Court Opinion

ID: 803109
Source: CourtListenerOpinion
Date Created: 2012-06-26 15:32:31+00
Date Added: 2024-06-11T18:00:06.797595
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 11-1445
                                   ___________

Platte Valley Bank, a Nebraska State  *
Bank,                                 *
                                      *
             Appellant,               *
                                      * Appeal from the United States
     v.                               * District Court for the
                                      * District of Nebraska.
Tetra Financial Group, LLC, a Utah    *
Limited Liability Company; Republic *
Bank, Inc., a Utah Corporation,       *
                                      *
             Appellees.               *
                                 ___________

                             Submitted: January 11, 2012
                                Filed: June 26, 2012
                                  ___________

Before RILEY, Chief Judge, MELLOY and SHEPHERD, Circuit Judges.
                              ___________

RILEY, Chief Judge.

       Platte Valley Bank (PVB), a Nebraska banking corporation, claimed a perfected
security interest in certain equipment owned by Heggem Construction, Inc. (Heggem),
a Wyoming corporation with its principal place of business in Scotts Bluff County,
Nebraska. In late 2008, Heggem sold the equipment in a sale and leaseback
transaction to Tetra Financial Group, LLC (Tetra), a Utah limited liability company
whose members are all domiciliaries of Utah. Tetra later transferred the equipment to
Republic Bank, Inc. (Republic, and with Tetra, appellees), a Utah corporation. PVB
sued appellees, claiming appellees converted the equipment and the collateral
proceeds of the sale. The district court1 denied PVB’s motion for summary judgment
and granted appellees summary judgment, finding the undisputed facts in the record
did not support PVB’s conversion claims. PVB appeals, and we affirm.

I.    BACKGROUND
      Heggem, a longtime customer of PVB, owed the bank more than $1,000,000.
To secure the payment of that debt, Heggem executed a commercial security
agreement on March 13, 2002, granting PVB a security interest in all of Heggem’s
“Property,” as described in the security agreement, including “Instruments,”
“Equipment,” and “Deposit Accounts,” as well as “all proceeds.” The agreement
defined equipment to include “machinery” and “vehicles,” as well as many other types
of equipment, parts, and tools.

       On May 6, 2002, PVB filed a financing statement in the office of the Secretary
of State for the State of Wyoming to perfect its security interest. On April 18, 2007,
PVB filed a continuation statement to keep the financing statement effective.

       In late 2007, Heggem and Tetra began discussing the possibility of Tetra
providing Heggem lease financing. Tetra and Heggem agreed to structure the
transaction as a sale and leaseback agreement under which Heggem would sell some
of its construction equipment to Tetra and lease it back for continued use in its
construction business. To alleviate Tetra’s concerns about the added risk of the longer
lease term and lower payments Heggem sought, Heggem suggested placing the
purchase funds in a certificate of deposit (CD) as security for the transaction. The
suggested structure would allow Heggem to increase its bonding capacity by moving
“booked assets to an operating lease and onto a CD.”

      1
      The Honorable Lyle E. Strom, United States District Judge for the District of
Nebraska.

                                          -2-
       Tetra later advised Heggem the security deposit would be placed in a ban
control account—held in Heggem’s name with Heggem bearing the interest—rather
than a CD. Tetra explained the revised structure would allow Tetra to perfect its
interest and better protect itself in the event of Heggem’s default. As the transaction
moved forward, Tetra asked Heggem for credit references. Heggem identified PVB
as a creditor, and PVB advised Tetra that Heggem was in good standing on its
financial obligations to PVB.

        In October 2008, Tetra sent Heggem a draft of the transaction documents,
including a subordination agreement for PVB to execute that would have subordinated
PVB’s security interest in the equipment to Tetra’s interest. The parties disagree as
to whether PVB was aware of the subordination agreement and was asked to execute
it, but agree PVB never signed the agreement.

