Central Washington Production Credit Ass'n v. Baker

• Decision Date: 18 April 1974
• Docket Number: No. 816--III,816--III
• Citation: 521 P.2d 226,11 Wn.App. 17
• Parties: , 14 UCC Rep.Serv. 1055 CENTRAL WASHINGTON PRODUCTION CREDIT ASSOCIATION, Respondent, v. Carl A. BAKER, Sr., et al., Defendants, Prosser Commission Company, Inc., and American States Insurance Co., a corporation, Appellants.
• Court: Washington Court of Appeals

Page 17

11 Wn.App. 17

521 P.2d 226, 14 UCC Rep.Serv. 1055

CENTRAL WASHINGTON PRODUCTION CREDIT ASSOCIATION, Respondent, v. Carl A. BAKER, Sr., et al., Defendants Prosser Commission Company, Inc., and American States Insurance Co., a corporation, Appellants.

No. 816--III.

Court of Appeals of Washington, Division 3.

April 18, 1974.

Dwight A. Halstead, Prosser, for appellants.

Lonny R. Suko of Lyon, Beaulaurier, Aaron, Weigand & Suko, Yakima, for respondent.

GREEN, Chief Judge.

In January 1969, plaintiff, Central Washington Production Credit Association, loaned a sum of money to Louis J. Cook, evidenced by a promissory note and a security agreement. The security interest was properly perfected by the filing of a financing statement on January 22, 1969. The financing statement covered

all crops, livestock, farm equipment, farm supplies and other farm products. After-acquired collateral is also covered. Disposition of collateral is Not hereby authorized.

The proceeds or products of the collateral were also covered. The security agreement with Mr. Cook provided:

Debtor will not permit any of the Collateral to be . . . sold, . . . Without first having obtained the written consent of the Secured Party.

(Italics ours.)

On June 11, 1969, the defendant, Prosser Commission Company, Inc., Purchased 14 head of cattle from Cook. These cattle were covered by the foregoing financing statement and security agreement. Defendant issued a check payable to Cook for $2,535 and Cook allegedly failed to account for these proceeds to the plaintiff. Plaintiff brought this action for conversion to collect these proceeds from the defendant upon the ground that the defendant had actual and constructive notice of plaintiff's security interest in the cattle. Defendant appeals from the granting of a motion for summary judgment in favor of the plaintiff for $2,535.

The central theme of defendant's argument on appeal is that a material issue of fact exists as to whether or not the plaintiff authorized Cook to sell cattle without first obtaining plaintiff's written consent, thereby waiving the provision in the security agreement. This argument is grounded in RCW 62A.9--306(2):

Except where this Article otherwise provides, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof by the debtor unless his action was authorized by the secured party in the security agreement Or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.

(Italics ours.) A buyer of farm products from a person engaged in farming operations does not take free of this provision. RCW 62A.9--307.

The writers of the Washington comments to RCW 62A.9--306(2) observed:

This subsection in its provision for pursuit of the collateral makes no change in Washington law.

These writers refer to Bunn v. Walch, 54 Wash.2d 457, 342 P.2d 211 (1959), a conversion case, as containing a useful discussion of consent by the security holder. In that case, at page 463, 342 P.2d at page 214, the court states:

The cause of action being in tort, it is a valid defense if the plaintiffs are shown to have consented to those acts for which they now seek to recover. Such consent may be shown from implication arising from a course of conduct as well as by express words.

The term 'or otherwise' contained in RCW 62A.9--306(2) should be construed in accordance with this language. See Clovis Nat'l Bank v. Thomas, 77 N.M. 554, 425 P.2d 726 (1967); See United States v. Central Livestock Ass'n, 349 F.Supp. 1033 (D.N.D.1972); See 4 R. Anderson, Uniform Commercial Code § 1--306:18 (2d ed. 1971, Cum.Supp.1973--74).

The record discloses that Cook sold cattle on February 7, March 18, March 31, April 21, May 26, June 19, July 24, August 11 and October 21, 1969; February 20, April 14 and December 8, 1970; and January 4, 1971, accounting for the proceeds to the plaintiff. The only sale for which the proceeds were allegedly not accounted for to the plaintiff was the June 11, 1969 sale to the defendant. There is nothing in the record showing that prior to any of these sales plaintiff gave its written or oral consent; nor, is there any...