Weststeyn Dairy 2 v. Eades Commodities Co.
| Decision Date | 07 May 2003 |
| Docket Number | No. CIV-F-00-7147OWWDLB.,CIV-F-00-7147OWWDLB. |
| Citation | 280 F.Supp.2d 1044 |
| Court | U.S. District Court — Eastern District of California |
| Parties | WESTSTEYN DAIRY 2, et al., Plaintiffs, v. EADES COMMODITIES CO., Diversified Business Credit Inc., and Does 1 through 100, inclusive, Defendants. Willy Creek Ranch, a California Corporation, Plaintiff, v. Eades Commodities Company; Diversified Business Credit, Inc., et al. Defendants. |
Fred A Silva, Damrell Nelson Schrimp Pallious Pacher and Silva, Modesto, CA, for Weststeyn Dairy 2, Joe Alamo, B & J Dairy, george TeVelde, J & M Bettencourt & Sons Dairy, Larrybell & Son Dairy, Bob Marchy, Sleepy Hollow Certified Milk Co., Tony Garcia, Case Van Steyn, Bruce Burroughs, George Plantenga.
Clinton Paul Walker, Damrell Nelson Schrimp Pallious Pacher and Silva, Modesto, CA, for Van Warmerdam Dairy Inc.
Shanti Renee Patching, Herum Crabtree Brown, Stockton, CA, for Willy Creek Ranch.
L Burda Gilbert, Weintraub Genshlea Chediak Sproul, Sacramento, CA, for Eades Commodities Co.
Alain M Baudry, Pro Hac Vice, Maslon Edelman Borman and Brand, Minneapolis, MN, Stephen Roy Cornwell, Cornwell and Sample, Fresno, CA, for Diversified Business Credit Inc.
MEMORANDUM AND ORDER RE: DEFENDANT DIVERSIFIED'S MOTION FOR SUMMARY JUDGMENT
Plaintiffs are fourteen dairy farms: Weststeyn Dairy 2; Joe Alamo, individually and dba Alamo Dairy; B & J Dairy; George TeVelde, individually and dba George TeVelde Dairy Farm; J & M Bettencourt & Sons Dairy; Larrybell & Son Dairy; Bob Marchy, individually and dba Marchy Dairy; Sleepy Hollow Certified Milk Co., a California corporation; Tony Garcia, individually and dba Tony Garcia Dairy; Case Van Steyn, individually and dba Van Steyn Dairy; Bruce Burroughs, individually and dba Vista Livestock Co.; George Plantenga, individually and dba Western Sky Dairy; Van Warmerdam Dairy, Inc., a California Corporation and Willy Creek Ranch. Thirteen dairies (hereinafter "Weststeyn") with the exception of Willy Creek Ranch filed their complaint in state court on November 7, 2000. The case was removed by defendant Diversified Business Credit ("Diversified") with the consent of defendant Eades Commodities Company ("Eades") to the United States District Court of the Eastern District of California, Sacramento Division on December 8, 2000. On December 19, 2000, Judge Shubb transferred the case to the Fresno Division pursuant to Local Rule 3-120(b). Plaintiff Willy Creek Ranch ("Willy Creek") filed its complaint in federal court on August 10, 2001. The cases were consolidated on November 26, 2001.
Plaintiffs sue Diversified and Eades on various claims arising out of the loss of approximately $1.1 million prepaid to Eades for cattle feed and subsequently taken by Eades' primary lender, Diversified, to enforce its security interest in Eades' accounts receivable or general intangibles. Plaintiffs allege conversion, unjust enrichment, intentional interference with contractual relations, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, and declaratory relief. Diversified moved for summary judgment on April 15, 2002, and revised its supporting memorandum of law on June 10, 2002. Willy Creek filed a separate opposition on June 24, 2002. Weststeyn filed a separate opposition on June 24, 2002, and also adopted and incorporated all of Willy Creek's legal arguments and objections. Oral argument was heard on September 23, 2002.
Undisputed Facts.
In 1989, Diversified, a Minnesota commercial lender, entered into a revolving line of credit agreement with Eades, a Nebraska cattle feed merchant. Walter Tomaszek Decl., Apr. 15, 2002, ¶ 2. Diversified secured its financing to Eades through a Credit and Security Agreement ("Security Agreement") dated November 22, 1989, by which it took perfected security interests in Eades' assets. Id. at ¶ 3 & Ex. A. Under Paragraph 3(a) of the Security Agreement, Eades granted Diversified a security interest in its inventory, documents of title, accounts receivable, equipment and fixtures, equity securities, general intangibles, and all proceeds and products, all defined as "Collateral." Id. Paragraph 3(A) of the Security Agreement provides in pertinent part:
Grant of Security Interest. Borrower hereby assigns to Lender and grants Lender a security interest (collectively referred to as the "Security Interests") in the property described below, as security for the payment and performance of each and every debt, liability and obligation of every type hereafter owed to Lender ... The Security Interests shall attach to the following property of Borrower (the "Collateral"), including all proceeds and products thereof:
....