       In late December 2008, Heggem and Tetra executed a Sale and Leaseback
Agreement (SLA) dated and effective October 2, 2008, under which Tetra purchased
twenty-two pieces of equipment subject to PVB’s security interest and then leased the
equipment back to Heggem.2 The SLA provided for a purchase price of $565,430
(holdback amount), which Tetra would hold back to be “used as a security deposit
pursuant to [the] Security Agreement” between Heggem and Tetra until Heggem
satisfied its lease obligations. The holdback amount was to be held “in an interest
bearing account at Republic Bank” for the duration of the base lease term. The SLA
did not provide further details about the account.

      2
         The equipment included five Mack trucks and a flatbed trailer that were titled
in Wyoming, which requires a notation on the certificate of title to perfect a security
interest. See Neb. U.C.C. §§ 9-303, 9-311; Wyo. Stat. Ann. § 31-2-801(a)(ii). Both
parties assert a security interest in the titled equipment, and dispute the priority of
their respective interests. Appellees have not asserted a counterclaim for the amounts
PVB recovered selling the titled equipment and the parties’ dispute does not affect
our disposition of this appeal.

                                          -3-
       In connection with the SLA, Heggem and Tetra also executed a Bill of Sale,
Master Lease Agreement (lease), and Lease Schedule No. 1 (lease schedule). Under
the terms of the lease, Heggem leased the equipment from Tetra for 60 months with
a base monthly rental payment of $11,591.32. The lease schedule stated 100% of the
$565,430 total lease cost for the equipment was “to be held in an instrument
acceptable to [Tetra] at Republic Bank.” Heggem granted Tetra a security interest in
the $565,430 security deposit and all Heggem’s assets. In the lease schedule, Tetra
expressly acknowledged its security interest in Heggem’s assets was “junior in
priority” to PVB’s security interest in those assets.

       The sale and leaseback transaction documents did not otherwise recognize
PVB’s security interest in Heggem’s equipment. The SLA and the bill of sale
indicated Heggem was transferring good title to the equipment “free and clear of all
liens, charges, encumbrances, security interests and rights of others, and that
[Heggem] has full right, power and lawful authority to sell said property.” (Bill of
Sale). Under the terms of the lease, Heggem retained physical possession of the
equipment.

       After completing the sale and leaseback, Tetra and Republic entered into a Sale
and Assignment Agreement (SAA) dated as of December 31, 2008, under which Tetra
sold the Heggem equipment to Republic and assigned the lease in exchange for
$555,899. At the end of the lease, if Republic had received all of the rental payments
due, all of Republic’s right, title, and interest in the Heggem equipment would
automatically transfer back to Tetra for no additional consideration. Like the sale and
leaseback documents, the SAA did not mention PVB’s security interest in the
equipment. Tetra represented it held “a first lien and priority security interest in the
[Heggem equipment]” and purportedly transferred the equipment “free and clear of all
liens, charges, encumbrances and other agreements other than the [l]ease and any
applicable software license.”

                                          -4-
        The SAA contemplated Republic paying Tetra the $555,899 purchase price in
cash on the closing date of January 2, 2009. Instead, at closing, Republic transferred
$555,899 of its own funds into a new account titled “Republic Bank BAN CONTROL
ACCOUNT Heggem Construction, Inc.” (holdback account). Tetra transferred $9,531
into the holdback account, bringing the balance to $565,430. Although Heggem’s
taxpayer identification number was assigned to the account, Heggem did not sign any
of the documents to open the account and did not have the right or ability to withdraw
funds from it. The holdback account was in the control and possession of Republic
at all times.

       Just three months after executing the sale and leaseback transaction, Heggem
failed to make the required lease payment for March 2009. Heggem was unable to
cure its default. On June 10, 2009, Republic applied the funds in the holdback account
to Heggem’s lease obligations, “thereby netting out the asset and liability of the [l]ease
on Republic Bank’s books to zero.”3

      Heggem also fell behind on its payments to PVB. By June 2009, PVB and
Heggem began discussing the possibility of selling some of Heggem’s assets to
provide cash to bring PVB’s loan current.

