in -- cases cited in the opinion which are also discussed in our brief.

Our position on the assertion that this indeed not a deprivation of property and not a taking is that we just, I have to say, we just -- that's just a manipulation of words.

That's not the case.

The taking of property is, indeed, the taking of property.

In some sense, it's measurable by the interest on $31.59, but I don't think $65-a week wager really cares about the interest.

It's a question of what someone of those means, what $31.59 means in terms of food, budget, rent or whatever.

It is a substantial deprivation to someone who's earning that kind of money to be place under the hammer of that kind of a threat and the possibility of loss of employment, possibility of impairment of means of livelihood for self and family and it is indeed a very substantial taking of looking in proportion of the circumstances of the individual.

So far as the cases are concerned, I believe I've implicitly covered our position with regard to those cases in response to questions.

Those cases involve special circumstances such as foreign attachment, the obtaining of jurisdiction, the commencement of an in rem proceeding or something of the sort.

Justice John M. Harlan: Is there any means whereby the alleged debtor will be a result of itself in the garnishment?

Mr. Jack Greenber: No, Mr. Justice Harlan, except that it has been suggested in the opinion below and that a collateral proceeding of some sort might be started.

I might say, first of all, I think that's rather illusory for someone in this kind of an income bracket but, as the dissenting opinion of Justice Heffernon points out and as a reading of those two cases points out, that collateral proceeding is, for all practical purposes, limited to the face of the complaint in garnishment.

As for example, the complaint in garnishment did not say that case was in contract tort or on a judgment, but it does not become an examination of the validity of the underlying debt, which would be the real issue, and indeed the entire statutory scheme is focused in the other direction.

The entire statutory scheme says you may not try the principal act, the garnishment action, until after the principal action is concluded.

So, there is neither a practical nor a legal way that that can be gone into.

Justice Byron R. White: Is your -- Is it your position that, until judgment there could no garnishment?

Mr. Jack Greenber: Absent special circumstances that we're talking about, I would say.

Absent foreign --

Justice Byron R. White: It must be -- the entire case has to be tried when judgment entered before there's --

Mr. Jack Greenber: Yes, that would be our position.

Justice Byron R. White: There wouldn't be any -- no preliminary hearing about good faith or probable cause, anything like that, would --

Mr. Jack Greenber: Well, if there were a preliminary hearing procedure, and I don't know of existence of any such procedure anywhere, it would have to be a procedure which would, indeed, accord due process rights and it would be -- it'd have to be a procedure in which the defendant, the principal defendant, would have some opportunity, some substantial opportunity both in law and practically with adequate time, and so forth, to contest the validity of the underlying claim.

I would say that should be so substantial, it would really ought to amount to the action in chief you --

Justice Byron R. White: Well, what would you say then that, a suit starts and there's an answer and then there's discovery interrogatories?

Did you find this promisory note?

The answer in 10 days is yes.

Is that -- something like is -- wouldn't be enough to then to base a garnishment on or an attachment?

Mr. Jack Greenber: I would say not because, in this particular case, while it's not a matter of the record, there has been some talking about it in the briefs.

She would have a defense that she signed the note induced by representations made to her which were not true.

Now, I don't really know what the legal validity of her position in that would be and that would not be anything to be contested here, but I would say that a due process hearing ought to give her sufficiently substantial opportunity to make or take whatever position she has with regard to the validity of the underlying claim.

So much so, that it would be duplicative of the principal action.

At least it ought to be pretty close to it.

There are at least something of the dignity of summary judgment proceeding which we have in the Federal Court, for example.

Justice Byron R. White: There are -- it happens not infrequently that the an action involving a substantial sum of money against someone, that the plaintiff asked for an order to be entered, preventing the person to transferring the property and it's based on some evidence given, some credit transfer, or something like that.

Mr. Jack Greenber: Then, I would -- if there were some substantial evidence of special circumstances such as absconding, which I believe is suggested by the form of your question, I would say, yes, but that's one of the -- there's nothing like that in this case and the garnishment laws are not addressed to that.

Some of the foreign garnishment, foreign attachment laws are and I imagine there are proceedings which can impound money or funds if somebody's threatening to get on the plane to Brazil, but that's not what we have here.

I would certainly feel it would be justifiable.

