## Facts

- Dayka & Hackett, LLC (D&H) financed and marketed Mexican growers’ 2007 table-grape crop under marketing and security agreements granting D&H an interest in the 2007 crop, future crops, and proceeds.
- On January 18, 2007, D&H filed a financing statement in Washington, D.C. under A.R.S. § 47-9307(C) to perfect its security interest.
- The 2007 crop failed financially; the growers defaulted and owed D&H about $688,587.71.
- Del Monte Fresh Produce N.A., Inc. later advanced funds for the growers’ 2008 crop and took its own security interest in the 2008 crop and proceeds, based on its search of a Sonora, Mexico registry.
- In April 2008, D&H notified Del Monte of D&H’s security interest in the growers’ crops and proceeds.
- In May 2008, Del Monte marketed and sold the 2008 crop, collected the sale proceeds, and retained them rather than turning them over to D&H.
- D&H sued the growers and Del Monte, asserting priority in the collateral and a conversion claim against Del Monte.
- The trial court granted summary judgment for D&H, finding D&H’s security interest superior, holding Del Monte liable for conversion, and awarding damages and attorney’s fees.

## Issues

1. Whether D&H properly perfected its security interest by filing in Washington, D.C. under A.R.S. § 47-9307(C) and thereby obtained priority over Del Monte’s later security interest in the 2008 crop and proceeds.
2. Whether Del Monte had a superior right of recoupment under A.R.S. § 47-9404(A)(1) permitting it to retain proceeds to reimburse advances and expenses.
3. Whether Del Monte’s sale of the 2008 crop and retention of proceeds after notice of D&H’s interest constituted conversion.
4. Whether D&H had a right to immediate possession of the proceeds sufficient to make Del Monte’s retention wrongful.

## Decision

- The Court of Appeals affirmed summary judgment for D&H.
- The court held Mexico’s law in 2007–2008 did not “generally require” public filing of nonpossessory security interests as a condition of priority against lien creditors; therefore, under A.R.S. § 47-9307(C), the growers were deemed located in the District of Columbia for perfection purposes.
- D&H’s Washington, D.C. filing perfected its security interest, which covered future crops and proceeds and thus extended to the 2008 crop proceeds.
- Del Monte’s recoupment theory under A.R.S. § 47-9404(A)(1) did not defeat D&H’s prior perfected security interest.
- Del Monte was liable for conversion because D&H had the superior right to the proceeds and an immediate right to possession when Del Monte collected and kept them after receiving notice.
- The court upheld the damages and attorney’s fees awards.

## Legal Principles

- Under A.R.S. § 47-9307(C) (UCC § 9-307(c)), when a foreign jurisdiction does not generally require public filing of nonpossessory security interests to obtain priority over a lien creditor, the debtor is treated as located in the District of Columbia for purposes of perfection and priority.
- A security agreement may grant a perfected security interest in future crops and proceeds, causing later proceeds from those crops to be subject to the earlier perfected interest.
- Contract-based recoupment rights under A.R.S. § 47-9404(A)(1) do not supersede a prior perfected Article 9 security interest in the same proceeds.
- Conversion occurs when a party intentionally exercises dominion or control over property inconsistent with another’s superior right to possession; retaining collateral proceeds after notice of a superior perfected interest can constitute conversion.

## Conclusion

The court affirmed that D&H’s D.C.-filed financing statement perfected a security interest reaching future crops and proceeds and gave D&H priority over Del Monte; Del Monte’s retention of 2008 crop proceeds after notice supported liability for conversion and the resulting damages and fee awards.


Dayka & Hackett, L.L.C. v. Del Monte Fresh Produce N.A., Inc., 228 Ariz. 533, 269 P.3d 709 (Ct. App. 2012)