       On June 29, 2009, an attorney for PVB sent appellees a letter claiming a security
interest in the Heggem equipment and the proceeds being held in the holdback account
at Republic. Receiving no response, PVB sent a second letter on September 1, 2009,
requesting appellees pay PVB the holdback amount. On October 13, 2009, Tetra’s
counsel responded by letter, denying PVB or Heggem had any interest in the $565,430
security deposit.

      3
       We join the district court in interpreting the references in the record to June
10, 2010, to be typographical errors referring to the events occurring on June 10,
2009.

                                           -5-
       In January 2010, PVB filed suit against appellees in state court in Nebraska,
alleging conversion. After filing suit, PVB, with Heggem’s cooperation, repossessed
and sold the equipment pursuant to PVB’s rights as a secured party under Revised
Article 9 of the Uniform Commercial Code (U.C.C.) to pay down Heggem’s debt to
PVB. Neither Tetra nor Republic interfered with PVB’s repossession and sale of the
equipment. PVB applied the sale proceeds from the untitled equipment to Heggem’s
outstanding obligations and is holding the sale proceeds from the titled equipment in
escrow pending resolution of this litigation.

       On February 10, 2010, appellees removed this case to the federal district court
pursuant to 28 U.S.C. §§ 1332(a)(1), 1441(a), and 1446, asserting diversity
jurisdiction. On May 13, 2010, PVB filed an amended complaint in the district court,
alleging appellees converted the equipment and the collateral proceeds acquired upon
the equipment’s sale. After discovery, PVB and appellees filed cross motions for
summary judgment. The district court granted appellees’ motion for summary
judgment and denied PVB’s motion, finding (1) any interference with PVB’s rights
in the equipment was not serious or important enough to constitute conversion, and
(2) appellees had a superior interest in the alleged collateral proceeds. PVB appeals.

II.    DISCUSSION
       A.      Standard of Review
       We review the district court’s resolution of cross motions for “summary
judgment de novo, viewing the record in the light most favorable to the nonmoving
party and drawing all reasonable inferences in that party’s favor.” Chambers v.
Pennycook, 641 F.3d 898, 904 (8th Cir. 2011). Summary judgment is proper “if the
movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

                                         -6-
       B.     Choice of Law
       The district court identified a potential choice-of-law issue with respect to
whether it should apply Nebraska, Utah, or Wyoming law based on the location of the
equipment and the domicile of the parties. A federal court sitting in diversity
generally applies the substantive law of the state in which it sits, see Erie R. Co. v.
Tompkins, 304 U.S. 64, 78 (1938), including the rules governing the choice of law.
See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Nebraska
law, “[t]he first step in a conflict-of-law analysis is to determine whether there is an
actual conflict between the legal rules of different states.” Christian v. Smith, 759
N.W.2d 447, 458 (Neb. 2008); accord Phillips v. Marist Soc. of Washington Province,
80 F.3d 274, 276 (8th Cir. 1996) (advising “before entangling itself in messy issues
of conflict of laws a court ought to satisfy itself that there actually is a difference
between the relevant laws of the different states.” (quoting Barron v. Ford Motor Co.
of Canada, 965 F.2d 195, 197 (7th Cir. 1992) (internal quotation marks omitted))).

       The district court found “no substantive difference between the applicable laws
of Nebraska, Utah, and Wyoming regarding the issues of this case” because “[a]ll three
states define conversion in a similar manner, and all three states have adopted the
revised Article 9 of the Uniform Commercial Code.” The parties do not challenge this
ruling, and we do not discern any error in the district court’s determination. Because
there is no substantive difference between the laws of the contact states, we apply the
law of Nebraska, the forum state. See Yoder v. Cotton,758 N.W.2d 630, 634-35 (Neb.
2008) (applying Nebraska law in the absence of a conflict in the law of the contact
states); accord Phillips, 80 F.3d at 276 (noting, absent a true conflict, the law of the
forum controls).

