Myzer

Jeff Myzer brought this class action on behalf of employees of Emark Corporation (Emark) who had been denied wages and benefits due. The court denied his motion to determine priority of claims and granted the cross-motions of defendants Pat Keig, Mike Rummel and Rieck and Crotty, P.C. (Rieck & Crotty), Emark’s secured creditors. Myzer appeals the denial of his motion and the ensuing judgment, contending the employees’ claims are entitled to priority under Code of Civil Procedure section 1205. We agree.

Factual and Procedural Background

Rieck & Crotty’s Claim

Rieck & Crotty were Emark’s corporate counsel until around March 1993. On April 29, 1992, Emark executed a $170,000 promissory note and an agreement granting Rieck & Crotty a perfected security interest in accounts, general intangibles, inventory, equipment, cash and records. On July 1, 1993, after Emark defaulted, Rieck & Crotty agreed not to seek immediate enforcement in exchange for a $229,260.62 note secured by the same collateral.

After Emark again defaulted, Rieck & Crotty foreclosed and acquired the collateral through a $170,000 credit bid at the November 11, 1993, foreclosure sale, subject to prior secured…