Travelers Insurance v. Lawrence

509 F.2d 83

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 23, 1974
• Docket: No. 73-1812
• Status: Published

Opinions

OPINION

JAMESON, District Judge:

Appellants, the plaintiff and defendants in an action to foreclose a mortgage on real property and the purchaser at foreclosure sale, challenge the validity of a commission of appellee, the United States Marshal for the District of Oregon, in the amount of $75,765, taxed as costs for selling the property pursuant to the decree of foreclosure. The commission was computed pursuant to 28 U.S.C. § 1921. The appeal is from an order overruling appellants’ objections and confirming the Marshal’s commission.

I. BACKGROUND

Plaintiff, Travelers Insurance Company, brought this suit in federal court, on the basis of diversity jurisdiction, to foreclose its mortgage on the “M. C. Ranch” located in Lake and Harney Counties, Oregon. Cross claims were filed by the holders of two subsequent mortgages. A judgment and decree was entered on July 31, 1972 in favor of the plaintiff and the two subsequent mortgage holders for the foreclosure of the three mortgages and directing that the property

“ . . . shall be sold as a unit by the United States Marshal on execution at the Court house door in Lake County, Oregon, after giving notice required by law; . . . that the United States Marshal give to such purchaser a certificate of sale, and after the time allowed by law for redemption, unless said property be redeemed, a deed.”

The court also ordered that the proceeds of the sale be distributed “[fjirst, to pay the costs and expenses of sale”.

On September 17, 1972 the clerk of court signed a writ of execution commanding the Marshal to sell the property “described in the attached judgment and decree as therein directed”.¹ On September 20, the Marshal issued a “Notice of Marshal’s Sale”, prepared by counsel for plaintiff, describing the property and setting the sale for November 1, 1972. As required by Oregon law, the notice was published in local newspapers.

Prior ■ to the sale, the judgments of Travelers and the second mortgage holders were sold and assigned to Wolfsen M. C. Ranch, a limited partnership. The sale was held on November 1, 1972, in Lakeview, Oregon. The Marshal drove to Lakeview the day before the sale, conducted the sale between 10:00 and 10:30 A.M. on November 1, and returned to Portland. Wolfsen was the only bidder at the sale, bidding $5,050,000.00, the approximate amount of the two judgments it held. The Marshal filed his “Return on Execution”, indicating his compliance with the “writ of execution, judgment and decree”.² The sale to Wolfsen was then confirmed. No money was paid to the Marshal by Wolfsen or anyone else in connection with the purchase at the sale.

Thereafter, the Marshal filed his “Statement of Costs” in which he claimed his statutory commission of $75,-765 out of the proceeds of the sale pursuant to 28 U.S.C. § 1921.³ It is undisputed that had the action been conducted in state court (as it could have been) the officer making the sale would have been limited to a fee of $10.00 for conducting the sale, plus $2.00 for making a certificate of sale and $5.00 for a sheriff’s deed.⁴

Objections to the commission were filed by the appellants.⁵ In overruling the objection, the court held that the taxation of marshals’ costs is discretionary, but if costs are taxed, the court must follow the formula in 28 U.S.C. § 1921; the Marshal had seized or levied on property and received and paid over money as required by § 1921; and the prescribed fees or commissions apply to judicial as well as execution sales.

Appellants contend that (1) the provision for a marshal’s commission in 28 U.S.C. § 1921 is not applicable because there was no seizure or levy and the Marshal did not receive or pay over any money; (2) under the Erie doctrine the commission is unauthorized because it is in conflict with the substantive law of Oregon, which protects redemption rights by limiting the sheriff’s fee to $10.00 on a foreclosure sale; (3) if § 1921 is applicable, the court had discretion to fix the commission at a lesser sum, or (4) if not, the imposition of a commission bearing “no relationship to the value of the services rendered” was an abuse of discretion.

