Ellsworth, In re, TRI-STATE

Decision Date03 January 1984
Docket Number83-1837,Nos. 83-1836,TRI-STATE,s. 83-1836
Citation722 F.2d 1448
Parties, Bankr. L. Rep. P 69,576, 37 UCC Rep.Serv. 1376 In re Robert ELLSWORTH and Judith Ellsworth, his wife, et al., Debtors.LIVESTOCK CREDIT CORPORATION, a California corporation, Plaintiff- Appellant, and Spence and Norton, a partnership; A.T. Spence, Jr.; and John Norton, Defendants-Appellants, v. Robert C. ELLSWORTH, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Page 1448

722 F.2d 1448
11 Bankr.Ct.Dec. 936, Bankr. L. Rep. P 69,576,
37 UCC Rep.Serv. 1376
In re Robert ELLSWORTH and Judith Ellsworth, his wife, et
al., Debtors.
TRI-STATE LIVESTOCK CREDIT CORPORATION, a California
corporation, Plaintiff- Appellant,
and
Spence and Norton, a partnership; A.T. Spence, Jr.; and
John Norton, Defendants-Appellants,
v.
Robert C. ELLSWORTH, et al., Defendants-Appellees.
Nos. 83-1836, 83-1837.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted Oct. 14, 1983.
Decided Jan. 3, 1984.

Page 1449

Evans, Kitchel & Jenckes, by Steven A. Hirsch, Phoenix, Ariz. for plaintiff-appellant.

Jennings, Strouss & Salmon, by Jefferson L. Lankford, Phoenix, Ariz., for defendants-appellants.

Snell & Wilmer, by Peter J. Rathwell, Phoenix, Ariz., for defendants-appellees.

Appeal from the Bankruptcy Appellate Panel for the Ninth Circuit.

Before DUNIWAY, ALARCON, and BOOCHEVER, Circuit Judges.

DUNIWAY, Circuit Judge:

Tri-State Livestock Credit Corporation and Spence and Norton appeal from the Bankruptcy Appellate Panel's reversal of the bankruptcy court's order of partial summary judgment in favor of Tri-State. In re Ellsworth, Bkrtcy.App. 9 Cir., 1983, 28 B.R. 13. We conclude that we have jurisdiction and we reverse.

I. FACTS.

Spence and Norton's cattle business is financed by loans from Tri-State, secured by Spence's cattle. In 1979, Tri-State and Spence executed a duly perfected security agreement, which secured the loans. It provided that Spence would not sell encumbered cattle without Tri-State's prior written consent. Notwithstanding the agreement, Spence customarily sold cattle without obtaining Tri-State's written consent. Tri-State did not object to these sales because it was understood that the proceeds would be used to pay Tri-State, and in fact they were so used.

In January and May 1981, Spence transferred 801 of the encumbered cattle to the debtor Ellsworth. Whether the transfers were leases or sales is disputed, but for purposes of this appeal they are conceded to be sales. Ellsworth never made any rental or purchase payments. Tri-State did not give express written consent to the sales to Ellsworth.

When Ellsworth got possession of the cattle, he obtained a loan from Arizona Livestock Production Credit Association (ALPCA) to enable him to feed and maintain the cattle. Ellsworth granted ALPCA a security interest in the cattle, which was perfected in April 1980. In August 1981, Ellsworth filed for a...

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