Facts

Plaintiff Doe Bank made several business loans over many years to defendants Moneyland Financial Services. One such loan was guaranteed by its principals, Eloy and Monica Jordan. By a Commercial Security Agreement, Moneyland pledged all of its business assets (tangible and intangible, which includes good will and customer base) as security for the loan and the pledge of collateral was perfected by the filing of a UCC-1.

Moneyland operated a check cashing business in Los Angeles. As part of that business, it required a daily influx of cash and obtained that cash influx from defendant Continental Currency Services, Inc., by calling ahead for the funds and, upon receipt of the funds, delivering a check for the funds plus a fee to Continental Currency.

In December 2007 to January 2008, Moneyland wrote 11 checks to Continental Currency, in exchange for delivery of operating cash in a collective sum in excess of $2.6 million. None of these checks were honored by Doe Bank, all having been returned as either drawn on insufficient funds and/or drawn on a closed bank account. The checks were written on an account that Moneyland had closed. Monelyand subsequently opened a new account with Doe Bank.

Continental Currency sued Moneyland for recovery of the $2.6 million in bad checks. The parties agreed to enter into settlement which involved transfer of Moneyland's assets to Continental Currency with Continental Currency paying off the debts of Moneyland, including the debt owed to Doe Bank. Doe Bank did not consent to this transfer of assets, which assets served as the collateral for Doe Bank's loan.

Subsequently, Doe Bank filed this action against Moneyland, the Jordans, and Continental Currency. Doe Bank obtained defaults against Moneyland and the Jordans. However, Doe Bank pursued its action against Continental Currency, claiming that, pursuant to the settlement agreement, Continental had received assets of Moneyland which were secured by UCC-1 liens in favor of Doe Bank.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended Continental Currency, converted its interests in the assets of Moneyland despite its recorded UCC-1 liens.

Doe Bank contended that the settlement agreement was performed in substantial part as evidenced by Continental Currency having taking over the businesses of Moneyland at the two locations and the receipt of real property.

DEFENDANT CONTENTIONS:
Continental Currency Services Inc., denied having received any assets of Moneyland Financial Services which were subject to Doe Bank's UCC-1 liens.

Continental Currency alleged that Moneyland engaged in a decade long check kiting scheme. Continental Currency contended that Moneyland relied upon Doe Bank's alleged unwritten policy of permitting overdrafts in their accounts wherein Doe Bank would honor insufficient fund checks from Moneyland up to a maximum of $1 million.

Continental Currency contended that, after the settlement agreement was executed, it discovered that Moneyland had misrepresented the extent of its liabilities, including the amount owed to Doe Bank, and the settlement agreement was rescinded. Moneyland transferred a commercial building to Continental Currency and paid other consideration to settle the $2.6 million owed. Continental Currency contended that, thereafter, Moneyland closed its stores and abandoned its leases.

In addition, Continental filed a Cross-Complaint against Doe Bank alleging that Doe Bank failed to comply with the "midnight deadline" rule for giving notice to Continental Currency of the dishonor of the 11 checks written by Moneyland upon its Doe Bank account. Defendant sought recovery of the face value of the checks pursuant to statute.

Result

Dismissal of all claims and cross-claims, with each party to bear their own costs and fees.

Other Information

FILING DATE: April 7, 2009.