Justice Byron R. White: What about a bank account, a substantial bank?

Mr. Jack Greenber: Well, I would say in any type of property owned by an alleged debtor, concerning which there's a threat of leaving the jurisdictions, running away with the money, or something like that is a different kind of case than the one we're talking about here.

Justice Byron R. White: Well, we aren't talking about this garnishment statute and suppose we're talking about it, you would say that it would be -- until judgment, you could not enter any orders about a bank account.

Mr. Jack Greenber: Absent special circumstances.

Justice Byron R. White: Even a large one?

Mr. Jack Greenber: Yes, absent special circumstances, but I don't see how you could distinguish the large one from the small one, except that there are special circumstances if someone is threatening to take the money away from the jurisdiction the power of the Court.

But that's not here and I think we make rather clear in our brief that we would think that would be another kind of a case.

Justice Abe Fortas: Does Wisconsin have a wage assignment statute?

Mr. Jack Greenber: I'm not sure whether it does or not, Mr. Justice Fortas.

Our position would be the same with regard to wage assignments if they occurred pursuant to a statute.

Justice Abe Fortas: Well, then presume it goes to, it might present some different problems.

Mr. Jack Greenber: They would be different, yes.

They would be different, but if it occurred pursuant to a statute, our position would be the same.

If it occurred pursuant to a common law scheme, that would then involve other questions.

Justice Hugo L. Black: Does this statute or any of the others that you referred to require that man can who gets the -- who garnishes the fund to make a bond?

Mr. Jack Greenber: The man who garnishes the funds to make a bond?

Justice Hugo L. Black: Yes.

Mr. Jack Greenber: It does -- no, it does not.

You mean, the plaintiff in the case?

Justice Hugo L. Black: Yes.

Mr. Jack Greenber: No, it does not.

Justice Hugo L. Black: Some of the others do, do they not?

Mr. Jack Greenber: This one does not.

Justice Hugo L. Black: Pardon me?

Mr. Jack Greenber: This one does not.

Justice Hugo L. Black: Yes.

Mr. Jack Greenber: In some, our position I think has been stated as to the due process claim.

A prejudgment garnishment surely cannot be called a principal problem of the poor and the disaffected in the country, but it's, indeed, a sufficient injustice that works considerable harm.

Indeed, it's astonishing how widely recognized this is by the court below and by our opponents, and it's perhaps no accident that such a gulling procedure flies squarely in the face of one of our most fundamental constitutional guarantees.

Those portions of our Constitution designed to assure fair procedure and equality, I think, evidenced a genius for expressing some of the basic sense of justice of man.

And to strike down prejudgment garnishment as unconstitutional will hardly solve all the problems of the poor and the disadvantaged, but it would be the right and constitutional thing to do and we submit it would make a difference.

Chief Justice Earl Warren: Mr. Frank.

Argument of Sheldon D. Frank

Mr. Sheldon D. Frank: Mr. Chief Justice and may it please the Court.

The matter of prejudgment garnishment has been discussed at length in the State of Wisconsin, especially since the institution of the original suit herein.

I would like to straighten the facts out, as Mr. Greenber didn't fully cover them.

The situation here did not involve the amount of $420.00 as such.

The petitioner here, Mrs. Sniadach, actually borrowed the sum of $1,800.00 and, in fact, although the record does not show she was a co-maker with her husband, this was taken out on September 2, 1964, and I stress the amount $1,800.00 because this is cash on the line.

This is not the case, as most people are familiar with, where you walk into a, say, a credit clothing store or a credit furniture store, you buy a suit, you buy a piece of furniture where the actual cost is $20.00 and the mark up can be up to $100.00 or $150.00.

In other words, whatever they can -- the traffic can bear, they will charge.

This was cash on the line.

Justice Abe Fortas: What are the interest terms?

Mr. Sheldon D. Frank: As to --

Justice Abe Fortas: As of June 18, she signed a note for how much?

Mr. Sheldon D. Frank: For $1,800.00, Mr. Justice.

Justice Abe Fortas: And how much cash did she get?

Mr. Sheldon D. Frank: Her actual cash was in the neighborhood of $1,560.00.

Justice Abe Fortas: So, you had an immediate discount of $240.00.

Mr. Sheldon D. Frank: That is right, over a three-year period.

Justice Abe Fortas: What were the interest terms?

