Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-01226/USCOURTS-ca10-90-01226-0/pdf.json

Parties Involved:
Heritage Financial Corporation
Not Party
Household Bank fsb
Appellant
Lower Downtown Associates
Not Party
Resolution Trust Corporation
Appellee
Richard H. Rossmiller
Not Party

Document Text:

.. FILED 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

Uniced Scace Coun of Appeals Tenth Circuit 

JUL 241991 

RESOLUTION TRUST CORPORATION, as ) 

Receiver for Southwest Savings ) 

Association, ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) 

) 

HERITAGE FINANCIAL CORPORATION, a ) 

Colorado corporation; RICHARD H. ) 

ROSSMILLER; LOWER DOWNTOWN ASSOCIATES, ) 

a Colorado partnership, ) 

) 

Defendants, ) 

) 

) 

HOUSEHOLD BANK FSB, formerly BRIGHTON ) 

FEDERAL SAVINGS AND LOAN ASSOCIATION, ) 

) 

Post-Judgment- ) 

Claimant-Appellant. ) 

) 

ORDER AND JUDGMENT* 

&OBERT L HOECKER 

Clerk 

No. 90-1226 

(D.C. No. 85-C-807) 

(D. Colo.) 

Before LOGAN, MOORE, and BALDOCK, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppal. 10th Cir. R. 

36.3. 

Appellate Case: 90-1226 Document: 010110129468 Date Filed: 07/24/1991 Page: 1 
4 

• 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. The case is therefore ordered submitted without oral argument. 

Household Bank appeals an order by the district court affirming the decisions of two magistrate judges awarding certain funds 

of a mutual judgment debtor, Richard H. Rossmiller, to Brazosbanc 

Savings Association of Texas. 1 At issue on appeal is whether the 

funds in question were in custodia legis2 when Household Bank attempted to execute on them and, if so, whether any of the attempted executions created a valid lien on the funds. 

In March 1986, Brazosbanc obtained a money judgment against 

Rossmiller in the federal district court in Denver, Colorado. 

Brazosbanc then sought discovery of Rossmiller's assets pursuant 

to Fed. R. Civ. P. 69. In November 1986, while Brazosbanc was 

still in discovery proceedings, Household Bank obtained a money 

judgment against Rossmiller in Colorado state court. 

After a hearing on Brazosbanc's discovery requests in January 

1987, Magistrate Judge Clifton entered an order directing 

Rossmiller to "pay to the order of the Clerk of this Court for 

deposit in the Court registry in interest-bearing accounts any and 

all tax refunds or other monies due him or to become due him from 

the United States of America through the Internal Revenue Service 

1 The original plaintiff in this action, Brazosbanc Savings 

Association of Texas, was succeeded by Southwest Savings Association, which is now under the receivership of the Resolution 

Trust Corporation. 

2 Custodia legis means "[i]n the custody of the law." Black's 

Law Dictionary 348 (6th ed. 1990). 

2 

Appellate Case: 90-1226 Document: 010110129468 Date Filed: 07/24/1991 Page: 2 
for tax years 1985 and 1986." IR. tab 4 at 1. The order also 

applied to "any State tax refunds, Colorado or otherwise, for tax 

years 1985 and 1986." Id. at 2. The order required Rossmiller to 

make "prompt written disclosure" of any deposit to all counsel of 

record and to "any parties known to Mr. Rossmiller to have an 

interest in the monies so deposited," id. at 1-2, and directed him 

not to "take any action, directly or indirectly, to impair or 

dispose of any of his interests in Federal or State tax refunds 

for tax years 1985 and 1986," id. at 2. The district court approved this turn-over order nunc pro tune in January 1987. 

In October 1987, Rossmiller deposited with the court the 

first installment of his 1985 federal tax refund. The parties to 

the action then stipulated to the procedure that would be followed 

in filing claims to the funds. Four claimants filed claims, 

including Brazosbanc and Household Bank. 

Before the hearing on the claims, Household Bank twice attempted to execute on the funds held by the federal district 

court. In January 1988, Household Bank served a writ of garnishment on the clerk of the federal district court, and in March 

1988, it served a writ of execution on the sheriff of the City and 

County of Denver. Both writs were issued by the state district 

court pursuant to state law. See Colo. R. Civ. P. 103; 

Colo. Rev. Stat. SS 13-54.5-103 & 13-52-110 to -111. Household 

Bank then argued at the hearing that its execution on the funds 

pursuant to Colorado law created a lien that was superior to 

Brazosbanc's claim. 

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Thereafter, in June 1988, Magistrate Judge Clifton determined 

that the security interests asserted by the other two claimants to 

the refund were void under Colo. Rev. Stat. § 38-10~117 because 

they were made "with the intent to hinder, delay or defraud 

creditors Brazosbanc and Household Bank from collecting their 

judgments." I R. tab 11 at 4. She further concluded that 

Household Bank's attempts to execute on the funds did not create a 

lien because "[w]hen the funds were paid into the court they were 

not subject to execution." Id. As between Brazosbanc and 

Household Bank, Magistrate Judge Clifton determined that 

Brazosbanc was entitled to the funds on equitable grounds: 

Brazosbanc obtained its judgment before Household Bank; the funds 

were discovered and brought into the court's hands solely through 

Brazosbanc's efforts; and both the turn-over order and the 

stipulation as to procedure contemplated that the funds would go 

to Brazosbanc in partial satisfaction of its judgment if no claimant had a superior claim. 

On October 26, 1988, Rossmiller's attorney mailed a check to 

the clerk of the court from the U.S. Treasury Department 

representing a portion of Rossmiller's 1986 federal tax refund. 

