Opinion
Civil Action No.: 02-1857 (RMU), Document No.: 13.
November 1, 2004
MEMORANDUM ORDER
DENYING THE PLAINTIFF'S MOTION FOR JUDGMENT OF CONDEMNATION I. INTRODUCTION
This matter comes before the court on the plaintiff's motion for entry of judgment of condemnation against garnishee NCRIC Group, Inc. ("NCRIC") pursuant to Federal Rule of Civil Procedure 69 ("Pl.'s Mot"). The plaintiff, Heller Healthcare Finance, is a duly perfected secured lender with a lien on the receivables and other rights of payment pledged by the Columbia Hospital for Women Medical Center, Inc. ("defendant"). Final Order and Consent Judgment ("Consent Judgment") ¶ 1. Pursuant to its lien, the plaintiff now seeks to garnish a portion of the amount the defendant won in a case against NCRIC. Because the plaintiff has established its lien priority and the D.C. Superior Court has issued a stay, the court denies the plaintiff's motion for judgment of condemnation without prejudice.
II. BACKGROUND
In February 1999, the plaintiff loaned the defendant $5,500,000 with a three-year financing term (the "Initial Loan"). Consent Judgment ¶ 1. As security for the Initial Loan, the defendant pledged
[a]ll of Borrower's now-owned and hereafter acquired or arising Accounts, accounts receivable and rights to payment of every kind and description derived from the operation of Borrowers' business, and all of Borrower's contract rights, chattel paper, instruments, general intangibles and obligations relating thereto, and all of Borrower's rights to any security agreements, liens and third party guaranties now or hereafter existing and securing or otherwise relating to any such Accounts, accounts receivable, contract rights, chattel paper, instruments, general intangibles or obligations . . . and all of Borrower's rights and remedies with respect to [receivables and related contracts].
Pl.'s Mot Ex A. In a letter agreement dated March 1, 2002, the parties extended the Initial Loan maturity date to April 1, 2002. Compl. ¶ 16. The defendant failed to pay off the Initial Loan by April 1, 2002, however, and publically announced a month later that it would be shutting down its business. Id. ¶¶ 17-18. As of September 17, 2002, the defendant owed the plaintiff $3,024,662.35 on the Initial Loan, not including daily interest accruals of $652.90 and miscellaneous costs. Id. ¶ 21.
In June 2002, the parties entered a new loan agreement (the "New Line") in which the plaintiff agreed to advance the defendant a $2 million line of credit. Id. ¶ 22. The parties secured the New Line with, inter alia, the defendant's real property and a lien on the collateral that the defendant previously pledged to the plaintiff. Id.
On September 19, 2002, the plaintiff filed its complaint, seeking damages for the defendant's failure to pay on the Initial Loan. Compl. ¶ 1. The parties entered and the court approved a final order and consent judgment on October 29, 2002, in which the defendant agreed, inter alia, that the plaintiff was entitled to payment on the Initial Loan (plus accrued and future interest, fees, and costs) and on the New Line (plus accrued and future interest, fees, and costs). Consent Judgment ¶¶ 6, 9; Pl.'s Mot. at 2.
More than a year later, in a separate case, NCRIC, Inc. v. Columbia Hospital for Women Medical Center, No. 00-7308 (D.C. Sup. 2004), the defendant in this case countersued NCRIC for breach of contract and tortious interference with the defendant's business relations. Pl.'s Mot. at 3. After a jury trial, on February 20, 2004, the D.C. Superior Court entered judgment in favor of Columbia Hospital for Women Medical Center for $18,220,002. Id.