      C.     Equipment
      PVB claims a security interest in Heggem’s equipment to secure Heggem’s
obligations to PVB. According to PVB, appellees converted PVB’s collateral by

                                          -7-
exercising “dominion and control over it that was inconsistent with the rights of PVB
as a secured party.”4

      Under U.C.C. § 9-315(a)(1), “a security interest . . . continues in collateral
notwithstanding sale, lease, license, exchange, or other disposition thereof unless the
secured party authorized the disposition free of the security interest.” See Neb. U.C.C.
§ 9-315(a)(1)(A); Wyo. Stat. Ann. § 34.1-9-315(a)(i). “[W]hen property is subject to
a security interest, an exercise of dominion or control over the property that is
inconsistent with the rights of the secured party constitutes, as to that secured party,
a conversion of the property.” Battle Creek State Bank v. Preusker, 571 N.W.2d 294,
300-01 (Neb. 1997).

      The “tort of conversion has been confined to those major interferences
      with the chattel, or with the plaintiff’s rights in it, which are so serious,
      and so important, as to justify the forced judicial sale to the defendant
      which is the distinguishing feature of the action.” [William L.] Prosser,
      [Handbook of the] Law of Torts [§ 15 at 80-81 (4th ed. 1971)]. In
      Restatement [(Second) of Torts § 222A at 431 (1965) (Restatement)], it
      is stated: “(1) Conversion is an intentional exercise of dominion or
      control over a chattel which so seriously interferes with the right of
      another to control it that the actor may justly be required to pay the other
      the full value of the chattel.” Therefore it can be seen that not all
      exercise of dominion over or interferences with the use of chattels
      constitute conversion.

      4
        Under Neb. U.C.C. § 9-301(2), “While collateral is located in a jurisdiction,
the local law of that jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a possessory security interest in that collateral.”
The record is not entirely clear as to the location of the equipment at issue. But the
parties generally agree the equipment was located in Nebraska and Wyoming and do
not dispute the district court’s conclusion that the law of those states is substantively
the same. At oral argument, counsel speculated some equipment may have been in
South Dakota, but that possibility is not indicated anywhere in the record.

                                           -8-
Polley v. Shoemaker, 266 N.W.2d 222, 225 (Neb. 1978).

            In determining the seriousness of the interference and the justice
      of requiring the actor to pay the full value, the following factors are
      important:

            (a) the extent and duration of the actor’s exercise of
      dominion or control;
            (b) the actor’s intent to assert a right in fact inconsistent
      with the other’s right of control;
            (c) the actor’s good faith;
            (d) the extent and duration of the resulting interference
      with the other’s right of control;
            (e) the harm done to the chattel;
            (f) the inconvenience and expense caused to the
            other.

Restatement § 222A(2) at 431.

      Applying this legal framework, the district court determined the sale and
leaseback and subsequent assignment to Republic “did not deny PVB any right it
possessed in the [Heggem] Equipment” because appellees “took ownership . . .
subject to PVB’s security interest” and did not significantly interfere with PVB’s use
and enjoyment of the equipment or its possession of the equipment upon Heggem’s
default. The district court concluded any interference with PVB’s rights was not so
serious or important as to constitute conversion.

       On appeal, PVB concedes Tetra’s purchase of the equipment from Heggem was
not a conversion, see Neb. U.C.C. § 9-401(b) (explaining a debtor generally retains
the power to sell collateral despite provisions in the security agreement prohibiting
transfer), but maintains appellees’ actions after that point constitute conversion. PVB
lists three factors it contends establish appellees’ liability for conversion:
(1) appellees’ failure to recognize PVB’s security interest in the transaction

                                         -9-
documents for the sale and leaseback and the sale and assignment; (2) Tetra’s lease
of the equipment to Heggem without forwarding Heggem’s lease payments to PVB;5
and (3) appellees’ knowledge of PVB’s security interest and efforts to structure their
financing transaction with Heggem to protect their interests in the absence of a
subordination agreement. In PVB’s view, out of concern Heggem would be making
lease payments rather than paying PVB, appellees should have called off the whole
transaction once it learned PVB had an interest in the equipment.

