8566. Claims by third persons; filing of claim; undertaking by plaintiff

(a) If tangible or intangible personal property levied on, whether or not it is in the actual possession of the levying officer, is claimed by a third person as his property by a written claim verified by his oath or that of his agent, setting out the reasonable value thereof, his title and right to the possession thereof, and delivered, together with a copy thereof, to the officer making the levy, the officer shall release the property and the levy unless the plaintiff, or the person in whose favor the writ runs, within five days after written demand by the officer, gives the officer an undertaking executed by at least two good and sufficient sureties, in a sum equal to double the value of the property levied upon.

(b) The undertaking shall be made in favor of and shall indemnify the third person against loss, liability, damages, costs and counsel fees, by reason of the levy or the seizing, taking, collecting, withholding, or sale of the property by the officer. Where the property levied upon is required by law to be registered or recorded in the name of the owner and it appears that at the time of the levy the defendant or judgment debtor was the registered or record owner of the property and the plaintiff, or the person in whose favor the writ runs, caused the levy to be made and maintained in good faith, and in reliance upon the registered or record ownership, there shall be no liability thereunder to the third person by the plaintiff, or the person in whose favor the writ runs, or his sureties, or the levying officer.

(c) Exceptions to the sufficiency of the sureties and their justification may be had and taken in the same manner as upon an undertaking on attachment. If they, or others in their place, fail to justify at the time and place appointed, the officer shall release the property and the levy. If exception is not taken within five days after notice of receipt of the undertaking, the third person is deemed to have waived objections to the sufficiency of the sureties.

(d) If objection is made to the undertaking, by the third person, on the ground that the amount thereof is not sufficient, or if for any reason it becomes necessary to ascertain the value of the property involved, the property involved may be appraised by one or more disinterested persons, appointed for that purpose by the court in which the action is pending or from which the writ issued, or by a judge thereof, or the court or judge may direct a hearing to determine the value of the property.

If, upon the appraisal or hearing, the court or judge finds that the undertaking given is not sufficient, an order shall be made fixing the amount of the undertaking, and within five days thereafter an undertaking in the amount so fixed may be given in the same form and manner and with the same effect as the original.

(e) The officer making the levy may demand and exact the undertaking provided for in this section notwithstanding any defect, informality or insufficiency of the verified claim delivered to him. The officer is not liable for damages to a third person for the levy upon, or the collection, taking, keeping or sale of the property if a claim is not delivered as provided in this section, nor, in any event, is the officer liable for the levy upon, or the holding, release or other disposition of the property in accordance with the provisions of this section and section 567 of this title.

(f) If the undertaking is given, the levy shall continue and the officer shall retain any property in his possession for the purposes of the levy under the writ; except that if an undertaking is given under section 568 of this title, the property and the levy shall be released.

§ 567. Same; hearing to determine title to property

(a) If a verified third party claim is delivered to the officer as provided by section 566 of this title upon levy of execution or attachment, whether an undertaking mentioned in that section is given or not, the plaintiff, or the person in whose favor the writ runs, the third party claimant, or any one or more joint third party claimants, is entitled to a hearing in the court in which the action is pending or from which the writ issued for the purpose of determining title to the property in question.

(b) The hearing shall be granted by the court upon petition therefor filed within 10 days after the delivery of the third party claim to the officer. The hearing shall be had within 20 days from the filing of the petition, unless continued as herein provided. Ten days' notice of the hearing shall be given to the officer, to the plaintiff or the person in whose favor the writ runs, and to the third party claimant, or their attorneys, specifying that the hearing is for the purpose of determining title to the property in question; but notice need not be given to the party filing the petition. The court may continue the hearing beyond the 20-day period, but good cause must be shown for any such continuance.

(c) The court may order the sale of perishable property held by the officer and direct the disposition of the proceeds of the sale. The court may, by order, stay execution sale, or forbid a transfer or other disposition of the property involved, until the proceedings for the determination of the title may be commenced and prosecuted to termination, and may require, as a condition of the order, such bond as the court may deem necessary. The orders may be modified or vacated by the judge granting them, or by the court in which the proceeding is pending, at any time prior to the termination of the proceedings, upon such terms as may be just.

(d) At the hearing had for the purpose of determining title, the third party claimant has the burden of proof. The third party claim delivered to the officer shall be filed by him with the court and shall constitute the pleading of the third party claimant, subject to the power of the court to permit an amendment in the interest of justice, and it is deemed controverted by the plaintiff or other person in whose favor the writ runs. This section does not deprive anybody of the right to a jury trial in any case where that right is given by law, but a jury trial may be waived in any such case in like manner as in the trial of an action. Findings are not required in any proceedings under this section.

