
    279 F. 321
    WOOD v. NOYES. WOOD et al. v. NOYES.
    No. 3636.
    Circuit Court of Appeals, Ninth Circuit.
    Feb. 6, 1922.
    Rehearing Denied May 15, 1922.
    
      J. J. Lermen, W. H. Metson,- G. K. Burgren, R. G. Hudson, and John L. McGinn, all of San Francisco, Cal., A. R. Heilig, of Fairbanks, Alaska, and Robt. W. Jennings, of Sausalito, Cal., for appellants.
    John 'E. Alexander, of San Francisco, Cal., for appellee.
    Before GILBERT, ROSS, and HUNT, Circuit Judges.
   HUNT, Circuit Judge

(after stating the facts as above).

The assignments of error first question the jurisdiction of the District Court of Alaska in the supplementary 'proceedings. Section 1127, Compiled Laws of Alaska, provides that after the issuing of the execution, and upon proof by “affidavit of the plaintiff, * * * or otherwise, to the satisfaction of the court or judge thereof,” that the judgment debtor has property liable to execution which he refuses to apply toward the judgment, the court may require the debtor to appear and answer under oath at a time and place specified in the order. Section 1128 provides that on appearance of the debtor he may be examined on oath by either party, and if it appear that he has any property liable to execution, the court or judge shall make an “order requiring the * * * debtor to apply the same in satisfaction of the judgment, or that such property be levied on by execution,” or both, as provided, as may seem most likely to effect the object of the proceeding.

It is argued that the affidavit of Noyes in the proceeding against McGinn did not contain averments concerning the issuance of an execution, or that the judgment debtor had property liable to execution, or that he refused to apply his property toward the satisfaction of the judgment, and that the affidavit against Wood contained no averment that execution had been issued against his property. But section 1127 does not make it essential that the affidavit should state that execution has been issued. That execution has been issued may be established by affidavit or otherwise, to the satisfaction of the court. Nor does the statute require that the affidavit should state that the judgment debtor has property which he refuses to apply in satisfaction of the judgment against him. That fact, also, may be shown to the court by other competent proof. In Bridges v. Koppelman, 63 Misc. 27, 117 N.Y.S. 306, the court considered a statute where supplementary proceedings could be had upon proof of the facts “by affidavit or other competent written evidence,” and held that an affidavit was not essential as a predicate for the special proceedings, and that an order could be granted upon proof of the facts by affidavit or other competent written evidence.

In the present matter the record informed the court that execution was issued August 1, 1918, was received by the marshal and docketed, and that the marshal made a return on August 1, 1918. Collins v. Angell, 72 Cal. 513, 14 P. 135. That the judgment debtors had property, consisting of stock in the First National Bank of Fairbanks, does appear, however, in the affidavits, and it is specially averred that Wood has “property liable to execution which he refuses to apply, and is now endeavoring not to apply, to the satisfaction of the judgment herein.” No test of the sufficiency of the affidavit was made by Wood, and we hold it was sufficient to give prima facie jurisdiction. State v. Downing, 40 Or. 309, 58 P. 863, 66 P. 917; Collins v. Angell, supra; Union Bank v. Sargeant, 53 Barb.(N.Y.) 422.

The affidavit against McGinn was made under section 1131 of the Alaska Compiled Laws. The affidavit set forth admission by him and Wood of the ownership in 1916 of 230 shares of stock in the First National Bank of Fairbanks, and- belief by the affiant that McGinn and Wood owned certain shares in the bank, but that the cashier had failed to furnish to the marshal a proper certificate as provided by law; that the certificate futnished was unsatisfactory, and that it' could not be determined from the certificate what the true interest of McGinn and Wood was; and 'that 'an order should be made to require the bank’s officer to appear and give information. Section 1131 provides that, when the- marshal with an execution shall apply to any person mentioned in subdivision 3 of section 972, for the purpose of levying .upon property therein mentioned, the person shall give to the marshal a certificate as prescribed by the statute. If such person or officer refuse to do so, “or if the certificate be unsatisfactory to the plaintiff in the writ,” he may have the order prescribed in section 974 against such person or officers, and thereafter proceedings upon such order shall be conducted as prescribed by section 975 to 993, inclusive. Subdivision 3 of section 972, Alaska Compiled Laws, provides that certain personal property shall be attached by leaving a certified copy of the writ and notice with the person having possession of the same, or, if it be a debt, then with the debtor, or, if it be rights or shares of stock, then with the person or officer of the association as the Code may authorize. Section 975 provides that, if the certificate is unsatisfactory to the plaintiff, the person may be required to appear in court and be examined, and section 992 provides that witnesses, including the defendant and garnishee, may also be required to testify, and section 993 authorizes the issuance of a restraining order. No objection was interposed by Wood and the hearing was properly proceeded with.

