Feresi

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 unperfected interest.

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…