On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-1414-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically argued December 7, 2010 - Decided Before Judges Sabatino and Alvarez.
The present appeal is the third arising out of this case and other related litigation.*fn1 As the result of a jury verdict, plaintiffs Charles and Carol Sachs obtained a judgment on May 11, 2009 against defendant Jefferson Loan Company ("Jefferson") in the sum of $71,000, plus $16,519.66 in prejudgment interest. The judgment was based on Jefferson's non-payment of five debentures held by plaintiffs. Jefferson was formerly in the business of making auto and other consumer loans. It financed its operations by issuing debentures to investors such as plaintiffs and also through a bank line of credit. We incorporate by reference the chronology of events precipitating Jefferson's indebtedness to plaintiffs, which is detailed in our two prior unpublished opinions.*fn2
The issues in the present appeal exclusively concern plaintiffs' efforts to collect on their judgment against Jefferson. The judgment was recorded as a lien on July 2, 2009.
Plaintiffs have since pursued two avenues of potential recovery:
(1) a levy upon proceeds held by Pressler and Pressler, L.L.P. ("the Pressler firm"), a law firm retained to collect sums owed to Jefferson by third parties; and (2) a levy upon Jefferson's bank account at Valley National Bank ("Valley National").
The funds held by both the Pressler firm and by Valley National are affected by a significant debt that Jefferson owes to Valley National. That debt arises out of a $12 million line of credit that Jefferson originally established with Valley National in 2001. In December 2006, Jefferson, following a downward economic spiral, wrote to plaintiffs and its other debenture holders and advised that it was ceasing its operations and that it was going into liquidation. At that time, Jefferson owed Valley National, a secured creditor, $7.5 million on the line of credit.
Thereafter, Jefferson negotiated an agreement with Valley National*fn3 that would allow the debenture holders to share equally in Jefferson's revenues once Valley National was paid the first $3.5 million on the secured debt. Even though Jefferson is no longer engaged in new business, it continues to collect revenues from loans and other debts owed to it by third parties. In addition, Valley National has leased Jefferson space within the bank's offices, at a nominal sum of one dollar per year, to allow Jefferson to wind up its affairs and to make collections.
Jefferson still maintains a bank account at Valley National. Rather than depleting the balance in that account to recover sums due on its secured debt, Valley National has taken from that account only portions of what it is owed. The limited record reflects that Valley National has allowed Jefferson to maintain a positive balance in the account and to make various disbursements to other parties.
Valley National has filed a UCC-1 instrument to perfect its secured interests. As of the time of the motion practice that is the subject of the present appeal, Jefferson owed Valley National approximately $5 million, and Valley National's recovery apparently had not yet reached the negotiated threshold for the equal sharing of revenues with the debenture holders.
Pursuant to a writ of execution, on June 23, 2009, plaintiffs levied upon proceeds of Jefferson's accounts receivable that had been collected and that were being held by the Pressler firm. On July 7, 2009, Jefferson filed a motion with the trial court, seeking to vacate that levy and the corresponding writ of execution. Plaintiffs cross-moved for an order directing the Pressler firm to turn over the funds. Following oral argument, the trial court vacated the levy and the writ concerning the funds held by the Pressler firm and denied turnover of those funds to plaintiffs.
In her written opinion dated August 13, 2009, the motion judge*fn4 concluded that "Valley National Bank's security interest is superior to [p]laintiffs' judgment lien." Accordingly, the judge found that "[p]laintiffs are entitled to execute and levy upon that income earned or accrued to [Jefferson] where same is not the subject of the U.C.C. financing statement filed by Valley National Bank against [Jefferson] on March 19, 2001[.]" The judge further determined that "[t]he monies due or becoming due to [Jefferson] from [the Pressler firm] fall within the subject of the March 19, 2001 financing statement because such monies constitute receivables and/or cash ...