It is said that the orders in personam terminated the supplementary proceedings. After those orders were signed on August 2, 1918, and payments were made thereunder, there remained two matters for disposition: How the money collected from the judgment debtors should be applied, and the application for the appointment of a receiver for the property of the judgment debtor Wood. Separate motions, filed in February and March, respectively, 1920, were made with respect to these matters. The obvious duty of the court was to see that the moneys collected were properly applied, and section 1585, Alaska Statutes, concerning receivers, guided the court in the receivership matter. • Compliance had with the orders in personam did not satisfy the judgment against Wood and McGinn, and the court went no farther than to direct the disposition of the property which, up to the time of the orders, had been discovered and reported upon. The further hearing had was as to Wood’s ownership of stock, concerning which the cashier of the bank was long previously directed to prepare a statement. It is not necessary to go into detail, but the findings of the court in the matter are well sustained; the only reasonable inference from the testimony being that, when the testimony closed on August 2d, the supplementary proceedings were incomplete, and that it was then contemplated that they would be resumed at a later time. As far as the order in personam directed the payment of a specific amount of money, it may have been in effect final; but it was by no means final as to any other money or property belonging to Wood, which might have been disclosed by the further examination of the cashier of the bank and of the statement which he was directed to prepare.

Appellants argue that they were ignorant of the contents of the orders in personam, and that there was an agreement between the litigants to which the judge was also a party, whereby there should be a certain application of the payments of the money paid over. The court’s findings are in direct conflict with such contentions, and we find that the evidence is in accord with the lower court’s conclusions. There was anxiety to have the orders of the court held back, in order to prevent a run on the bank in which Wood and McGinn were very large stockholders, and we gather from all the evidence that the moneys were paid involuntarily, solely in compliance with the orders of the court. That the moneys paid were inadequate to meet the judgments on file is indisputable. Payments having been involuntary, McGinn cannot claim credit for the $37,500 paid by Wood, and, by thereto adding what Wood paid, plead payment of the judgments against him, when the fact is that Wood still owes approximately $240,000, and Mc-Ginn approximately $37,000.

It is said, however, that the court was in error in the application of the payments. It appears that on May 3, 1919, the receiver moved the court to have the moneys which had been placed in the registry of the court applied in a particular way. Wood and McGinn made separate answers or objections. Wood set up that the only payment made by reason of the judgments entered against him was $37,000 paid August 8, 1918, by and on behalf of Henry Riley, one of the sureties of Wood and McGinn upon appeal to the Circuit Court of Appeals from the judgment against Wood, McGinn, and others in the action of Noyes v. Wood and others, the judgment being for $33,720, and that the balance paid in behalf of the surety was on account of certain items in the judgment referred to, recovered against McGinn and others, not including Wood, upon appeal, wherein Riley and others were sureties.

Wood also set up that to the sum of $30,000 paid by the sureties McGinn added $7,950 to make up the $45,-000 paid August 8, 1918, together with sums included in judgments against McGinn and others. -It was also alleged that, when the $45,000 was paid, it was specifically appropriated by and on behalf of the sureties and McGinn, as stated, and was accepted accordingly by the marshal. Wood then pleaded that in 1917 and 1918, desiring to protect his sureties against loss, he delivered to the Bank of California money and securities, in amount $17,000, in trust for the benefit of Riley as surety upon the appeal bond; that subsequently Riley, as surety, paid $20,000 into the bank to be applied on account of the judgments for the payment of which he had become liable by the affirmance on appeal of the judgments of June 15, 1914; and that on August 5, 1918, the cashier of the bank, in behalf of the surety, paid to the bank at Fairbanks, Alaska, $37,000 to pay the judgments entered June 15, 1914, against Wood and Mc-Ginn.

McGinn’s objections to the application of the payments were that he paid $7,955 on August 8, 1918, included in the $45,000 paid, and $5,000 on April 9, 1919, and that $675 of that sum was appropriated by McGinn to judgments against him in the case just above referred to, and the balance, $7,280, was appropriated by him in part payment of the judgment of $16,591 against him and others, entered in the above referred to case on August 1, 1918, and that the $5,000 payment on April 9, 1919, was specifically paid on account of the judgment of $16,591, rendered against him and others on August 1, 1918.

