Superior Court County: King. Superior Court Cause No: 92-2-27682-8. Date filed in Superior Court: 8/15/94. Superior Court Judge Signing: Nancy Ann Holman.
Ellington, J., Kennedy, Acj, Agid, J., concur
ELLINGTON, J. -- This case requires us to determine the effect of a writ of execution on the debtor's interest in pending litigation. We hold that execution on the lawsuit survives settlement of the suit, and gives priority over later assignment of settlement proceeds. We therefore reverse the trial court's refusal to permit garnishment of the settlement proceeds.
On September 9,1993, Michael Robb obtained a judgment for $25,972 against Lowell Kaufman. On February 9, 1994, Robb procured a writ of execution against Kaufman's personal property. At the time, Kaufman was involved in a Superior Court lawsuit against Verla Justice, and Robb caused the sheriff to levy upon Kaufman's "right, title and interest" in the lawsuit. Robb filed a notice of this levy and sale with the clerk of the Superior Court on February 10, 1994; a sheriffs sale of this "right, title and interest" was duly scheduled for March 25, 1994.
After seizing the lawsuit, Robb engaged in settlement negotiations with Kaufman's attorneys. These negotiations led to a tentative agreement which would have allowed Robb and Kaufman's attorneys to recover monies owed to both from the proceeds of the pending lawsuit.
This agreement was not yet memorialized when the Kaufman v. Justice suit settled on or about March 7, 1994. The case was formally dismissed on March 10, 1994. Terms of the settlement included payment by Justice to Kaufman of $175,000. Robb learned of this settlement and dismissal on March 14, 1994, when Kaufman's attorneys responded to his March 9, 1994 draft of a proposed agreement. Kaufman and his attorneys took the position that the settlement with Justice extinguished Robb's levy.
On March 22, 1994, Kaufman assigned all of his interest in the settlement proceeds to Donald Shaw, David Whitney, and his own attorneys (hereafter, the Assignees). On March 24, 1994, the Assignees perfected their assignments by filing UCC-1 financing statements. At the sheriffs sale on March 25th, Robb purchased Kaufman's "right, title and interest" in the then-dismissed Kaufman v. Justice suit.
On March 31, 1994, Robb directed a writ of garnishment against Justice. In her answer, Justice acknowledged that Kaufman had assigned his rights to the settlement proceeds, but took no position as to the priority of the assignments relative to Robb's levy and purchase.
On July 6, 1994, Robb served each of the Assignees with an order to show cause why the court should not award Robb priority over the Assignees' interests. In response, the Assignees provided the lower court with written and oral arguments as to why their assignments deserved priority over Robb's levy and purchase.
On August 15, 1994, the court denied Robb's motion for order on writ of garnishment and allowed the contested funds to be dispersed to the Assignees. The reasoning behind this denial is not apparent from the order, but counsel for Shaw represented to this court that the trial court held Robb was not entitled to relief because the Assignees perfected their assignments prior to service of the writ of garnishment. Robb appealed, but did not file a supersedeas bond to stay distribution of the funds. The funds
were dispersed as follows: $75,000 to Kaufman's attorneys, $65,000 to Shaw, ...