Joseph Stephens & Company, Inc. v. Cikanek

[Editor’s Note: The title of the underlying opinion and of the excerpt in Commercial Transactions Under the Uniform Commercial Code and Other Laws (Donald King et al. eds., 6th ed. 2011) erroneously names the company “Joseph Stephens & Company, Inc.” The correct name of the company is “Joseph Stevens & Company, Inc.”] Joseph Stevens & Company, Inc. (JSC) (plaintiff) had a deposit account in New York maintained by Citibank, N.A. In February 2007, JSC signed a standby letter of credit in favor of the landlord for its New York offices and pledged the New York deposit account as collateral in a security agreement. The security agreement indicated that New York law was to govern the agreement. David Cikanek (defendant) had a failed business relationship with JSC. Cikanek subsequently won an arbitration hearing against JSC. Accordingly, on July 21, 2008, the court entered a final money judgment of $238,519 in Cikanek’s favor. JSC stopped operating its business and, two days later, initiated a supplemental proceeding by issuing several citations to obtain discovery from third parties regarding its assets. Citibank responded to JSC’s discovery request and indicated that the New York deposit account contained $82,688.19. Thereafter, Cikanek, who had not been paid, petitioned the court for a turnover order directing Citibank to turn over the full amount of JSC’s New York deposit account as partial satisfaction of Cikanek’s judgment lien. Citibank objected to turning over the funds and contended that its perfected security interest under Uniform Commercial Code (UCC) Article 9 had priority over Cikanek’s judgment lien.