Procedural Posture

Procedural Posture

Appellant subordinate secured party sought review of an order of the Superior Court of Los Angeles County (California) that found a subordination agreement was valid and supported by consideration, and granted summary judgment in favor of appellee first secured party.

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Appellee first secured party entered into a security agreement with debtor. Appellant subordinate secured party entered into a written consignment with debtor. Each party had a security interest in debtor’s inventory. Appellee and appellant entered a written subordination agreement in which they agreed appellant’s interest would be junior to appellee’s interest. Appellee filed suit against appellant for conversion of the inventory. Appellant cross-claimed for fraud. The trial court granted appellee’s motion for summary judgment. Appellant sought review. Summary judgment was proper only if there were no facts that gave rise to a triable issue. The court found a question of fact existed as to what constituted consideration in the subordination agreement because it was unclear as to whether appellee was required to continue to finance the debtor. When the terms of the contract were ambiguous, the parties were entitled to an opportunity to establish the facts. The court reversed and remanded because the trial court improperly decided a factual question when it decided what constituted consideration.


Summary judgment granted by the lower court in favor of appellee first secured party was reversed and the case was remanded because there was an ambiguity in a subordination agreement as to what constituted consideration creating an issue for the trier of fact.

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