Wells Fargo Bank v. Levin Professional Services

Decision Date11 March 2004
Docket NumberNo. 03-CV-427.,03-CV-427.
CourtU.S. District Court — Eastern District of Virginia
PartiesWELLS FARGO BANK MINN., N.A., Plaintiff, v. LEVIN PROF'L SERVS., INC. t/a Washington Prof'l Sys., et al. Defendants.

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348 F.Supp.2d 638
LEVIN PROF'L SERVS., INC. t/a Washington Prof'l Sys., et al. Defendants.
No. 03-CV-427.
United States District Court, E.D. Virginia, Alexandria Division.
March 11, 2004.

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Nancy Elizabeth Nunan, Jacqueline Reid Fields, Joseph Leigh Fuller, Kutak Rock LLP, Washington, DC, for Plaintiff.

Zachary Booth Cotner, Falls Church, VA, for Defendants.


CACHERIS, District Judge.

Plaintiff Wells Fargo Bank Minnesota, N.A. ("Wells Fargo") commenced this action to recover lease payments allegedly owed to it by the Defendants. Specifically, Wells Fargo alleges that Levin Professional Services, Inc., t/a Washington Professional Systems ("Levin") has improperly garnished lease payments from Defendant Henninger Media Services, Inc. ("Henninger") owed to Wells Fargo under an equipment lease ("the Lease" or "Lease 4023"). Both Wells Fargo and Levin have moved for summary judgment.

The questions that the Court must answer are the following: (1) is Levin's garnishment of the lease proper under Virginia law; (2) if the garnishment is improper, does the Doctrine of Laches prevent Wells Fargo from receiving the lease payments; and (3) is the propriety of the garnishment res judicata or is Wells Fargo collaterally estopped from

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attacking the garnishment. For the reasons stated below, the Court will grant the Wells Fargo's motion for Summary Judgment and deny the Defendant's motion for Summary Judgment.

I. Background

A. Transactions Between Levin, Terminal, and Henninger

Levin is an equipment vendor, incorporated with its principal place of business in Maryland. It sold electronic, multi-media equipment to Terminal Marketing Company Inc. ("Terminal"), a company in the business of leasing equipment. On June 29, 2000, Terminal leased this equipment to Henninger Media Services Inc. ("Henninger"), a company involved in multi-media production. The Lease provided that an assignee took the Lease "with[out] any obligations or liabilities" of the original Lessor and "free from all defenses, setoffs or counterclaims which [Lessee] may be entitled to assert." (Pl.Ex. A ¶ 14.)

B. Transactions Between Terminal and Wells Fargo

On August 1, 2000, Terminal assigned this lease to Terminal Finance Corporation II ("TFC II"), a special purpose trust corporation created by Terminal. TFC II obtained the funds needed to purchase the assignment by borrowing money from and issuing promissory notes to investors ("noteholders"). As security for the noteholders, TFC II assigned the leases to Wells Fargo, who served as the indenture trustee.1 This type of transaction is known as an asset-backed securitization. Wells Fargo Bank Minn., N.A. v. Nassau Broad. P'ship, L.P., No. 01 Civ. 11255(HB), 2003 WL 22339299, at *2 (S.D.N.Y. Oct. 10, 2003). Terminal created TFC II to serve as a conduit to purchase equipment leases as security in exchange for loans from investors. Id.

On or about January 25, 2001, TFC II, as part of a securitization involving thousands of other leases, sold and assigned the Lease to Wells Fargo, as Indenture Trustee for the Noteholders who had provided the funds to pay for the purchase of the Lease. Terminal delivered the original Lease to Wells Fargo. Wells Fargo paid TFC II $294,098 for the Lease. TFC II, in turn, assigned all of its rights, title and interest in the Lease to Wells Fargo. In addition, on or about January 25, 2001, Wells Fargo took possession of the Lease and continues to maintain physical possession. Ultimately, on February 14, 2001, Wells Fargo terminated its relationship with Terminal as Servicer.

In an unrelated set of transactions, Terminal became indebted to Levin. On July 17, 2001, Levin obtained a default judgment against Terminal in the United States District Court for the District of Maryland. On October 18, 2001, Levin filed an Entry of Foreign Judgment in this Court.

