Filed 3/23/23 Outsource v. Horizon Communications Technologies CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion 

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

OUTSOURCE, LLC,

Plaintiff and Appellant,

v.

HORIZON 

COMMUNICATIONS 

TECHNOLOGIES, INC. et al., 

 Defendants;

SUNWEST BANK,

Third Party Claimant 

and Respondent.

 B314438

 (Los Angeles County

 Super. Ct. No. 

 20STCV20862)
2

APPEAL from an order of the Superior Court of Los 

Angeles County, Stephen I. Goorvitch, Judge. Reversed.

Parcells Law Firm and Dayton B. Parcells III for Plaintiff 

and Appellant.

Procopio, Cory, Hargreaves & Savitch, Steven Casselberry, 

and Stephen Isbell for Third Party Claimant and Respondent. 

* * * * * *

The trial court ruled that the funds held in a bank deposit 

account belonged to a third party possessing a security interest in 

those funds as collateral for its prior loans to the account holder 

rather than to a different creditor who had sued the account 

holder and had obtained a writ of attachment against the funds 

in the deposit account. This was error, so we reverse.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. Horizon borrows money from Sunwest Bank

On August 6, 2018, Horizon Communications Technologies, 

Inc. (Horizon) took out two small business loans—each in the 

amount of $1 million—from Sunwest Bank (Sunwest).

For each loan, Horizon executed a Commercial Security 

Agreement, in which Horizon granted Sunwest a “blanket” 

“security interest” in many of its assets as “[c]ollateral to secure 

the indebtedness.” That collateral included Horizon’s “deposit 

accounts.”

On August 20, 2018, Sunwest filed a UCC financing 

statement as to each loan with the California Secretary of State. 
3

B. Horizon defaults on payment plan with 

Outsource

In February 2019, Horizon signed an “Agreement for 

Payment Plan” with Outsource, LLC (Outsource). In that 

agreement, Horizon admitted that it owed Outsource $433,261.66 

for temporary staffing services previously provided by Outsource 

pursuant to a 2010 contract between the two entities; Horizon 

agreed to pay a discounted amount of $265,190.63 pursuant to a 

weekly payment schedule; and Outsource agreed to accept this 

discounted amount in lieu of the full amount if Horizon timely 

made all scheduled payments. 

Horizon stopped making the agreed-upon weekly payments 

in August 2019.

II. Procedural Background

A. Outsource sues and obtains a writ of 

attachment

On June 3, 2020, Outsource sued Horizon and its owner

(who had personally guaranteed Horizon’s obligations in the 

original 2010 contract for services) for (1) breach of contract, (2) 

account stated, (3) open book accounts, and (4) common counts. 

All of these claims stem from Horizon’s failure to make the 

payments under the 2019 payment plan agreement.

On June 23, 2020, the trial court issued Outsource a right 

to attach order and writ of attachment. The court ordered that, 

during the pendency of the litigation and so long as Outsource

posted a $10,000 undertaking, Outsource had the right to attach 

Horizon’s property—including “all money in [Horizon’s] deposit 

accounts”—in the amount of $562,652.90.

On July 22, 2020, Outsource served a notice of attachment 

on Comerica Bank, where Horizon had a deposit account with a 
4

balance of $193,973.41, and Comerica Bank remitted those funds 

to the levying officer (the local sheriff’s department). 

B. Sunwest files a third party claim

On August 3, 2020, Sunwest filed a third party claim with

the levying officer asserting that (1) it held a security interest in 

Horizon’s deposit account, and (2) its security interest was senior 

to Outsource’s writ of attachment. In response, Outsource filed a 

petition in the trial court seeking a determination of the validity 

of Sunwest’s claim, arguing that Sunwest’s third party claim was 

“defective and ineffective” because Horizon had not defaulted on 

either of Sunwest’s loans and Sunwest only had a security 

interest in the event of a default. 

