U.S. ex rel. Goldman v. Meredith

• Decision Date: 09 May 1979
• Docket Number: No. 78-1622,78-1622
• Citation: U.S. ex rel. Goldman v. Meredith, 596 F.2d 1353 (8th Cir. 1979)
• Parties: UNITED STATES ex rel. Sam GOLDMAN, Petitioner-Appellant, v. The Honorable James H. MEREDITH, Chief Judge, The Honorable John F. Nangle, Judge, W. H. Blumenthal, Secretary of the Treasury, Respondents. Appeal of MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1353

596 F.2d 1353

UNITED STATES ex rel. Sam GOLDMAN, Petitioner-Appellant, v.The Honorable James H. MEREDITH, Chief Judge, TheHonorable John F. Nangle, Judge, W. H. Blumenthal, Secretary of the Treasury, RespondentsAppeal of MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.

No. 78-1622.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 17, 1978.

Decided April 24, 1979.

Rehearing Denied May 9, 1979.

Stuart J. Radloff, Friedman & Fredericks, Clayton, Mo., argued and on brief, for petitioner-appellant.

Gerre S. Langton, Evans & Dixon, St. Louis, Mo. (argued), and Henry D. Mehghini, St. Louis, Mo., on brief, for Merrill Lynch, et al.

Joseph Moore, Asst. U. S. Atty., St. Louis, Mo. (argued), and Robert D. Kingsland, U. S. Atty., St. Louis, Mo., on brief, for Secretary of Treasury.

Before STEPHENSON and McMILLIAN, Circuit Judges, and ROBINSON, ^*Senior District Judge.

McMILLIAN, Circuit Judge.

This case concerns the validity of several orders entered by the district court¹ in supplementary post-judgment proceedings to enforce its judgment.It also raises a question that appears to be one of first impression, that is, whether book-entry Treasury bills are subject to garnishment proceedings.

In the underlying litigation appellee, Merrill Lynch, Pierce, Fenner & Smith, Inc.(hereinafter Merrill Lynch), sued appellant, Sam Goldman(hereinafter petitioner), to recover a deficiency of $119,145.00 in petitioner's commodities margin trading account.After a bench trial, judgment was entered in favor of Merrill Lynch for the amount of the deficiency plus interest and costs.²Petitioner filed a notice of appeal but did not post a supersedeas bond.Therefore, Merrill Lynch proceeded to execute upon petitioner's property to satisfy its judgment; however, the execution was returned unsatisfied.

Merrill Lynch then instituted supplementary post-judgment proceedings ³ which included the submission of written interrogatories and a judgment debtor examination.These proceedings disclosed that petitioner's property consisted of two apartment buildings in Clayton, Missouri, substantial savings and checking accounts at local banks, and some U.S. Treasury bills.Petitioner further revealed that he had disposed of most of this property ⁴ in January and February of 1978, before the trial, and had used the proceeds to purchase book-entry Treasury bills.Petitioner invested approximately $205,000 in book-entry Treasury bills.

In light of this information, Merrill Lynch attempted to register the judgment in the United States District Court for the District of Columbia, ⁵ pursuant to 28 U.S.C § 1963.⁶The clerk of the court refused to register the judgment because it was not "final by appeal."SeeAbegglen v. Burnham, 94 F.Supp. 484, 486(D.Utah1950)(holding a judgment of a district court does not become "final by appeal" within the meaning of the statute providing for registration of such judgments in another district until the case has been disposed of by appeal);Accord, Stanford v. Utley, 341 F.2d 265(8th Cir.1965);Lipton v. Schmertz, 68 F.R.D. 249(S.D.N.Y.1974).

Merrill Lynch next caused a writ of garnishment to be issued to the Federal Reserve Bank in St. Louis, Missouri.It was returned unsatisfied for the reason that the Federal Reserve Bank held neither petitioner's book-entry Treasury bills account nor any evidence of indebtedness belonging to petitioner.Confronted with the prospect that petitioner's assets could not be reached through garnishment proceedings, Merrill Lynch sought equitable relief in the district court on July 12, 1978, by filing an application for a temporary restraining order, a preliminary injunction and a mandatory injunction.On the same day, the district court issued its order to show cause and a temporary restraining order prohibiting petitioner from transferring or cashing out his interest in the book-entry Treasury bills to the extent of $131,655.22 (judgment plus interest and costs at that date).A preliminary hearing was set for July 21, 1978.

After the preliminary hearing at which the parties stipulated to most of the facts at issue, the district court entered its order on July 31, 1978, granting a preliminary injunction and further ordering petitioner to cash sufficient book-entry Treasury bills to satisfy the outstanding judgment.The latter part of the order was stayed pending disposition of the appeal.

