T hi s di s pos i t i on i s notappr opr i a t e f orpubl i c a t i on and i s notpr e c e de nt * e xc e pta s pr ovi de d by9th C i r . R . 36- 3. NOT F OR P UB L I CAT I ON UN I TE D STATE S C OU RT OF APPE ALS FOR T HE NI NTH CI RC UI T M ETRO PO LI TA N BA N K & TRU ST C O ., P la in tif

f - c o u n te r - d e f

e n d a n t, v. D E S E R T V A L L E Y F IN A N C IA L L L C ; et a l., D efen d an t s-A p p el l ees, P A C I F I C B U S I N E S S C A P I T A L C O R P ., D e f

e n d a n t- c r o s s - c la im a n t - A ppe l l e e v. HU NT I NG T ON NA T I ON AL B AN K, C o u n te r - d e f e n d a n t - A p p e lla n t. N o. 08- 16511 D. C . No . 2 : 0 1 - c v - 0 0 6 2 2 - L DG LRL ME MOR AN DU M *

M ETRO PO LI TA N BA N K & TRU ST C O ., P la in tif

f - c o u n te r - d e f

e n d a n t, N o. 08- 16758

D. C . No . 2 : 0 1 - c v - 0 0 6 2 2 - L DG LRL 

# FI LED NO V 18 2009 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALS2

v. D E S E R T V A L L E Y F IN A N C IA L L L C ; et a l., D efen d an t s-A p p el l ees, P A C I F I C B U S I N E S S C A P I T A L C O R P ., D e f

e n d a n t- c r o s s - c la im a n t - A pp el l ee , v. HU NT I NG T ON NA T I ON AL B AN K, C o u n te r - d e f e n d a n t - A p p e lla n t. A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f orthe D i s tr i c tof

N e va da L l oy d D . G e or ge , D i s tr i c tJ udge , P r e s i di ng A r gue d a nd S ubm i tt e d N ove m be r5, 2009 S a n F r a n c is c o , C a lif

o rn ia B efo re: H U G , R Y M E R an dM cK E O W N , C i rcu i tJu d g es. M etropo l i t an B ank & T rustC o. (M etropo l i t an) app ea l s f rom the di stri ct c ourt ’ s j udgm e ntf

orP a c i f i c B us i ne s s C api t a l C orp. ( P B C C ) a f t e rabe nc h tr i a l on P B C C ’s co n v er sio n claim . W e h av e ju risd icti o n u n d er2 8 U .S .C . § 1 2 9 1 . “ W e r e v ie w th e d is tr ic t c o u rt’s f in d in g s o f

f a c t a f te rab e n c h tr ia l f

o rc le a re rr o ra n ditsM e tr o p o l i t a n a n dPBCC a g r e e th a tth e p r e - r e v i s i o n v e r s i o n o f th e U . C. C. 1 a n dth e f o rm e rp r o v is io n s o f

th e C a lif

o rn iaC o m m e r c ia l C o d e c o n tr o l. 3 c o n c l u s i o n s o f

l a w de no vo . ” Fr i e nds of Y os e m i te V

al le yv . N or ton , 348 F . 3d 789, 7 9 3 ( 9 th C ir . 2 0 0 3 ) . W e a f f irm in p a rt a n dr e v e r s e in p a rt.

I T o e s tab lis h ad e f

e n s e u n d e rU n if

o rm C o m m e r c ia l C o d e ( U .C .C .) § 9- 308( a ) , M e tr opol i t a n ne e de d t o pr ove tha tw i thouti t s ow n a c tu a l know l e dge

1 of P B C C ’ s s ec uri ty i nt er es t , i t(1) gave new val ue for the m ob i l e hom e l oan contra ct s ( H om e L oans) and (2) t oo k p osse ss i on of the H om e L oans i n the ordi nary c o u r s e o f its b u s in e s s . See U . C . C . § 9 -308 cm t . 3; 9 A nd er son o n the U ni form C om m e r c i a l C ode § 9 - 3 0 8 :7 ( 1 9 9 9 ) ; see a l so C al . C om m . C od e § 12 01 (25)(c ) (not i ng that“ [a ] pers on ‘ kn ow s’ or has ‘ kn ow l edge’ of a f ac tw hen h e or s he has a c tu a l k n o w le d g e o f

it.” ) . T h e d is tr ic t c o u rt in c o rr e c tlya ttr ib u te dM o u n ta in C om m uni tyB a nk’ s know l e dge t o M e tr opol i t a n. A s the di s tr i c tc ourtdi d not d eter m in e w h eth erM etro p o li tan ac ted w ith o u t actu al k n o w led g e o f P B C C ’sI f

