Opinion ID: 726149
Heading Depth: 2
Heading Rank: 1

Heading: Effectiveness of Levy

Text: 8 Federal Rule of Civil Procedure 69(a) governs execution proceedings in federal courts. It provides that 9 [t]he 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. 10 We therefore begin our analysis with California law. 11 California enacted in 1982 a revised comprehensive scheme governing the enforcement of judgments, the Enforcement of Judgments Law (EJL), which is codified as Title 9 of California's Code of Civil Procedure. The law includes an entire division on the enforcement of money judgments. See Cal.Civ.Proc. §§ 695.010 et seq. The EJL makes all property of a judgment debtor subject to enforcement of the judgment and allows enforcement by levy against that property, including a debtor's deposit accounts. Cal.Civ.Proc. §§ 695.010, 699.710, 699.080(a)(5). The manner in which a judgment creditor can levy upon a deposit account is specifically set forth: [T]o levy upon a deposit account, the levying officer shall personally serve a copy of the writ of execution and a notice of levy on the financial institution with which the deposit account is maintained. Cal.Civ.Proc. § 700.140(a). The general provisions of the EJL further provide that if a writ, notice, order, or other paper is required to be personally served under this title and [i]f the service is on ... a financial institution, then service shall be made at the office or branch that has actual possession of the property levied upon or at which a deposit account levied upon is carried. Cal.Civ.Proc. § 684.110(a),(c). Because there is no dispute that the deposit accounts of the Estate are not carried at the Banks' Los Angeles offices, under California law the personal service of the writs of execution and notices of levy at those locations was ineffective to levy on the Estate's accounts. 3 12 Hilao is incorrect in its assertion that provisions of the International Banking Act of 1978, 12 U.S.C. §§ 3101 et seq., constitute an applicable federal statute that under Rule 69(a) preempts California execution law. Under 12 C.F.R. § 28.11, promulgated under the Act, [a] foreign bank operating at any Federal branch or agency is subject to service of process at the location of each such Federal branch or agency. 4 The offices at which the notices of levy were served, however, are not Federal branches or agencies. The International Banking Act provides that a foreign bank ... may ... establish one or more Federal branches or agencies in any State in which ... it is not operating a branch or agency pursuant to State law, 12 U.S.C. § 3102(a)(1), and California's Financial Code provides that [n]o foreign (other nation) bank which maintains a federal agency or federal branch in this state shall concurrently be licensed to maintain an agency or branch office in this state, Cal.Fin.Code § 1707. Thus, federal and state branches and agencies of foreign banks are mutually exclusive under both federal and state law. Credit Suisse's Los Angeles branch is licensed by California's State Banking Department as a wholesale branch, while Swiss Bank Corporation's Los Angeles office is licensed by the state as a representative office. Since the Banks both have state-licensed branches in California, 5 their California offices cannot be federal agencies or branches. Therefore, service of the notice of levy at the Los Angeles offices was not authorized by 12 C.F.R. § 28.11 in derogation of California execution law under Rule 69(a). 13 A more difficult question is whether or not Rule 4.1 of the Federal Rules of Civil Procedure preempts California execution law under Rule 69(a) as to service of a notice of levy. 6 Rule 4.1 provides that [p]rocess other than a summons ... or subpoena ... shall be served by a United States marshal, a deputy United States marshal, or a person specially appointed for that purpose and that [t]he process may be served anywhere within the territorial limits of the state in which the district court is located. 7 Hilao argues that it complied with these requirements and therefore service was proper and the levy effective. 14 Case law in at least one circuit appears to hold that a general rule of procedure such as Rule 4.1 does not apply in supplementary execution proceedings under Rule 69(a), even though the Federal Rules have the force of statute. 8 The reference in Rule 69(a) to applicable federal statutes appears to refer to federal statutes expressly governing execution, see Note of Advisory Committee on Rule 69(a), a category that would presumably comprehend any rule regulating execution, such as Rule 62(a), but not the rules of procedure or of evidence in gross. Resolution Trust Corp. v. Ruggiero, 994 F.2d 1221, 1226 (7th Cir.1993) (suggesting that because enforcement proceedings are meant to be swift, cheap, [and] informal a district court could proceed in any way that satisfied the requirements of due process). 