Almost one year later, and after further briefing, discovery, 

and a hearing, the trial court on July 14, 2021, ruled that 

Sunwest’s third party claim “is valid and entitled to priority.” 

The court found that Sunwest “has the senior lien” because it 

filed its UCC financing statements in 2018, which was before 

Outsource obtained a writ of attachment in 2020. The court also 

concluded that Outsource’s focus on whether Horizon was in 

default on its loans with Sunwest “misse[d] ‘the forest for the 

trees’” because the only “dispositive issue” was whether Sunwest 

had a “superior security interest,” not whether Sunwest could 

foreclose on that interest due to a default.

C. Appeal

Outsource filed this timely appeal.

DISCUSSION

Outsource argues that the trial court erred in determining 

that Sunwest’s security interest in the funds in Horizon’s deposit 

account was superior to its lien that was created by the writ of 

attachment. By virtue of the writ of attachment issued by the 
5

trial court, Outsource has a pre-judgment lien in the amount of 

the anticipated judgment in its pending lawsuit that reaches the 

funds contained in Horizon’s deposit account. (Code Civ. Proc., §§ 

483.010, subd. (a) [requirements for issuance of writ of 

attachment], 484.010, 488.500, subd. (a), 488.455 [writ of 

attachment on deposit account]; Whitehouse v. Six Corp. (1995) 

40 Cal.App.4th 527, 532.) California’s Enforcement of Judgments 

Law (Code Civ. Proc., § 680.010 et seq.) creates a procedural 

mechanism by which a third party who is a stranger to a pending 

lawsuit and who has a security interest in the property subject to 

a pre-judgment lien (here, Sunwest) can initiate a claim with the 

levying officer that triggers the trial court that issued the writ of 

attachment to decide whether the third party’s security interest 

is “superior” to the pre-judgment lien (and, if the court so decides,

to prevent the plaintiff-creditor with that lien from having a 

superior entitlement to the funds at issue if a verdict is 

ultimately rendered in its favor). (Id., §§ 488.110, 720.210, subd. 

(a), 720.220, 720.390.) This mechanism is a “summary 

proceeding” (Cassel v. Kolb (1999) 72 Cal.App.4th 568, 579-580

(Cassel)), and the third party has the initial burden of showing 

that it has a security interest superior to the pre-judgment lien 

(Code Civ. Proc., §§ 720.360, 720.210, subd. (a) [requiring proof of 

“superior” “security interest”]; cf. Oxford Street Properties, LLC v. 

Rehabilitation Associates, LLC (2012) 206 Cal.App.4th 296, 307 

(Oxford Street Properties) [once initial burden is met, burden 

shifts to lien creditor to rebut third party’s showing of 

superiority]). Under California law and as pertinent here, a third 

party’s security interest in specific property is “superior” to a prejudgment lien over that property if (1) the third party’s security 

interest has “attached” to that property; and (2) the third party’s 
6

security interest is senior to the pre-judgment lien. (Oxford 

Street Properties, supra, 206 Cal.App.4th at p. 308.)

In evaluating a trial court’s order granting or denying a 

third party’s claim of a superior security interest, we review 

issues of law de novo and any factual findings for substantial 

evidence. (Cassel, supra, at p. 574; Oxford Street Properties, 

supra, 206 Cal.App.4th at p. 307.)

I. By the Time Outsource Obtained Its Pre-judgment 

Lien, Had Sunwest’s Security Interest Attached to 

Horizon’s Deposit Account at Comerica Bank?

A “security interest” is “an interest in” collateral, and 

“collateral” is any property that “secures payment or performance 

of an obligation.” (Cal. U. Com. Code, §§ 1201, subd. (a)(35) 

[defining “security interest”], 9102, subd. (a)(12) [defining 

“collateral”].) A security interest “attaches” to collateral if (1) the 

secured party has provided value for its interest in the collateral, 

(2) the debtor has rights (or the power to transfer rights) in that 

collateral, and (3) the debtor has signed a security agreement 

that identifies the collateral. (Id., § 9203, subds. (a) & (b), 9102, 

subd. (a)(7) [defining “authentication” as signature].)