RECEIVABLES: Each and every right of Borrower to the payment of money, whether such right to payment exists or hereafter arises, whether such right to payment arises out of a sale, lease or other disposition of goods or other property, out of a rendering of services, out of a loan, out of overpayment of taxes or other liabilities, or other transaction or event, whether such right to payment is created, generated or earned by Borrower or by some other person whose interest is subsequently transferred to Borrower, whether such right is or is not already earned by performance, and howsoever such right to payment may be evidenced, together with all other rights and interests (including all liens, security interests and guaranties) which Borrower may at any time have by law or agreement against any account debtor or other person obligated to make any such payment or against any property of such account papers, bonds, notes and other debt instruments, and all rights to payment in the nature of general intangibles; all checking accounts, savings accounts and other certificates of depository accounts and all savings certificates and certificates of deposit maintained with or issued by Lender or any other bank or other financial institution.
...
GENERAL INTANGIBLES: All general intangibles of every type and description now owned or hereafter acquired by Borrower, including (without limitation) all present and future foreign and domestic patents, patent applications, trademarks, trademark applications, copyrights, trade names, trade secrets, shop drawings, engineering manuals, operating instructions, customer or supplier lists and contracts, licenses, permits, franchises, the right to use Borrower's corporate name, and the goodwill of Borrower's business.
Ex. A, ¶ 3(a) (emphasis added). Eades agreed "to deposit in one or more special collateral accounts maintained for Lender at Firstier Bank, Omaha, Nebraska, or any other bank reasonably satisfactory to Lender and Borrower, all collections on accounts, contract rights, chattel paper and other rights to payment constituting Collateral, and all other cash proceeds of collateral, immediately upon receipt thereof, in the form received, except for Borrower's endorsement when deemed necessary." Id. at ¶ 3(c). The Security Agreement specified that "[e]xcept to the extent otherwise required by law, this Agreement and the transactions evidenced hereby shall be governed by the substantive laws of the State in which this Agreement is accepted by Lender." Id. at ¶ 13. Diversified filed a financing statement with the Nebraska Secretary of State on November 27, 1989 to perfect its security interest and preserved its perfected status by filing a continuation statement on October 25, 1999. Tomaszek Decl. at ¶ 5. As of all the transactions in dispute, Diversified held a valid and perfected security interest of record in California in all Eades' receivables and general intangibles.
Prior to March 2000, Eades supplied grain feed to dairies and other cattle operations throughout California, including Plaintiffs. Plaintiffs purchased cattle feed from Eades', sometimes dealing with Eades directly, but most of the time dealing through brokers Wes Creswick and Stan Lawrence of Feed Services Company, Eades' California agents. Eades offered a prepay program to provide customers an incentive to prepay for cattle feed. Customers who prepaid could get a discount of $2 a ton off the price of the commodity; alternatively, they could earn interest on their prepaid balance at the rate of 7% per year. Eades Dep. at 12:12-23, Ex. 5. The prepay program allowed Eades' customers to prepay at the end of one year for feed to be delivered in the following year. A tax deduction was taken by the buyer for the full amount of the purchase, including for undelivered feed. As feed was needed throughout the following year, Eades shipped feed and the prepay deposit balance was reduced.
The contract of sale confirmation between each plaintiff and Eades called for delivery of a fixed amount of grain over a specified period of time at a fixed price, with certain terms and conditions specified on the reverse side of the contract. Eades Dep. at 6, Ex. 1 at 2. The sales agreement specified that "salesmen and brokers are not empowered to give contracts to bind the Seller." An integration clause provided:
This contract constitutes the entire understanding between the parties hereto and no modification or amendment of this Contract shall be valid or binding unless agreed to by both parties and confirmed in writing by either parties to the other. THERE ARE NO ORAL AGREEMENTS OR WARRANTIES COLLATERAL TO BE AFFECTING THIS CONTRACT. Buyer agrees to be bound by the terms of this Contract in the event of any conflict in terms or conditions hereof with Buyer's contract for such purchase.
Plaintiff Joe Alamo dba Alamo Dairy prepaid Eades for feed in 1999. Alamo Dairy took an expense deduction from income for tax purposes for the full amount of a prepayment in the year the contract was formed on the advice of...
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