Liaison West Distribution v. West Central Produce CA4/3 ( 2023 )

Filed 5/5/23 Liaison West Distribution v. West Central Produce CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
LIAISON WEST DISTRIBUTION, INC.,
Plaintiff and Respondent, G061288
v. (Super. Ct. No. 30-2020-01166843)
WEST CENTRAL PRODUCE, INC., OPI NION
Defendant;
WCP PARENT, LLC,
Third Party Claimant and Appellant.
Appeal from an order of the Superior Court of Orange County, Nancy E.
Zeltzer, Judge. Affirmed.
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.
FACTS
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.”
1 All further statutory references are to the California Uniform Commercial Code unless
otherwise indicated.
2 “Resolving conflicting claims in the same collateral requires a three-step inquiry: First,
has the security interest attached; second, has the security interest been perfected; and
third, does the perfected security interest have priority. [Citation.] Once a security
interest has attached to the debtor’s collateral [citation], perfection of a security interest
makes it enforceable against third parties and priority determines which of competing
claims to collateral will take precedence [citation].” (Oxford Street Properties, LLC v.
Rehabilitation Associates, LLC (2012) 206 Cal.App.4th 296, 308.)
2
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 working-
capital-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) [ “control” necessary to perfect security interest in deposit
account].) 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),
3
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 (N.D.Cal. May 25, 2016, No. 16-mc-
80059-EMC) 2016 U.S. Dist. LEXIS 68744, at *21-23 (Stierwalt).)
4
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) (as the more specific statute that
applies to funds transferred from a deposit account) controlled over section 9315(f) (the
more general provision about whether a security interest survives disposition of
collateral).
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.
3 Parent elected to proceed without a record of oral proceedings.
5
Accordingly, the court denied Parent’s third-party claim and directed payment of the
levied funds to Liaison West.
DISCUSSION
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.) “The one contesting that result thus bears the burden of showing legal
error. That requires legal authority.” (Singman v. IMDB.com, Inc. (2021) 72
Cal.App.5th 1150, 1151 (Singman); Cal. Rules of Court, rule 8.204(a)(1)(B) [appellate
brief must “support each point by argument and, if possible, by citation of authority”].)
“‘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.)
6
Parent relies primarily on the first step of this process, the plain meaning of
the statutory language. It states “the purpose of [section 9315(f)] is to maintain the status
quo of assets” held by the levying officer while the court determines who has priority.
Without citation to authority, Parent jumps to the conclusion that the trial court changed
the characterization of the funds—in contravention of section 9315(f)—by treating
Liaison West as a transferee under section 9332(b). In essence, Parent contends a levying
officer who possesses funds levied from a deposit account is not a “transferee” within the
meaning of section 9332(b). This argument, however, skips past a discussion of the plain
meaning of section 9332(b).
To ascertain a statute’s plain meaning, “‘[w]e consider the ordinary
meaning of the relevant terms, related provisions, terms used in other parts of the statute,
and the structure of the statutory scheme.’” (Hirschfield v. Cohen (2022) 82 Cal.App.5th
648, 660.) “‘The meaning of a statute may not be determined from a single word or
sentence[.]’” (Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 659.)
“‘[E]ven though a statute may appear to be unambiguous on its face, when it is
considered in light of closely related statutes a legislative purpose may emerge that is
inconsistent with, and controlling over, the language read without reference to the entire
scheme of the law.’” (Hirschfield, at p. 660.) If the statutory text “is unambiguous and
provides a clear answer, we need go no further.” (Microsoft Corp. v. Franchise Tax Bd.
(2006) 39 Cal.4th 750, 758.)
Parent’s reading of section 9315(f) is not so clear-cut when considered
against the text of section 9332(b). As relevant here, section 9332(b) provides that “[a]
transferee of funds a deposit account takes the funds free of a security interest in the
deposit account[.]” The term “transferee” is not defined under section 9332(b), but it is
commonly understood as “a person to whom a conveyance or transfer is made.”
(Webster’s 3d New Internat. Dict. (2002) p. 2427.) A levying officer who receives bank
funds appears to fit within this definition. Although the term “transferee” is not found in
7
section 9315, the Assembly Committee comment to section 9315 states there are “several
provisions under which a transferee takes free of a security interest” and “[s]ection 9332
enables most transferees (including non-purchasers) of funds from a deposit account . . .
to take free of a perfected security interest in the deposit account[.]” (Assem. Com. com.,
23B pt.2 West’s Ann. Cal. Comm. Code, 1999 Addition, foll. § 9315, p. 322.) The
recognition that section 9332 may prevail over section 9315 cuts against Parent’s plain-
meaning interpretation of section 9315(f).
Because the statutory text is unclear, it is necessary to look to legislative
history and other interpretative aids. (Weiss v. City of Del Mar (2019) 39 Cal.App.5th
609, 618.) Parent contends that application of section 9332(b) here would nullify the
third-party claim procedures in the Enforcement of Judgment Laws. (§§ 720.210 et seq.
& 720.310 et seq.) Unfortunately, Parent provides no analysis of the legislative history
of section 9315(f) or the Enforcement of Judgment Laws generally. Without
“‘meaningful legal analysis supported by citations to authority,’” this generalized
complaint fails to satisfy Parent’s “‘burden to affirmatively show error.’” (Estrada v.
Royalty Carpet Mills, Inc. (2022) 76 Cal.App.5th 685, 730.)
In short, Parent’s failure to undertake meaningful or reasoned statutory
interpretation dooms this appeal. As presented, its briefing “effectively asks the appellate
court to become the appellant’s lawyer. A court cannot fairly embrace this partisan role.”
(Singman, supra, 72 Cal.App.5th at pp. 1151-1152.)
8
DISPOSITION
The order is affirmed. Respondent to recover costs on appeal.
DELANEY, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
SANCHEZ, J.
9