In this case, the trial court correctly concluded that

Horizon’s deposit account was “collateral” and that Sunwest’s

security interest in that collateral had “attached” back in 2018 

(and hence prior to the issuance of Outsource’s pre-judgment lien 

in 2020). Horizon’s deposit account at Comerica Bank secured

Horizon’s payment or performance of the two small business 

loans Sunwest made to Horizon. Further, Sunwest’s security 

interest had attached to the deposit account back in 2018. That 

is because, as a result of Sunwest’s loans and the Commercial 

Security Agreements, (1) Sunwest provided value (namely, the 
7

two $1 million loans) for the deposit account serving as collateral 

for those loans, (2) Horizon had rights in its own deposit account, 

and (3) Horizon signed a Commercial Security Agreement for 

each loan that identified the deposit account as collateral. 

Outsource resists this conclusion with two arguments.

First, Outsource argues that California Uniform

Commercial Code section 9332, subdivision (b), entitles it to 

possession of the funds in Horizon’s deposit account “free of 

[Sunwest’s] security interests.” Outsource is wrong. To be sure, 

that section provides that a “transferee of funds from a deposit 

account” takes “the funds free of a security interest” (Cal. U. 

Com. Code, § 9332, subd. (b)), and the term “transferee” has been 

interpreted broadly (Orix Financial Services, Inc. v. Kovacs 

(2008) 167 Cal.App.4th 242, 250). But even a broad definition of 

“transferee” does not reach a party—like Outsource—to whom 

funds were never actually transferred. Outsource obtained a writ 

of attachment and obtained a pre-judgment lien as to the funds in 

Horizon’s deposit account (Code Civ. Proc., § 488.500, subd. (a)), 

but Sunwest’s third party claim halted the transfer of those funds 

into Outsource’s proverbial hands (and, indeed, a transfer of 

those funds could not in any event happen unless and until 

Outsource prevails in its lawsuit against Horizon (Code Civ. 

Proc., §§ 720.250, subd. (a) [levying officer may not execute writ 

after third party claim timely filed], 697.020; Brun v. Evans 

(1925) 197 Cal. 439, 442 [pre-judgment attachment lien merges 

into judgment lien]; Anderson v. Schloesser (1908) 153 Cal. 219, 

222-223 [“The effect of levying an attachment against the 

property of the defendant was merely to create a lien on that 

property as security for any judgment that might be recovered”])).
8

Second, Outsource argues that Sunwest’s security interest 

never attached to Horizon’s deposit account because the plain 

language of the parties’ security agreements specifies that no 

security interest attaches until Horizon defaults on Sunwest’s 

loans. Again, Outsource is wrong. To be sure, “a security 

agreement is effective according to its terms.” (Cal. U. Com. 

Code, § 9201, subd. (a).) However, the plain language of the 

security agreements here does not use default on the loan as a 

trigger for attachment of the security interest; instead, the

agreements use default as the trigger for Sunwest’s right to 

possess the collateral and to execute the rights of a secured 

creditor vis-à-vis secured collateral. (See generally Cal. U. Com. 

Code, § 9601 [enumerating rights of a secured party after debtor’s 

default].)

II. Is Sunwest’s Security Interest Senior to the Prejudgment Lien?

The trial court erred in concluding that Sunwest’s security 

interest in Horizon’s deposit account was “senior” to Outsource’s 

pre-judgment lien. 

California law provides that the determination of whether 

a security interest that has attached to a deposit account in a 

bank is senior to a pre-judgment lien is a function—not of 

California law—but of “[t]he local law of the bank’s jurisdiction.” 