       But the law does not require a subsequent creditor to reject an encumbered
asset as potential collateral or to treat an existing creditor’s interests as paramount to
avoid facing liability for conversion. The U.C.C. contemplates multiple security
interests in the same collateral and devised a system for determining the priority of
those interests should they ripen. See, e.g., Neb. U.C.C. §§ 9-317 to 9-339.

       Heggem sought additional financing to put its equipment to further use for its
business.6 Unfortunately, Heggem’s plans failed and its business faltered. Heggem
stopped making payments on the PVB loan, and PVB sought to exercise its secured-
party rights in the equipment. When PVB went to take possession of the equipment,
appellees did not object or interfere with PVB’s right of control. Appellees’

      5
       In its opening brief, PVB notes Heggem’s lease payments “would have been
proceeds of PVB’s collateral pursuant to UCC § 9-102(a)(64) . . . to which PVB’s
security interest would attach under UCC § 9-315(a).” In its reply and at oral
argument, PVB conceded it has not argued appellees converted the lease payments
as a separate claim, instead arguing appellees’ “receipt and retention” of the lease
payments was “merely one of the factors establishing the conversion” of the
equipment. In light of PVB’s concession, we need not consider whether appellees
converted the lease payments.
      6
      The PVB security agreement may have prohibited Heggem from using the
equipment as collateral for additional financing. That potential alternative basis for
Heggem’s default does not affect our conversion analysis.

                                          -10-
transaction documents may not have adequately recognized PVB’s security interest,
but appellees did not dispute PVB’s interest when it mattered most.

       Because Heggem always maintained possession of the equipment, PVB was
able to recover the equipment intact, liquidate it, and use the amount received to pay
down Heggem’s loan, just as it would had Heggem never sold the equipment or
obtained financing from appellees. Appellees’ purchase of the equipment did not
substantially alter the condition or location of the equipment, increase PVB’s expense
or inconvenience in recovering the equipment, or hinder PVB’s right to possess the
equipment upon Heggem’s default and sell it to satisfy Heggem’s obligations.

       PVB simply fails to articulate any harm it suffered that was so substantial that
justice would require appellees to pay PVB the full value of the equipment. The
district court did not err in concluding any interference by appellees with PVB’s right
in the equipment was not so serious or important as to constitute conversion.

         D.   Deposit Account
         PVB contends appellees converted the proceeds of PVB’s collateral by
depositing the amount appellees paid for the Heggem equipment into the holdback
account and applying the funds in the account to Heggem’s obligations under the
lease. See Neb. U.C.C. § 9-102(64) (defining proceeds to include “whatever is
acquired upon the sale, lease, license, exchange, or other disposition of collateral”).
The district court determined “[w]hether PVB’s security interest attached to the
[h]oldback [a]mount is unclear,” but found it “need not decide this issue because even
if it is assumed PVB’s security interest attached, PVB would still not be entitled to
the [h]oldback [a]mount.” We agree.

      PVB does not dispute the district court’s determination that the holdback
account was a “deposit account,” as defined in U.C.C. § 102(a)(29). See Neb. U.C.C.
§ 9-102(a)(29). Under Neb. U.C.C. § 9-304, Utah law “governs perfection, the effect

                                         -11-
of perfection or nonperfection, and the priority of a security interest in a deposit
account maintained with [Republic]” because Republic is a Utah corporation. Utah
law provides,

      (1) A security interest held by a secured party having control of the
      deposit account under Section 70A-9a-104 has priority over a
      conflicting security interest held by a secured party that does not have
      control.