II. APPLICABILITY OF 28 U.S.C. § 1921

Prior to 1962, the statute establishing marshals’ fees had remained relatively unchanged since its enactment in 1853. The statute read in pertinent part:

“Only the following fees of United States marshals shall be collected and taxed as costs, except as otherwise provided:

“For serving a writ of possession, partition, execution, or any final process, the same mileage as is allowed for the service of any other writ, and for making the service, seizing or levying on property, advertising and disposing of the same by sale, set off, or otherwise according to law and receiving and paying over the money, the same fees and poundage as are or shall be allowed for similar services to the sheriffs of the States, respectively,, in which the service is rendered . . ..” (emphasis added).

In 1962 Congress amended this provision of § 1921 to read:

“Only the following fees of United States marshals shall be collected and taxed as costs, except as otherwise provided:

For serving a writ of execution . . ., $3;

“For the preparation of any notice of sale ... or bill of sale, $3;

“For seizing or levying on property (including seizures in admiralty), disposing of the same by sale, setoff, or otherwise and receiving and paying over money, commissions of 3 percentum on the first $1,000 of the amounts collected and IV2 per centum on the excess of any sum over $1,000. If not disposed by marshal’s sale, the commission shall be in such amount as may be allowed by the court.” (emphasis added).⁶

A comparison of the old statute with the new indicates that the only substantial change made by the 1962 amendment was to substitute a uniform “commission” for the marshal’s services for the provision that the marshal should be paid the fees “allowed for similar services to the sheriffs of the States”. Both expressly provide that the marshal is required to do three things before he is entitled to a commission. He must (1) seize or levy on the property; (2) dispose of it by sale; and (3) receive and pay over money. Appellants contend that requirements (1) and (3) were not met in this case.

Does the sale of real property pursuant to a decree of mortgage foreclosure involve a seizure or levy within the meaning of § 1921? In finding § 1921 applicable, the district court relied on Hill v. Whitlock Oil Services, Inc., 450 F.2d 170 (10 Cir. 1971). In Hill, as in this case, a United States Marshal sold real property pursuant to an order in a foreclosure action. Refusing to grant the marshal’s commission of $117.81 that was subsequently assessed, the lower court held that under Kansas law, the sale was a judicial rather than an execution sale and did not involve a levy or seizure as required by § 1921.

In reversing, the Tenth Circuit agreed that “under Kansas law no seizure or levy was made”, but held that “federal, not local, law applies in the interpretation and application of federal statutes”. Id. at 173. Recognizing that the “controlling consideration here is legislative intent”, the court concluded that in using the words “seizing or levying” Congress intended to include judicial sales. Id. at 174.

The court noted that “ ‘Levy’ is an ambiguous word, with its meaning dependent on the context in which it is used”. Id. It relied on the general definition in the Uniform Enforcement of Foreign Judgment Acts, § 1(c) which defines “levy” as follows:

“ ‘Levy’ means to take control of or create a lien upon property under any judicial writ or process whereby satisfaction of a judgment may be enforced against such property”.

Applying that definition, the court concluded that the Marshal “took control of the land under a court order”, and thereby in effect levied on the land. The court stressed that the “purpose of the pertinent provisions of § 1921 is to reimburse the federal government for services rendered to private litigants by United States marshals” and that the 1962 amendment established a uniform formula for computing the fees. The court concluded that uniformity in the fee structure would be “impossible if the right of the Marshal depends on the fine distinction which state law may draw.” Id.

We agree that in amending § 1921, Congress intended to establish a uniform fee for services rendered by United States marshals. As stated in House Report No. 1724, the purpose of setting a uniform fee was “to increase the charges to private litigants for the services of U. S. marshals”.⁷ We agree also that § 1921 prescribes the fees which may be collected for services performed by a United States marshal, including the sale of property. We cannot agree, however, that state law is to be ignored in determining whether the commission prescribed in § 1921 is applicable. The fees assessed pursuant to § 1921 are based on the nature of the services performed by the marshal. Here the marshal was charged with the responsibility of conducting a mortgage foreclosure sale pursuant to a writ of execution.

All parties to this action agree that pursuant to Rule 69(a) of the Federal Rules of Civil Procedure, Oregon law governs the practice and procedures to be followed by the marshal in conducting the sale. See United States v. Yazell, 382 U.S. 341, 355, 86 S.Ct. 500, 15 L.Ed.2d 404 (1966); Custer v. McCutcheon, 283 U.S. 514, 51 S.Ct. 530, 75 L.Ed. 1239 (1931); and Fink v. O’Neil, 106 U.S. 272, 284-285, 1 S.Ct. 325, 27 L.Ed. 196 (1882).