On September 18, 2001, in an effort to satisfy its judgment against Terminal, Levin filed a garnishment action against the Asgard Entertainment Group, Inc. ("Asgard") seeking garnishment of Lease No. 4056 that were due to Terminal. By letter dated November 27, 2001 counsel for Wells Fargo wrote to Asgard, claiming that it held "all rights, title, and interest" in Lease 4056, including the right to receive payments from Asgard. (Pl. Mem. Ex. 1 ¶ 22.) Wells Fargo intervened in the Asgard garnishment. (Id. ¶ 26.)

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On January 21, 2002, Henninger accepted service of a garnishment summons from this Court, stating that all payments due from Henninger to Terminal should be paid instead to Levin. On January 29, 2002, this Court ordered Henninger to make 18 monthly payments due under the Lease to Levin. Wells Fargo was not given specific notice of these proceedings relating to the garnishment.2

On July 15, 2002, Henninger filed for bankruptcy protection. Pursuant to the Bankruptcy plan, Henninger is continuing to make payments on the other Terminal Leases assigned to Well Fargo. Henninger, however, is making payments to Levin under this Court's Garnishment Order.

Consequently, Wells Fargo brings this suit requesting (1) a declaration that it is the owner of the Lease; (2) disgorgement of payments made to Levin under the garnishment Order; (3) return of all money paid by Henninger to Levin under the garnishment Order; and (4) that a constructive trust be imposed on the Lease payments made by Henninger to Levin.

II. Standard of Review

Summary judgment is appropriate only if the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See Fed.R.Civ.P. 56(Copr.). The party seeking summary judgment has the initial burden to show the absence of a material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265. A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The party opposing summary judgment may not rest upon mere allegations or denials; a "mere scintilla" of evidence is insufficient to overcome summary judgment. Anderson, 477 U.S. at 248-52, 106 S.Ct. 2505. A genuine issue exists when there is sufficient evidence on which a reasonable jury could return a verdict in favor of the nonmoving party. See id. at 255, 106 S.Ct. 2505. Unsupported speculation is not enough to withstand a motion for summary judgment. See Ash v. United Parcel Serv., Inc., 800 F.2d 409, 411-12 (4th Cir.1986). Summary judgment is appropriate when, after discovery, a party has failed to make a "showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548 (1986). When a motion for summary judgment is made, the evidence presented must always be construed in the light most favorable to the nonmoving party. See Smith v. Va. Commonwealth Univ., 84 F.3d 672, 675 (4th Cir.1996) (en banc).

III. Analysis

The question in this case is who owns the right to the payments under Lease 4023. More specifically, the Court must decide who had the right to the Lease payments at the time of Levin's judgment and garnishment. This case involves the laws of multiple jurisdictions. First, the

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question of garnishment is determined with reference to Virginia law. Second, the question of whether the assignment of the Lease from Terminal to Wells Fargo was effective is governed by the law of New York State.3

A. Plaintiff's Motion for Summary Judgment

Wells Fargo contends that Levin's garnishment of the Lease payments is improper because Terminal, the judgment debtor, had no rights to the Lease or the Lease payments at the time of the garnishment, because all rights, title, and interest were sold and assigned for value to Wells Fargo. In other words, Levin's judgment cannot be satisfied with the payments from the Lease, because Terminal had no rights to that property.

1. Garnishment

The Court must first determine whether the Garnishment was proper. Under Virginia law, judgment creditors may satisfy their judgments by obtaining a writ of fieri facias.4 Network Solutions v. Umbro Int'l Inc., 259 Va. 759, 529 S.E.2d 80, 85 (2000). Virginia Code 8.01-478 provides that except for exemptions provided for in Title 34, a writ of fieri facias may be levied on goods and chattels and money and banknotes of a judgment debtor and "shall bind what is capable of being levied on only from the time it is actually levied by the officer to whom it has been delivered to be executed." Va.Code Ann. § 8.01-428; In re Lamm, 47 B.R. 364, 367 (D.C.Va.1984). The Virginia Code further elaborates on what property may be garnished:

Every writ of fieri facias shall ... be a lien from the time it is delivered ... on all the personal estate of or to which the judgment debtor is, or may afterwards and on or before the return day of such writ become, possessed or entitled, in which, from its nature is not capable of being levied on ... and except that, as against an assignee of any such estate for valuable consideration, the lien by virtue of this section shall not affect him unless he had notice thereof at the time of the assignment.

Va.Code. Ann. § 8.01-501.

A lien established under section 8.01-501 attaches to a debt owed by a third party to the debtor and which arises prior to the return date of the writ, even though payment on that debt will not be received by the debtor until after the return date. In re Andrews, 210 B.R....

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