Mr. Sheldon D. Frank: Interest is set by statute.

Justice Abe Fortas: What's that?

Mr. Sheldon D. Frank: It averages out over the entire length of around 12% to 14%.

Justice Abe Fortas: What was it precisely?

Mr. Sheldon D. Frank: I don't --

Justice Abe Fortas: What the statute said, 2% per month on unpaid increments?

Mr. Sheldon D. Frank: No,no.

In Wisconsin, under the statute, your monthly interest is what we term on a small loan under $300.00, where it's based at 2.5% on the first hundred, 2% on the second hundred, and 1% on the balance.

Over $300.00, you come under a different statute where the interest is predetermined and you've -- the companies, be either finance company or a bank, follow a chart.

I do not have that chart with me.

Justice Abe Fortas: Well, now, if she paid -- there was a discount, or whatever you want to call it, immediately of $200.00, and what did you say, $240.00?

Mr. Sheldon D. Frank: Around 240 or 250.

Justice Abe Fortas: And then, what you said was 12% over what period of time?

Mr. Sheldon D. Frank: Over -- I believe this was a three-year loan.

Justice Abe Fortas: You mean, 12% per anum?

Mr. Sheldon D. Frank: No, for the entire length of the contract.

Justice Abe Fortas: And that was figured on the $1,800.00 principal?

Mr. Sheldon D. Frank: That is correct.

Justice Abe Fortas: And which did it amount to when figured it on which she actually got?

Mr. Sheldon D. Frank: She got somewhere around $1,500.00 to $1,550.00.

Justice Abe Fortas: How much was the interest rate fee on which she actually got?

Mr. Sheldon D. Frank: Her interest rate was figured on the $1,500.00.

Justice Abe Fortas: I know that -- on the what?

Mr. Sheldon D. Frank: On the amount that she actually got.

Justice Abe Fortas: When you said 12%, was that -- is 12% on the $1,560.00 or on the $1,800.00?

Mr. Sheldon D. Frank: On the $1,560.00.

Justice Abe Fortas: I see.

And -- now, that's 12% on the principal amount.

Didn't she have to pay back a monthly or whatever?

Mr. Sheldon D. Frank: Paid back on monthly installments.

Justice Abe Fortas: Is there any recalculation of the interest depending on the unpaid balances?

Mr. Sheldon D. Frank: If she prepays, she is given a rebate on the unearned interest.

This is also by statute.

Justice Abe Fortas: This is not prepayment I'm talking about.

She paid back principal month by month.

Does the record show anywhere what the true effect of interest rate -- what the true effect of cost to this loan of this woman was?

Mr. Sheldon D. Frank: The record does not show that, Your Honor, Mr. Justice.

I would like to state this.

This loan was taken out in September 2, 1964.

Now, of course, we come to a very interesting question, and this is the question of notice.

Mr. Greenber indicated that no notice was necessary, but I've dealt with these matters over a number of years and it's a question, in my mind, what would one consider as notice?

True, the statute does not specifically say that you have to give notice prior to a garnishment, but in this situation, this principal action and garnishment was not instituted until November 16, 1966, a little better than two years after the original loan was made.

And at that time, she owed a balance that is, when I say she, I'm talking of the petitioner and her husband, of $1,500.00, so that I know the general practice of the -- my client and other companies.

She not only received notice of what was going to happen once but she received notice over a period of months.

Unlike the brief of the petitioner where they alleged that it is normal practice within 10 days after an account is in default the garnishment is issued, this in fact is not the case.

In fact, if a check could be made, and I know of no check made of these cases, in my own experience, normally, a garnishment is not instituted for a period of anywhere from six months to two years after it is in default with numerous notices being sent out.

I'll agree with Mr. Greenber that the collection method is highly systematized, but I do not see where this can be criticized because I think the best system setup for collection of debts is that setup by the Internal Revenues Department to collect unpaid taxes and this, I will state, is setup to an Nth-degree.

You have the same situation here.

Justice Thurgood Marshall: Do I understand you to say that it's common practice for a small-loan company in Wisconsin to let somebody go two years without paying and not being bothered?

Mr. Sheldon D. Frank: Justice Marshall, I can -- it isn't -- I said it was normally somewhere between six months and two years.