(Cal. U. Com. Code, § 9304, subd. (a).) Which jurisdiction is “the 

bank’s jurisdiction” is defined, in order of preference, as (1) the 

jurisdiction expressly identified as the “bank’s jurisdiction” in “an 

agreement between the bank and” the deposit account holder (id., 

subd. (b)(1)); (2) the jurisdiction identified for choice-of-law 

purposes in such an agreement (id., subd. (b)(2)); (3) the 

jurisdiction identified in such an agreement as the location where 
9

the deposit account is maintained (id., subd. (b)(3)); (4) the office 

identified in the bank’s account statements as the office serving 

the account holder’s account (id. subd. (b)(4)); or (5) the location 

of “the chief executive office of the bank” (id., subd. (b)(5)). 

Because Sunwest did not introduce the agreement between 

Comerica Bank and Horizon, did not introduce any account 

statements, and did not introduce any evidence on where 

Comerica Bank’s chief executive office is located, we have no idea 

which jurisdiction is Comerica Bank’s jurisdiction. This 

evidentiary void is fatal to Sunwest’s third party claim. Without 

that information, which was Sunwest’s burden—as the third

party movant—to establish, we cannot determine which “local 

law” to apply to assess perfection and priority. Because 

“perfection of a security interest makes it enforceable against 

third parties and priority determines which of competing claims 

to [the deposit account] will take precedence” (Oxford Street 

Properties, supra, 206 Cal.App.4th at p. 308), we are unable to 

conclude that Sunwest met the governing standard for perfection 

and priority set by the unknown local law of Comerica Bank.

Even if we were to assume that California is Comerica

Bank’s “jurisdiction,” Sunwest satisfied neither of the two 

pertinent methods of establishing the seniority of its security 

interest. Under California law, a third party with a security 

interest in collateral establishes the seniority of that security 

interest by showing that, prior to the time that the pre-judgment 

lien was created, either (a) the third party “perfected” its security 

interest in that collateral, or (b) the third party signed a “security 

agreement” and properly filed a UCC financing statement that 

both identify that collateral. (Cal. U. Com. Code, §§ 9317, subd. 
10

(a)(2), 9203, subd. (b)(3)(A); Oxford Street Properties, supra, 206 

Cal.App.4th at p. 308.)1

Sunwest did not establish that it ever perfected its security 

interest in Horizon’s deposit account. Under California law, a 

security interest in a deposit account is perfected by the secured 

party’s “control of the collateral.” (Cal. U. Com. Code., §§ 9312, 

subd. (b)(1), 9314, subd. (a); see also Official Comments on the 

Cal. U. Com. Code foll. § 9104 [“when a deposit account is taken 

as original collateral, the only method of perfection is obtaining 

control”].) California law defines “control” as being when (1) the 

secured party is the bank where the deposit account is 

maintained, (2) the secured party becomes the bank’s customer 

“with respect to the deposit account,” or (3) the secured party, the 

account holder, and the bank have entered into a so-called 

“control agreement” that empowers the secured party to “direct[ 

the] disposition of funds in the deposit account without further 

consent by the” account holder. (Cal. U. Com. Code, §§ 9314, 

subd. (a), 9104, subd. (a).) Sunwest did not meet this standard. 

That is because Sunwest never established in the record before 

1 Several other methods of determining the seniority of 

competing interests in a debtor’s property exist, but do not apply 

here. Because a pre-judgment lien is necessarily unperfected

(e.g., Diamant v. Kaspaian (In re Southern California Plastics, 

Inc.) (9th Cir. 1999) 165 F.3d 1243, 1246 (Diamant) [prejudgment lien is a “potential” or “contingent” interest, dependent 

upon outcome of the yet-to-occur trial]), the rules for determining 

seniority between competing perfected interests are not 

pertinent. (Cal. U. Com. Code, §§ 9317, subd. (a)(1), 9322, subd. 

(a).) Because a pre-judgment lien is not a purchase money 

security interest, the rule for determining the seniority of that 

specific type of interest is also not pertinent. (Id., § 9317, subds. 