Rule 69(a) provides:

“Process 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.” (emphasis added).

Rule 69(a) and § 1921 are interrelated. Rule 69(a) provides that state procedure shall determine what services the marshal will perform. § 1921 prescribes the fees he may collect for those services.⁸ Thus, if state law does not require a levy or seizure to be made when mortgaged property is sold pursuant to a decree of foreclosure, then according to Rule 69(a) the marshal does not make a seizure or levy. Nor should he be compensated for making one under § 1921.⁹

The threshold question here, therefore, is whether under Oregon law a levy or seizure is required in selling real property at a mortgage foreclosure sale. In Oregon, as in most states, a real property mortgage constitutes a lien. See O.R.S. § 88.010. According to Oregon law, a decree of foreclosure “may be enforced by execution as an ordinary decree for the recovery of money”. O.R.S. § 88.060. See Close v. Riddle, 40 Or. 592, 67 P. 932, 933 (1902). That is what happened here. The district court clerk issued a writ of execution directing the Marshal to sell the property pursuant to the decree of foreclosure.

While Oregon generally requires a levy in execution sales, O.R.S. § 23.-410(3), it does recognize a distinction between those cases wherein the property to be sold is already in the control of the court and those cases in which the court has no custody of any property with which to satisfy a judgment. Where real property is already in the custody of the court, Oregon requires no levy or seizure. The rationale for this distinction was discussed by the Oregon Supreme Court in the early case of Bank of British Columbia v. Page, 7 Or. 454, 456 (1879). There the court expressly held that no levy was necessary to sell mortgaged premises upon a decree of foreclosure. The court stated:

“When a judgment, upon which an execution has issued is a lien upon land, it is not necessary that the sheriff should make any formal levy or seizure before proceeding to advertise and sell. The judgment binds the land, which is already in the custody of the law, before the execution issues. The execution comes as a power to enable the creditor to reap the fruits of the seizure already made.

“This same rule should govern the sale of mortgaged premises upon a decree of foreclosure, and when an execution is issued thereon, it is not necessary that the sheriff should make a levy upon the premises before proceeding to sell the same.”

In German Savings & Loan Soc. v. Kern, 38 Or. 232, 62 P. 788 (1900) the Supreme Court of Oregon reaffirmed its holding in Bank v. Page, stating:

“The authorities are uniform that no levy is required under an execution issued upon a decree of foreclosure. Mr. Freemen says that ‘if the sale has been ordered by a court of chancery, in a suit in which all the parties in interest were before the court, there is no need of any levy, for the right to sell the land has attached as a consequence of the proceedings in the suit. In truth, the suit may have been for the express purpose of enforcing a pre-existing lien. If so, the title to he acquired by the sale will relate back to the inception of that lien, and cannot possibly be aided by any levy made after the entry of the decree. Hence, under a decree foreclosing a mortgage, no levy need be made on the mortgaged premises.’ 2 Freem.Ex’ns (3d Ed.) § 280.” 62 P. at 790.

Accord, Lesamis v. Greenberg, 225 F. 449, 453 (9 Cir. 1915); see also Smith v. Dwight, 80 Or. 1, 148 P. 477, 156 P. 573, 578 (1916).¹⁰

This rule is based on the fact that historically the purpose of a levy has been to subject property to the custody of the law so that a judgment debt- or might not divert it to any other purpose. State ex rel. Coffey v. District Court, 74 Mont. 355, 240 P. 667, 670 (1925); accord, Winslow v. Klundt, 51 N.D. 808, 201 N.W. 169, 171 (1924); R. S. Corson Co. v. Hartman, 144 W.Va. 790, 111 S.E.2d 346, 354 (1959). Here, the mortgage constituted a lien on the real estate and the court already had custody of the property. A further levy or seizure would have accomplished nothing and under Oregon law was unnecessary. Accordingly, the “commission” prescribed by § 1921 is not applicable, since the Marshal was not required to make any levy or seizure in executing the writ.

