New West Fruit Corp. v. Coastal Berry Corp.

In this appeal we consider whether a contract that purports to grant a security interest to a creditor is enforceable if it fails to fully delineate the nature of the debtor’s obligation. As we will explain below, we conclude that this fact alone does not preclude enforcement of a security agreement if the language of the agreement and circumstances of the transaction reveal an intent by the parties to grant a security interest to the creditor.

Background

Both parties to this action, New West Fruit Corporation (New West) and Coastal Berry Corporation (Coastal Berry), are brokers of fresh strawberries. In the second half of 1984 New West’s predecessor, Monc’s Consolidated Produce, Inc. (Monc’s), made loans of money and strawberry plants to a group of strawberry growers known collectively as Cooperativa La Paz. In September 1984 Monc’s and Cooperativa La Paz entered into a contract entitled “Sales and Marketing Agreement,” which granted Monc’s the exclusive right to market the strawberries grown by the collective during the 1984-1985 season. The agreement did not specifically refer to advances of money or plants either already made or contemplated.

Paragraph 18 of the…