2010-296 Salvatore Rabbia v. Max E. Rocha & a.

No. 2010-296

Merrimack

Superior Court (Sullivan LYNN, J. The plaintiff, Salvatore Rabbia, appeals an order of the

Winer and Bennett, LLP

Law Offices of Edward W. Richards & Associates, P.C.

and orally), for the intervenor.

defendants. (Edward W. Richards on the memorandum of law and orally), for the

THE SUPREME COURT OF NEW HAMPSHIRE orally), for the plaintiff. and Phillips Law Office, PLLC, of Concord (Roger B. Phillips on the brief and

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 to press. Errors may be reported by E-mail at the following address: editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as p. 2 January 2007, April 2007 and June 2008. See Hampshire Secretary of State in October 2002, May 2004, August 2004, 2 perfected its security interest by filing financing statements with the New 2004, September 2004, November 2005 and November 2006. The intervenor

agreement in September 2002 and signed amended agreements in August proceeds thereof.” See Harvard and the intervenor signed the first floor plan financing

intangibles and all additions, accessions, accessories, replacements and inventory of motor vehicles, equipment, accounts, chattel paper, general now owned or hereafter acquired inventory including but not limited to following collateral, described in its October 2002 financing statement: “All A. Harvard and the Intervenor 2010), -315 (2004). The intervenor’s perfected security interest applied to the RSA 382-A:9-310, -312 (Supp.

purchase vehicles. See Harvard borrowed money from the intervenor against a line of credit to The intervenor provided “floor plan financing” to Harvard, that is, additions, accessions, accessories, and replacements of the foregoing.” accounts, . . . and general intangibles,” and “any and all proceeds, products, documents, including but not limited to . . . accounts, . . . monies, . . . deposit vehicles “and other inventory of any kind” owned or acquired by Harvard, “all granted the intervenor a security interest in all of its assets, including its were ongoing. escrow in the summer of 2008, while settlement discussions with the plaintiff to amortize Harvard’s debt. In exchange for the intervenor’s financing, Harvard competing claims to funds the defendants gave to their counsel to hold in portion of the proceeds of any given vehicle sale for payment to the intervenor March 2008. The instant appeal concerns the plaintiff’s and the intervenor’s arrangement, which began in 2002, Harvard was required to hold “in trust” a plaintiff was involved in a long-standing dispute with Harvard, which settled in Leasing in the Automobile Industry §1.4, at 7 (2004). Pursuant to this creditors. The intervenor financed Harvard’s purchase of inventory; the R. Billings, Jr., Floor Planning, Retail Financing & vehicle business. The intervenor and the plaintiff are two of Harvard’s defendants Max E. Rocha and Evangelos Karagianis, were in the salvage motor Auto Sales, Inc., d/b/a Hitcars.com (Harvard Auto), and its principals, Before going out of business in 2008, the corporate defendant, Harvard

I. Background

attorney’s fees. We affirm in part, reverse in part and remand. Corporation, instead of to the plaintiff, and denying the plaintiff’s motion for being held in escrow be dispersed to the intervenor, Automotive Finance p. 3 3

decision in an unpublished order, Salvatore Rabbia v. Max E. Rocha & a. trial court’s order enforcing the settlement, and we affirmed the trial court’s the funds would continue to be held in escrow. The defendants appealed the decided that its orders requiring payment to the plaintiff would be stayed and otherwise agreed by the parties.” In the event of an appeal, the trial court the plaintiff with interest following expiration of the appeal period, unless escrowed funds into “an interest-bearing escrow account, to be disbursed to enforce the settlement and ordered defense counsel to place the previously On October 29, 2008, the trial court granted the plaintiff’s motion to C. The Instant Dispute

proof, the plaintiff argued that he was the proper recipient of the escrowed funds. At a December 2009 hearing at which the trial court heard offers of intervenor petitioned to intervene in the matter and to recover the escrowed should be released to the plaintiff or the intervenor. In September 2009, the filed a motion in the settlement action asking the court to decide whether they In August 2009, the defendants paid the escrowed funds into court and

$ p. 3 37,000 plus interest. 2008-0918 (July 31, 2009). attorney placed into an escrow account. The total amount held in escrow was, No. check, the defendants gave additional checks to their attorney, which the shall continue to be made.” As a result, in addition to the $25,000 cashier’s court issued an order stating that “the previously ordered escrowed payments B. Harvard and the Plaintiff put it in his client trust account or an escrow account. The following day, the the attorney informed the court about the check, and the court ordered him to attorney, made payable to the attorney’s law firm. At a July 10, 2008 hearing, On July 1, 2008, the defendants brought a $25,000 cashier’s check to their the trial court ordered payments under the settlement to be made in escrow. However, as a result of various challenges to the settlement, on May 27, 2008, which they refused to repay. In March 2008, the dispute was settled. become a shareholder in Harvard and $216,000 he claims to have lent them, defendants concerning $201,000 he claims to have given the defendants to Until March 2008, the plaintiff was involved in a dispute with the

attorney’s fees. December 1, 2009, Harvard owed the intervenor $1,52 p. 3 3,66 p. 4 4.14, including action to repossess Harvard’s cars subject to its security interest. As of Billings, Jr., supra §1.4, at 7. As a result, the intervenor brought a replevin the intervenor as required under the floor plan financing arrangement. See Harvard’s accounts were “out of trust,” meaning that Harvard had failed to pay At some point before November 19, 2008, the intervenor discovered that 4

the funds. See RSA 382-A:9-332 occurred, extinguishing the intervenor’s secured interest in title to the funds passed to him, and, thus, a “transfer” within the meaning of with interest. The plaintiff argues that once this occurred, legal and equitable settlement and requiring the escrowed funds to be disbursed to the plaintiff extinguished when we affirmed the trial court’s order enforcing the parties’ upon RSA 382-A:9-332, the plaintiff argues that any such interest was intervenor had a perfected security interest in the escrowed funds. Relying For the purposes of this appeal, we assume, without deciding, that the

