Opinion
No. FST CV 99 0171597 S
May 14, 2007
MEMORANDUM OF DECISION
FACTS Background
In June 1996, Chester and Barbara Kaye (the "Kayes") sold their dry cleaning business to Susan and Salvatore Brancato (the "Brancatos"). A large portion of the consideration was paid via promissory notes made by the Brancatos to the Kayes. Joseph DiScala, and/or entities which he controlled or in which he had an interest, were the owners and landlord of the premises where the dry cleaner was located.
By 1998, a serious dispute regarding the financial and environmental condition of the dry cleaning business had developed between the Brancatos and Kayes, leading to the commencement of litigation between them. When the dispute began, the Brancatos began depositing their payments on the purchase notes into escrow, first with their attorney, then with Robinson Cole pursuant to a formal escrow agreement.
In January 1999, the Brancatos stopped paying rent and ultimately vacated the premises. DiScala subsequently filed this action and obtained an order for prejudgment remedy (the proceeding for which the Kayes were neither notified of nor participated in) in 2001. A writ of attachment pursuant to the prejudgment remedy was purportedly served on Robinson Cole. The court has seen no proof of service. DiScala obtained a default judgment against the Brancatos in 2002.
The disputes between the Kayes and the Brancatos, which included a count for declaratory judgment regarding ownership of the escrowed funds, were consolidated into one case which was tried before a jury and the Hon. Alfred Jennings during September and October of 2006, in a case titled Brancato v. Kaye, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. X08 CV 984002302. On October 13, 2006, the jury returned a verdict entirely in favor of the Kayes. After the trial and verdict, DiScala attempted to intervene with regard to the escrowed funds and served an execution in this case to obtain the escrowed funds on December 8, 2006. Post-verdict motions were heard by Judge Jennings and decided in March 2007. On March 20, 2007, Judge Jennings issued an order granting declaratory judgment for the Kayes regarding ownership of the escrow funds. DiScala now seeks to appropriate those funds via execution on a judgment against the Brancatos. The Kayes request an order determining that they have the superior interest in the escrowed funds.
The court has read the April 18, 2007 brief filed on behalf of the Joseph N. DiScala 1997 Trust (the "DiScala Trust") and the April 14, 2007 brief filed on behalf of Chester and Barbara Kaye.
LAW
A litigant may only execute "against the nonexempt personal property of the judgment debtor . . ." General Statutes § 52-356a(a)(1).
A garnishment, not an attachment, is the appropriate vehicle for securing an interest in escrowed funds held by an attorney, and the service of a prejudgment remedy in the form of an attachment fails to attach anything at all. Tobin Melien v. Catalano, Superior Court, judicial district of New Haven, Docket No. CV 000434995 (July 18, 2001, Pittman, J.) ( 30 Conn. L. Rptr. 143, 145).
A "secured party" is a "person in whose favor a security interest is created or provided for under a security agreement . . ." General Statutes § 42a-9-102(72)(A). A "security agreement" means "an agreement that creates or provides for a security interest." General Statutes § 42a-9-102(73). A security interest in bank or deposit accounts may only be perfected by obtaining "control" over those funds. General Statutes § 42a-9-314(a). "Control" occurs when the bank itself is the secured party, there is a properly authenticated agreement among the debtor, secured party and bank, or the secured party becomes a customer of the bank with regard to the deposit account at issue. General Statutes § 42a-9-104(a).
DISCUSSION
The funds that Robinson Cole are holding in escrow have been held by Judge Jennings to be the property of the Kayes, not the judgment-debtor Brancatos. The DiScala Trust has no prior right to the escrowed funds as a result of the prejudgment remedy attachment. Tobin Melien v. Catalano, supra, 30 Conn. L. Rptr. 145. Further, the DiScala Trust has failed to present the court with a security agreement demonstrating that it maintains a security interest in the funds. Finally, even assuming that the Discala Trust is a secured party, it has failed to perfect that interest as required per Connecticut state statutes.
CONCLUSION
The DiScala Trust has no "perfected security interest" in the escrowed funds and is not entitled to them. Chester J. Kaye and Barbara J. Kaye are the owners of the funds held in the escrow account of Robinson Cole.
So Ordered.