(e) At the conclusion of the hearing the court shall give judgment determining the title to the property in question, which is conclusive as to the right of the plaintiff, or other person in whose favor the writ runs, to have the property levied upon, taken, or held, by the officer and to subject the property to payment or other satisfaction of his judgment. In the judgment the court may make all proper orders for the disposition of the property or the proceeds thereof. If the property or levy has been released by the officer for want of an undertaking, and final judgment is for the plaintiff or other person in whose favor the writ runs, the officer shall retake or levy upon the property on the writ if the writ is still in his hands, or if the writ has been returned, another writ may be issued on which the officer may take or otherwise levy upon the property.

(f) An appeal lies from any judgment determining title under this section, to be taken in the manner provided for appeals from the court in which such proceeding is had.

§ 568. Same; undertaking by claimant

(a) Where property levied upon under execution to satisfy a judgment for the payment of money is claimed, in whole or in part, by a third person, other than the judgment debtor, and an undertaking has been given by the judgment creditor as provided in section 566 of this title, the claimant may give an undertaking as provided in this section, which shall release the property described in the undertaking from the lien and levy of the execution.

(b) The undertaking, with two sureties, shall be executed by the third person claiming in whole or in part the property upon which execution is levied in double the estimated value of the property claimed by the third person; except that in no case need the undertaking be for a greater sum than double the amount for which the execution is levied. Where the estimated value of the property claimed by the third person is less than the sum for which the execution is levied, the estimated value shall be stated in the undertaking, and the undertaking shall be conditioned that if the property claimed by the third person is finally adjudged to be the property of the judg ment debtor, the third person will pay of the judgment upon which execution has issued a sum equal to the value, as estimated in the undertaking, of the property claimed by the third person, and the property claimed shall be described in the undertaking,

(c) The undertaking shall be filed in the action in which the execution issued and a copy thereof served upon the judgment creditor or his attorney in the action.

(d) Within 10 days after the service of the copy of the undertaking, the judgment creditor may object to the undertaking on the ground of inability of the sureties, or either of them, to pay the sum for which they become bound in the undertaking, and upon the ground that the estimated value of property therein is less than the market value of the property claimed. The objection to the undertaking shall be made in writing, specifying the ground or grounds of objection, and if the objection is made to the undertaking that the estimated value therein is less than the market value of the property claimed, the objection shall specify the judgment creditor's estimate of the market value of the property claimed. The written objection shall be served upon the third person giving the undertaking and claiming the property therein described.

(e) Exceptions to the sufficiency of the sureties and their justifi cation may be had or taken in the same manner as upon an undertaking on attachment. If they, or others in their place, fail to justify at the time and place appointed, the officer shall not release the property. If objection is not taken as provided in this section, the judgment creditor is deemed to have waived objections to the sufficiency of the sureties.

(f) When objection is made to the undertaking upon the ground that the estimated value of the property claimed, as stated in the undertaking, is less than the market value of the property claimed, the third person may accept the estimated value stated by the judgment creditor in the objection, and a new undertaking may be at once filed with the judgment creditor's estimate stated therein as the estimated value, and objection may not thereafter be made upon that ground. If the judgment creditor's estimate of the market value is not accepted, the value of the property shall be determined as provided in section 566 of this title.

(g) The sureties shall justify upon the undertaking as required by section 431 of Title 3.

(h) The undertaking shall become effective for the purpose herein specified 10 days after service of a copy thereof on the judgment

creditor, unless objection to the undertaking is made as herein provided, and if objection is made to the undertaking filed and served, then the undertaking shall become effective for such purposes when an undertaking is given as herein provided.

§ 569. Attachments and executions on mortgaged personal property

(a) Except as provided in subsection (b) of this section, before mortgaged personal property is taken under attachment or execution issued at the suit of a creditor of the mortgagor, the officer shall pay or tender to the mortgagee the amount of the mortgage debt and interest or deposit the amount thereof with the registrar of property, payable to the order of the mortgagee.

(b) When an attachment or execution creditor presents to the officer a verified statement that the mortgage is void or invalid for reasons therein specified and delivers to the officer a good and sufficient indemnity bond in double the amount of the mortgage debt or double the value of the mortgaged property, as the officer may determine and require, the officer shall take the property, and, in the case of an execution, sell it in the manner provided by law.

