Opinion
No. HHD CV-07-4029723 S
June 23, 2011
MEMORANDUM OF DECISION RE DETERMINATION OF INTERESTS IN DISPUTED PROPERTY
In this action the plaintiff, the State of Connecticut, obtained a prejudgment remedy on April 27, 2007, pursuant to which the marshal, on May 1, 2007, attached two Porsche automobiles owned by the defendants. The marshal took possession of the automobiles and placed them in a storage facility where they have remained. On May 13, 2010, judgment was entered against the defendants in the amount of $140,295.91. On June 14, 2010 an execution on the judgment was issued and, on June 29, 2010, the marshal levied against the automobiles pursuant to that execution. Since the vehicles were not sold within the four-month period set forth in the statute, the marshal returned the execution to court unsatisfied on October 26, 2010. Subsequently, the state learned that other parties were claiming an interest in the automobiles. On November 5, 2010, 1175 Main Street, LLC filed a financing statement with the Secretary of the State's office in which it claimed a security interest in the vehicles. On February 5, 2011, the State applied for a second execution. It was issued by the court on February 17 and on March 9 the marshal again levied against the vehicles pursuant to the execution. On March 25, 2011, the State filed a claim for determination of interests in disputed property.
The defendants claim that 1175 Main Street, LLC holds a security interest, dating back to January 10, 2006, in the automobiles which is superior to the state's judgment lien. The state claims that the security interest was not perfected until November 5, 2010, after the state's lien attached.
The defendants claim that 1175 Main Street, LLC holds a valid first lien on the automobiles pursuant to General Statutes § 42a-9-203(a), part of the Uniform Commercial Code (UCC).
Attachment and perfection are two distinct concepts under the UCC. Attachment deals with the enforceability of a security interest against the debtor, while perfection deals with the issues of priority and enforceability of that interest against other creditors of the debtor who have claims to the same collateral. Attachment of a security interest to an item of collateral occurs when all three of the following requirements are met: 1) the secured party has given value; 2) the debtor has obtained rights in the collateral; and 3) the debtor has signed a written security agreement that describes the collateral. General Statutes § 42a-9-203. Here, a security agreement was entered into by the defendants and 1175 Main Street, LLC on January 10, 2006, regarding collateral which included the two vehicles attached by the State. This was done in conjunction with the execution of a promissory note for $60,000 between the parties. Thus the security interest of 1175 Main Street, LLC attached to the vehicles in January 2006. However, the State argues that since the security interest was not perfected until November 5, 2010, the State's lien takes priority over it. The court agrees.
General Statutes § 42a-9-317(a)(2) provides in relevant part: "[a] security interest . . . is subordinate to the rights of . . . a person that becomes a lien creditor before the earlier of the time:(A) The security interest . . . is perfected; or (B) One of the conditions specified in subdivision (3) of subsection (b) of section 42a-9-203 is met and a financing statement covering the collateral is filed." A lien creditor is defined as "[a] creditor that has acquired a lien on the property involved by attachment, levy or the like . . ." General Statutes § 42a-9-102(a)(52)(A).
"[A] security interest is perfected if it has attached and all of the applicable requirements for perfection in sections 42a-9-310 to 42a-9-316, inclusive, have been satisfied." General Statutes § 42a-9-308(a). The filing of a financing statement is required to perfect all security interests that do not fall within one of the exceptions set forth in § 42a-9-310(b). If a financing statement is not filed, then the attached security interest remains unperfected and subject to subordination pursuant to § 42a-9-317(a)(2).
Normally the filing of a financing statement would not be required to perfect a security interest in a motor vehicle because most vehicles are subject to a certificate-of-title statute that delineates its own process to perfect a security interest. General Statutes § 42a-9-311(a)(2) provides in relevant part: "The filing of a financing statement is not necessary or effective to perfect a security interest in property subject to . . . [a]ny certificate-of-title statute covering automobiles . . . which provides for a security interest to be indicated on the certificate as a condition or result of perfection . . ." General Statutes § 14-185(a) provides that "[A] security interest in a vehicle of a type for which a certificate of title is required is perfected by the delivery to the commissioner of the existing certificate of title, if any, an application for a certificate of title containing the name and address of the lien holder and the date of the security agreement and the required fee. It is perfected as of the time when it attached if such delivery is completed within twenty days thereafter, and without regard to the limitations expressed in section 42a-9-317; otherwise it is perfected as of the time of such delivery."
