Home › Case briefs › Civil Procedure

Merritt-Chapman & Scott Corp. v. Public Utility District No. 2

United States District Court for the Southern District of New York · Civil Procedure

Civil ProcedureAttachmentSubject Matter JurisdictionQuasi in remTrust propertyattachmentgovernmental immunitysubstantial interference

Facts

Plaintiff contractor sought payment allegedly due under a 1956 public works contract with defendant Washington public utility district for construction related to the Priest Rapids Project. Plaintiff attached monies in New York held in a Construction Fund and Construction Interest Fund established under the district's bond resolution and deposited with Bankers Trust as "Construction Fund Trustee." The project had been certified complete except for minor items, was in operation, and no payments had been made from the interest fund since 1961. The district argued the levy interfered with its public functions, that New York lacked jurisdiction because the contract was not made there, and that the funds were trust property rather than the district's property.

Issue

Whether the attachment should be vacated because the levy would substantially interfere with the district's public functions, because the contract was not made in New York and thus fell outside New York's jurisdictional statute for suits between foreign corporations, or because the attached funds were held in trust and were not property of the district subject to attachment. Also, whether service should be set aside if the attachment was invalid.

Rule

A levy on an out-of-state governmental instrumentality's funds is not invalid on governmental-immunity grounds unless it will substantially interfere with the instrumentality's public duties. Under New York law, a contract is made where the last act necessary for formation occurs, but if a party manifests an intent not to be bound until formal execution, no binding contract exists until that execution. Funds placed with a trustee are not attachable as the defendant's property when the parties intended to create a trust, the trustee has active duties, and the defendant has no assignable title, beneficial interest, or reversionary interest in the funds.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Sierra Aggregate, a Nevada corporation, sued Lake Valley Water District, a municipal utility created under Oregon law, in New York state court for unpaid contract balances. It attached $6 million in New York accounts earmarked for a reservoir project, but the record showed the reservoir had been operating for two years, no payments had been made from one attached interest account for eighteen months, and more than enough unattached project money remained to cover any legitimate construction-related obligations.

Should the attachment be vacated on the ground that it impermissibly interferes with the district's public functions?

Explanation. The majority adopted a substantial-interference test, not absolute immunity. A levy may stand unless its effect will substantially interfere with fulfillment of the instrumentality's public duties. Here, as in the opinion, the project is complete and operating, one account has not been used for construction-period interest for a long time, and sufficient unattached funds remain to satisfy legitimate obligations. That defeats the interference argument. (Derived from Merritt-Chapman & Scott Corp. v. Public Utility District No. 2 (n.d.).)