The U.S. District Court for the Northern District of Iowa has enlisted the assistance of the Iowa Supreme Court to determine whether a feed supplier must file a new financing statement every 31 days for feed delivered in the preceding 31-day period in order to maintain lien perfection and retain superpriority status under Iowa’s agricultural supply dealer lien law (Iowa Code Sec. 570A.4).
Background. The debtor, Crooked Creek Corporation, operated a farrow-to-finish hog operation, raising hogs from birth. Oyens Feed & Supply, Inc. provided the debtor’s sole source of hog feed.
The debtor filed for Chapter 12 bankruptcy on Aug. 18, 2009, and the livestock was sold. The proceeds were deposited in a cash collateral account. The debtor owes Oyens roughly $342,000 for unpaid feed. Oyens filed financing statements on May 28, 2009, and Aug. 14, 2009, to perfect its lien for the debtor’s feed purchases.
The debtor also owed Primebank $1.2 million on two promissory notes, of which approximately $315,000 remains after write-offs and other transactions. Primebank perfected its secured position in 1997 with a standard Article 9 “blanket lien,” which included the debtor’s hogs, and properly renewed its interest in 2002 and 2007.
Oyens asserted that it was entitled to the proceeds of the hogs' sale, contending its lien held superpriority status under Iowa's agricultural supply dealer lien law. The bankruptcy court, however, concluded that to retain superpriority status, Oyens was required to file a financing statement every 31 days in order to maintain perfection of its lien as to feed supplied within the preceding 31 day period. As a result, the court held that Oyens had a superpriority claim for only $156,000—reflecting only the feed delivered in the 31-day periods before its May 28, 2009, and Aug. 14, 2009, financing statements—and an unsecured claim for the remaining $186,000.
Applicable provisions. Section 570A.5 of Iowa’s agricultural supply dealer lien provisions states that a properly perfected agricultural supply dealer lien in livestock has priority over subsequent liens, as well as priority over an earlier perfected lien or security interest “to the extent of the difference between the acquisition price of the livestock and the fair market value of the livestock at the time the lien attaches or the sale price of the livestock, whichever is greater.”
To perfect an agricultural supply dealer lien, Sec. 570A.4 provides that “the agricultural supply dealer must file a financing statement in the office of the secretary of state … within thirty-one days after the date that the farmer purchases the agricultural supply."
Filing requirements. On appeal, Oyens challenged the bankruptcy court’s conclusion that Oyens was required to file a financing statement every 31 days. Oyens argued that the law does not limit the duration of the lien to 31 days but, instead, limits the retroactive perfection of the lien to 31 days. As a result, Oyens contended that a single financing statement may be filed to perfect the lien as to future deliveries and as to feed delivered up to 31 days before the filing. Accordingly, the district court certified the following question to the Iowa Supreme Court:
“Pursuant to Iowa Code Sec. 570A.4, is an agricultural supply dealer required to file a new financing statement every thirty-one (31) days in order to maintain perfection of its agricultural supply dealer’s lien as to feed supplied within the preceding thirty-one (31) day period?”"Acquisition price." In addition, Primebank challenged the bankruptcy court’s ruling that the “acquisition price” under Sec. 570A.5 is $0 when hogs are born in the facility. Primebank noted that even though the hogs were born at the debtor’s facility, the debtor incurred certain costs associated with gaining possession and ownership of the hogs. Thus, the district court has also certified the following:
“Pursuant to Iowa Code Section 570A.5(3), is the “acquisition price” zero when the livestock are born in the farmer’s facility?”It should be noted this is not the first time that the Iowa Supreme Court has been called on to resolve an issue of law in the matter. In 2011, the Iowa Supreme Court concluded that Primebank’s lien was superior insofar as it covered the purchase price of the hogs, but that Oyens had priority on increases in the hogs’ value from acquisition price to final sale.
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