The clerk received the check on October 28th. In the interim, 

Household Bank served writs of garnishment on Rossmiller's attorney (located in Arapahoe County) and the clerk of the court. 

Household Bank also served writs of execution on the sheriffs of 

Denver and Arapahoe Counties. Household Bank then filed its claim 

to the funds, asserting a prior lien resulting from the writs. 

The only other claimant to the funds was Brazosbapc. 

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Without holding a hearing, Magistrate Judge Harvey entered an 

order on December 9, 1988, awarding the funds to Brazosbanc, basing his decision on the reasoning of Magistrate Judge Clifton's 

June 1988 order, and Household Bank attempted to appeal Magistrate 

Judge Harvey's order to this court. We dismissed this appeal, 

reciting in our order that because the parties did not formally 

agree to the jurisdiction of the magistrate judge under 28 u.s.c. 

§ 636(c), and the district court did not approve the magistrate 

judge's order after it was entered under 28 u.s.c. S 636(b), the 

appeal was defective for the same reasons set forth in Colorado 

Bldg. & Constr. Trades Council v. B.B. Andersen Constr. Co., 879 

F.2d 809 (10th Cir. 1989). I. R. tab 18. 

In light of our order; Household Bank filed objections to the 

two magistrate judges' orders with the district court. The 

district court approved the two distribution orders, concluding 

that the magistrate judges properly applied Colorado law in 

determining that under the doctrine of custodia legis, Household 

Bank's actions were not effective to create a superior lien on the 

funds. This appeal followed. 

On appeal, Household Bank contends that the magistrate judges 

and the district court improperly applied the doctrine of custodia 

legis to invalidate Household Bank's attempts to execute on the 

funds. It argues that funds held in custodia legis are exempt 

only from levy and garnishment, not execution. Household Bank 

reasons that a writ of execution, unlike a writ of garnishment or 

5 

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' ./ 

levy, attaches only a lien to the property and does not require 

the court to turn over the property. Therefore, a writ of execution does not interfere with the custodial court's jurisdiction 

over the funds. Household Bank also argues that even if the decision to give the 1985 tax refund to Brazosbanc were correct, the 

same rationale should not have been used in determining priorities 

to the 1986 tax refund. Household Bank contends that by serving 

writs of garnishment and execution on the appropriate parties 

before the clerk of the court actually received the 1986 payment, 

the funds arrived at the court subject to Household Bank's lien. 

We disagree. 

The procedure to enforce a money judgment obtained in federal 

court "shall be in accordance with the practice and procedure of 

the state in which the district court is held. It 

Fed. R. Civ. P. 69(a). Colorado "has consistently adhered to the 

well-established common law doctrine that property which has 

passed into the custody of a court cannot be interfered with by 

process issued by another judge in the conduct of other legal 

proceedings." Boatright v. Spalding, 439 P.2d 362, 363 (Colo. 

1968). This doctrine of custodia legis applies to property either 

actually or constructively in the custody of the court. Gibbons 

v. Ellis, 165 P. 783, 785 (Colo. 1917). 

Under Colorado law, the turn-over order entered in January 

1987, was sufficient to put Rossmiller's refunds in custodia 

legis. See Maley v. Heichemer, 256 P. 4, 6, 8 (Colo. 1927) (court 

order in criminal action directing warehouse to prevent removal of 

500 cases of tomatoes put goods in custodia legis); Gibbons v. 

6 

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, 

Ellis, 165 P. at 786 (mere commencement of suit to determine 

rights to stock certificates put certificates "in the constructive 

possession of the law"). 

Once the tax refunds were in custodia legis, Household Bank 

could not use the process of any other court to "'assert any claim 

to, or secure any right in or lien upon, such funds'" without the 

federal court's permission. Gibbons v. Ellis, 165 P. at 785 

(quoting Corbitt v. Farmers' Bank of Del., 114 F. 602, 603 (4th 

Cir. 1902)). Therefore, from the moment the federal court issued 

the turn-over order, Household Bank could neither garnish the 

funds nor execute on them, even if their only effect would be to 

attach a lien to the funds. 3 Household Bank's attempts to 

establish a priority over Brazosbanc were in vain. 

In deciding which of the two judgment creditors were entitled 

to the funds, Magistrate Judge Clifton properly determined that 

neither had a lien on the funds. She then applied equitable 

principles to determine which of the two otherwise equal claimants 

was entitled to the funds. Household Bank does not take issue 

with this approach and does not argue that the distributions were 

inequitable. Household Bank argues only that equitable principles 

should not be used to exalt a nonlienholder judgment creditor over 

3 We note that under Colorado law, a writ of execution 

contemplates more than the mere attachment of a lien; it 

contemplates that any property described in the writ and located 

in the county will be seized by the sheriff and delivered to the 

court for satisfaction of the judgment within ninety days of 

delivery of the writ to the sheriff. See Colo. Rev. Stat. 

S 13-52-111; I. R. tab 13 (writs of execution in this case 

directed sheriffs of Denver and Arapahoe Counties to "satisfy the 

above judgment ... from the goods, chattels, lands and tenements 

of the above-named judgment debtor," and to "rend~r said moneys to 

this court to apply to the satisfaction of said judgment"). 

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t 

an alleged lienholder judgment creditor. Having concluded that 

Household Bank was not a lienholder, we affirm the order of the 

district court approving the distribution orders of the two 

magistrate judges. 

The judgment of the United States District Court for the 

District of Colorado is AFFIRMED. 

Entered for the Court 

James K. Logan 

Circuit Judge 

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