FRAZIER NUTS, INC v. AMERICAN AG CREDIT

Filed 8/2/06

CERTIFIED FOR PARTIAL PUBLICATION^*

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Merced County. Ronald W. Hansen, Judge.

Drummond & Associates, Bridget B. Laurent and Donald F. Drummond for Plaintiffs and Appellants.

Abbey, Weitzenberg, Warren & Emery, Patrick W. Emery, John W. Alden and Rachel K. Nunes for Defendant and Respondent.

Creditors of a bankrupt almond processor each claim superior rights to proceeds generated by the processor's sale of almonds. The processor paid the proceeds to its secured lender to reduce its loan balance. Unpaid almond growers who sold their crops to the processor on credit sued the secured lender to recover the proceeds. The growers claimed California's producer's lien statute gave them rights to the proceeds that were superior to the lender's security interest.

The trial court ruled in favor of the secured lender by (1) sustaining a demurrer to the growers' claims of conversion and unfair business practices and (2) granting summary judgment on the growers' remaining claims for intentional interference with contractual relations, unjust enrichment, and money had and received.

The growers appeal and ask this court to resolve a question of law that has not been addressed by a California appellate court--to wit, whether California's producer's lien statute grants a producer rights to the proceeds from a processor's sale of farm products that have priority over the rights of other claimants.

We conclude that the provision in Food and Agricultural Code section 55638^[1] that imposes a legal obligation on processors to use the proceeds of sales of farm products to pay producers necessarily creates a correlative right in producers to be paid from the proceeds generated by such sales. The producer's right to be paid from the proceeds meets the ordinary definition of â€