Liaison W. Distribution, Inc. v. W. Cent. Produce
| Decision Date | 05 May 2023 |
| Docket Number | G061288 |
| Parties | LIAISON WEST DISTRIBUTION, INC., Plaintiff and Respondent, v. WEST CENTRAL PRODUCE, INC., Defendant; WCP PARENT, LLC, Third Party Claimant and Appellant. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County Super Ct. No. 30-2020-01166843, Nancy E. Zeltzer, Judge.
Buchalter, Matthew L. Seror and Robert M. Dato for Third Party Claimant and Appellant.
Ramsaur Law Office and Brett H. Ramsaur for Plaintiff and Respondent.
WCP Parent, LLC (Parent) appeals a trial court order denying its third-party claim of a superior security interest in bank funds levied by judgment creditor Liaison West Distribution, Inc. (Liaison West). Parent contends the court erred by misinterpreting certain provisions of the California Uniform Commercial Code.[1] But because Parent failed to adequately brief the issue, we conclude it has forfeited the issue on appeal. We thus affirm the order.
After a years-long business relationship, West Central Produce, Inc. (WCP) failed to pay Liaison West for shipments of truffle oil. Liaison West sued and obtained a default judgment of nearly $35,000 against WCP for the unpaid invoices.
To collect on the judgment, Liaison West levied a writ of execution on a Wells Fargo Bank deposit account in WCP's name. The levy reached $34,906.66 of the $55,784.59 held in the account at the time.
While the funds were with the levying officer, Parent filed a third-party claim to establish that its security interest in the funds was superior to Liaison West's execution lien.[2] (Code Civ. Proc., § 720.210, subd. (a).) Parent claimed it was the assignee of certain loan documents executed by WCP and held a security interest in "all personal property of WCP, including money in bank accounts."
The third-party claim set forth the following facts to support the security interest: WCP borrowed money from and opened a $30 million demand line of credit with HSBC Bank USA (HSBC), as memorialized in a loan agreement and workingcapital-line letter agreement. WCP executed a $2.25 million term note, a $1.75 million line of credit, and a $30 million revolving demand note. To secure the debt, WCP executed three security agreements granting HSBC a security interest in all of WCP's personal property. To perfect its security interest, HSBC filed three Uniform Commercial Code (UCC) financing statements, each identifying HSBC as the secured party, WCP as the debtor, and the collateral as "[a]ll Personal Property now owned or hereafter acquired." HSBC later assigned its interests in these loans, lines of credit, security agreements, and UCC financing statements to Parent for $3.25 million. This assignment was also reflected in three filed UCC financing statement amendments. Parent valued its secured claims against WCP at $28 million and asked the trial court to order the levied funds released to it, instead of Liaison West.
Liaison West conceded Parent's security interest was created and had attached to WCP's personal property before the execution lien, but it raised two points in opposition. First, it claimed Parent failed to show a perfected security interest in the Wells Fargo account because there was no evidence Parent controlled the account. (§§ 9104, 9314, subd. (a) [].) Second, it maintained that notwithstanding a perfected security interest held by Parent, it took the levied funds free and clear pursuant to section 9332, subdivision (b) (section 9332(b)) and Orix Financial Services, Inc. v. Kovacs (2008) 167 Cal.App.4th 242 (Orix Financial Services). Section 9332(b) provides, subject to an exception not applicable here, that "[a] transferee of funds from a deposit account takes the funds free of a security interest in the deposit account[.]" And the court in Orix Financial Services held "an unsecured judgment creditor, who satisfies its judgment from deposit account funds, [is] included in the definition of 'transferee' as contemplated by section 9332(b), such that it may take those funds free of any security interest." (Orix Financial Services, at p. 246.)