This conclusion is supported by the common law rule that a levy or seizure is not required in a judicial sale. The distinction in this regard between judicial sales and the ordinary execution sales is well summarized in 47 Am.Jur.2d Judicial Sales § 3, p. 301 as follows:

“The unique characteristics of a judicial sale, as that term is used in this article, would seem clearly to distinguish such sales from execution sales, which are not made pursuant to a judicial order or decree, but under final process, that is, by a writ, issued by the clerk of the court, which does not direct the sale of specifically designated property, does not prescribe the mode of sale, and does not impose conditions on the sale, but merely requires ministerial action by a designated officer to levy on property of a judgment debtor and sell it as prescribed by statute to satisfy a money judgment.”

For our purposes, the most significant distinction between a judicial sale and an execution sale is that no levy or seizure is required in a judicial sale. Mortgage foreclosure sales while often made pursuant to a writ of execution and even termed special execution sales have been treated like judicial sales.

“Thus the rules governing judicial sales, instead of the statutory provisions regulating execution sales, have been applied to a sale in a mortgage foreclosure proceeding under a special execution, since such proceedings give rise to a special case, which is in the nature of a proceeding in rem wherein the decree of the court operates directly on the mortgaged property, and no levy or seizure is necessary to give effect to the judgment.” (emphasis added).

47 Am.Jur.2d Judicial Sales § 3 p. 302 citing Norton v. Reardon, 67 Kan. 302, 72 P. 861, 863 (1903); see also Thomas v. Thomas, 44 Mont. 102, 119 P. 283, 284 (1911).¹¹

It appears to us also that the definition of “levy” in the Uniform Enforcement of Foreign Judgments Act, relied upon in Hill,12 is entirely consistent with our conclusion in this case. § 1(c) states that “ ‘Levy’ means to take control of or create a lien upon property under any judicial writ or process whereby satisfaction of a judgment may be enforced against such property”. Obviously in the enforcement of a foreign judgment, it is necessary to take control of or create a lien upon property in the state where the foreign judgment is to be enforced.¹³ But here the lien has already been created upon the specific property sold. The Marshal simply sold the property pursuant to the foreclosure decree. It was unnecessary to take control of or create any lien upon the property.

On the basis of the foregoing analysis of Oregon law, as well as the common law rule that a levy or seizure is not required for a judicial sale of real property, including a sale under a judgment of foreclosure, it is reasonable to conclude that Congress did not intend the percentage formula of § 1921 to apply to mortgage foreclosure sales of real property.¹⁴ Given the value of real property, application of the formula to judicial sales would usually result in excessive fees. Here, under the relevant Oregon law at the time of the foreclosure sale, a $10.00 fee would have been assessed for the sheriff’s services in selling the property. Because the action was brought in federal court, the fee for the same service was over seven thousand times greater, i. e. $75,765.00.¹⁵

Prior to the 1962 amendment, the marshal would have received the same fee as the sheriff. In establishing the percentage formula in ■ 1962, the Congress projected that the new fee structure would “moderately increase the fees charged to private litigants”. The Congress expressly recognized the “need to avoid raising the cost of litigation in the Federal Courts to a prohibitive level”. H.R.No.1724, 87th Cong.2d Sess. (1962) p. 2. As this case so well demonstrates, to apply the percentage formula to sales of land would impose an unjust burden on the litigants, thus rendering the federal courts an economically unacceptable forum for foreclosure proceedings.¹⁶ We' conclude that Congress did not intend that result.¹⁷

Reversed and remanded for a determination of Marshal’s fees consistent with this opinion.

1 . The writ also commanded the Marshal to make distribution of the proceeds of the sale and to perform all things “as directed in said judgment and decree”.

2 . The return recited the sale to Wolfsen for $5,050,000, “less than the aggregate amount owing under the two judgments” held by Wolfsen, and providing that the amount bid be entered of record in satisfaction of the judgments, first deducting the fee or commission to be paid the Marshal, as finally determined by the court, this amount to be paid by Wolfsen.