In the present case, however, the vehicles at issue are not subject to the certificate-of-title statute because both vehicles were manufactured prior to 1981, and the acquisition of a certificate of title is not required for any vehicle manufactured prior to 1981. General Statutes § 14-166(a) provides that: "The acquisition of a certificate of title for any vehicle manufactured prior to 1981 shall not be required." Therefore, 1175 Main Street, LLC could not perfect a security interest in the vehicles pursuant to the procedures found in the certificate-of-title statute.
Consequently, although 1175 Main Street, LLC's lien attached in 2006, pursuant to General Statutes § 42a-9-310, it was required to file a financing statement to perfect its security interest in order to take priority over a subsequent judgment lien, such as the State's. Section 42a-9-310(a) provides that "a financing statement must be filed to perfect all security interests and agricultural liens" except in certain situations not applicable here. Therefore, the State's interest in the vehicles has priority over 1175 Main Street, LLC's interest because it did not perfect its interest until it filed the financing statement on November 5, 2010.
Lastly, the court agrees with the State that the vehicles did not need to be sold within any specified period of time after the marshal had levied on the property. Although the court is unsure why the marshal returned the execution unsatisfied while at the same time he states in his affidavit that he levied on the property pursuant to the execution, that does not invalidate the State's lien, contrary to the defendants' claim. General Statutes § 52-328 provides in relevant part that: "no personal estate which has been attached may be held to respond to the judgment obtained in the suit, either against the debtor or any other creditor, unless the judgment creditor takes out an execution and has it levied on the personal estate attached . . . within sixty days after final judgment . . ." The State did so. Once the State had an execution issued and the marshal levied on the property, which the State had previously attached, it perfected its attachment. See Bradbury v. Wodjenski, 159 Conn. 366, 370 (1970). General Statutes § 52-356a provides in relevant part that: "The judgment debtor's interest in personal property levied on pursuant to an execution, other than any money so obtained, shall be sold by the levying officer, or by an indifferent person deputed to act on his behalf, or by such other levying officer as the court in which the money judgment was rendered directs, in accordance with subdivisions (2) and (3) of this subsection. The sale shall be held at such time and place and in such manner as is commercially reasonable . . ." The statute does not require that a sale take place within four months. In fact, § 52-356a(a)(3) provides that: "The untimely return of a property execution more than four months after issuance shall not of itself invalidate any otherwise valid levy made during the four-month period." From a reading of the statute, the "return" of the execution is the officer's statement regarding a description of the property levied on and the amount toward the judgment the marshal was able to recover from the sale of the property. The statute then requires that the clerk of the court "note on the record of the judgment whether, or to what extent, the judgment was satisfied." General Statutes § 52-356a(f).
Therefore the marshal was not required to file a return within four months in order to preserve the validity of the State's lien on the automobiles and the subsequent execution was unnecessary and of no effect. The State, having obtained a prejudgment attachment in 2007, and having obtained an execution and levied on the property within sixty days of the judgment, perfected its judgment lien on the vehicles which then related back to the date of the prejudgment attachment. General Statutes § 52-356a(a)(7) states in relevant part that: "[I]f the property to be executed against is already subject to an attachment, garnishment or judgment lien of the judgment creditor as security for that judgment, the priority of the execution shall hold from the date of perfecting of the attachment, garnishment or other lien." Although 1175 Main Street, LLC had a security interest in the vehicles which predated the State's attachment, it was not perfected, and therefore became subordinate to the State's judgment lien pursuant to § 42a-9-317(a)(2). That statute provides that: "A security interest . . . is subordinate to the rights of . . . a person that becomes a lien creditor before the earlier of the time . . . [t]he security interest . . . is perfected."
In conclusion, the court determines that the State's lien on the subject vehicles takes priority over the security interest of 1175 Main Street, LLC.