(a)(2), (e).)
11

us the “control” required by California law: Sunwest is not 

Comerica Bank (the bank where Horizon maintains its deposit 

account); Sunwest did not become Comerica Bank’s customer 

regarding Horizon’s deposit account; and Sunwest never 

introduced a “control agreement” granting it power to dispose of 

the funds in Horizon’s deposit account.

Sunwest at first blush seems to have satisfied the second 

pertinent method of establishing seniority because it has security 

agreements with Horizon and because it filed UCC financing 

statements in California, all of which identify the deposit 

account. But Sunwest did not establish that the UCC financing 

statements were properly filed. That is because, without knowing 

which jurisdiction is Comerica Bank’s jurisdiction, we do not 

know whether the UCC financing statements filed in California 

were filed in the right place.2

In these respects, this case is indistinguishable from Full 

Throttle Films, Inc. v. National Mobile Television, Inc. (2009) 180 

Cal.App.4th 1438 (Full Throttle). In that case, as here, a third 

party who had obtained a security interest in deposit accounts 

held by a bank filed a third party claim for priority over a 

creditor who had secured a pre-judgment writ of attachment over 

the same accounts. (Id. at p. 1440.) In that case, as here, there 

was no evidence of which jurisdiction was the bank’s jurisdiction. 

(Id. at p. 1444.) And in that case, as here, the inability to know 

which jurisdiction’s law to apply meant that a UCC financing 

statement filed in California was not properly filed (even though 

it was properly filed under California law). (Ibid.) Just as Full 

2 Although Sunwest may in theory have covered all the bases 

by filing UCC financing statements in all 50 states, it has not 

introduced any evidence of that fact.
12

Throttle concluded that the third party’s claim must be denied, so 

must we.

Sunwest resists this conclusion with what boils down to 

three arguments.

First, and as a procedural matter, Sunwest argues that we 

cannot consider whether its security interest is senior because 

Outsource did not raise the issue of seniority before the trial 

court (and instead focused on the lack of attachment and its own 

status as a “transferee” under California Uniform Commercial 

Code section 9332). Although Sunwest is correct that Outsource 

did not object to the seniority of Sunwest’s security interest 

before the trial court, this is of no consequence because it was 

Sunwest’s burden to prove the seniority of its security interest; 

that burden exists whether or not anyone else objected to it. 

Sunwest responds that its burden did not include establishing 

seniority, but it is wrong: The Enforcement of Judgments Law 

plainly requires the third party to establish that its “claimed” 

“security interest” is “superior” to the pre-judgment lien (Code 

Civ. Proc., § 720.210, subd. (a)), and superiority under the 

California Uniform Commercial Code necessarily includes a 

showing of seniority.

Second, Sunwest argues that its filing of UCC financing 

statements perfected its security interest in Horizon’s deposit 

account. Sunwest is wrong. Although the filing of a UCC 

financing statement is a sufficient method for perfecting security 

interests in many types of collateral (see, e.g., Cal. U. Com. Code, 

§ 9312 [filing sufficient for “chattel paper, negotiable documents, 

instruments, or investment property”]; Corona Fruits & Veggies 

Inc. v. Frozsun Foods, Inc. (2006) 143 Cal.App.4th 319, 322 [“In 

California, the filing of a UCC-1 financing statement is generally 
13

required to perfect a security interest . . .”]), California law—

again, assuming California is Comerica Bank’s jurisdiction—

explicitly erects a different method for deposit accounts, and 

hinges perfection of a security interest of such accounts upon 

control and control alone. (Cal. U. Com. Code, §§ 9312, subd. 

(b)(1), 9314; Royce v. Michael R. Needle, P.C. (N.D.Ill. 2019) 381 

F.Supp.3d 968, 982 [under analogous federal law, “distinction” 

between deposit accounts and other collateral “is critical”].) 

