## Facts

- A dissolution judgment awarded the husband all shares of a closely held corporation and awarded the wife other property of lesser value.
- To equalize the property division, the husband was ordered to pay the wife $483,393.
- The judgment expressly secured the equalization obligation with the husband’s corporate stock and required the stock certificates to be delivered to the wife’s counsel to hold as security until payment.
- The husband appealed the dissolution judgment and obtained a stay; the stock certificates were deposited with the court clerk in lieu of an undertaking.
- While the dissolution appeal was pending, a corporate creditor obtained a money judgment against the husband alone on a separate debt and later attempted to levy on the stock held by the court clerk.
- In post-judgment dissolution proceedings, the trial court issued orders favoring the wife’s claim to the stock and also treated the creditor as able to enforce against the wife or property awarded to her; the trial court further ordered title to the stock transferred to the wife.
- The corporate creditor appealed from those post-judgment orders.

## Issues

1. Whether the dissolution judgment created, and the custodial arrangements perfected, a security interest in the husband’s stock in favor of the wife that had priority over the creditor’s later judgment lien and levy.
2. Whether a third-party creditor of one spouse may recover that spouse’s separate debt from the other spouse personally or from property awarded to the other spouse in a final dissolution judgment.
3. Whether the dissolution court could transfer title to the stock to the wife, or whether the wife’s remedy was limited to rights of a secured creditor subject to Article 9 procedures.

## Decision

- The Court of Appeal held the wife had a prior perfected security interest in the stock and therefore priority over the creditor’s later judgment lien and execution efforts.
- The Court of Appeal held the creditor could not recover the husband’s debt from the wife personally or from property awarded to her in the dissolution.
- The Court of Appeal held the trial court erred by transferring title to the stock to the wife; she was entitled to possession as a secured creditor and had to proceed under Article 9 of the Commercial Code.

## Legal Principles

- A dissolution judgment may create a security interest to secure an equalization payment; where the collateral is certificated stock, perfection may be accomplished by possession consistent with the Commercial Code.
- A prior perfected security interest in stock has priority over a later-acquired judgment lien and levy by an outside creditor of the debtor-spouse.
- A third-party creditor generally cannot use enforcement proceedings to reallocate debts or disturb the property-and-debt allocation in a final dissolution judgment; absent reopening or modification by a spouse, the creditor’s recovery is limited to the debtor-spouse and the debtor-spouse’s interests.
- When property is awarded to one spouse but used as collateral to secure a payment to the other spouse, the non-owner spouse holds a security interest rather than title; any disposition upon default must comply with Article 9 requirements.

## Conclusion

The court treated the dissolution-ordered stock collateral as a perfected Article 9 security interest in favor of the wife with priority over a later judgment creditor, barred the creditor from collecting the husband’s separate debt from the wife or her awarded property, and reversed the trial court’s transfer of stock title because the wife’s rights were those of a secured creditor governed by Article 9.


In re Marriage of Braendle, 46 Cal. App. 4th 1037 (Cal. Ct. App. 1996)