On March 4, 2004, the Clerk of the Court issued a writ of attachment on judgment to NCRIC, preventing NCRIC from paying or surrendering money and property to anyone without court order. Writ of Attachment (Mar. 4, 2004). The plaintiff served the writ on NCRIC on March 8, 2004. Pl.'s Mot. at 4. Separately, on March 5, 2004, NCRIC made an unopposed motion in D.C. Superior Court for approval of its supersedeas bond and to stay execution of the writ of attachment pending NRCIC's appeal and related motions in NCRIC, Inc. v. Columbia Hospital for Women Medical Center. Pl.'s Mot at 3-4. The D.C. Superior Court granted NCRIC's motion on April 20, 2004. Sur-Reply of Garnishee NCRIC ("Sur-Reply") at 2.
III. ANALYSIS A. Legal Standard for Post-Judgment Execution
Federal Rule of Civil Procedure 69(a) governs proceedings in aid of execution of a judgment. FED. R. CIV. P. 69(a). Rule 69(a) states in relevant part that
[p]rocess to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise. The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, existing at the time the remedy is sought, except that any statute of the United States governs to the extent that it is applicable.
Because Rule 69(a) directs the court to apply the "practice and procedure of the state in which the district court is held," the court looks to the District of Columbia law on post-judgment enforcement. Id.; see D.C. Code §§ 16-541, et seq. (1981). In the District of Columbia, a party may seek to enforce a judgment not only by writ of execution, but also by writ of garnishment, the latter satisfying indebtedness by garnishing credits of the judgment debtor in the hands of a third party. D.C. Code § 16-556; Consumers United Ins. Co. v. Smith, 644 A.2d 1328, 1351-52 (D.C. 1994); United States v. Thornton, 672 F.2d 101, 105 (D.C. Cir. 1982). As the D.C. Code provides,
if a garnishee has admitted credits in his hands, in answer to interrogatories served upon him . . . judgment shall be entered against him for the amount of credits admitted or found, not exceeding the amount of the plaintiff's judgment, and costs, and execution shall be had thereon not to exceed the credits in his hands. When the credits are not immediately due and payable, execution shall be stayed until they become due.
In the District of Columbia, a judgment creditor begins the enforcement process by requesting the court to issue a writ of attachment. See D.C. Code § 16-542 (1989); Consumers United Ins., 644 A.2d at 1351. The judgment creditor then serves the garnishee with a copy of the writ, accompanying interrogatories, "and a notice that any property or credits of the defendant in his hands are seized by virtue of the attachment." D.C. Code § 16-546 (1989). The judgment creditor obtains a valid lien on the debtor's property held by the garnishee upon service of the writ. Id.; Consumers United Ins., 644 A.2d at 1352.
To actually obtain a debtor's property held by the garnishee, the judgment creditor must request condemnation of the funds held by the garnishee within four weeks of the garnishee admitting that it has such funds. D.C. SUPER. CT. CIV. R. 69-I(e); Consumers United Ins., 644 A.2d at 1352.
The District of Columbia Superior Court Rule 69-I(e) states that
[n]o judgment against a garnishee under D.C. Code 1973, § 16-556 or 16-575 shall be entered except by order of Court. Applications for a judgment shall be filed (1) within four weeks after answers to the interrogatories are due and not filed, or (2) as to property other than `wages' as defined in D.C. Code 1973, § 16-571 within four weeks after the garnishee has filed answers to the interrogatories . . . or (4) within such later time as may be authorized by the Court upon a motion made within the applicable period.
D.C. SUPER. CT. CIV. R. 69-I(e).
B. The Writ of Attachment
The D.C. Superior Court docketed judgment in NCRIC, Inc. v. Columbia Hospital for Women Medical Center on February 20, 2004. Pursuant to District of Columbia law, an automatic stay therefore commenced in that case on February 23, 2004, and expired at the end of March 5, 2004. D.C. SUPER. CT. CIV. R. 6(a), 62(a); Affordable Elegance Travel, Inc. v. Worldspan, L.P., 774 A.2d 320, 330-31 (D.C. 2001).