Parent in turn filed a response brief that cited only section 9315 in support of its position. It asserted for the first time that the levied funds represented proceeds of WCP's accounts receivable, and WCP's chief financial officer filed a declaration to that effect. Parent contended its security interest in the accounts receivable was perfected by filing the UCC financing statements and continued to be perfected as "identifiable cash proceeds" in the Wells Fargo account. (§ 9315, subds. (c)-(d).) Without citation to authority, it argued Liaison West was not a "transferee" under section 9332(b) because it "never actually took possession of the funds at issue." Parent interpreted section 9315, subdivision (f) (section 9315(f)), which provides that "[c]ash proceeds retain their character as cash proceeds while in the possession of the levying officer pursuant to . . . [the Enforcement of Judgment Laws]," to mean that Liaison West could not be a transferee while the levying officer held the funds. According to Parent, Orix Financial Services was factually distinguishable because the judgment creditor there actually possessed the funds.
In reply, Liaison West cited an unpublished opinion in which a federal district court, expanding on Orix Financial Services, concluded "that there was a transfer pursuant to § 9332(b) when the U.S. Marshal levied upon the bank account, such that [the judgment creditor] 'takes the funds free of a security interest in the deposit account.'" (Stierwalt v. Associated Third Party Administrator 2016 U.S. Dist. LEXIS 68744, at *21-23 (Stierwalt).)
A hearing was held on the third-party claim.[3] As neither Orix Financial Services nor Stierwalt discussed section 9315(f), the trial court asked for "supplemental briefing on whether [s]ection 9315(f) impacts Liaison West's status as a transferee of the [l]evied [f]unds under [s]ection 9332(b)."
In its supplemental briefing, Liaison West argued section 9315(f) "exists, by its own language, simply to preserve the character of funds held by a levying officer during the claims determination process-not to alter the legal analysis of such third-party claim adjudication, such as a determination of rights under section 9332(b) here." (Boldface omitted.) It further contended section 9332(b) () controlled over section 9315(f) ().
Parent's supplemental brief cited section 9315(f) again and asked the trial court to accept its interpretation of the competing statutes over the construction offered by Liaison West. The court noted the absence of new law in Parent's briefing: "Not surprisingly, no[ ] additional decisional authority was unearthed addressing this very specific issue."
Ultimately, the trial court denied Parent's claim. Despite finding Parent had "a superior, perfected, security interest in the subject account," the court concluded "Liaison West is a transferee of the levied funds for purposes of section 9332(b) and takes the funds free of WCP Parent's security interest." The court interpreted section 9315(f) as not impacting or changing its analysis of who has priority over the funds. In the court's view, the levying officer was "similar to a middleman," Liaison West was the transferee, and the levy was "complete" when the funds reached the levying officer.
Accordingly, the court denied Parent's third-party claim and directed payment of the levied funds to Liaison West.
Parent contends that unless and until Liaison West receives the funds from the levying officer, Liaison West cannot invoke section 9332(b) to defeat Parent's perfected security interest in those funds. Parent asks us to instead determine that section 9315(f) prevails over section 9332(b). Parent does not cite, nor could we find, case law examining the interplay between these provisions. The issue calls for statutory interpretation-an effort that Parent failed to adequately undertake. For this reason, we conclude the issue is forfeited on appeal.
"[I]t is a fundamental principle of appellate procedure that a trial court judgment is ordinarily presumed to be correct[.]" (Jameson v. Desta (2018) 5 Cal.5th 594, 608-609.) (Singman v. IMDB.com, Inc. (2021) 72 Cal.App.5th 1150, 1151 (Singman); Cal. Rules of Court, rule 8.204(a)(1)(B) [].) "'Mere suggestions of error without supporting argument or authority other than general abstract principles do not properly present grounds for appellate review.'" (Multani v. Witkin &Neal (2013) 215 Cal.App.4th 1428, 1457 (Multani).) Simply put, "[a]n absence of legal authority forfeits an appellant's cause." (Singman, at pp. 1151-1152.)
"[T]he objective of statutory interpretation is to ascertain and effectuate legislative intent." (Nolan v. City of Anaheim (2004) 33 Cal.4th 335, 340.) Under well-settled principles, "[t]his process involves up to a three-step inquiry in which 'we first look to the plain meaning of the statutory language, then to its legislative history and finally to the reasonableness of a proposed construction.'" (290 Division (EAT), LLC v. City and County of San Francisco (2022) 86 Cal.App.5th 439 453.)
Parent relies primarily on the...
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