Attachment: Securing Vanishing Assets

When a creditor is faced with a customer in default who is actively concealing or attempting to remove assets from the state, prospects of collection can often appear dim. In this situation where time is of the essence, prompt and prudent action can make all the difference. Virginia, like many states, provides a narrowly-tailored remedy to creditors in this pressing circumstance: pre-trial attachment. This article presents a short summary of the nature and requirements for pre-trial attachment.

A STRICTLY STATUTORY REMEDY

No remedy for attachment existed in Virginia at common law. As a creation of statute, attachment has a long history of undergoing significant modifications by the Virginia legislature over time. Notwithstanding its uneven development through more than two-centuries in the Commonwealth, attachment continues to present a uniquely suitable remedy to creditors who hold a present-but-diminishing opportunity to collect on disappearing assets. Its primary purpose is to secure a lien on the property of a Defendant debtor in default until the Plaintiff creditor can obtain judgment and then liquidate such property for the satisfaction of that judgment.

With its existence conferred only by legislative decree, attachment is neither an action at law or equity, but purely a statutory procedure which Virginia courts strictly construe. It is notable that the underlying claim for relief for which the attachment is sought can be either legal or equitable, and importantly, the property to be attached does not necessarily have to be related to the underlying claim.

PROPER PLAINTIFFS FOR ATTACHMENT UNDER VA. CODE § 8.01-533

The restrictions on attachment are narrower on proper defendants than on proper plaintiffs. So long as a person holds a claim to (i) any specific personal property, (ii) any debt, including rent, whether the debt is due and payable or not, (iii) damages for breach of any contract, express or implied, or (iv) damages for a wrong, or for a judgment for which no bond has been posted, that person may sue out an attachment of the Defendant debtor’s property.

SPECIFIC GROUNDS UNDER VA. CODE § 8.01-534

The grounds upon which a Plaintiff creditor can seek pre-trial attachment are specifically enumerated and exhaustive. The Defendant must be either: (i) removing or about to remove himself from Virginia with intent to change his domicile, (ii) removing or about to remove his property from Virginia, (iii) converting or about to convert his property into liquid assets with intent to hinder, delay, or defraud his creditors, (iv) assigning or disposing or about to assign or dispose of his estate, with intent to hinder, delay, or defraud his creditors; or (vi) absconding or about to abscond with his property to the injury of his creditors, or is a fugitive from justice.

A creditor may also seek attachment against a foreign corporation, or an individual who is not a resident of Virginia, where that foreign corporation or individual has either financial rights or interests which can be protected, enforced, or proceeded against in Virginia courts. However, under Section 8.01-533, in this circumstance where the Defendant has property or rights in the state but is either a foreign corporation or not a resident of the Commonwealth, the debt on which the Plaintiff creditor’s claim is based must be due and owing at the time of filing for attachment.

THE MECHANICS OF AN ATTACHMENT PROCEEDING

To initiate attachment, a Plaintiff creditor must file for an attachment proceeding with the clerk or magistrate sitting in the jurisdiction where the property or right exists. With that filing, the creditor must swear to and allege one or more of the grounds (mentioned above) under Va. Code § 8.01-534. The proceeding then occurs ex parte, and at the proceeding, the creditor must prove the alleged grounds before the judge or magistrate. The only evidence that the judge or magistrate is permitted to consider is the sworn petition. If the judge or magistrate determines that there is reasonable cause to believe the alleged grounds, then the court may issue an attachment order against any of the Defendant debtor’s property to satisfy the claim.

At this point, the Plaintiff creditor must post a bond in order for the judge to order a levy by the sheriff on the property. If the Defendant debtor posts a bond, he may retain the property pending the resolution of the underlying claim. Additionally, the Defendant debtor may raise defenses or counterclaims as in a formal legal action, or may challenge the attachment specifically on grounds of lack of jurisdiction, issuance on false information, failure of the required statutory grounds, or the Plaintiff creditor’s unlikelihood of success on the merits. If such defenses or challenges are successful, the attachment will be quashed. 

APPLICATION IN A HEARING ON THE MERITS

The next general step is a hearing on the merits of the underlying claim. The Plaintiff creditor will be required to prove his underlying claim, and the Defendant debtor may assert defenses and/or counterclaims to that action.

If the Plaintiff creditor succeeds, then the attachment lien will relate back to the date of the sheriff’s levy rather than the date on which the Plaintiff creditor obtains judgment. If the Defendant debtor wins, he or she will retain the property.

THE IMPORTANCE OF SOUND JUDGMENT

Because of the unusually swift and severe ability to seize a defendant’s property by ex parte proceeding, attachment is viewed as an extreme remedy. Accordingly, sound judgment and caution must be used here, as a Defendant who is successful either in initially quashing the attachment or in defending the underlying action can recover damages for wrongful seizure or sale where such action was taken without good cause. Such a Defendant may similarly seek damages for abuse of process. Thus, pre-trial attachment is best reserved for cases in which the creditor clearly and unequivocally holds right to payment, the Defendant debtor is in default, and seizable assets are either disappearing or about to disappear.