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Winfield Solutions, LLC v. Success Grain, Inc.

United States District Court, E.D. Arkansas, Jonesboro Division

April 2, 2018

WINFIELD SOLUTIONS, LLC PLAINTIFF
v.
SUCCESS GRAIN, INC.; J. TODD BERRY; GLENNA S. LANE; and FARM CREDIT MIDSOUTH, PCA DEFENDANTS

          OPINION AND ORDER

          J. LEON HOLMES UNITED STATES DISTRICT JUDGE

         Success Grain, Inc., sells or sold crop seed, fertilizer, and such to farmers in Arkansas. Document #8 at ¶12. J. Todd Berry is or was Success Grain's president and Glenna S. Lane is or was its secretary and treasurer. Id. ¶13. Success Grain purchased “crop inputs” from United Suppliers, Inc., a company that has now merged with Winfield Solutions, LLC. Id. ¶15. Success Grain agreed to financing terms with United Suppliers pursuant to a credit application, and Berry and Lane each executed personal guarantees in favor of United Suppliers. Id. ¶¶14-17. Success Grain also granted United Suppliers two security interests: one covered assets like equipment and farm products, and the second was a purchase-money security interest that covered inventory and proceeds of the inventory. Id. ¶¶18-19. Winfield is United Suppliers' successor-in-interest to the financing agreement, guarantees of Berry and Lane, and two security interests. Success Grain was also indebted to Farm Credit Midsouth, PCA, and it granted Farm Credit security interests in some of the same assets in which it granted United Suppliers a security interest.

         Success Grain sold its equipment at auction for a total amount of $855, 775.19. Winfield commenced this suit to enforce its security interest and the guarantees executed by Berry and Lane and to claim its priority to the proceeds from the equipment sale. Farm Credit also claims priority by virtue of its security interest in the proceeds. Winfield has since conceded that it has no claim to $328, 221.58 of the total proceeds-leaving $527, 553.61 in dispute between Winfield and Farm Credit. Winfield and Farm Credit have moved for summary judgment, each arguing that its claim is superior to the other's. Winfield also moves for summary judgment on its breach of contract claims against Berry and Lane.

         A court should grant summary judgment if the evidence demonstrates that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine dispute for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). If the moving party meets that burden, the nonmoving party must come forward with specific facts that establish a genuine dispute of material fact. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). A genuine dispute of material fact exists only if the evidence is sufficient to allow a reasonable jury to return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The Court must view the evidence in the light most favorable to the nonmoving party and must give that party the benefit of all reasonable inferences that can be drawn from the record. Pedersen v. Bio-Med. Applications of Minn., 775 F.3d 1049, 1053 (8th Cir. 2015). If the nonmoving party fails to present evidence sufficient to establish an essential element of a claim on which that party bears the burden of proof, then the moving party is entitled to judgment as a matter of law. Id.

         United Suppliers filed financing statements for its security interests with the Arkansas Secretary of State on July 18, 2007. Farm Credit filed a financing statement for its security interest on June 28, 2007. Document #1-12. The financing statement that Farm Credit filed states as follows:

This FINANCING STATEMENT covers the following collateral:
ALL GRAIN HANDLING FACILITIES AND EQUIPMENT, SCALES, CROP DRYERS, GRAIN STORAGE FACILITIES, ELEVATORS, AUGERS, CONVEYORS, POWER UNITS, FUEL STORAGE, ELECTRICAL CONTROLS AND TESTING EQUIPMENT WITH REPLACEMENTS, ADDITIONS, AND SIMILAR EQUIPMENT AND ALL GOODS THAT ARE NOW OR TO BECOME FIXTURES, NOW OWNED OR HEREAFTER ACQUIRED.
ALL ACCOUNT RECEIVABLES, CONTRACT RIGHTS, DOCUMENTS, GENERAL INTANGIBLES, INVENTORY, FARM PRODUCTS, EQUIPMENT, COMMODITY INVENTORY, STORED COMMODITY INVENTORY AND PROCESSED SEED INVENTORY, ALL SEASONAL WHEAT, RICE, COTTON, CORN, MILO, AND SOYBEANS LOCATED AT PLANT FACILITIES.
ALL EQUIPMENT, ALL SPARE PARTS AND SPECIAL TOOLS FOR SUCH EQUIPMENT, ALL MOTOR VEHICLES AND ALL FIXTURES NOW OWNED OR HEREAFTER ACQUIRED AND WHEREVER LOCATED.
THIS FILING FILED AS AG LIEN.

Id. The same financing statement contained a box designating the interest as an “AG LIEN.” Id. Farm Credit did not check this box. Id. On May 3, 2011, Farm Credit amended its financing statement to clarify that its interest was a security interest and not an agricultural lien. Document #1-13.

         Winfield acknowledges that Success Grain signed a security agreement with Farm Credit granting Farm Credit a security interest in its equipment and other collateral, that Farm Credit gave value to Success Grain, and that Success Grain had rights in the collateral. See Ark. Code Ann. 4-9-203(b). Winfield further acknowledges that Farm Credit filed its financing statement first. Winfield's only claim to priority is that Farm Credit's financing statement filed on June 28, 2007, is “seriously misleading” because the financing statement says that it is filed as an agricultural lien. Winfield says that this error rendered Farm Credit's filing legally insufficient to provide notice to third-party creditors of Farm Credit's interest.

         The filing of a financing statement is required for security interests in equipment to be perfected. Ark. Code Ann. § 4-9-310(a). “[A] financing statement is sufficient only if it: (1) provides the name of the debtor; (2) provides the name of the secured party or a representative of the secured party; and (3) indicates the collateral covered by the financing statement.” Id. § 4-9-502(a). A financing statement that “substantially” satisfies these requirements “is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.” Id. § 4-9-506(a). Priority of competing perfected security interests in the same collateral ranks according to the time filed. Id. § 4-9-322(a)(1).

         Winfield does not argue that Farm Credit's financing statement improperly provided the name of the debtor or the name of the secured party. The issue in dispute here is whether Farm Credit's inclusion of “THIS FILING FILED AS AG LIEN” made its financing statement seriously misleading and, thus, insufficient under Ark. Code Ann. § 4-9-502(a). This is a question of the sufficiency of the description of the collateral. Because the proceeds at issue are solely proceeds from equipment, the Court will limit its ...


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