IMPERIAL NH3 v. Central Valley Feed Yards, Inc.

Plaintiff Imperial NH3, a Division of Western Farm Service, Inc., filed this action against defendant Central Valley Feed Yards, Inc. to recover damages for the conversion of the “proceeds” of a hay crop in which plaintiff had a $32,252.79 security interest. Before learning of plaintiff’s lien, defendant had agreed to buy a large quantity of hay from a farmer and had advanced him $68,000 needed for operating expenses. Thereafter, the farmer delivered hay to defendant valued at $59,482. This sum defendant simply offset against the $68,000 previously advanced. The trial court entered judgment for defendant on the theory that plaintiff had waived its security interest in the crop by impliedly authorizing its harvest and delivery to defendant and that the $68,000 paid to the farmer constituted the “proceeds” of sale.

On appeal plaintiff contends the judgment should be reversed because the trial court erred in concluding the plaintiff waived its security interest, and the proceeds are still in the possession of defendant, and defendant’s refusal to honor plaintiff’s security interest is conversion.

The Credit Manager’s Association of Southern California, as amicus curiae…