The automatic stay provides that "no execution shall issue upon a judgment nor shall proceedings be taken for its enforcement until the expiration of 10 days after its entry." D.C. SUPER. CT. CIV. R. 62(a). The Clerk of the Federal District Court for the District of Columbia signed the plaintiff's writ of attachment on March 4, 2004, and the plaintiff served the writ on NCRIC on March 8, 2004. The first question, then, is whether the plaintiff's application for the writ (which the plaintiff necessarily made during the stay), or the Clerk's issuance of the writ, constitute a proceeding to enforce judgment and thus violate the automatic stay.
NCRIC does not suggest that the court should quash the plaintiff's writ of attachment. Opp'n at 3; Sur-Reply at 4. To the contrary, NCRIC essentially argues that the plaintiff's writ of attachment is not at issue. Id.; Sur-Reply at 4 n. 2.
The court holds that, in the context of this case, the application for or issuance of the writ of attachment does not violate the automatic stay. Cf. In re Vanden Bossche, 125 B.R. 571, 573-74 (Bankr. N.D. Cal. 1991) (holding that the automatic stay of Federal Rule of Civil Procedure 62(a) does not prevent the recording an abstract of judgment to secure lien priority). The automatic stay provision of the D.C. Superior Court Rules, a provision that is identical to the automatic stay provision of the Federal Rules, seeks to prevent a victorious party from racing out to execute (i.e., obtain) judgment prior to the losing party's appeal or evaluation of other post-trial options. See Fin. Am. Corp. v. Moyler, 494 A.2d 926, 931 (D.C. 1985) (noting that "[t]he principal grounds for which stays have been allowed are the pendency of a timely appeal or motion, material facts occurring subsequent to the judgment, and antecedent facts showing fraud in the rendition of the judgment, or want of jurisdiction apparent on the record") (citation omitted).
In this case, the plaintiff has not taken and does not propose to take any money from NCRIC until NCRIC completes its appeal and resolves its post-trial motions. The plaintiff's writ of attachment, therefore, does not seek to "execute" or "enforce" judgment. Rather, the writ merely establishes lien priority vis-a-vis competing creditors. See D.C. Code § 16-545. By filing competing writs, creditors essentially form a line to get their money, and the rush that the stay seeks to prevent is in fact prevented. See id. The court therefore holds that application for and issuance of the writ of attachment did not violate the stay. Consumers United, 644 A.2d at 1352 (stating that "although steps in addition to serving a writ of attachment may be required to obtain the property of the debtor held by the garnishee, the judgment creditor has a valid lien as of the date the writ is served on the garnishee") (emphasis added); cf. Goldsmith v. William S. Bergman Assocs., Inc., 708 A.2d 640 (D.C. 1998) (holding that "[t]he purpose of the writ is to prevent the garnishee from prematurely disposing of any assets belonging to the judgment debtor that come into the garnishee's hands at any time prior to the resolution of the garnishment proceeding") (internal quotations and citations omitted).
The next question concerns the plaintiff's service of the writ of attachment. NCRIC filed a supersedeas bond and motion to stay execution on March 5, 2004. Sur-Reply at 2. The plaintiff served the writ of attachment on NCRIC on March 8, 2004. On April 20, 2004, Judge Blackburne-Rigsby of the D.C. Superior Court granted NCRIC's motion to stay execution of the judgment and approved NCRIC's supersedeas bond. NCRIC, Inc. v. Columbia Hospital for Women Medical Center, Civ. No. 00-7308 (Order Approving Supersedeas Bond and Staying Execution) (Apr. 20, 2004) (ordering that "[t]he execution of the judgment docketed in this action on February 20, 2004, and any proceedings to enforce said judgment, are hereby stayed pending a determination of NCRIC's Motion for a New Trial and Renewed Motion for Judgment as a Matter of Law, and any appeal taken from the judgment").