In this particular case, --

Justice Thurgood Marshall: Well, you say it's usually six months?

Mr. Sheldon D. Frank: On the average, six months to two years before a garnishment is put in.

In rare circumstances where they have heard, and I have had this occasion, that the man has quitting his --

Justice Thurgood Marshall: Well, when an investigation was going on in Congress last year, didn't they invite Wisconsin to testify to that?

Mr. Sheldon D. Frank: I don't believe anybody --

Justice Thurgood Marshall: They should have.

Mr. Sheldon D. Frank: From the finance industry.

Justice Thurgood Marshall: They should have because it's different from other testimonies.

Mr. Sheldon D. Frank: I realize that.

I'm quite aware of that, Mr. Justice.

In this case, it was two years.

I would just, for the moment, like to --

Chief Justice Earl Warren: What I -- I'd like to ask a question just to get this straight on my mind.

You said at the outset that this lady got $1,800.00 on the line.

Mr. Sheldon D. Frank: That is correct.

Chief Justice Earl Warren: Then, you told us that the actual amount of money that she got was $1,500.00 something --

Mr. Sheldon D. Frank: The $1,500.00 and some odd cents.

Chief Justice Earl Warren: Yes, and that she was paying interest on only $1,500.00 and something.

Mr. Sheldon D. Frank: That's right, with the interest --

Chief Justice Earl Warren: Now, tell me why.

What's the significance of the $1,800.00 if she got $1,500.00 and she's paying on $1,500.00?

Mr. Sheldon D. Frank: She is -- the interest is added onto the amount that she got.

The interest is computed in advance.

She is not paying the interest, as you would normally figure that if you borrow $1,000.00, the interest is computed, say at -- may expedite matter, say, 10% per anum.

And as you go along, you would be computing the interest on a monthly payment.

The interest is computed in advance for the total term of the loan, so that when she is paying it back, she is paying back the principal plus the predetermined interest.

Chief Justice Earl Warren: For the whole period?

Mr. Sheldon D. Frank: For the whole period.

In the event she pays the loan up, say, within 12 months instead of 24 or 36.

She would be given a refund of the interest that has not been used up.

Justice Abe Fortas: Well, on the basis of what you have said, she pays 12% on $1,500.00 and something, plus a re-payment of the total $1,800.00, that is to say $300.00, additional to the interest.

Mr. Sheldon D. Frank: No, no.

It -- the --

Justice Abe Fortas: It's bound to be.

She signs a note for $1,800.00.

Mr. Sheldon D. Frank: In the note itself, which is not in record, which showed a principal amount $1,500.00, interest $300.00.

Her payments would be setup on the $1,800.00, say $24 at X-dollars per month.

She does not pay any additional interest.

Justice Abe Fortas: Her payments are setup on the $1,800.00 basis?

Mr. Sheldon D. Frank: On the $1,800.00, the principal amount that she received plus the pre-computed for the entire length of the loan.

There's one thing I would like to --

Justice Hugo L. Black: When was it due?

How long was it?

Mr. Sheldon D. Frank: The loan was due, I believe it was, in three years, and the loan was made on September 2, 1964.

The first installment was due on October 2, 1964.

Justice Hugo L. Black: How much installment was that?

Mr. Sheldon D. Frank: The installment payments were -- this alone, in question, was 30 months at $60.00 a month.

And --

Justice Byron R. White: That's the principal or interest?

Mr. Sheldon D. Frank: The principal interest.

Let me correct myself, Justice Fortas.

The full amount of the loan was $180.00 and I am looking at one of the -- a copy of the note in question.

Discount that was charged was $322.50 which is computed at $15.89 per annum, simple interest.

There was a service fee of $9.45.

She received $1,468.05.

It was the net amount of the loan.

Now, Justice White, in answer to your query where you mentioned attachment and replevin.

I would like to state this, that the attachment and replevin are set up separately in the State of Wisconsin.

They are not considered in the same nature as a garnishment although, to a certain extent, they act in the same manner, so that, we're not too concerned with attachment and replevin here.

In fact, as Mr. --

Justice Byron R. White: Hold on.

You can't just put them aside.

Mr. Sheldon D. Frank: You don't put them aside, except for this.

Justice Byron R. White: If they go on without notice and I would suppose --

Mr. Sheldon D. Frank: Well, may I clarify this for you, Justice White?

