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Knapp v. McFarland

decided: May 1, 1972.


Hays, Mansfield and Mulligan, Circuit Judges.

Author: Mansfield

MANSFIELD, Circuit Judge:

This appeal deals with one more chapter in the efforts of Elizabeth Knapp, assignee of the law firm of Tanner & Friedman, to enforce a judgment of the United States District Court for the Southern District of New York against McFarland awarding her legal fees in the sum of $154,999.54 for services rendered by Tanner & Friedman to McFarland. Upon appeal that judgment was recently affirmed in part, reversed in part and remanded for further proceedings. See Knapp v. McFarland, 457 F.2d 881 (March 28, 1972). The present controversy arises from the method Knapp chose to obtain execution on the judgment. More specifically, McFarland appeals from the district court's order denying his motion to vacate the notice of execution and the Sheriff appeals from its order denying poundage on the ground that the execution and levy never became effective. The first of these two orders is affirmed and the second is reversed.

Discussion of the issues necessitates a brief review of Knapp's efforts to enforce the federal judgment. That judgment was entered on July 14, 1971, and on July 19, 1971 costs in the sum of $2,308.52 were taxed against McFarland. On July 29, 1971 Knapp's counsel (Tanner & Friedman) filed a transcript of the judgment in the office of the Clerk of New York County and on the same day issued an execution under the heading of the Supreme Court of the State of New York, New York County, to the Sheriff of the City of New York, directing him to levy upon certain treasury bills held by the Chemical Bank in a custody account for the Security National Bank of Washington, D.C. ("Security").

At the time of the levy Security was escrow agent for the proceeds of the sale of the Arlington Towers Apartments in Arlington, Virginia, in which McFarland and one Edward P. Johnson had interests that were then the subject of litigation between them in the Virginia state courts. Security, in turn, had placed some of the proceeds of the sale in the treasury bills in a custody account held for its account by the Chemical Bank, upon which the levy was sought. On July 27 the Sheriff served the writ of execution on the Chemical Bank. However, he never collected anything from the bank toward satisfaction of the judgment. Simultaneously Tanner & Friedman also obtained a restraining notice from the United States District Court which it caused to be served on the Chemical Bank.

By memorandum opinion dated September 17, 1971 Judge Levet denied McFarland's motion to vacate the Sheriff's levy, holding that pursuant to 28 U.S.C. § 1962 and New York Civil Practice Law & Rules ("CPLR") § 5018 (b) the filing of the federal judgment with the New York County Clerk gave it the same effect as a judgment of the New York Supreme Court, including the right to have execution issued and a levy made as provided by New York law. See CPLR § 5230(b). Since McFarland had in the meantime filed a supersedeas bond in the district court, Judge Levet on September 20 released the restraining order that had been served on the Chemical Bank.

Two days later, after the Sheriff had submitted to the jurisdiction of the district court, Judge Levet released the execution except to the extent of $11,000 (to cover the Sheriff's claim to poundage, not yet determined). In an opinion dated October 14, 1971, he decided that the Sheriff was not entitled to poundage and that his levy was ineffective because he had not collected or attempted to collect the funds in the Chemical Bank in which McFarland had an interest. On October 26 Judge Levet accordingly ordered the execution on the Chemical Bank vacated in its entirety. Although we agree with the district court that the method of execution engaged in here was proper, we disagree with its conclusion that the Sheriff's failure to collect anything under the levy bars him from recovery of poundage.

Turning first to the question of whether the method of execution employed here was valid, the controlling federal statute, which in our view authorizes the method used, is 28 U.S.C. § 1962, which provides:

"Every judgment rendered by a district court within a State shall be a lien on the property located in such State in the same manner, to the same extent and under the same conditions as a judgment of a court of general jurisdiction in such State, and shall cease to be a lien in the same manner and time. Whenever the law of any State requires a judgment of a State court to be registered, recorded, docketed or indexed, or any other act to be done, in a particular manner, or in a certain office or county or parish before such lien attaches, such requirements shall apply only if the law of such State authorizes the judgment of a court of the United States to be registered, recorded, docketed, indexed or otherwise conformed to rules and requirements relating to judgments of the courts of the State." (Emphasis supplied)

It will be noted that the statute, by speaking of "property" without limitation, encompasses both real and personal property of the judgment debtor.

In exercise of the option thus created by 28 U.S.C. § 1962 the State of New York enacted what is now CPLR § 5018(b), which provides that:

"A transcript of the judgment of a court of the United States rendered or filed within the state may be filed in the office of the clerk of any county and upon such filing the clerk shall docket the judgment in the same manner and with the same effect as a judgment entered in the supreme court within the county." (Emphasis supplied)

Under this statute a federal judgment, upon being docketed with a clerk of a county of the state, becomes a judgment of a Supreme Court of the State of New York for purposes of enforcement in that county. In this respect § 5018(b) gives to a federal judgment docketed in the county clerk's office an effect similar to that given by CPLR § 5018(a) to the judgment of a state court rendered in another county which is so docketed. See generally Brownell v. Parsons, 220 N.Y. 483, 487, 116 N.E. 366 (1917); Dieffenbach v. Roch, 112 N.Y. 621, 626, 20 N.E. 560 (1889); Quackenbush v. Johnston, 249 App.Div. 452, 453-454, 293 N.Y.S. 123, 125 (3d Dept. 1937).

Without more the docketing of a judgment, state or federal, in the office of the county clerk creates a lien upon the debtor's realty in that county. CPLR § 5203. E. g., United States v. Hodes, 355 F.2d 746, 748 (2d Cir.), cert. granted, 384 U.S. 968, 86 S. Ct. 1858, 16 L. Ed. 2d 680 (1966), cert. dismissed, 386 U.S. 901, 87 S. Ct. 784, 17 L. Ed. 2d 779 (1967); Hulbert v. Hulbert, 216 N.Y. 430, 438, 440, 111 N.E. 70 (1916). To enforce the judgment as a lien against the debtor's personalty, however, the judgment creditor must, after docketing of the judgment, deliver a writ of execution to the sheriff for levy, CPLR § 5202(a); 9 Carmody-Wait, ...

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