15 The few other cases that have addressed the interaction of state and federal service requirements in execution proceedings under Rule 69 held that the provisions of the federal rules on service of process were applicable under Rule 69, but those decisions do not resolve the issue presented in this case. Those decisions uniformly applied the federal requirements but did so because the state rules asserted in those cases were general provisions governing service of process, not specific provisions concerning enforcement of judgments: 16 We are of the opinion that in supplementary proceedings the Federal Rules of Civil Procedure with respect to the method of service and to the person who may make the service control, rather than general provisions of state practice and procedure, prescribed by state statute, which do not deal specifically with practice and procedure in supplementary proceedings. 17 Rumsey v. George E. Failing Co., 333 F.2d 960, 962 (10th Cir.1964). See also Oklahoma Radio Associates v. Federal Deposit Insurance Corp., 969 F.2d 940, 942 (10th Cir.1992) (where Oklahoma law required personal service of motion for deficiency judgment but personal service was defined by reference to general Oklahoma procedural law, federal rules held to control service of motion); Mid-Continent Casualty Co. v. Everett, 340 F.2d 65, 68-69 (10th Cir.1965); United States v. St. Paul Mercury Insurance Co., 361 F.2d 838, 839 (5th Cir.1966) (We are of the opinion that [Fed.R.Civ.P.] 4(c) ... governs the service of writs of garnishment issued in a proceeding in a federal court, rather than Rule 1.3(c) [of the Florida Rules of Civil Procedure], which is not a rule peculiarly applicable to service of writs of garnishment.) (applying analogous language of Fed.R.Civ.P. 64), cert. denied, 385 U.S. 971, 87 S.Ct. 510, 17 L.Ed.2d 435 (1966); United States v. Pauly, 725 F.Supp. 923, 926-27 (W.D.Mich.1989) (Rule 69(a) does not require application of state statutes which deal generally with service of process; rather Rule 69(a) contemplates application of state statutes that deal specifically with enforcement of judgments.... Rule 4(c) and 28 U.S.C. § 566(c) govern service of writs of garnishment in this case because subchapter 2.100 of the Michigan Court Rules relates to service of process in general and does not apply specifically to supplementary proceedings.). 18 In this case, the California requirement that personal service of a notice of levy on a deposit account be made at the office or branch of the financial institution at which the account is actually carried is part of California's law specifically governing only the procedure for the enforcement of money judgments. The fact that the manner of service revolves around the location of property to be levied upon indicates clearly that the requirement only applies in proceedings to enforce a judgment. And while the general rule for personal service in proceedings to enforce money judgments, Cal.Civ.Proc. § 684.110(a), refers back to general California procedural law on service of a summons, the provision governing service on a financial institution in enforcement proceedings is set forth in its entirety in the Enforcement of Judgments Law, id. at § 684.110(c), and does not refer back to any other more general provision of the civil procedure code. 19 Thus, California's requirements for service of a notice of levy against a deposit account are not preempted by, but instead supplement, Rule 4.1. Rule 4.1 directs who shall make service--a U.S. marshal, deputy marshal, or special appointee--and where that officer can make such service--anywhere within the state in which the district court sits--but it does not specify the manner in which service shall be made (e.g., personally, by mail, etc.) or upon whom service shall be made. Under Rule 69(a), in post-judgment enforcement proceedings those latter requirements for service are provided by state law, as one prominent commentary on the Federal Rules explains: 20 Rule 4(c)(1) [now Rule 4.1] requires that a United States marshal, deputy marshal, or special appointee serve all process other than a subpoena or summons and complaint.... The proper manner of service under Rule 4(c)(1) is not immediately clear.... Other federal rules instruct how to serve process in certain situations ... Rule 69(a) states that the procedure for service '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.' Consequently, the manner of service on in-state defendants in such proceedings must be derived not from Rule 4 but from the applicable federal or state statute. 21 4A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure: Civil 2d § 1090 (1987) (emphasis added) (footnotes omitted). Therefore, Hilao's compliance with Rule 4.1 does not excuse its failure to comply with § 684.110(c) of California's Code of Civil Procedure. 22 Hilao also contends that the Banks cannot object to service of the notices of levy because the Banks entered general appearances in the court below. A general appearance, of course, subjects the party who appears to the personal jurisdiction of the court. In this case, however, the Banks have never challenged the court's personal jurisdiction over them or the effectiveness of service to invoke that jurisdiction. The Banks are challenging only the effectiveness of service in levying on the funds. 23 Because Hilao never effectively levied upon any Marcos accounts maintained by the Banks, if the district court had ruled on the motions before it, it should have granted the Banks' motions to vacate and quash the levies and denied Hilao's motion for judgment against the Banks for failure to comply with the levies. 24