M e tr o p o lita n c a n e s tab lis h o n r e m a n daU .C .C . § 9 - 3 0 8 ( a ) d e f e n s e a s to 2 the i ni t i al 12 8 H om e L oans, the di stri ctcourtm ayneed t o rec on si der w hether M e tr o p o lita n g a v e n e w v a lu e f o rth e s u b s titu te H o m e L o a n s b yr e le a s in g s e c u r ity in te r e s ts in th e H o m e L o a n s it r e tu rn e d . See C a l. C o m m . C o d e § 9 1 0 5 ( 1 ) ( o ) ; Nw. A c c e ptanc e C or

p. v . L y nnw ood E qui

p. , Inc. , 1 U. C . C . R e p . S e rv . 2 d1 7 1 0 ( W. D. W a s h . 1 9 8 6 ) , af

f’d , 84 1 F . 2d 91 8 (9th C i r. 19 88 ). 4 s e c u r i tyi n t e r e s tw i th r e s p e c tt o th e i n i t i a l 1 2 8 H o me Lo a n s o rth e s u b s t i tu t e H o me L o an s, w e m u strev erse fo r i tt o m ak e th ese fi n d i n g s. 2

I I T he di s tr i c tc ourtpr ope r l yr e j e c t e d M e tr opol i t a n’ s U . C . C . § 9- 306( 2) defe nse. T o est abl i sh thi s def ense , M etropo l i t an needed t o p rove the transac t i on al do cum ent s betw ee n P B C C and S i l ver S t at e M ob i l e H om es and G al axy F i nanci al Se rv i c e s ( c o l l e c t i v e l y , Si l v e r/ G a l a x y ) au th o r i z e dSi l v e r/ G a l a x yt o s e l l H o me L oa ns . T he tr a ns a c t i ona l doc um e nt s author i z e d S i l ve r/ G a l a xyt o s e l l H om e L oa ns onl yw i th P B C C ’ s e xpr e s s w r i tt e n c ons e nt . T he di s tr i c tc ourt ’ s appa r e ntr e a di ng of s e c t i on 2( f

) of the P l e dge A gr e e m e nt s a s apr ohi bi t i on a ga i ns ts e l l i ng H om e L oa ns w i th o u tco n sen ti s co n si st en tw i th th e sco p e o f th e P l ed g e A g reem en t s. Ital so m a tc h e s th e p a rtie s ’ c o u r s e o f c o n d u c t. A s P B C C d idn o t e x p r e s s lyc o n s e n t to S i l ve r/ G a l a xy ’ s i ni t i a l s a l e of 128 H om e L oa ns t o M ount a i n C om m uni tyB a nk - orEv e n i f th e tr a n s a c t i o n a l d o c u me n t s au th o r i z e dSi l v e r/ G a l a x yt o s e l l H o me 3 L oa ns i n the or di na ryc our s e of bus i ne s s w i thoutc ons e nt , the r e c or d s upport s the d is tr ic t c o u rt’s f

a c tu a l f in d in g th a t S ilv e r/G a la x yd idn o t s e ll - o rs u b s e q u e n tly tran sfer - th e H o m e L o an s i n th e o rd i n ary co u rse o f i t s b u si n ess. T h e d is tr ic t c o u rt w ill n e e dto r e c o n s id e rits d a m a g e a w a r d , o f c o u r s e , if

it 4 f in d s o n r e m a n dth a t M e tr o p o lita n c a n e s tab lis h aU .C .C . § 9 - 3 0 8 ( a ) d e f e n s e . 5 S i l ve r/ G a l a xy ’ s s ubs e que nttr a ns f e rof s ubs t i tut e H om e L oa ns t o M e tr opol i t a n - M etro p o l i t an ’ s U . C . C . § 9 -3 0 6 (2 ) d efen se fai l s. 3

II I F i na l l y , the di s tr i c tc ourt ’ s da m a ge a w a r d w a s notf aul tyorove r s t a t e d. 4 F i r s t , unde rC a l i f

orni aC om m e r c i a l C ode § 9503, P B C C ha d ar i ghtt o t a ke po ss es si on of the H om e L oans on A pri l 3, 19 98 , the dat e S i l ver/ G al axy c ause d an

“ E ve ntof

D e f aul t ” unde rthe tr a ns a c t i ona l doc um e nt s bys e l l i ng H om e L oa ns w i tho utP B C C ’ s c on se nt . S ec on d, the di stri ctcourtre as on abl y r ef used t o reduce da m a ge s f

orr e turne d H om e L oa ns . T o the e xt e ntthe s e r e turne d l oa ns ha d a ny v a lu e , th e v a lu e w a s r e a liz e d , f o rth e m o s t p a rt, b yS ilv e r/G a la x ya n dn o t P B C C . T hi r d, the di s tr i c tc ourtr e a s onabl yc onc l ude d the H om e L oa ns ’ a c tua l va l ue a tthe tim e o f c o n v e r s io n w a s a t le a s t e q u a l to th e a m o u n t M e tr o p o lita n o r ig in a llyp a id f o rth o s e lo a n s . E a c h p a rtys h a ll b e a rits o w n c o s ts o n ap p e a l.6

AF F I R ME D I N P AR T , R E VE R S E D I N P AR T , AN D R E MAND E D.