Northwest Equipment Sales Co., a Washington Corporation v. Western Packers, Inc., an Idaho Corporation

Competing security interests in the same collateral are involved in this case. The action was originally brought in an Idaho court, but was removed to the federal district court pursuant to 28 U.S.C. §§ 1441 (a) and 1444, federal jurisdiction being based on 28 U.S.C. §§ 1332 and 2410. The action is controlled by Idaho law. Northwest Equipment Sales Company (Northwest) appeals from an adverse judgment of the district court. We vacate and remand.

Background

In July 1969 Northwest sold various items of machinery, collectively referred to as a fruit packing line, to Orchards, Inc. (Orchards) and retained a security interest therein to assure payment of the agreed purchase price of $22,765.93. On September 24, 1969, the machinery was affixed to real property owned by George and Goldie Yost (the Yosts). The Yosts executed a contract to sell the real property to Cold House, Inc. (Cold House) on September 25, 1969. Cold House and Orchards were affiliates in the fruit business and had interlocking boards of directors and corporate officers. Cold House and Orchards “set up” Gem County Development Company (Gem) to build the fruit packing plant. In October 1969, Cold House made two…