Lastly, Sunwest argues that its security interest is senior—

even if that interest is unperfected—because, pursuant to Code of 

Civil Procedure section 697.590, subdivision (b), a conflict 

between two unperfected interests in property is resolved in favor 

of the first one created; because, Sunwest continues, its security 

interest in Horizon’s deposit account was created in 2018, that 

security interest is senior to Outsource’s pre-judgment lien 

created in 2020. The legal premise of Sunwest’s argument is 

incorrect. Code of Civil Procedure section 697.590, subdivision 

(b), provides the governing rule when resolving a conflict between 

a “judgment lien” and a “conflicting security interest.” But 

Outsource does not have a judgment lien; it has a pre-judgment 

lien by writ of attachment. Thus, the pertinent governing rule is 

the one that resolves conflicts between a pre-judgment lien and a 

security interest. That rule is supplied, as noted above, by 

California Uniform Commercial Code section 9317, subdivision 

(a)(2), which resolves conflicts between a “lien creditor” (which 

includes a creditor that has obtained a writ of attachment (Cal. 

U. Com. Code, § 9102, subd. (a)(52)(A); Full Throttle, supra, 180 

Cal.App.4th at p. 1441)) and a “security interest” in favor of the 

secured party only if that security interest (1) is “perfected” or (2) 

is accompanied by a security agreement and a properly filed UCC 
14

financing statement. (Cal. U. Com. Code, § 9317, subd. (a)(2).) 

This pertinent rule does not rest upon a simple inquiry into 

which unperfected security interest came first. Indeed, the firstin-time rule Sunwest urges would inevitably dictate that the prejudgment lien would inevitably be junior because pre-judgment

liens are by definition unperfected (see In re Southern California 

Plastics, Inc., supra, 165 F.3d at p. 1246), and would always be 

created after the third party’s unperfected security interest. We 

decline to adopt a rule that would eviscerate California Uniform 

Commercial Code section 9317, subdivision (a)(2). (Accord, 

Tuolomne Jobs & Small Business Alliance v. Superior Court 

(2014) 59 Cal.4th 1029, 1037 [statutory interpretations that lead 

to absurd results or render words surplusage are to be avoided]; 

People v. Bullard (2020) 9 Cal.5th 94, 107 [same].) 

In the interest of fairness, we sought supplemental briefing 

from the parties on the relevance of the “local law” requirement 

not squarely addressed in the parties’ briefing. In its 

supplemental briefing, Sunwest concedes that the “local law” of 

Comerica Bank governs the determination of whether its security 

interest was perfected and has priority. However, Sunwest offers 

two further arguments. First, Sunwest suggested at oral 

argument that choice of law issues can be waived, and (echoing 

its argument about seniority of liens) urges that Outsource 

waived the ability to contest which law is the appropriate “local 

law” by not raising the issue before the trial court. But this 

argument ignores that Sunwest had the burden of proving the 

seniority of its security interest; Sunwest cannot now shift to 

Outsource the blame for Sunwest’s own failure to prove its 

entitlement to relief under the proper “local law.” Second, 

Sunwest asserts that the appropriate remedy is to remand the 
15

matter to give Sunwest an opportunity to conduct discovery to 

obtain evidence establishing that governing local law. But 

Sunwest is not entitled to that second bite at the apple. As noted, 

Sunwest bore the burden of establishing that its security interest 

is senior and it failed to do so under the applicable statutes. 

What is more, Outsource’s petition to determine the priority of 

the competing interests in Horizon’s deposit account was pending 

for nearly one year, yet Sunwest never sought discovery. (See 

Clark v. Optical Coating Laboratory, Inc. (2008) 165 Cal.App.4th 

150, 182, fn. 32 [failure to request a continuance to conduct 

further discovery to oppose summary judgment waives the right 

to further discovery].) 

DISPOSITION

The order is reversed. Outsource is entitled to its costs on 

appeal. 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

______________________, J.

HOFFSTADT

We concur:

_________________________, Acting P. J.

ASHMANN-GERST

_________________________, J.

CHAVEZ