WESTERMAN STORE EQUIPMENT v. GALATAS

MEMORANDUM OF DECISION AND ORDER ON MOTIONS TO DISSOLVE WORCESTER TRUSTEE EXECUTION

INTRODUCTION

TOOMEY, J.

This matter concerns a dispute among the parties and intervenors, in this Worcester action and in a previous Essex County action (the "Essex action"), as to the rightful holder of a July 18, 1997 promissory note in the amount of $70,000 (the "Note"). The Note, payable in part to defendant Costas Galatas ("Galatas"), was executed by the trustee defendants in this action.The instant motion arises from two separate actions against Galatas — a 1998 Essex County action and a 1999 Worcester County action — in which both courts have ordered attachment of the proceeds of the Note. In addition, defendant Raymond Bandar ("Bandar") asserts that both attachments should be dismissed because Galatas, whose liability is asserted by both lawsuits, has had no interest in the proceeds of the Note since he conveyed the Note to Bandar for consideration in August of 1997.

Shenouda v. Galatas (Essex Civil Action 98-1006)

The co-payee on the Note was one Nikolaos Papaionou ("Papaionou"). On August 10, 2001, Papaionu was found in contempt in the instant action for failure to attend a deposition and failure to appear in response to a contempt summons issued on August 1, 2001.

BACKGROUND

The Essex Action:

In the 1998 Essex action, Mervat Shenouda brought a breach of contract claim against Galatas. Arguing that she was likely to prevail on the merits and that Galatas would be unable to satisfy a judgment against her, Shenouda sought and received from the Essex Superior Court a $45,000 trustee process attachment on the proceeds of the Note. The attachment could be executed if Shenouda eventually obtained judgment against Galatas. Defendant Raymond Bandar intervened and opposed the attachment. Bandar argued that he was the lawful holder of the Note because Galatas had assigned the Note to him for consideration in August of 1997, prior to Shenouda's lawsuit against Galatas. In denying Bandar's motion to dismiss the attachment, the Essex Superior Court (Roseman, J.) ordered that, "[i]f plaintiff recovers judgment, an evidentiary hearing will be held on Bandar's claim that he is the good faith assignee of the note in question." The Essex action is still pending. The Worcester Action

The two cases were consolidated by this court (Toomey, J.) on June 2, 2000. The matters are now wholly within the jurisdiction of the Worcester Superior Court.

In September of 1999, the Worcester District Court issued a $14,311.50 execution for Westerman as a judgment creditor of Galatas. Seeking satisfaction of that debt, Westerman brought an action in Worcester Superior Court to reach and apply any property and proceeds of property in the possession and/or control of Bandar and the trustee defendants, including the proceeds of the Note. In their answer to Westerman's complaint, the trustee defendants denied that they owed money to, or were holding money, goods or credits on behalf of, Bandar.

On February 9, 2000, Westerman obtained a default judgment against Galatas. On March 15, 2000, the Worcester Superior Court ordered a $14,727.88 trustee execution on the proceeds of the Note to satisfy the February 9, 2000 default judgment in favor of Westerman.

On March 21, 2000, Shenouda, the plaintiff in the Essex action, intervened in the Worcester action and moved to vacate the March 15, 2000 trustee execution. Shenouda argued that, because the defendants and trustee defendants in the Worcester action had notice of the prior Essex attachment, their failure to inform the court of the Essex attachment constituted fraud and misrepresentation to the court. In addition, Bandar sought to dismiss both Shenouda's and Westerman's interests in the Note, contending that he was the lawful holder of the Note. The court took no action pending the consolidation, by agreement of all parties, of the Essex and Worcester actions.

The Essex and Worcester actions were consolidated in Worcester Superior Court on June 2, 2000. On January 26, 2001, Bandar moved to vacate the Worcester trustee execution. The motions to dissolve the Worcester trustee execution are now on the table for resolution.

BACKGROUND

In the interests of clarity, an objective unlikely, in these circumstances, to be realized, the court presents a timeline of the occurrences to date:

1.July 18, 1997: Trustee defendants Demakis, Hanna, Gakob and Hanna-Gakob Corp. draft $70,000 Promissory Note payable to Galatas and Papaionou.

2. August 13, 1997: Galatas and Papaionou purportedly assign Note to Bandar in return for $54,000. The assignment is signed by Galatas, but not by Papaionou.

