Los Angeles Paper Bag Company v. James Talcott, Inc., a New York Corporation

Appellant, Los Angeles Paper Bag Co. (“Paper Bag”), appeals from a summary judgment order, entered on stipulated facts, awarding $21,851.21 in interpleaded funds to appellee, James Talcott, Inc. (“Talcott”). The District Court’s award to appellee was based on its construction of Arizona law relating to the conflicting rights of an unpaid cash seller in goods delivered at the buyer’s direction to a third party and of a secured party who holds a perfected security interest in the buyer’s inventory and accounts receivable in those same goods and in the proceeds derived therefrom. The District Court held that, under Arizona law, the interest of the unpaid cash seller, Paper Bag, was subordinate to the interest of the holder of the validly perfected security interest, Talcott. We affirm.

I.

In March of 1974, Talcott and Ace Paper Products (“Ace”) entered into a financing agreement whereby Talcott agreed to make loans to Ace and Ace, in turn, granted Talcott a security interest in its inventory, after-acquired property, and accounts receivable. The security agreement was duly recorded. At the time of Talcott’s motion for summary judgment in this action, Ace owed Talcott…