Farm Credit Bank Of St. Paul v. F&A Dairy

477 N.W.2d 357 (1991)

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Nature of the Case

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Facts

Bonneprise owns and operates a dairy farm. Bonneprise borrowed $300,000 from P. As collateral for the loan, the bank obtained and perfected a security interest covering Bonneprise's milk and all accounts arising from the sale or other disposition of that milk and milk products. Bonneprise was selling milk to Land O' Lakes Dairy. In return for a waiver of its lien, the bank executed an assignment with Land O' Lakes and Bonneprise whereby Land O' Lakes would pay the bank $4,333 per month from the Bonneprise's milk proceeds. In August 1988, Bonneprise switched dairies and began selling their milk to D. After P received no payment in August, it found out that Bonneprise had switched dairies. By letter dated August 22, 1988, P notified D of its previous assignment with Land O' Lakes and demanded payments of $4,333 in accordance with the assignment. D enclosed a copy of the assignment, a product lien-notification statement and a copy of its financing statement filed in accordance with the U.C.C. Four days later, P notified D of its perfected security interest in the Bonneprise milk and all accounts arising from the sale or other disposition of that milk and milk products. P also enclosed a copy of the security agreement. D refused to pay the bank $4,333 per month for milk sales during August, September, October, and November. The trial court found that P had an effective perfected security interest in the milk. It also found that Bonneprise had defaulted and P was entitled to immediate possession of the secured property. The trial ruled that D bought the milk subject to P's security interest under §1631 because P had met the §1631 notice requirements. It found that D converted the sum of $ 4,333 per month during September, October, November, and December totaling $17,332. D appealed.