In a matter of a replevin, this can be started in one of two ways.

First of all, you can start the replevin by the issuance of your summons, take it to the sheriff without any seizure, and the matter is then returnable within 8 to 15 days after issuance, and it can be heard by the Court.

At that time, the Court can enter a judgment in replevin, as I term it, in the alternative, either you get the cash or the merchandise back.

This is used where you have a conditional sales contract or today, under the uniform code, a security device.

The other way or the other alternative on a replevin is that you can issue the same papers but, at the time of issuance to the sheriff, you post a bond with the sheriff to double the value of the merchandise which you seek to repossess.

The sheriff, then, serves a copy upon the debtor or defendant and leaves a copy of the bond with him, takes the furniture in his possession, and I'm saying the sheriff's possession, where it is held, pending the determination by the Court.

The same type of a remedy is true in the attachment.

And in these two cases, you post a bond.

This you do not have to do in a garnishment.

A garnishment issue is forthwith and a levy is made upon the employer who answers.

Justice Byron R. White: When in a garnishment, you'd normally just foreshow that it's not intangible.

Mr. Sheldon D. Frank: Well, a garnishment would be on a wages --

Justice Byron R. White: Bank accounts?

Mr. Sheldon D. Frank: Bank accounts, except --

Justice Byron R. White: Debts due?

Mr. Sheldon D. Frank: Debts due, you could but normally you would attach -- there's micro-seizures are going to attach on a debt due.

Justice Byron R. White: Do you usually attach bank accounts?

Mr. Sheldon D. Frank: Garnishee on a bank account.

Justice Byron R. White: Well, that's just a debt due.

Mr. Sheldon D. Frank: That's a debt due, but I prefer an attachment on a debt due, of course, depending upon the amount.

Justice Thurgood Marshall: Well, of all of these, which is the easiest, garnishment, for you?

Mr. Sheldon D. Frank: Well, the easiest --

Justice Thurgood Marshall: Well, you don't have to put up a bond.

Mr. Sheldon D. Frank: You don't have to put up a bond, but --

Justice Thurgood Marshall: You don't have to give notice.

Mr. Sheldon D. Frank: Justice Marshall, let's carry it --

Justice Thurgood Marshall: You just pay $3.50 and ask your secretary to fill out a piece of paper.

Mr. Sheldon D. Frank: It isn't $3.50.

Now, this is a misconception that the Court has been advised and this, I assume, is because Mr. Greenber does not practice in Wisconsin.

This is also why it's a fallacy to say that for only $3.00 any creditor can go and get his money.

The actual cost out of pocket disbursements on a garnishment of under $500.00, which is the small-claimed limit in the State of Wisconsin is, $15.20.

In other words, my client is $15.00 --

Justice Thurgood Marshall: You mean, you spent $15.20 to get this $30.00?

Mr. Sheldon D. Frank: That is correct, Mr. Justice.

Justice Byron R. White: Then, why did you do that?

Mr. Sheldon D. Frank: Well, after two-and-a half -- after over two years of attempting to get the money with numerous letters, my client instructed me to proceed with the garnishment because, voluntarily, Mrs. Sniadach wouldn't even bother to call or come in.

Justice Byron R. White: But the -- she just decided if she could put up with losing $30.00, why, you haven't been very effective, have you?

Mr. Sheldon D. Frank: That is correct.

Justice Byron R. White: Except that her employer might be upset?

Mr. Sheldon D. Frank: No, we're not too concerned with the employer, quite frankly.

As a practical situation, certain companies, and I will name them: A.O. Smith Corporation, Allis-Chalmers Corporation, Harness Fissure, American Motors, have a policy of discharge after so many garnishments of which we are well-aware, and we are well-aware of it because the individual plants have setup special personnel departments to work with these employees so that, before a garnishment is issued, I know as a practical situation and as an actuality that this matter has been discussed in 99 out 100 garnishments with the personnel manager or the party who's in charge, they call him a labor relations expert or an expediter and normally he has said, “Look, I can't do anything.

I have the men in here.

You'll have to garnishee if you want to get your money."

Justice William O. Douglas: Doesn't the new Federal Act ban discharged?

Mr. Sheldon D. Frank: Yes, it bans discharge.

