Helena Chemical Co. v. R&E Farms

          ORDER ON MOTIONS FOR WRITS OF GARNISHMENT

          JANE M. VIRDEN, UNITED STATES MAGISTRATE JUDGE.

         This matter is before the court, sua sponte, to determine whether this case is properly before this court. For the reasons stated below, the court finds that the procedural posture of the case is improper and subject matter jurisdiction over the purported garnishments is lacking. In short, the holding of Berry v. McLemore, 795 F.2d 452 (5^th Cir. 1986) requires that this court conclude: 1) plaintiff must initiate a new, separate, action for any writs of garnishment, and 2) if that action is to be filed in the United States District Court for the Northern District of Mississippi, plaintiff must establish an independent basis for federal subject matter jurisdiction over the garnishment proceeding- which is based on state law.

         Facts

         Defendant Double Y and Young defaulted under the terms of a credit sales agreement with Helena. Similarly, R&E Farms and Young defaulted under the terms of another credit sales agreement with Helena. Helena then sued in this court to enforce the agreements and recover its losses- asserting subject matter jurisdiction pursuant to 28 U.S.C. § 1332 as the basis for jurisdiction in each action. Following a motion, the cases were consolidated. Ultimately, the cases were resolved by Helena's successful motions for summary judgment, and on April 27, 2017, the court entered judgment against Double Y and Young- in the total amount of $432, 335.99 plus post-judgment interest at the federal rate- and R&E Farms and Young- in the total amount of $280, 767.11 plus post-judgment interest at the federal rate. The consolidated cases were then closed.

         On October 9, 2017, Helena filed twelve motions for issuance of writs of garnishment [53]-[58] and [54]-[59], respectively- six in each closed consolidated action- against a number of banks or other companies believed to have accounts with or owe money to the defendants. No independent basis for jurisdiction was alleged to support the garnishment actions.

         Law and Analysis

         Because this court has an independent duty to examine its own jurisdiction, see, generally, Ruhrgas Ag v. Marathon Oil Co., 526 U.S. 574 (1999), the court invited briefs on the issue of whether the motions for writs of garnishment were properly filed in this closed action- and in particular, whether this court had subject matter jurisdiction over them. Specifically, the court called to the plaintiff's attention the decisions in Berry v. McLemore, 795 F.2d 452 (5^th Cir. 1986) and Bass v. Denney (In re Bass), 171 F.3d 1016 (5^th Cir. 1999).

         In Berry v. McLemore, the United States Court of Appeals for the Fifth Circuit held that a garnishment action seeking enforcement against third parties who were strangers to the underlying judgment requires the institution of a new proceeding- separate from the primary action that established the judgment debt. Id. at 455. The Fifth Circuit further held that the Court did not have ancillary jurisdiction over garnishment proceedings, even if the garnishment is sought to satisfy the earlier judgment entered in the same case. Id. In short, an independent basis of federal jurisdiction must exist to vest the federal court with jurisdiction over the new and independent garnishment action in order for it to proceed thereon in federal court.

         The Court of Appeals reiterated the holding in Berry in the later case, In re Bass, stating:

Perhaps even more to the point is the recognition that the particular “supplemental jurisdiction” action we review today is a new and independent action. As noted earlier, the Denneys instituted this case against the Trustees as a combined garnishment and injunction proceeding . . . . Even though the Denneys voluntarily non-suited the garnishment, it and the mandatory injunction for advance notice are analytically indistinguishable for purposes of classification as new and independent actions.

In this we are bound by our holding in Berry v. McLemore and the reasoning behind it. If anything, Berry was a closer case: It dealt with a money judgment previously rendered by the same court in which the judgment creditor was seeking to garnish the judgment debtor's former employer. Moreover, the court in question was a federal district court and thus a court of broader jurisdiction than a bankruptcy court. As in the instant case, the judicial proceeding in which the money judgment was rendered had been completed and was inactive, and the third party against whom the garnishment was sought in the second proceeding had not been a party to the first. The Berry court recognized the general principle that prior termination of a proceeding does not ordinarily prevent the court from aiding in collection, but determined that the general rule gives way to the more specific exception when the subsequent action is new and independent from the first. Relying on our pronouncement in Butler v. Polk that garnishment actions against those who were not parties to the original action “are generally construed as independent suits, at least in relation to the primary action” in which the judgment was rendered, we held in Berry that the district court lacked jurisdiction to entertain the garnishment.

The Butler/Berry analysis is clearly applicable to the action brought by the Denneys in the Bankruptcy Court in Texas and stymies their effort to support jurisdiction of that court under the rules of supplemental jurisdiction. As we stated in Berry, “we can find no case where a court held that it had ancillary jurisdiction to consider claims in a new and independent action merely because the second action sought to satisfy or give additional meaning to an earlier judgment.” The bankruptcy court has no inherent jurisdiction to hear this case.

In re Bass, 171 F.3d 1016, 1024-25 (5th Cir. 1999).

         Despite this authority, Helena argues, first, that the United States Supreme Court's decision in Peacock v. Thomas, 516 U.S. 349 (1996) “overruled (or in the very least limited) [Berry]”, and, second, that In re Bass- decided three years after Peacock- “turned on the limits of a bankruptcy court's jurisdiction as ...