604 F.2d 38 (9th Cir. 1979), 77-2496, Los Angeles Paper Bag Co. v. James Talcott, Inc.

Docket Nº:77-2496.
Citation:604 F.2d 38
Party Name:LOS ANGELES PAPER BAG COMPANY, Appellant, v. JAMES TALCOTT, INC., a New York Corporation, Appellee.
Case Date:September 12, 1979
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 38

604 F.2d 38 (9th Cir. 1979)

LOS ANGELES PAPER BAG COMPANY, Appellant,

v.

JAMES TALCOTT, INC., a New York Corporation, Appellee.

No. 77-2496.

United States Court of Appeals, Ninth Circuit

September 12, 1979

Page 39

Dean Estep (argued), Phoenix, Ariz., for appellant.

Richard Calvin Cooledge (argued), Brown & Bain, Phoenix, Ariz., for appellee.

Appeal from the United States District Court for the District of Arizona.

Before ELY and KENNEDY, Circuit Judges, and ORRICK, [*] District Judge.

ELY, Circuit Judge:

Appellant, Los Angeles Paper Bag Co. ("Paper Bag"), appeals from a summary judgment order, entered on stipulated facts, awarding $21,851.21 in interpleaded funds to appellee, James Talcott, Inc. ("Talcott"). The District Court's award to appellee was based on its construction of Arizona law relating to the conflicting rights of an unpaid cash seller in goods delivered at the buyer's direction to a third party and of a secured party who holds a perfected security interest in the buyer's inventory and accounts receivable in those same goods and in the proceeds derived therefrom. The District Court held that, under Arizona law, the interest of the unpaid cash seller, Paper Bag, was subordinate to the interest of the holder of the validly perfected security interest, Talcott. We affirm.

I.

In March of 1974, Talcott and Ace Paper Products ("Ace") entered into a financing agreement whereby Talcott agreed to make loans to Ace and Ace, in turn, granted Talcott a security interest in its inventory, after-acquired property, and accounts receivable. The security agreement was duly recorded. At the time of Talcott's motion for summary judgment in this action, Ace owed Talcott $67,837.35.

In June and July of 1976, plaintiff-in-interpleader, Fry's Food Stores of Arizona, Inc. ("Fry's"), made a purchase order for paper goods from Ace. Ace, in turn, ordered the goods from Paper Bag. Paper Bag, pursuant to instructions received from Ace, shipped the goods directly to Fry's. Ace's order for the paper goods was accompanied by a check drawn in the amount of $20,343.47 as full payment. That check was subsequently dishonored upon presentment. Paper Bag has yet to receive payment for the paper goods it sent on orders from Ace. 1

Having been informed by Paper Bag and Talcott of each party's competing demands for payment, and not yet having paid...

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