The bond shall be made to both the officer and the mortgagee and shall indemnify them and each of them for the taking of the property against loss, liability, damages, costs, and counsel fees.

(c) When the property is taken after payment or tender of deposit as provided for in subsection (a) of this section and is sold under process the officer shall apply the proceeds of the sale as follows:

(1) to the repayment of the sum paid to the mortgagee, with interest from the date of the payment; and

(2) the balance, if any, in like manner as the proceeds of sales under execution are applied in other cases.

(d) When the property is taken after presentation to the officer of the verified statement and bond mentioned in subsection (b) of this section and is sold under process the officer shall apply the proceeds of the sale as follows:

(1) to the satisfaction of the amount specified in the process including interest and costs; and

(2) the balance, if any, in like manner as the proceeds of sales under execution are applied in other cases.

Subchapter III-Proceedings Supplemental to Execution

§ 601. Examination of judgment debtor

When an execution against property of the judgment debtor, or of any one of several debtors in the same judgment, issued to the marshal, is returned unsatisfied in whole or in part, the judgment creditor, at any time after the return is made, is entitled to an order from the judge of the court, requiring the judgment debtor to appear and answer concerning his property before the judge, or a referee appointed by him, at a time and place specified in the order. § 602. Order for judgment debtor to appear; arrest; bail

(a) After the issuing of an execution against property, and upon proof, by affidavit of a party or otherwise, to the satisfaction of the judge of the court that a judgment debtor has property which he unjustly refuses to apply toward the satisfaction of the judgment, the judge may, by an order, require the judgment debtor to appear at a specified time and place before the judge, or a referee appointed by him, to answer concerning the same; and such proceedings may thereupon be had for the application of the property of the judgment debtor toward the satisfaction of the judgment as are provided upon the return of an execution.

(b) Instead of the order requiring the attendance of the judgment debtor, the judge may, upon affidavit of the judgment creditor, his agent or attorney, if it appears to him that there is danger of the debtor's absconding, order the marshal to arrest the debtor and bring him before the judge. Upon being brought before the judge, the judgment debtor may be ordered to enter into an undertaking, with sufficient surety, that he will attend from time to time before the judge or referee, as may be directed during the pendency of proceedings and until the final termination thereof, and will not in the meantime dispose of any portion of his property not exempt from execution. In default of entering into the undertaking he may be committed to jail.

§ 603. Payment by debtor of judgment debtor

After the issuing of an execution against property, and before its return, any person indebted to the judgment debtor may pay to the marshal the amount of his debt, or so much thereof as may be necessary to satisfy the execution; and the marshal's receipt is a sufficient discharge for the amount so paid.

8 604. Examination of debtor of judgment debtor

After the issuing or return of an execution against property of the judgment debtor, or of any one of several debtors in the same judgment, and upon proof by affidavit or otherwise, to the satisfaction of the judge, that any person or corporation has property of the judgment debtor, or is indebted to him in an amount exceeding $50, the judge may, by an order, require the person or corporation, or any officer or member thereof, to appear at a specified time and place before him, or a referee appointed by him, and answer concerning the

same.

§ 605. Witnesses

Witnesses may be required to appear and testify before the judge or referee, upon any proceeding under this subchapter, in the same manner as upon the trial of an issue.

§ 606. Order applying property toward satisfaction of judgment The judge or referee may order any property of the judgment debtor, not exempt from execution, in the hands of the debtor, or any other person, or due to the judgment debtor, to be applied toward the satisfaction of the judgment; but an order may not be made as to money or property in the hands of any other person or claimed to be due from him to the judgment debtor, if the person claims an interest in the property adverse to the judgment debtor or denies the debt. § 607. Third person claiming interest or denying debt; action by judgment creditor

If it appears that a person, alleged to have property of the judgment debtor, or to be indebted to him, claims an interest in the property adverse to him, or denies the debt, the judgment creditor may maintain an action against that person for the recovery of the interest or debt; and the judge or referee may, by order, forbid a transfer or other disposition of the interest or debt, until an action can be commenced and prosecuted to judgment. The order may be modified or vacated by the judge or referee granting it, or the court in which the action is brought, at any time, upon such terms as may be just.

§ 608. Contempt

If any person, party, or witness disobeys an order of the referee, properly made, in the proceedings before him under this subchapter, he may be punished by the court or judge ordering the reference, for a contempt.