NCRIC moved for its stay pursuant to D.C. Superior Court Rules of Civil Procedure 62(b) and 62(d). NCRIC Mot. for Approval of Supersedeas Bond and to Stay Execution. D.C. Rule 62(d) provides that the stay is effective as a matter of right when the court approves the supersedeas bond. D.C. SUPER. CT. CIV. R. 62(d); Pierola v. Moschonas, 687 A.2d 942, 945 n. 2 (D.C. 1997). D.C. Rule 62(d) therefore poses no obstacle to the plaintiff's service of the writ of attachment, because the plaintiff served the writ between the expiration of the automatic stay and the commencement of the court-approved stay. Furthermore, a stay pursuant to D.C. Rule 62(b) requires court approval. D.C. SUPER. CT. CIV. R. 62(b). Thus, NCRIC would not have had a stay under D.C. Rule 62(b) until April 20, 2004. Accordingly, no stay — under Rules 62(a), (b), or (d) — was in place to prevent the plaintiff from serving its writ of attachment. To summarize, the court determines that the plaintiff properly filed its writ of attachment, and the result of this proper filing is that the plaintiff has established its place in line among competing creditors.
C. Judgment of Condemnation
The only remaining question is how to handle the plaintiff's motion for (stayed) judgment of condemnation. As indicated above, the plaintiff's service of the writ on NCRIC established the plaintiff's priority over competing creditors. Thus, it is not entirely clear how a stayed judgment of condemnation would benefit the plaintiff. Nevertheless, NCRIC admits to credits in its hands, see D.C. Code § 16-556, and the court may therefore enter judgment against NCRIC, provided that the credits are "immediately due and payable." Id. If the credits are not "immediately due and payable," the D.C. Code indicates that "execution shall be stayed until they become due." Id.
NCRIC answered the plaintiff's writ of attachment as follows:
[o]n February 20, 2004, in civil action number 00-0007308, NCRIC Inc. v. Columbia Hospital for Women, Inc. ("Columbia"), judgment was entered for Columbia, against NCRIC, in the amount of $18,220,002.00. However, the judgment is not final and is the subject of a post trial Motion for a New Trial, Renewed Motion for Judgment as a Matter of Law and Remittitur. Moreover, the time for appeal has not expired.
Opp'n at 1.
The parties agree that a general stay on execution of judgment (such as Judge Blackburne-Rigsby's stay) would render a motion for judgment against a garnishee "premature," Reply at 2, 4 (stating that "[c]learly, it is the `stay' . . . that protects a judgment against execution"); Sur-Reply at 2, although they dispute whether or not a stay can apply retroactively, compare Reply at 2 (arguing that the stay would need to be "in place when the writ of garnishment is served") 8 (arguing that "because no stay of judgment was in effect when GE garnished NCRIC[,] the judgment against NCRIC represents a `credit'") with Sur-Reply at 2 (arguing that a stay can function retroactively).
Along these lines, the parties also disagree over what constitutes an "unconditional" judgment under D.C. Code § 16-541, which states that the term "`judgment' includes an unconditional decree for the payment of money[.]" D.C. Code § 16-541. Because this dispute has some bearing on the plaintiff's writ of attachment (because normally courts issue writs of attachment after judgments, D.C. Code § 16-542), the court takes a moment to address the parties' dispute.
NCRIC relies on Ascher v. Gutierrez, 66 F.R.D. 548 (D.D.C. 1975), in which the court stated that the pendency of an appeal prevents a judgment from being "unconditional." Id. at 549 n. 2. The plaintiff responds with two arguments: first, that Ascher does not apply because it addressed judgments, not credits in the hands of a garnishee, and second, that Asher incorrectly stated the law. Reply at 7.
