Apple v. Miami Valley Production Credit Assoc., 85-3459

• Decision Date: 30 October 1986
• Docket Number: No. 85-3459,85-3459
• Citation: 804 F.2d 917
• Parties: 2 UCC Rep.Serv.2d 672 David C. APPLE and Betty Lou Apple, Plaintiffs-Appellants, v. MIAMI VALLEY PRODUCTION CREDIT ASSOC. and Continental Grain Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 917

804 F.2d 917

2 UCC Rep.Serv.2d 672

David C. APPLE and Betty Lou Apple, Plaintiffs-Appellants, v. MIAMI VALLEY PRODUCTION CREDIT ASSOC. and Continental Grain Co., Defendants-Appellees.

No. 85-3459.

United States Court of Appeals Sixth Circuit.

Submitted April 4, 1986.

Decided Oct. 30, 1986.

Charles W. Ewing, Columbus, Ohio, Carla I. Struble, for plaintiffs-appellants.

Roger F. Carroll, Columbus, Ohio, John R. Butz, Springfield, Ohio, for defendants-appellees.

Before KEITH, NELSON and BOGGS, Circuit Judges.

DAVID A. NELSON, Circuit Judge.

This is an appeal from a summary judgment in which the district court held, among other things, that a security interest in certain farm assets extended to an entitlement under the United States Department of Agriculture's Payment in Kind (PIK) program. The appeal has been voluntarily dismissed as to one of the two appellees, and we shall affirm the judgment as to the other.

I

The appellants, Mr. and Mrs. Apple, operated a farm on which they fed cattle and hogs with corn and other fodder grown on the farm. In 1977 they began borrowing money from the Miami Valley Production Credit Association, a federally chartered instrumentality of the United States empowered to make contracts and to sue and be sued. See 12 U.S.C. Secs. 2091 and 2093.

To secure the loans, the Association had the Apples sign a Uniform Commercial Code financing statement and security agreement covering, among other things, "all" of the Apples' "interest" in property identified in handwritten entries made under several different printed headings. Two such entries are relevant here: "All crops including but not limited to all crops of corn, wheat and soybeans" (the entry for Item 3, captioned "Crops"), and "All corn, wheat and soybeans; all cattle; all hogs" (the entry for Item 6, captioned "Livestock, Farm Products and Personal Property").

Item 6 was followed by two printed paragraphs reading as follows:

"7 All property similar to that listed above, which at any time may hereafter be acquired by the Debtor(s) including, but not limited to, all offspring of livestock, additions and replacements of livestock and poultry, and replacements of and additions to equipment and other personal property above described; and all products of crops, livestock and poultry, and all feed to be used in fattening or maintaining said livestock and poultry.

8 All proceeds of the sale or other disposition of any of the property described or referred to under Items 3 to 7, inclusive above, and of any offspring, wool, milk, poultry products and contract rights derived from said property, together with all accounts receivable resulting from such sales."

Item 10 of the printed form said that "[a]ll of the above described crops and fixtures are or will become located on the [Apples'] farm land...."

The financing statement was properly filed in 1977, and a continuation of the financing statement was filed in October of 1982.

In 1983 the Apples signed a contract to participate in the federal government's PIK program. The contract obligated the Apples to plant no corn and obligated the government to provide the Apples 9,569 bushels of government surplus corn. After signing the contract the Apples sold their PIK entitlement--the right to receive the 9,569 bushels of corn--to appellee Continental Grain Co., a private company.

Before making payment to the Apples, Continental checked the courthouse records, learned of the financing statement, and contacted the Association. The Association said it had a security interest in the Apples' PIK entitlement, and Continental was instructed to issue its payment checks to the Association and the Apples jointly. Continental did so, and the Association refused to endorse the checks for the Apples until their indebtedness was extinguished.

The Apples thereupon brought an action in federal district court against the Association and Continental. Count one of the complaint alleged that the Association had wrongfully refused to advance funds for the purchase of livestock. Count two set forth a claim for damages resulting from Continental's refusal to issue checks payable solely to the Apples and from the Association's refusal to endorse the checks payable jointly. Count three alleged that the Association and Continental had taken the Apples' property without due process of law in violation of the Fifth Amendment.

Both defendants moved for summary judgment, and the district court granted the motions and dismissed the action. 614 F.Supp. 119. The Apples appealed, but subsequently entered into a settlement agreement with the Association...