Feresi v. The Livery, LLC
California Court of Appeals
182 Cal. Rptr. 3d 169 (2014)
Mesa, Feresi (plaintiff), and Hartley were all members of The Livery, LLC (defendant). Mesa owed Feresi a divorce-settlement debt secured by his LLC interest, but Feresi never perfected that security interest. Mesa later borrowed from fellow LLC member Hartley, securing that new loan with the same LLC interest; Hartley knew about Feresi's earlier, unperfected claim to the same collateral but perfected his own interest anyway without telling her. The trial court ruled for Feresi, subordinating Hartley's claim, and the LLC appealed.
Whether a senior secured claim can be equitably subordinated to a junior claim when the senior creditor had a fiduciary relationship with the junior creditor and engaged in inequitable conduct that gave the senior creditor an unfair advantage.