The fact that Ascher discussed judgments, not credits in the hands of a garnishee, does not make Ascher inapplicable. Quite the contrary, attachment of credits requires service of "a copy of the writ of attachment," D.C. Code § 16-546, and as indicated above, the writ typically issues after a judgment. D.C. Code § 16-542. Accordingly, credits and judgments are not as distinct as the plaintiff argues. See also id. §§ 16-544 (stating that "[a]n attachment may be levied upon the judgment debtor's goods, chattels, and credits") (emphasis added); § 16-556 (discussing judgment against the garnishee and stating that "judgment shall be entered against [the garnishee] for the amount of credits admitted or found, not exceeding the amount of the plaintiff's judgment[.]") (emphasis added).
The court agrees with the plaintiff on its second point, however. Ascher provided no support for its statement that a pending appeal converts an otherwise "unconditional decree" into a conditional decree so as to prevent the appealed decision from falling under the definition of "judgment." This court believes a better interpretation of D.C. Code § 16-541 results when the term "unconditional" is read simply to modify "decree," not to refer to the pendency of appeal or post-trial motions.
Beginning with the text of the D.C. Code, the court notes that the code states that "[a]s used in this subchapter, `judgment' includes an unconditional decree," D.C. Code. § 16-541 (emphasis added), but not, for example, that "judgment" means or is limited to unconditional decrees. The parties supply no argument for looking beyond the plain text of the statute. And using the District of Columbia Superior Court Rules as an analogy, the court further notes that those rules offer a definition of "judgment" directly contrary to what NCRIC proposes: "a decree and any order from which an appeal lies." SUPER. CT. CIV. R. 54(a) (emphasis added); FED. R. CIV. P. 54(a) (same); see also FED. R. CIV. P. 62. Moreover, the ability to suspend or stay the enforcement of a judgment pending appeal by, for example, filing a supersedeas bond, renders NCRIC's interpretation problematic. See, e.g., Dickey v. Fair, 768 A.2d 540, 542 (D.C. 2001) (holding that "the noting of an appeal that is not accompanied or followed by the filing of a supersedeas bond does not operate to stay the enforcement of a judgment"). The court therefore determines that the pendency of appeal and/or post-trial motions does not render a decree "conditional" for the purposes of D.C. Code § 16-541. See also Mosley v. Welch, 830 A.2d 1246, 1248 (D.C. 2003) (discussing without disapproval writs of fieri facias and attachment, and the lower court's entering of judgment of condemnation, all prior to the lower court ruling on a post-trial motion); cf. D.C. Code § 15-102(a) (stating that a " final judgment or decree for the payment of money rendered in the United States District Court for the District of Columbia, or the Superior Court of the District of Columbia, from the date such judgment or decree is filed and recorded in the office of the Recorder of Deeds of the District of Columbia" constitutes a lien on real property) (emphasis added).
In this case, the stay contains no language indicating that it should apply retroactively. Nor did NCRIC's motion for the stay mention the possibility of retroactive application. In any event, it is indisputable that a stay now exists in NCRIC's case, and the court has serious concerns entering a judgment of condemnation while that stay exists, even if this court were to stay the enforcement of that judgment. The plaintiff has secured its position in the line of creditors by filing its writ of attachment, and granting the plaintiff's motion for judgment of condemnation would only complicate this court's interaction with the D.C. Superior Court's stay. Conversely, denying the plaintiff's motion without prejudice will not cause great harm to the plaintiff, because the plaintiff has established its lien priority. The court therefore denies the plaintiff's motion for judgment of condemnation without prejudice. See Wrecking Corp. of Am., Va., Inc. v. Jersey Welding Supply, Inc., 463 A.2d 678, 680 (D.C. 1983) (stating that "[t]he decision to enter a judgment of condemnation . . . lies in the discretion of the trial court") (citing Metropolitan Roofing Sheet Metal Co. v. Franklin Investment Co., 256 A.2d 913, 915 (D.C. 1969); Pastor v. Republic Savings Loan Ass'n, 153 A.2d 813, 815 (D.C. 1959)).
For all these reasons it is this 1st day of November, 2004,
ORDERED that the plaintiff's motion for judgment of condemnation is DENIED, without prejudice.
SO ORDERED.