Prior to the issuance of the preliminary and mandatory injunctions, Merrill Lynch had caused a writ of execution and summons to be issued to the Department of the Treasury(hereinafter the Treasury) on July 18, 1978.The answer of the Treasury disclosed that, as of the date of service, it held two book-entry Treasury bills in petitioner's account (total value of $170,000) and had marked the account so petitioner could not withdraw them without prior authorization.The answer further stated that because book-entry Treasury bills were not represented by a definitive security in the form of an engraved certificate, the bills would have to be transferred through the Federal Reserve Bank communication system into a book-entry account maintained by or through a member bank in the Federal Reserve System before they could be subject to execution and sale.

Thereafter, on August 18, 1978, the district court ordered the U.S. Marshal to seize petitioner's book-entry Treasury bills, to transfer them through the Federal Reserve Bank system, and to sell them in satisfaction of the judgment.On August 25, 1978, the district court further ordered the Treasury bills to be sold through a Federal Reserve Member bank, at the market price, and without prior public notice.

Three days later, on August 28, 1978, petitioner filed a petition for a writ of mandamus or alternatively for a writ of prohibition, challenging the validity of the district court orders and the recognition of such orders by the Treasury.Petitioner sought to have the orders set aside and to have the Treasury prohibited from transferring the book-entry Treasury bills without petitioner's consent.

On September 5, 1978, this court ordered the above orders of the district court stayed pending the appeal and hearing on the petition for mandamus.We further ordered petitioner not to cash, transfer, or in any way alter the status of his book-entry Treasury bills in the amount of $130,000.00 pending the final judgment of the court in this matter.

As a basis for relief petitioner argues that (1)the district court did not have jurisdiction to grant equitable relief, (2)the district court erred in granting the preliminary and permanent injunctions, and (3) the Treasury violated its own regulations by restrictively marking petitioner's book-entry Treasury bills.For the reasons discussed below, we are unable to agree with petitioner and therefore deny the petition for writ of mandamus or in the alternative for writ of prohibition.

First, petitioner argues that the district court exceeded its jurisdiction in granting Merrill Lynch injunctive relief.Petitioner argues that Merrill Lynch sought equitable relief in the form of a "creditor's bill" and that such relief is not available under Missouri law.We disagree.F.R.Civ.P. 69(a) provides in part:

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.

Thus, in the absence of a controlling federal statute, the district court has the same authority to aid judgment creditors in supplementary proceedings as that which is provided to state courts under local law.E. G., North Pacific Steamship Co. v. Pyramid Bulkcarriers, Inc., 515 F.2d 426(5th Cir.1975);Hamilton v. MacDonald, 503 F.2d 1138(9th Cir.1975);Nelson v. Maiden, 402 F.Supp. 1307(E.D.Tenn.1975);Douglass v. First National Realty Corp., 351 F.Supp. 1142(D.D.C.1972).

Our review of Missouri law persuades us that equitable relief in the form of a creditor's bill is an available creditor's remedy, under the appropriate circumstances.E. g., Buckley v. Maupin, 344 Mo. 193, 125 S.W.2d 820(1939);O'Connell v. Smith, 131 S.W.2d 730(Mo.Ct.App.1939);State ex rel. Busby v. Cowan, 232 Mo.App. 391, 107 S.W.2d 805(1937);Cf.Haase v. Chapman, 308 F.Supp. 399(W.D.Mo.1969)(appointment of receiver).In general, a creditor's bill is considered the equitable equivalent of garnishment or execution and comparable to proceedings supplementary to and in aid of execution.SeePierce v. United States, 255 U.S. 398, 401-02, 41 S.Ct. 365, 65 L.Ed. 697(1921);State ex rel. Busby v. Cowan, supra, 107 S.W.2d at 807.By the means of a creditor's bill, a judgment creditor seeks to satisfy his judgment from property of the judgment debtor which is not subject to execution.Such relief is thus appropriate only upon a showing by the judgment creditor that he has no adequate legal remedy.SeeO'Connell v. Smith, supra, 131 S.W.2d at 733.Missouri case law indicates that this type of equitable relief is within the general equitable jurisdiction of Missouri state courts and further that it is a remedy "as comprehensive in scope and purpose as the remedy provided by the statutory enactments in other states."Geist v. City of St. Louis, 156 Mo. 643, 57 S.W. 766, 767(1900).

We also find the cases cited by petitioner, First National Bank of Boston v. Santisteban, 285 F.2d 855(1st Cir.1961), andNelson v. Maiden, supra, to be distinguishable because in each case the local law did not provide for the type of relief sought in supplementary proceedings for the enforcement of judgments.As noted above, our...