Judgment creditors frequently encounter difficulties enforcing their judgments against debtors, particularly those in distressed circumstances. A recent decision by the Ohio Court of Appeals in Wulco v. The O’Gara Group & Monroe Capital Partners Fund, 2023 WL 7292951 (Ohio Ct. App. Nov. 6, 2023), involved a battle between a judgment creditor and a UCC secured creditor, each seeking to obtain funds in a debtor’s bank account. The court examined not only the relative rights of the creditors as to those funds, but also whether a court clerk to whom the funds were transferred (as part of garnishment proceedings) could be a “transferee” under Section 9-332 of the Uniform Commercial Code, thereby stripping away any prior security interest.

Factual Background

In December 2021 and January 2022, The O’Gara Group Inc., a manufacturer of tactical vehicles for the U.S. military, purchased armor components and other military equipment from Wulco Inc., a supplier of those products. Because of financial difficulty, O’Gara failed to pay for those purchases or to make payments on tens of millions of dollars in loans to various lenders.