Superior Court of Ventura County
Procedural Posture
Plaintiffs sought review of the judgment of the Superior Court of Ventura County (California) entered pursuant to the trial court decision to grant defendants' motion for judgment on the pleadings.
Overview: judicial council of california civil jury instructions
Plaintiffs leased property for their business, which they later sold, including the lease. The purchase was secured by a statement that conformed with the Uniform Commercial Code (UCC). Defendants opened an escrow that included instructions that the note be secured by a security agreement that included the leasehold interest and that it would be recorded. The purchaser defaulted on the note and filed for protection under the bankruptcy laws. Over plaintiffs' objection, the bankruptcy court entered an order approving the purchasers' assumption of the lease. The trustee in bankruptcy found a buyer for the business, and plaintiffs agreed to take a note of a lesser amount. Plaintiffs then sued defendants for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and negligence. Defendants moved for judgment on the pleadings. The trial court granted the motion, and plaintiffs appealed. The court affirmed, finding that the security interest in a leasehold was not governed by the UCC, but by the laws of real estate mortgages, and, therefore, plaintiffs received a perfected security interest in the lease.
Outcome
The court affirmed the judgment of the trial court that entered judgment in favor of defendants and awarded defendants costs because, although security interests in real estate leases were not governed by the Uniform Commercial Code (UCC), a UCC financing statement that specifically stated that it covered a leasehold interest was sufficient to constitute a leasehold mortgage.
The Plaintiffs failed to show reliance and causation. The Plaintiffs also failed to cast doubt on the accounting. Judgment was based on the accounting alone, and no violation of the anti-deficiency rules occurred. Additionally, the damage and prejudgment interest award was upheld, as plaintiffs had not objected and issues not raised in the trial court could not be raised for the first time on appeal.