RSA 382-A:9-332(a) (“A transferee of money takes the money

Although we review the trial court’s statutory interpretation de

considered as a whole. In the Matter of Scott & Pierce arbiters of the legislature’s intent as expressed in the words of the statute the Matter of Salesky & Salesky, 157 N.H. 698, 707 (2008). evidence does not support them or they are erroneous as a matter of law. In Under our ordinary rules of statutory construction, we are the final Bendetson, 15 p. 4 4 N.H. at 641, we will uphold its factual findings unless the

to include. Id II. Analysis. legislature might have said or add language that the legislature did not see fit legislative intent from the statute as written and will not consider what the language according to its plain and ordinary meaning. Id. We interpret first look to the language of the statute itself, and, if possible, construe that , 160 N.H. at 359. We

the Uniform Commercial Code (UCC). See Addressing the parties’ arguments requires that we interpret Article 9 of model act for guidance on intended meaning of election statute). v. Killarney, Inc., 15 p. 4 4 N.H. 637, 643 (2006) (we will look to official comments of upon official comments to Uniform Interstate Family Support Act); Bendetson statutes); In the Matter of Scott & Pierce, 160 N.H. 354, 359 (2010) (we rely Code and its Commentaries when interpreting analogous New Hampshire escrowed funds belonged to the intervenor. This appeal followed. Code is largely derived from Model Penal Code, we have looked to Model Penal trial court granted the intervenor’s petition to intervene and ruled that the any interest the plaintiff may have had in them. Following the hearing, the jurisdictions); cf. In re Alex C., 161 N.H. 231, 240 (2010) (because our Criminal A:1-103(a)(3)(2011) (UCC construed to make uniform the law in various proper recipient of the funds because its perfected security interest predated construction, but also upon the official comments to the UCC. See intervenor may have had in them. The intervenor asserted that it was the RSA 382- 2010). To do so, we rely not only upon our ordinary rules of statutory

funds because his interest in them predated any secured interest the other party.” McCarthy Bldg. Companies v. St. Louis p. 5 owner of the account and retains title until performance of a condition by the 5 In this situation the party who deposits property into an escrow account is the person for delivery to another only upon the occurrence of a stated condition. In the typical escrow arrangement, “property is deposited with a third

“Rules of law governing property delivered in escrow apply to situations in Hathaway Ranch Partnership, 127 B.R. 859, 863 (Bankr. C.D. Cal. 1990). perfected security interest the intervenor may have had in them. the escrow conditions, legal title to the property passes to the grantee.” In re equitable title to the escrowed funds, entitling him to take them free of any equitable title to the subject property, and upon satisfaction or performance of funds to the plaintiff. As a result, the plaintiff acquired both legal and As a result of depositing property into escrow, “the grantee acquires immediate affirmed the trial court’s decision requiring disbursement of the escrowed ownership of the property in the escrow account immediately transfers.” Id. Here, we conclude that a “transfer” occurred on July 31, 2009, when we Ct. App. 2002). When, however, “the condition of performance is completed,

However, “the debtor itself is not a transferee.” Id A:9-332 does not define the term “transferee.” RSA 382-A:9-332 cmt. 2. the transferee purchases with the funds.” RSA 382-A:9-332 cmt. 3. RSA 382interest in the check.” Id “minimizes the likelihood that a secured party will enjoy a claim to whatever lender’s security interest in the deposit account “does not give rise to a security security interests in deposit accounts do not impair the free flow of funds” and lender has a security interest, and makes the check payable to a payee, the money.” RSA 382-A:9-332 cmt. 2. Such broad protection “helps to ensure that For example, if a debtor draws a check on a deposit account in which a transferees who take funds from a deposit account and to those who take The purpose of RSA 382-A:9-332 is to “afford[ ] broad protection to

value for the check.” Id. whether Payee is a holder in due course of the check and even if Payee gave no of Payee) free of Lender’s security interest.” Id. “This is true regardless of violation of Lender’s rights, Payee takes the funds (the credits running in favor . “Unless Payee acted in collusion with Debtor in

and credits another account it maintains for the debtor.” Id. deposit account or the case in which a bank debits an encumbered account “does not cover the case in which a debtor withdraws money (currency) from its

violating the rights of the secured party.”). We agree. the deposit account unless the transferee acts in collusion with the debtor in of funds from a deposit account takes the funds free of a security interest in in violating the rights of the secured party.”); RSA 382-A:9-332(b) (“A transferee free of a security interest unless the transferee acts in collusion with the debtor p. 6 Affirmed in part; reversed in

the trial court erred when it granted the intervenor’s petition to intervene. In light of our decision, we need not address the plaintiff’s assertion that

DALIANIS, C.J.