Dayka & Hackett, LLC v. Del Monte Fresh Produce, N.A., Inc.
228 Ariz. 533
| Ariz. Ct. App. | 2012Background
- D&H financed the growers’ 2007 crop and perfected its security interest by filing in Washington, D.C. (Jan 18, 2007).
- Growers defaulted on their obligations to D&H, leaving a substantial debt of $688,587.71.
- Del Monte advanced funds for the 2008 crop and obtained a security interest in the 2008 crop and proceeds, registering in Sonora in May 2008.
- Del Monte marketed the 2008 crop and retained the sale proceeds, while D&H informed Del Monte of its superior interest in April 2008.
- Trial court granted summary judgment to D&H on the conversion claim and held D&H’s interest superior; Del Monte’s asserted right of recoupment under § 47-9404 was rejected.
- Arizona appellate court resolved whether Mexican law satisfied UCC § 9-307(c) (as adopted in Ariz. § 47-9307(C)) to determine priority; court adopted a comprehensive approach and found Mexico did not meet the standard in 2007–2008; thus D&H’s UCC filing in D.C. controlled under priority rules.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether D&H’s security interest had priority over Del Monte’s. | D&H argues priority rests on proper perfection; D&H perfected in D.C.; Mexican system did not meet § 47-9307(C). | Del Monte argues its Mexican registration or alternative perfection methods could establish priority. | D&H’s filing in D.C. gave priority; Mexican system did not meet § 47-9307(C) in 2007–2008. |
| Whether Del Monte’s sale of the crop violated the conversion rule. | D&H asserts Del Monte’s sale and keeping proceeds violated the senior interest and constituted conversion. | Del Monte contends it disposed of collateral per § 47-9610 and § 47-9615 and did not breach; but no effect on conversion. | Del Monte’s sale and retention of proceeds violated D&H’s senior interest; conversion established. |
| Whether Del Monte has a right of recoupment under § 47-9404. | D&H is not an assignee relying on an account debtor; § 47-9404 does not apply to conversion claims. | Del Monte seeks recoupment against D&H under the marketing agreement as an account debtor. | Recoupment not applicable to a conversion claim; § 47-9404 does not bar or alter outcome. |
| Whether the trial court erred by applying non-UCC law to determine priority. | D&H argued that UCC-based priority rules apply; Mexican law failed § 47-9307(C). | Del Monte urged collateral-specific or other interpretations to defeat priority. | Comprehensive approach adopted; Mexico did not meet § 47-9307(C); D&H prevailed on priority. |
Key Cases Cited
- Citicorp Homeowners, Inc. v. Western Sur. Co., 131 Ariz. 334 (App. 1981) (conversion and possessory rights principles for secured parties)
- Gehrke v. Case Corp., 208 Ariz. 140 (Ariz. 2004) (propensity of secured party to sue for conversion when possessory rights exist)
- Empire Fire & Marine Ins. Co. v. First Nat’l Bank of Ariz., 26 Ariz. App. 157 (1996) (conversion/sale of collateral and proceeds)
- Sears Consumer Fin. Corp. v. Thunderbird Prods., 166 Ariz. 333 (App. 1990) (conversion-related possessory rights of secured party)
- W. Coach Corp. v. Kincheloe, 24 Ariz. App. 55 (App. 1975) (demand/refusal requirements for conversion actions)
- J.R. Simplot Co. v. Sales King Int’l, Inc., 17 P.3d 1100 (Utah 2000) (discussion of account debtor/assignment/recoupment context)