      ....

      (3) Except as otherwise provided in Subsection (4), a security interest
      held by the bank with which the deposit account is maintained has
      priority over a conflicting security interest held by another secured
      party.

Utah Code Ann. § 70A-9a-327.

      A secured party has control of a deposit account if:

            (a) the secured party is the bank with which the deposit account
      is maintained; [or]

       ....

            (c) the secured party becomes the bank’s customer with respect to
      the deposit account.

Utah Code Ann. § 70A-9a-104(1). Comment 3 to U.C.C. § 9-327 states “security
interests perfected by control [under paragraph (1)] . . . take priority over those

                                       -12-
perfected otherwise, e.g., as identifiable cash proceeds under Section 9-315.”7
Comment 4 explains,

      Under paragraph (3), the security interest of the bank with which the
      deposit account is maintained normally takes priority over all other
      conflicting security interests in the deposit account, regardless of
      whether the deposit account constitutes the competing secured party’s
      original collateral or its proceeds. A rule of this kind enables banks to
      extend credit to their depositors without the need to examine either the
      public record or their own records to determine whether another party
      might have a security interest in the deposit account.

      PVB acknowledges Republic had possession and control of the holdback
account from the time Republic transferred funds into the account until Republic
applied the account balance to Heggem’s obligations under the lease. PVB further
acknowledges Utah Code Ann. § 70A-9a-327(3) could provide Republic with an
argument that Republic had a superior security interest in the holdback account.

       However, PVB contends Republic cannot successfully argue Republic has
priority under Utah Code Ann. § 70A-9a-327(3) because Heggem never granted
Tetra, and by assignment Republic, a security interest in the holdback account. See
Utah Code Ann. § 70A-9a-203(2)(c)(iv) (explaining a security interest in a deposit
account is only enforceable against third parties if “the secured party has control . . .
pursuant to the debtor’s security agreement”). According to PVB, Heggem’s
agreement with Tetra and the transaction documents, including the security
agreement, contemplated the holdback amount being placed in an “instrument” and

      7
        “The official comments to the UCC have not been adopted by the Utah
legislature and are therefore not authoritative, but rather, persuasive as to the code’s
interpretation.” J.R. Simplot Co. v. Sales King Int’l, Inc., 17 P.3d 1100, 1108 (Utah
2000).

                                          -13-
did not give Tetra or Republic control over a “deposit account.” As PVB points out,
the distinction is significant under U.C.C. § 9-327, which does not apply to accounts
evidenced by an “instrument.” See U.C.C. § 9-327 cmt. 2 (stating U.C.C. § 9-327
“does not apply to accounts evidenced by an instrument (e.g., certain certificates of
deposit), which by definition are not deposit accounts”).

       PVB raises an interesting issue with respect to whether Heggem granted Tetra,
and by assignment Republic, a security interest in the holdback account based on the
granting language in the security agreement. But the argument comes too late. PVB
did not raise this argument before the district court in its brief in support of its motion
for summary judgment or in opposing appellees’ motion. “Absent exceptional
circumstances,” not present here, “we cannot consider issues not raised in the district
court.” Shanklin v. Fitzgerald, 397 F.3d 596, 601 (8th Cir. 2005).

       PVB does not otherwise challenge the district court’s determination that
Republic’s security interest in the holdback account was superior to any interest PVB
may have had in the account as proceeds. PVB also does not challenge the district
court’s conclusion “[a] secured party that holds a security interest in a deposit account
by control is permitted to apply the balance of the deposit account against the
obligation the deposit account secures.” See Myers v. Christensen, 776 N.W.2d 201,
206 (Neb. 2009) (explaining after a default, a secured party who “holds a security
interest in a deposit account perfected by control . . . may apply the balance of the
deposit account to the obligation secured by the deposit account” (quoting Neb.
U.C.C. § 9-607(a)(4) (internal quotation marks omitted))).

