This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Plaintiff obtained a compensation order in a workers' compensation claim against her employer, who failed to pay. She then sought enforcement through a writ of garnishment served on the Defendant's credit union account. The credit union claimed a prior lien on the account as security for loans made to the employer.
Procedural History
- District Court, May 1990: Entered a default judgment against the employer for failure to pay the compensation order.
- District Court, October 1990: Discharged the Plaintiff's writ of garnishment, finding that the credit union's security interest in the account had priority.
Parties' Submissions
- Plaintiff-Appellant: Argued that no valid security interest could be claimed in a savings account under Article 9 of the Uniform Commercial Code (UCC) and that the credit union was not in possession of the account due to insufficient funds.
- Garnishee-Appellee (Credit Union): Asserted a perfected security interest in the account under UCC Section 55-9-305, claiming possession of the funds as collateral for loans made to the employer.
Legal Issues
- Did the credit union have a valid and perfected security interest in the employer's savings account that took priority over the Plaintiff's garnishment lien?
- Was the district court correct in discharging the writ of garnishment without sufficient evidence of the credit union's claimed interest?
Disposition
- The Court of Appeals reversed the district court's decision and remanded the case for trial on the merits.
Reasons
Per Minzner J. (Apodaca and Black JJ. concurring):
The Court found that the district court erred in granting judgment for the credit union without sufficient evidence to establish its claimed security interest. The credit union's answer to the garnishment was unverified and could not be treated as evidence. Additionally, the credit union failed to provide documentation or proof of its interest in the account that would give it priority over the Plaintiff's garnishment lien.
The Court noted that Article 9 of the UCC excludes deposit accounts from its scope, leaving the issue to be governed by common law or other statutory provisions. While the Credit Union Regulatory Act creates a lien and right of set-off for credit unions, the credit union did not provide evidence to show it qualified under the statute or had exercised its rights.
The Court concluded that the pleadings raised a triable issue of fact regarding the priority of the credit union's interest. The case was remanded for trial, where the credit union would bear the burden of proving its superior interest in the account.