Los Angeles Federal Credit Union v. Madatyan
209 Cal. App. 4th 1383
| Cal. Ct. App. | 2012Background
- Credit Union financed the purchase of a 2000 Bentley for Khachikian, with a lien on the car and a loan condition to maintain insurance naming the Credit Union as loss payee.
- Khachikian obtained an Allstate policy but did not name the Credit Union as an additional insured as required by the loan.
- An insurance check for $39,697.35 was issued to Khachikian and GAD after the car damage and was endorsed by Edgar for GAD.
- GAD did not repair the car and did not receive any funds from the check; Edgar did not know of the Credit Union’s lien.
- The Credit Union repossessed the car, incurred repair costs, and the trial court found that the defendants converted the insurance proceeds by endorsing the check.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Equitable lien on insurance proceeds created by breach of insurance obligation | Khachikian breached by not naming Credit Union; equitable lien created | No enforceable interest or lien against proceeds | Substantial evidence supported lien and liability for conversion |
| Endorsement of the check constitutes conversion | Endorsing the check interfered with Credit Union’s lien | Endorsement alone not conversion | Endorsement constituted conversion liability |
| Credit Union’s interest suffices despite lack of knowledge by defendants | Interest arises from equitable lien, not knowledge | Knowledge of lien not established | Knowledge immaterial; lien and interference support liability |
Key Cases Cited
- Burlesci v. Petersen, 68 Cal.App.4th 1066 (Cal. Ct. App. 1998) (conversion is strict liability; intent not required)
- Gordon v. J. C. Penney Co., 7 Cal.App.3d 280 (Cal. Ct. App. 1970) (equitable lien on insurance proceeds supports recovery)
- McCafferty v. Gilbank, 249 Cal.App.2d 569 (Cal. Ct. App. 1967) (equitable lien rights can be enforced against endorsed proceeds)