Alco Construction Corp. v. H & S Electric, Inc. , 49 Mich. App. 667 ( 1973 )

Bashara, J.

Plaintiff instituted suit against defendant for breach of a contract to install electrical equipment alleging damages in excess of $100,-000. The same day plaintiff filed affidavits for writs of prejudgment garnishment under the authority of GCR 1963, 738.2. The affidavits alleged indebtedness in the same amount as stated in plaintiff’s complaint.

The affidavits further stated:

" * * * that Plaintiff is justly apprehensive of the loss of said sum * * * unless a Writ of Garnishment is issued for the reason that said defendant has failed to pay its debts as they mature and may have incurred debts in excess of its assets and without said writ of garnishment may at any time release, remove, secrete, transfer, dispose of or withdraw its assets or prefer other creditors, thereby leaving itself without sufficient assets to satisfy plaintiffs judgment.”

After service of writs of garnishment on six Detroit area banks, one garnishee defendant disclosed indebtedness of about $3,000.

Defendant H & S Electric Co. sought a bill of particulars. Plaintiff eventually replied, revising damages to $69,035.58 to reflect the amount plaintiff alleged was paid out in excess of the original contract price as a result of defendant’s failure to complete the contract.

Defendant moved to quash the writ of garnishment contending that plaintiff failed to set forth facts sufficient to support its claim as required by GCR 1963, 738.2(3). It was defendant’s further contention that the writ stated an incorrect indebtedness as shown by the plaintiff’s bill of particulars. The trial judge granted defendant’s motion to quash. This Court has granted plaintiff’s application for leave to appeal from that order.

Plaintiff contends on appeal that the statement contained in its affidavit was specific enough to satisfy the rule. GCR 1963, 738.2(3) provides that the writ shall issue if plaintiff or his representative avers that:

"the plaintiff is justly apprehensive of the loss of his claim against the defendant unless a writ of garnishment is issued and setting forth the facts in support of this claim. ” (Emphasis supplied.)

The question regarding the degree of specificity of the affidavit on prejudgment garnishments under the present court rule appears to be one of first impression in the appellate courts of Michigan. In Tsingos v Michigan Packing Co, 272 Mich 7; 260 NW 783 (1935), the Court stated that the purpose of garnishment is to impound security for satisfaction of a demand where the plaintiff or affiant is justly apprehensive of the loss of the security unless a writ of garnishment issue. GCR 1963, 738.2(3), which requires the affidavit, is meant to impose a limitation on the power of the plaintiff to impound such security by requiring him to show that he is not only apprehensive of loss, but to also set forth the facts in support of his claim. The principal defendant is thereby given notice of the allegations which have caused a freezing of his assets and may come forward to deny or repel such allegations.

Two interesting West Virginia decisions appear to shed some light on the problem. Roberts v Burns, 48 W Va 92; 35 SE 922 (1900), required the statement of material facts to be certain and definite in legal point of view in order to inform the defendant of facts he must repel. In ruling on the necessary degree of specificity of facts supporting an affidavit for writ of attachment, the West Virginia Court cited with approval an earlier case, Delaplain & Co v Armstrong, 21 W Va 211, 214 (1882). The Court there stated:

"The manifest object of the statute in requiring the material facts to be stated, is to guard the property of the debtor against improper seizure and to enable the court to judge and determine whether the information, thus supplied by the affidavit, furnishes reasonable proof of the main fact involved — the fraudulent intent of the debtor.”

The inherent difficulty in requiring specific facts in affidavits for prejudgment garnishments is that there has been no opportunity for discovery. GCR 1963, 738.9 (1)(4); GCR 1963, 302-313. Were discovery available, however, and defendant put on notice, the plaintiff’s apprehension of loss could well become a reality. This could defeat the security the rule means to provide.

The court rule was intended to force the plaintiff to a disclosure of some facts beyond the mere conclusion of apprehension of loss. This disclosure would enable the principal defendant to have notice of, and an opportunity to repel, those more specific allegations upon which the writ is founded.

Application of the foregoing principles to the instant affidavit results in the following analysis: Plaintiff claims it fears loss because defendant failed to pay its debts as they matured. Such an allegation, if supported, provides notice to the defendant of a fact he must repel, tends to prove plaintiff’s apprehension of loss, and notifies the court of potential risk. Plaintiff next alleges that defendant’s liabilities may exceed its assets. While defendant claims such a statement is conclusory and speculative, without discovery greater specificity of supporting facts is improbable. Plaintiff further notifies the defendant, by this allegation, of a fact he must repel.

Defendant next argues that the trial court order should be upheld because plaintiff stated an incorrect amount of indebtedness in the initial writ. When damages are ascertainable by standards established in the contract, the amount stated in the writ need not be absolutely correct:

"The statute requires that the affidavit in garnishment shall state that the principal defendant is indebted to the plaintiff in a given amount. This requirement was met by plaintiff’s garnishment affidavit; and it is not required that the amount be stated with absolute correctness as determined by the amount ultimately found due to plaintiff in the principal suit. In the case at bar, the damages may be ascertained by the standards set up in the alleged contract, if proven.” (Emphasis by the Court.) Talbert v Solventol Chemical Products, Inc, 304 Mich 557, 565; 8 NW2d 637, 640 (1943). See also Geistert v Scheiffler, 312 Mich 36, 39; 19 NW2d 477, 479 (1945), and Goldblum v United Automobile, Aircraft & Agricultural Implement Workers of America, Ford Local No 50, 319 Mich 30, 40-41; 29 NW2d 310, 314 (1947).

The contract here provides:

"If, for any reason, the Contractor shall fail to complete any of the portions or the whole of this contract within the time specified, ALCO may have the work done by others and the cost of completion of said work shall be charged to Contractor.”

The damages were ascertainable by reference to the cost of completion standard in the contract. Plaintiffs estimate of the cost of completion was as reasonable as could be expected at the time the complaint and affidavit were filed.

It is, then, our opinion that the trial judge was incorrect in quashing the writ of garnishment on the facts before us. We, therefore, reverse and remand with direction to reinstate the original writ.

Holbrook, J., concurred.