Now, how effective that would be, Mr. Justice Douglas, I don't know.

Justice Byron R. White: That's just for one debt, discharging for one debt.

Mr. Sheldon D. Frank: Discharge for one debt, but the problem here is that when, normally, you have to resort to a garnishment, you have deepened a path to the door, either personally, telephone calls, or letters in an attempt to get a payment or something on the account rather than garnishee and, it's been my experience that if you have been doing this, God only knows how many other creditors are attempting to obtain the money, too, because, practically, these people don't only owe you, they owe others.

Justice Byron R. White: I suppose the cost of garnishing is added to the indebtedness of the --

Mr. Sheldon D. Frank: The actual outweigh of cost is chargeable to the debtor or defendant.

As a practical situation, if you can get your principal amount back most of the banks, finance companies, unlike your credit clothing or furniture companies, will be more glad to take their principal and waive interest and all other charges.

Justice Abe Fortas: How long would it take you?

How long would it take you in Wisconsin, as a practical matter, to get a judgment for the amount due?

Mr. Sheldon D. Frank: Taking this situation here, I can state this.

That, although there is nothing in these statutes specifically calling for an immediate trial, that as a practical situation in this matter, had it not been for the fact that this was to be a test case, that this matter could have been tried within 24 to 48 hours after the Court have been notified that her check have been tied up.

The --

Justice Abe Fortas: No, I don't mean that.

I mean, how long would it take you to get a judgment on the indebtedness?

Mr. Sheldon D. Frank: On this indebtedness?

Justice Abe Fortas: Yes, as a practical matter.

Let's suppose you decided to go to the Court and get a judgment, how long would it take you?

Mr. Sheldon D. Frank: This action was instituted on Sep -- on November 16, 1966, assuming that I follow the minimum of eight days -- service within eight days of the date of issuance, which would mean that this action, both the principal and garnishment, would be returnable in the County Court or the Small Claim Court on the 24th day of November.

Now, the statute does provide for an immediate trial on the return date, and if the situation is so urgent, as had been indicated here, the matter could have been tried on the return day and the Court would have handed down a decision on that date.

Justice Abe Fortas: So -- no, I'm -- in theory, then, you --

Mr. Sheldon D. Frank: In theory, within 30 days --

Justice Abe Fortas: That's your Court's work, and as your Court's work out there, if you had decided to proceed to judgment before garnishment, you say before attachment, and before trying to collect through the employer, you could've gotten a judgment in anywhere to 8 to 24 days, is that what you're telling me?

Mr. Sheldon D. Frank: Well, normally, if you're saying just to start the principal action and forget the garnishment?

Justice Abe Fortas: That's right.

Mr. Sheldon D. Frank: Normally, around 30 days.

Justice Abe Fortas: 30 days?

Mr. Sheldon D. Frank: Yes, there are exceptions if the -- because of illness of one of the presiding judges where you have to transfer calendars but, normally, 30 days.

Generally, 60 days is the longest, barring any unforn -- unforeseen emergency.

Chief Justice Earl Warren: Does your note provide for attorney's fees for collection?

Mr. Sheldon D. Frank: Mr. Chief Justice, they do not.

The notes provide that an attorney fee can be added on.

There is no provision for any percentage.

The attorney fees are taxed by the Court, normally around $5.00, depending upon the amount.

In the case of -- assuming I'd recovered a judgment for $1,800.00, and I would like to state this to the Court, being over $500.00, if I had sued for the entire amount, at the time this suit was instituted, there would've been two filing fees.

So that, over $500.00, in addition to the cost that I've mentioned, there would be a $15.00-filing fee for each of the actions on the principal action and the garnishment.

In order to hold the Court cost down, I chose to bring an action for back payments to hold it under $500.00.

Today, the Court has only one filing fee for both actions.

Instead of $30.00, there'd be a $15.00-filing fee but, assuming that I had instituted suit for the entire $1,800.00, this is over the small-claim limit which the maximum is $500.

This probably would have not reached trial or anywhere between six months and a year.

So, on a large-claim, we have a different waiting period than we do on a small-claim matter.

But I think the crux of the question before the Court, as Mr. Greenber has indicated, this is a deprivation of the moneys of the wage earner, and I would agree that there is some deprivation.

However, this is a sword that is two-bladed.

