Owen Trust et al v. Schwalbe et al

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1The transaction was styled as a sale and leaseback.
2Owens has subordinated its interests to Vestin.
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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
LOHREY ENTERPRISES, INC., 	No. 08-12206
Debtor(s).
______________________________________/
OWENS TRUST, et al.,
Plaintiff(s),
v. 	A.P. No. 09-1001
RICHARD SCHWALBE, Trustee, et al.,
Defendant(s).
_______________________________________/
Memorandum on Motion for Summary Judgment
_________________
On June 6, 2008, debtor Lohrey Enterprises, Inc., entered into a secured transaction with
defendant Podium Financial Group, Inc., pledging its laundry business equipment as collateral. 1 In this
adversary proceeding, plaintiffs Vestin Mortgage, Inc., and Owens Trust allege that Vestin2 has a
Entered on Docket
October 05, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-01001 Doc# 29 Filed: 10/05/09 Entered: 10/05/09 16:24:32 Page 1 of 2

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senior security interest in the same equipment. Podium has moved for summary judgment.
Plaintiffs did not file a memorandum of law in opposition to the motion. However, they did
file a declaration establishing that two years before the Podium transaction Vestin loaned
$16,000,000.00 to Lohrey Investments LLC, an entity related to Lohrey Enterprises, Inc. 	The
declaration avers that part of the loan was to be used for laundry equipment, Vestin was given a
security interest in that equipment, and the security interest was properly perfected. 	Thus, Vestin
argues that its security interest in the laundry equipment is senior to that of Podium.
There appears to be a triable issue of fact in this case as to whether any of the equipment
subject to the dispute was ever the property of Lohrey Investments LLC. If it was, § 9507 of the
California Commercial Code would give plaintiffs a senior security interest notwithstanding
subsequent transfer of the equipment to Lohrey Enterprises, Inc. See Bank of the West v. Commercial
Credit Fin. Serv., 852 F.2d 1162, 1174 (9th Cir. 1988).
There being a disputed issue of material fact as to whether any of the disputed equipment was
ever owned by Lohrey Investments, summary judgment cannot be granted. Any party may submit an
appropriate form of order.
Dated: October 5, 2009
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 09-01001 Doc# 29 Filed: 10/05/09 Entered: 10/05/09 16:24:32 Page 2 of 2