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Williams v. Farm Sources International Capital, LLC

Court of Appeals of Arizona, First Division

December 26, 2013

RODNEY WILLIAMS dba WILLIAMS FARMS, Plaintiff/Appellant,
v.
FARM SOURCES INTERNATIONAL CAPITAL, LLC, a Delaware limited liability company, Defendant/Appellee.

Not for Publication – Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Superior Court in Yuma County No. S1400CV201200332 The Honorable John P. Plante, Judge

Don B. Engler, PC, Donald B. Engler Counsel for Plaintiff/Appellant

Law Offices of Larry W. Suciu, PLC, Barry L. Olsen, Larry W. Suciu Counsel for Defendant/Appellee

Presiding Judge Lawrence F. Winthrop and Judge Margaret H. Downie joined.

MEMORANDUM DECISION

Diane M. Johnsen, Chief Judge

¶1 Rodney Williams dba Williams Farms ("Williams") appeals from the superior court's entry of summary judgment in favor of Farm Sources International Capital, LLC ("FSI Capital"). The court held FSI Capital had a first-position security interest in a cotton crop and released to FSI Capital the proceeds of the cotton, which had been deposited with the court in an interpleader action. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In November 2010 and January 2011, Williams leased farm land from the Imperial Irrigation District ("Irrigation District"). The leases transferred the Irrigation District's "right, title, claim and interest" in any crops grown on the land to Williams and gave the Irrigation District a security interest in such crops in the event of a default.

¶3 A few months later, Williams and Robert Taylor Farming, L.L.C. ("Taylor") entered a joint farming agreement, under which Williams agreed to provide the leased land and Taylor agreed to arrange for the financing necessary for their joint venture. Taylor then approached a sister company of FSI Capital, Farm Sources International Holding, LLC ("FSI Holding"), which agreed to make a loan to the venture only if could obtain an ownership interest in the enterprise. To that effect, Taylor and FSI Holding formed Imperial Valley 1137, LLC ("Imperial Valley"), and Taylor, with Williams's written consent, assigned all of its "right[s], title, claim and interest" in the venture to Imperial Valley. In turn, Imperial Valley assumed all of Taylor's duties under the joint farming agreement.

¶4 FSI Capital then loaned Imperial Valley $981, 000 for use in the "planting and harvesting" of cotton on the land. Imperial Valley granted FSI Capital a security interest in the cotton, and Williams, Imperial Valley and the Irrigation District executed a "Crop Lease Subordination Agreement" establishing that FSI Capital's security interest would have first priority. Specifically, the subordination agreement provided:

In consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which consideration is hereby acknowledged, and in order to induce [FSI Capital] to make the loan . . . it is hereby declared, understood and agreed as follows:
1. That [FSI Capital's] Lien, and any renewals or extensions thereof, shall unconditionally be and remain at all times a lien or charge prior and superior to the lien or charge of the [Irrigation District's] Lien.

¶5 Eventually, cotton harvested from the land was transported to Yuco Gin, where it was ginned and baled. With Williams, Imperial Valley and FSI Capital all claiming an interest in the cotton, Yuco Gin filed an interpleader action naming each as a defendant. Ten days later, Williams filed a separate complaint against Yuco Gin, Imperial Valley and FSI Capital, claiming to be the rightful owner of the cotton and alleging breach of contract and conversion. The superior court consolidated the two cases and, ...


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