You have a party here that's had this money out for over two years and they have been deprived of the use of that money.

I think we are well-aware that, today in business, the companies and the banks borrow from other sources in which they pay interest.

Finance companies and your other institutions also borrow, and they pay interest on this money.

We are deprived of our money.

The creditor sits back and waits.

And under the suggestion of Mr. Greenber, by then, the creditor would be the one sitting back holding the bag and the debtor is the one that's taking advantage of the situation and has the use of this scot-free.

Quite frankly, with the new Consumer Code coming in the Truth in Lending, I don't know who's going to be better off, the creditor or the debtor.

My own way of thinking, and this is contrary to some of the articles that I have just read in the past few weeks, they are now coming out saying that even under the new Credit Consumer Code, which goes into effect July of 1970, I believe, that the creditor is still coming out ahead instead of the debtor.

Now, I've heard comments relative to this and to the Truth in Lending Bill.

I've gone over the Bills.

I haven't gone into them thoroughly but, to my way of thinking, I still -- I feel that the -- today, under the present passage of these two Bills, we're better off to be a debtor than we are a creditor.

Justice Potter Stewart: Does Wisconsin have procedures available to a judgment of creditor similar to garnishment or attachment?

After you -- if you'd gone and gotten your judgmen for the underlying debt --

Mr. Sheldon D. Frank: Then, I could've proc --

Justice Potter Stewart: Then, what remedies would Wisconsin give you?

Mr. Sheldon D. Frank: I could have proceeded with a garnishment.

Justice Potter Stewart: With the same limitation?

Is this garnishment just a fraction of one pay period?

Mr. Sheldon D. Frank: Yes.

In fact, let me put it to you this way.

The amount held is $31.00 over, say, $60.00 actually being held.

Under the Wisconsin statute, a single person is given an exemption of $25.00.

Now, this is a subsistence allowance so that, if assuming that Ms.-- Mrs.Sniadach, and she was single at that time or she was divorced, let me put it as I recall.

If she had been single, she would've been given the $25.00.

The employer properly should have held $41.00 and not $31.00.

If she was with dependence, her amount that would have to be given to her first is $40.00, so that the employer should have held $26.00.

I didn't check this.

I didn't argue this.

This is the amount that they answered when they came in and we let it go with that.

Justice Potter Stewart: But my question is, after your judgment creditor, what are your remedies given by Wisconsin?

Mr. Sheldon D. Frank: One garnishment.

Justice Byron R. White: Can't you keep serving garnishments every pay period after judgment?

Mr. Sheldon D. Frank: Only if you have disposed of the previous garnishment.

In other words, until about three years ago when they change the statute, it was possible and there were companies doing it.

Some of these credit clothing outfits were doing it, were garnishing every week and tying up that paycheck before they had even disposed of the previous garnishment.

You can no longer do this.

If you can put in a garnishment, you must dispose of that matter.

There must be a release.

There must be an official or judicial determination.

Justice Byron R. White: So even after judgment, after you've got a judgment to the amount of your promissory note and you're trying to collect?

Mr. Sheldon D. Frank: That's right, you can garnishee.

Justice Byron R. White: Well, you can garnishee, but do you still have those limitations?

Mr. Sheldon D. Frank: Still have those limitations.

The question was brought up relative to wage assignments.

We do have a wage assignment law in Wisconsin.

But the wage assignment is limited to a period of 60 days and then, normally, the amount is by agreement and, in the case of these manufacturing companies, the employment man who is responsible for it or is in charge of working with the employees will normally suggest the amount to take off.

He reviews the situation and I have found, personally, that they are more than considerate of the needs of the creditor, as well as the needs of the employee.

Justice Abe Fortas: Garnishment -- the garnishment procedure is really a procedure by which creditors ensure the cooperation of the employer and see to it that the employee pays his debts.

Is that a fair definition?

Mr. Sheldon D. Frank: No, I don't believe it is, Mr. Justice Fortas.

I believe that a garnishment is a remedy which is afforded to the creditor, strictly a feature of the legislature, no question of it.

But it was given to the creditor because he had no other remedy, and I think it is more important today than it was 15 years ago or 20 years ago.

Justice Abe Fortas: Well, the return to Mr. Justice Stewart's question, I'm not clear about it.

Let's suppose you got a judgment.