      PVB does challenge the district court’s determination that “no conversion
occurred” under the circumstances of this case. PVB asserts “even if UCC § 9-327
did give [appellees] priority to the [holdback account], . . . such would not relieve
[appellees] of liability to PVB for conversion of its collateral proceeds” because the

                                           -14-
priority provisions of U.C.C. § 9-327 “do not protect the secured party for wrongful
actions taken with regard to [conflicting security interests in the deposit account].”

       According to PVB, the district court “failed to recognize . . . [appellees], not
[Heggem] . . . transferred the proceeds of the [Heggem] Equipment” into the holdback
account and later used the funds “to satisfy [Heggem’s] obligations . . . under the
lease.” PVB maintains “[i]t is these actions . . . that constitute conversion of PVB’s
collateral.” PVB analogizes appellees’ actions to the second example in U.C.C. § 9-
332 comment 2, in which the commentators indicate a depository bank that holds a
superior interest in a deposit account maintained at the bank potentially could be
liable to a creditor with a junior interest based upon the depository bank’s wrongful
conduct in colluding with the debtor to violate the junior creditor’s rights.

      PVB’s assertion that priority does not necessarily preclude liability for
conversion may have merit, but PVB again fails to demonstrate conversion on the
facts of this case. Though stopping short of claiming appellees colluded with
Heggem, PVB ascribes nefarious motives to appellees and characterizes their actions
as somehow underhanded or wrongful without citing anything in the record to
support those contentions. The undisputed facts in the record indicate appellees
agreed to provide new financing to a distressed borrower and at least hoped to have
PVB subordinate its security interest in Heggem’s assets. When appellees’ efforts to
obtain a subordination agreement failed, appellees structured the transaction to
minimize their risk and protect their interest in the new funds they provided.

      “The primary purpose of Article 9 . . . was to simplify and lend certainty to
procedures for establishing security interests” to facilitate efficient and effective
financing and allow creditors to allocate the risk of providing credit. See N. Platte
State Bank v. Prod. Credit Ass’n of N. Platte, 200 N.W.2d 1, 4 (Neb. 1972); accord
Boatmen’s Nat’l Bank of St. Louis v. Sears, Roebuck & Co., 106 F.3d 227, 230-31
(8th Cir. 1997) (“A fundamental purpose of Article 9 is ‘to create commercial

                                         -15-
certainty and predictability by allowing [creditors] to rely on the specific perfection
and priority rules that govern collateral within the scope of Article 9.’” (quoting
Carlson v. Tandy Computer Leasing, 803 F.2d 391, 394 (8th Cir. 1986))) (alteration
in Boatmen’s); J.R. Simplot, 17 P.3d at 1104 (similar). The scope of Revised Article
9 was expanded to include provisions covering the perfection and priority of deposit
accounts as original collateral and included special rules for banks. See Utah Code
Ann. §§ 70A-9a-327 and U.C.C. § 9-101 cmts. 4(a) and (e).

       Simply making use of those provisions, without more, does not constitute
conversion. Rather than underhanded or wrongful, the actions PVB challenges in this
appeal were consistent with the purpose of Utah Code Ann. § 70A-9a-327. A new
creditor like appellees would not be willing to provide additional financing to a
distressed borrower like Heggem if it could not secure the debt or if the funds the
creditor provided were immediately subject to superior security interests upon
closing.

       Republic funded the Heggem transaction with new money and did not resist
PVB’s repossession and sale of the collateral that originally secured PVB’s loan.
Republic’s application of the funds it transferred to the holdback account to satisfy
Heggem’s obligations under the lease did not materially change PVB’s position from
where PVB would have been, had the transaction between appellees and Heggem
never occurred. Because PVB has failed to articulate any significant harm it suffered
as a result of appellees’ actions with respect to the holdback account, the district court
did not err in concluding no conversion occurred.

III.   CONCLUSION
       We affirm.
                  ______________________________

                                          -16-