The Idaho Supreme Court recently has been called upon to decide two cases that could have important implications for agricultural lenders. The first is already decided; the second has been briefed and will likely be decided this summer.
Cows Gobble Up Commodity Lien
In Farmer’s National Bank v. Green River Dairy, LLC, 2014 WL 268643 (Jan. 24, 2014), the Court held that an agricultural commodity lien on diary feed did not extend to the livestock that eventually consumed the feed.
In Green River, Farmer’s National Bank (“Bank”) held a properly attached and perfected security interest in the dairy cows of Green River Dairy (“Dairy”). Certain commodity sellers (“Feed Providers”) sold hay and wheat products to Dairy for use as feed. Dairy defaulted on its payments to Bank. Bank foreclosed on the cows and sold them at auction. Bank and the Feed Providers each claimed a priority interest in the proceeds of the sale.
Bank claimed priority pursuant to general U.C.C. Article 9 principles. See Idaho Code § 28-9-101, et. seq. According to such principles, conflicting security interests and liens generally rank “according to priority in time of filing or perfection,” and a prior perfected security interest has priority over a conflicting unperfected interest. See Idaho Code § 28-9-322.