ALERT - Equitable Principles May Override UCC Seemingly Strict Statutory Scheme of Lien Priorities
Based on a recent California case (Feresi v. Livery, 2014 Cal.App.LEXIS 1138 (Cal.App.2d Dist. Dec. 15, 2014)), equitable principles may override Uniform Commercial Code (“UCC”) priority rules in situations where a creditor breaches his/her fiduciary duty to another creditor. In Feresi, pursuant to a dissolution of marriage judgment, Feresi obtained an interest in an LLC. Feresi’s ex-spouse granted to Feresi a security interest in his remaining LLC interests, which Feresi did not perfect by filing a financing statement. However, Feresi did notify the LLC’s manager of the security interest in her ex-spouse’s remaining LLC membership interest. The LLC manager later made an unsecured loan to the ex-spouse and filed a financing statement in order to perfect the LLC manager’s interest in the...