3. August 1997 to Summer of 1998: Trustee defendants continue to make payments on Note to Galatas.

The Essex Action

4. June 8, 1998: Shenouda files breach of contract action against Galatas in Essex Superior Court (Shenouda v. Galatas, Essex Civil Action #8-1066).

5. July 1, 1998: Bandar first informs trustee defendants that, on August 13, 1997, Note was ssigned to him and instructs that all payments on Note be made to him.

6. September 21, 1998: Bandar motion to intervene in Essex action allowed

7. September 21, 1998: Bandar motion opposing Essex trustee process attachment denied after telephone hearing; court orders: "[i]f plaintiff recovers judgment, an evidentiary hearing will be held on Bandar's claim that he is the good faith assignee of the note in question."

8. November 25, 1998: Shenouda receives $45,000 trustee process attachment on Note from Essex court. Shenouda represents to court that she has a reasonable likelihood of success on the merits, that Galatas was adjudged bankrupt in 1992 and 1995, and that the property that secured the Note was sold on December 30, 1997.

The Worcester Action

9. September 24, 1999: Worcester District Court issues execution in amount of $14,311.50 for Westerman as judgment creditor of Galatas.

10. October 22, 1999: Westerman brings action in Worcester Superior Court against Galatas on September 24, 1999 execution and seeks to reach and apply, in satisfaction of the debt, property and proceeds of property in the possession and/or control of Bandar and Trustee Defendants

11. December 14, 1999: Trustee defendants file answer to Westerman action, asserting that trustee defendants' obligation on Note is to Galatas and Papaionou, that, since July of 1998, payments on Note have been made to Papaionou and Attorney Demakis, and that payments to Demakis have been held in escrow account at Lynn Community Credit Union. The trustee defendants deny that they owe money to, or are holding money, goods or credits on behalf of, Bandar.

12. January 26, 2000: Bandar's motion in opposition to trustee execution denied without prejudice.

13. February 9, 2000: Rule 55(b)(2) and 54(b) default judgment enters for Westerman against Galatas in Worcester Superior Court.

14. March 15, 2000: Worcester Superior Court issues $14,727.88 Trustee Execution on Note to satisfy February 9, 2000 judgment for Westerman.

15. March 21, 2000: Mervat Shenouda, plaintiff in Essex action, moves to intervene in Worcester action and to vacate Worcester trustee execution on Note.

16. May 12, 2000: Shenouda's motion to intervene is allowed by agreement. The court takes no action on motion to vacate trustee execution, pending consolidation, by agreement of all parties, of the Essex and Worcester actions.

17. June 2, 2000: Essex and Worcester actions are consolidated in Worcester Superior Court.

18. January 26, 2001: Bandar moves to vacate Worcester trustee execution, claiming that he, not Galatas, is the lawful holder of the Note.

19. October 5, 2001: Oral argument, in Worcester Superior Court, on motion to vacate trustee execution.

DISCUSSION

The question before this court is whether to dissolve the trustee execution entered in the Worcester action. Given the complicated procedural history of this case, and the fact that a competing attachment issued on the same Note in the Essex action, an attempt to answer that question now would be premature. The issue of whether Bandar was a good faith holder of the Note was considered by the Essex Superior Court when it denied Bandar's motion to intervene in the Essex action. The Essex court decided that the Shenouda — Galatas breach of contract case should be decided on the merits before the question of the validity of the assignment to Bandar was addressed at an evidentiary proceeding. This court is similarly inclined.

The discovery conducted by the parties raises questions as to whether Bandar is a good faith holder of the Note. An evidentiary hearing will likely be required to resolve those questions. Now that the Essex and Worcester actions have been consolidated, circumstances suggest that resolution of Shenouda's breach of contract action against Galatas, by trial or otherwise, is the next appropriate occurrence in this gallimaufry. As the Essex Superior Court ordered, once the Essex portion of the now-consolidated matter has been resolved, the court will proceed, if necessary, to address the validity of Bandar's claim to be a good faith holder of the Note. The resolution of the breach of contract action and the determination of Bandar's rights in the Note will then guide the court in its resolution of Bandar's and Shenouda's motions to dissolve the Worcester trustee execution.

ORDER

For the foregoing reasons, it is hereby ORDERED that the motions to dissolve the Worcester County Trustee execution are DENIED without prejudice pending resolution of the Shenouda-Galatas breach of contract claim and, if necessary, an evidentiary determination as to the validity of Bandar's status as an assignee of the Note.

________________________ Daniel F. Toomey Justice of the Superior Court

Dated: January, 2002