Metropolitan Bank & Trust Co. v. Desert Valley Financial LLC

MEMORANDUM

Metropolitan Bank & Trust Co. (Metropolitan) appeals from the district court’s judgment for Pacific Business Capital Corp. (PBCC) after a bench trial on PBCC’s conversion claim. We have jurisdiction under 28 U.S.C. § 1291 . “We review the district court’s findings of fact after a bench trial for clear error and its conclusions of law de novo.” Friends of Yosemite Valley v. Norton, 348 F.3d 789, 793 (9th Cir.2003). We affirm in part and reverse in part.

I

To establish a defense under Uniform Commercial Code (U.C.C.) § 9-308(a) Metropolitan needed to prove that without its own actual knowledge of PBCC’s security interest, it (1) gave new value for the mobile home loan contracts (Home Loans) and (2) took possession of the Home Loans in the ordinary course of its business. See U.C.C. § 9-308 cmt. 3; 9 Anderson on the Uniform Commercial Code § 9-308:7 (1999); see also Cal. Comm.Code § 1201(25)(c) (noting that “[a] person ‘knows’ or has ‘knowledge’ of a fact when he or she has actual knowledge of it.”). The district court incorrectly attributed Mountain Community Bank’s knowledge to Metropolitan. As the district court did not determine whether Metropolitan acted without…