California Court of Appeals, Second District, Sixth Division
[As Modification on January 8, 2015]
Superior Court County of Ventura No. 56-200900362200- CU-CO-VTA Charles R. McGrath, Judge
[Copyrighted Material Omitted]
Goldenring & Prosser, Peter A. Goldenring and James E. Prosser for Defendants and Appellants.
Law Offices of William Crockett, William E. Crockett and Kenneth C. Bounds for Plaintiff and Respondent.
BURKE, J. [*]
The California Uniform Commercial Code
provides that "a financing statement must be filed to perfect all security
interests...." (§ 9310, subd. (a).) It further provides, "A perfected security
interest... has priority over a conflicting unperfected security interest...."
(§ 9322, subd. (a)(2).)
This order of priority is not immutable and in some circumstances must yield
to principles of equity. Here two parties hold security interests in the same
entity. One party perfected his security interest by breaching a fiduciary duty
owed to the party whose security interest was unperfected. We conclude that
equity compels the subordination of the perfected interest to the holder of the
The security interests held by the parties to this
dispute attach to James Mesa's (Mesa) membership share in The Livery, LLC (the
LLC). The competing claimants are Mesa's former wife, Renee Feresi (Feresi) whose unperfected security interest was created in 2006, and Mark Hartley (Hartley) as Trustee of the Fitzgerald-Hartley Pension Plan whose perfected security interest was created in 2008. Hartley is the president and managing member of the LLC.
The LLC and Hartley appeal the trial court's judgment in favor of Feresi. Hartley contends his perfected security interest in Mesa's ownership share of the LLC has statutory priority over Feresi's preexisting but unperfected security interest. Feresi contends Hartley's security interest is invalid because he created the priority of his interest by breaching the fiduciary duty of good faith and fair dealing that he owed to her as a member of the LLC.
We modify the judgment to strike the references to "Mark Hartley, individually" and affirm the judgment as modified.
PROCEDURAL HISTORY AND FACTS
Feresi and Mesa married in 1995 and separated in 2002. During their marriage, the couple acquired a 25 percent interest in the LLC. The LLC began with four investors who owned equal shares. Hartley's family trust was an ...