Mattson v. Commercial Credit Business Loans, Inc.

723 P.2d 996 (1986)

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Nature of the Case

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Facts

P and West Coast Lumber made a contract where West Coast would cut P’s logs for orders pre-sold by West Coast and approved by P. In May 1980, West Coast removed 285,000 board feet of lumber from P’s site without P’s approval. In September 1980, P sued West Coast seeking money damages for the conversion of the lumber. P did not seek replevin or an injunction to prevent the sale of the lumber or a constructive trust against the proceeds. In February 1981, while litigation was ongoing, Commercial Credit (D) opened a line of credit for West Coast secured by inventory and accounts. West Coast’s attorney advised D of the pending litigation but also advised D that the existence of the litigation did not prevent a loan so long as Ps were making no claim to the collateral on which D was relying to make the loan. In June 1982, Ps won a judgment for $192,011.17 against West Coast for conversion. West Coast then filed a petition for bankruptcy. Under the terms of the loan agreement, all money received by West Coast was turned over to D, and then D would make further advances. During the term of the contract, D loaned $2 million more than it received back. D declared West Coast in default in July 1982. During the bankruptcy, P learned that D claimed a security interest in West Coast’s entire inventory including the converted lumber and money generated from the sale of the converted lumber. Ps sued D asserting a claim against the proceeds of the converted lumber. D moved for summary judgment. The trial court granted the motion, and the court of appeals affirmed. This appeal resulted.