Can't you levy execution -- You have a procedure by which you levy execution there, don't you?

Now, can you go to the employer and, in effect, levy execution on wages that I view, and can you -- will it also reach wages as they come to you?

Mr. Sheldon D. Frank: No, it only affects the wages due as of the date of service of the garnishment papers.

Anything earned after that cannot be touched.

It's strictly a one-shot proposition.

Justice Potter Stewart: Well, what if you get -- what if you get a judgment for $1,000.00 against some man who's an employee and who's making a $100.00 a week, what are your legal rights as a judgment creditor against that judgment debtor?

Mr. Sheldon D. Frank: I can only levy -- I can institute a garnishment either with an execution or without an execution in the case of a judgment of a $1,000.00 where your garnishment cost are not $1,520.00, but every time you would issue a garnishment, you would have $30.00 involved because you have a filing fee.

In such a case, you would normally issue an execution and then bring Court commissioner proceeding to ascertain if the man has any assets which can be reached.

Justice Potter Stewart: And then there would be an examination of the judgment debtor?

Mr. Sheldon D. Frank: An examination of the judgment debtor.

If he has assets under our statutes --

Justice Potter Stewart: Under my question, he's making -- he's got wages of a $100.00 a week.

Mr. Sheldon D. Frank: His wages --

Justice Potter Stewart: Can there be a compulsory assignment of a fraction of his wages?

Mr. Sheldon D. Frank: No, there is no such thing as a compulsory wage assignment in Wisconsin.

It has to be entirely voluntarily and it must be joined in by the wife, if the man is married and has a family, so that there is adequate protection.

One further statement relative to the garnishment that, although we are not required in Wisconsin to post a bond at the time of a garnishment, there is, under statute, a provision that if there is a wrongful garnishment, the creditor can be sued for wrongful garnishment and there are actions that are now pending and have been tried and there can be substantial damages for a wrongful garnishment.

So, I feel that the protection is well afforded and that, as Mr. Greenber had indicated, there had been five attempts or five Bills introduced into the legislature to change it.

The last change was several years ago, limiting the garnishment to strictly one action before he could start another and there must be a judgment at that time.

Thank you.

Justice Hugo L. Black: If you get a judgment in Wisconsin, can you file it as lien?

Mr. Sheldon D. Frank: As to --

Justice Hugo L. Black: Could it stand as a lien on the property of the man?

Mr. Sheldon D. Frank: If you have a judgment over $200.00, the judgment can be docketed, as we term it, and it then automatically becomes a lien against a property, which is only good if the equity in the property exceeds the $10,000 maximum.

There is a $10,000 homestead exemption.

Justice Hugo L. Black: Is this real estate?

Mr. Sheldon D. Frank: On real estate.

Justice Hugo L. Black: Real estate?

How much personal property?

Mr. Sheldon D. Frank: Personal property, there is outside of his household goods and furnishings and the wages on his exemption.

The exemption statute in Wisconsin follows pretty close to the Chandler Act as to exemptions.

Chief Justice Earl Warren: Thank you.

Mr. Greenber.

Rebuttal of Jack Greenber

Mr. Jack Greenber: May I'd like to add just a word or two.

There's been some bit of going outside the record on the nature of this debt and I don't know that it's important that it could be asserted that these are the facts and they'd be considered as a hypothetical situation, if the Court likes.

Indeed, it would be asserted that she had a defense here, that the defense was inducement of her signature by fraud, that her husband was in jail, that she subsequently was divorced from him, and it was a defense of a sort which would take some -- perhaps some considerable development of evidence and discovery in order to present it properly to the Court, adequately to the Court.

This leads me to Mr. Justice White's inquiry about what will be a proper standard for a prejudgment garnishment if some sort of hearing or procedure were to be established.

It certainly should be a standard, if one were adopted, which would adequately enable development of whatever defense, the party, the defendant in the principal action might have which would involve, in cases of this sort, sometimes a considerable discovery because many of the facts are principally within the possession of the creditor.

Usually, the note is in documents and so forth, particularly for people who deal with small-loan companies of this sort.

There was a mention of the Uniform Consumer Credit Code that has not been adopted in Wisconsin.

My information is that it has been adopted only in the State of Utah.

We submit that the judgment below should be reversed for the reasons given.