The court denied the motion of the receiver for application of payments, but made the order “without prejudice to future applications,” and appellants say that the order or judgment denying the motion became res judicata. But the court was not making final orders with respect to the whole proceeding. The application first made only affected $45,000, paid under protest; the second application involved' $55,000, and the denial of the motion without prejudice had the effect of not. foreclosing the right of the receiver to apply for further orders. It is quite evident, too, that at the last hearing defendants regarded the matter as open for investigation, for they then raised no point that the former order was res judicata, and limited their contest solely to the manner of the application of the moneys, and they should not now be heard to contravene the usual effect of the words “without prejudice,” which would prevent them from availing themselves of the defense of res judicata in the subsequent proceeding. Beach on Eq.Prac. § 643, 644; Comegys v. Hendricks, 55 Or. 533, 106 Pac. 1016.

In considering the judgments and the application of moneys, these facts are material: The judgments against Wood amounted to $274,000. Only one was secured, that for. $33,720 against Wood, McGinn, and certain others, jointly and severally. The judgments against McGinn which were secured were, two for $3,000 and $1,000, respectively, running against McGinn and others jointly and severally; unsecured judgments for $16,591 ran against Mc-Ginn and others, jointly and severally; also, judgment for $16,500 and over ran against Wood, McGinn, and others jointly and severally.- The receiver, in his last showing before the court, set forth all these judgments, and averred and proved to the satisfaction of the court that it.was for the best interests of the estate that the moneys collected should be applied on judgments against certain other persons jointly and severally liable with Wood and McGinn, for the reason that one of such persons, Jesson, was out of the jurisdiction and was execution proof, and that two others liable were dead and left no estates. Obviously judgments which could not be collected from the co-judgment debtors of Wood and McGinn, and which were not secured, were in a precarious condition, and it was for the best interests of the estate to collect, if it were possible to do so. The court took this view, and made findings and judgment accordingly.

Authorities controlling the right of the debtor to make application of payments voluntarily made are not relevant, for, as already said, the payments in the case before us were involuntary. The defendants therefore lost the right to direct the applications of the payments, and the court _ had the authority to make appropriation. United States v. Kirkpatrick et al., 9 Wheat. 720, 6 L.Ed. 199; 30 Cyc. 1228; Wilson v. Allen, 11 Or. 154, 2 P. 91; Smith v. Moore, 112 Iowa, 60, 83 N.W. 813; Backhouse v. Patton, 5 Pet. 160, 8 L.Ed. 82.

Further point pressed is that, of the money paid by Wood, $37,500 was advanced by a surety. The substance of the evidence in respect to this is that $37,500 belonged to Wood; that $17,500 was his own money in bank in San Francisco, and was part of $23,000 which he took out of the jurisdiction of the Alaska court; and that the balance was money borrowed from a bank in San Francisco on a loan secured by 190 shares of stock in the bank in Alaska. Riley’s relation to the transaction was as follows: Wood borrowed $20,000; McGinn made a note for $20,000 in favor of Riley, and Wood indorsed the note; Wood’s stock and the note were put in the bank in San Francisco as security for the loan of $20,000 to Wood. In 1919 the dividends on the bank stock amounted to $9,500, which was paid to bank, and a credit for $6,758 on the note was given. Riley did not advance his own money. The Bank of California held the note with security by way of pledge of Wood’s 190 shares. Possible liability of Riley would not be fixed until after the bank disposed of the pledged stock, and even then McGinn might be liable on the obligation as maker.

We fail to see how Wood can contend that the money obtained on the note was a payment by Riley, or on his behalf, upon any of the judgments against Wood. If Riley desires to raise any question, nothing in these proceedings will estop him; but the record affords no ground for excluding the case from the general rule that, where a creditor holds two obligations, one better secured than the other, and has collateral security for both alike, in the absence of an agreement he has the right to have the collateral applied upon the obligation which is the more precarious by reason of being tire least secured; and if it be a fact that, by the terms of a pledge to secure the obligations, the property pledged as security has been intended for the protection of the surety on one of the obligations as well as to secure the creditor, the right of the creditor is not affected, for he may make the application of the proceeds of the pledge apply toward the debt least secured, even to the detriment of the sureties on the other obligation. California National Bank v. Ginty, 108 Cal. 148, 41 P. 38; Noble v. Murphy, 91 Mich. 653, 52 N.W. 148, 30 Am. St.Rep. 507; Wilson v. Allen, supra.

It is insisted that the order appointing a receiver of the property of Wood was erroneous, but, as the application stated ample ground for the exercise of jurisdiction, the court properly treated the proceeding as incidental to those supplementary to execution. Section 1585, Alaska Laws; Matter of Crane, 81 Hun, 86, 30 N.Y.S. 616. Any transfer made to the receiver was merely of the interest of Wood in the properties described in the findings, and which would not be reached by execution, and which was not exempt from execution. Indeed, the order directing the transfer specifically directs that it shall not cover any property subject to execution.

Close examination of the entire record satisfies us that the court was right in its conclusions, and that its judgment should be affirmed.  