3 . The remaining costs, totaling $890.07, have been paid and are not in dispute. These included publication charges, mileage, and “Execution $3.00, Notice $3.00, and Marshal’s Deed $3.00”.

4 . The Oregon statute prescribing sheriff’s fees in effect when the Marshal’s sale was conducted, O.R.S. 21.410, reads in pertinent part:

“The sheriff . . . shall, in all civil suits, actions and proceedings, collect in advance the following fees:

(10) For serving or collecting an execution or decree other than for the sale of land, one percent on the amount realized as shown by the sheriff’s return.

(11) For selling land on execution or decree, $10.

(12) For making a conveyance of real property, sold on any process, to be paid by or for the grantee, $5.

(14) For making a certificate of sale of real property, $2.

5 . Prior to the sale appellants had moved the court for an order fixing the Marshal’s fee. The court denied the motion subject to the right of the parties to object subsequent to the sale to any fee or commission claimed by the marshal.

6 . These commissions are turned into the Federal Treasury. See 31 U.S.C. § 725v(b), and 28 U.S.C. § 572(a).

7 . The report concludes:

“The Committee on the Judiciary is aware of the need to avoid raising the cost of litigation in the Federal Courts to a prohibitive level. However, the committee is of the view that it would not unduly burden private litigants to require them to bear a greater share of the cost of their litigation. Accordingly, this bill would moderately increase the fees charged to private litigants for the services of U. S. marshals. It is estimated that the legislation will result in an increase in income to the Federal Government of about $150,000 a year.” H.R.No. 1724, 87th Cong.2d Sess. (1962) p. 2.

8 . The Senate Report reads in part: “Section 1921 . . . specifies the fees to be charged by U. S. marshals for the service of various types of process on behalf of private litigants”. S.R.No.1785, 1962 U.S.Code Cong. & Admin.News, p. 2240. Neither the Act itself nor the legislative history makes any reference to the meaning of “seizing or levying”.

9 . In Hill, the court apparently did not consider the effect of Rule 69(a). The property sold was located in Kansas. As indicated infra, Kansas like Oregon would not require a levy or seizure in a foreclosure sale of real property. Norton v. Reardon, 67 Kan. 302, 72 P. 861, 863 (1903).

10 . The distinction has also been recognized in Oregon in prescribing sheriffs fees. A commission is allowed “for serving or collecting an execution or decree other than for the sale of land”. A fee of $10.00 is prescribed “for selling land on execution or decree”. (See note 4).

11 . In a different context the distinction between judicial and execution sales was recognized by the Supreme Court in Yazoo & M. V. R. Co. v. Clarksdale, 257 U.S. 10, 19, 42 S.Ct. 27, 66 L.Ed. 104 (1921).

12 . Counsel have not cited, nor have we found, any case, other than Hill, holding that a levy or seizure is required to give effect to a judgment foreclosing a mortgage on real estate.

13 . This would be true also with respect to the enforcement of a judgment within a state if the court did not have control of any specific property with which to satisfy the judgment.

14 . It does not appear from the legislative history that the meaning of the terms “levy” and “seizure” or the effect of the amendment on the foreclosure of mortgages on real property were expressly considered by Congress. The estimate of a total increase in income of about $150,000 a year (see note 7) is hardly consistent with an intent to impose the per- ^ centage formula on foreclosure sales of real property.

15 . As noted supra, the action could have been brought in státe court. While the plaintiff had a choice of forum, the defendants did not and are confronted with a judgment against them over $75,000 in excess of what it would have been had the action been filed in state court.

16 . Had the plaintiffs anticipated the assessment of a $75,000 fee for the sale of the property, the action would no doubt have been filed in state court. That option of course would not be available to the other litigants in an action in which the United States is a party and either files in or removes to federal court.

17 . This conclusion is supported by the fact, as indicated, supra, that the terms “seizure” and “levy” have a specific meaning founded in the common law. Historically, a mortgage foreclosure sale did not involve either a “seizure” or a “levy”. In the absence of express language to the contrary, we are unwilling to hold that Congress intended to accord those terms a definition broad enough to cover mortgage foreclosure sales, where no levy or seizure is required. Having reached this conclusion, we need not consider the other issues raised by the appellants.