Saga Irvine Co. Ltd. v. Cyberlink Technologies, Inc.
Published: Jul. 3, 1999 | Result Date: May 12, 1999 | Filing Date: Jan. 1, 1900 |Case number: 784468 Verdict – $98,648
Facts
The defendant, Cyberlink Technologies, Inc. leased commercial property from the plaintiff, Saga Irvine LLC, the successor agent to plaintiff Saga Irvince Co., Ltd. In July 1997, Cyberlink stopped paying rent and, instead, deposited its rent in Cyberlink's attorney trust account. Saga filed an unlawful detainer action to recover the premises and unpaid rent. In January 1998, Saga obtained summary adjudication of its unlawful detainer claim and a writ of attachment for $95,669.14, representing Saga's minimum provable damages against Cyberlink. Pursuant to a stipulated court order, Cyberlink's attorney deposited the previously deposited rent into an interest-bearing bank account in lieu of a non-interest-bearing account with the Sheriff's Office. The account remained untouched by either Saga or Cyberlink pending the outcome of the unlawful detainer lawsuit. Six months after the account was created, Cyberlink declared bankruptcy. In late 1998, Saga obtained leave from the bankruptcy court to seek recovery of its damages from the account. Cyberlink's lender, third-party claimant Silicon Valley Bank, also obtained relief from the bankruptcy court to recover $275,000 of its loan to Cyberlink. The bank filed a third-party lien against the account and asserted it had a superior right in the funds in the account by virtue of its UCC-1 Financing Statement securing the bank's loan with Cyberlink's assets.
Settlement Discussions
No significant settlement discussions were held between Saga and Cyberlink. The bank offered to release its lien in exchange for $50,000 the day before trial. On the morning of trial, the bank offered to release its lien for $5,000. Saga offered the bank $1,000 to release its lien on the morning of trial.
Other Information
The court held that the bank failed to comply with the statutory prerequisites for filing a third-party lien and failed to meet its evidentiary burden of tracing the funds in the account to the bank's collateral. The case presented the issue of whether the voluntary payment by a defendant into an interest-bearing account in lieu of the plaintiff levying a writ of attachment creates a lien in favor of the plaintiff in the interest-bearing account.
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