Baldwin v. Castro County Feeders I, Ltd., 22912
| Citation | 678 NW 2d 796,2004 SD 43 |
| Decision Date | 31 March 2004 |
| Docket Number | No. 22912,22912 |
| Parties | RYAN BALDWIN, Plaintiff and Appellant, v. CASTRO COUNTY FEEDERS I, LTD., Defendant and Appellee. |
| Court | South Dakota Supreme Court |
DOUGLAS R. KETTERING of Kettering Law Offices, Yankton, South Dakota, Attorney for plaintiff and appellant.
TIMOTHY R. WHALEN of Whalen Law Office, P.C., Lake Andes, South Dakota, Attorney for defendant and appellee.
[¶ AUTONUM 1.] A South Dakota circuit court determined Castro County Feeders I, Ltd. (Castro County) had an enforceable security interest in the proceeds of a sale of seventy-eight cattle owned by Ryan Baldwin (Baldwin). Baldwin sold the cattle through Livestock Sales in Wagner, South Dakota. On appeal, Baldwin argues the circuit court erred in finding that Castro County had a security interest in the cattle, and he also disputes the circuit court's conclusion that the proceeds of the sale were subject to arbitration. We affirm the judgment of the circuit court.
[¶ AUTONUM 2.] Both parties to this controversy reside in the State of Texas. Castro County runs a feedlot operation wherein it contracts to feed cattle placed in its lots as well as to provide the vitamins, minerals, and medicine necessary for the proper care of the cattle. Baldwin owns and operates a business specializing in the purchase and sale of cattle. As part of his business, Baldwin often placed his cattle with Castro County. Castro County would feed the livestock for a period of time and then release the cattle to Baldwin for transport and sale in Kansas. Generally, the sale proceeds were made payable to Baldwin and Castro County in order to reimburse it for the feed and related services provided to Baldwin's cattle.
[¶ AUTONUM 3.] Baldwin filed suit in circuit court seeking a Declaratory Judgment ordering Livestock Sales to release to him the proceeds of the sale. In response, Livestock Sales filed a motion to substitute parties and for removal of it as a defendant. Based upon stipulation of the parties, Livestock Sales was released from the action. Castro County was substituted as the only defendant in the action. Baldwin and Castro County stipulated to most of the facts in the case and agreed that only a question of law was before the court. After considering the facts, reviewing the relevant documents, and hearing argument of the parties, the circuit court found in favor of Castro County. The circuit court determined Castro County had a valid security interest in the cattle sold at Wagner. The circuit court also ruled the proceeds were subject to arbitration by the Texas Cattle Feeders Association as outlined by the Agreement executed by Baldwin and Castro County. Baldwin appeals the judgment of the circuit court and raises the following issues for our review:
[¶ AUTONUM 4.] We review the circuit court's findings of fact under the clearly erroneous standard. City of Deadwood v. Summit, Inc., 2000 SD 29, ¶9, 607 NW2d 22, 25. The interpretation and application of South Dakota's statutes governing secured transactions require de novo review by this Court. Farm Credit Services v. First State Bank, 1998 SD 13, ¶6, 575 NW2d 250, 251. Our construction of the state's commercial code is also guided by SDCL 57A-1-102, which provides in pertinent part:
[¶ AUTONUM 5.] 1. Whether Castro County had a valid security interest in the proceeds of the sale of Baldwin's cattle.
[¶ AUTONUM 6.] The circuit court determined Castro County had a valid security interest in Baldwin's cattle sold in Wagner. SDCL ch. 57A-9, South Dakota's codified version of Article 9 of the Uniform Commercial Code, governs secured transactions. Generally, in order to be considered secured, a party must have a security agreement executed by a debtor granting that party a security interest in collateral. 57A-9-203; SDCL 57A-9-102(72) and (73) (); see generally SDCL 57A-9-101 through 57A-9-507; see also Continental Grain Company v. Brandenburg, 1998 SD 118, ¶15, 587 NW2d 196, 200. Specifically, SDCL 57A-9-203(b) lists three requirements that must be met before a security interest will be enforceable against a debtor:
(emphasis added).1 In this case, Castro County provided value in the form of feed and related services to the cattle in question. In fact, Castro County claims Baldwin owes it in excess of $94,000. Although Baldwin disagrees with this figure, he does not dispute that he owes Castro County some amount of money. Thus, the value-given requirement under subsection one is clearly met. In addition, since Baldwin stipulated he owned the cattle placed in Castro County's feedlots and subsequently sold in South Dakota, the second requirement has been established.
[¶ AUTONUM 7.] The primary question Baldwin raises on appeal is whether the Agreement between himself and Castro County functions as a valid security agreement as required by SDCL 57A-9-203(b)(3)(A), set out above. First, Baldwin questions whether the Agreement was properly "authenticated."2 He points out the Agreement twice refers to a "Rick Baldwin" as opposed to "Ryan Baldwin." A brief study of the document, however, shows "Ryan Baldwin" actually signed the document twice and scratched out the name "Rick" below the signature line. Furthermore, at trial Baldwin admitted he entered into the Agreement with Castro County and stipulated the document into evidence. Given these facts, we find Baldwin's argument that the Agreement was not authenticated to be without merit.
[¶ AUTONUM 8.] Second, Baldwin questions whether the Agreement provides a sufficient description of the collateral. SDCL 57A-9-108 provides in relevant part:
In particular, Baldwin argues the Agreement insufficiently described the collateral because it gave Castro County a security interest in all cattle "being specifically located in Lot(s) #_______________ at Castro County Feeders, I, Ltd., Hart, Castro County, Texas."4 In other words, Baldwin believes the Agreement failed to sufficiently identify the cattle at issue in this case because it did not specify the feedlots in which his cattle were located. We disagree:
The parties often adopt Code definitions to describe collateral in their security agreement. In many cases, a creditor argues that its interest in "inventory," "equipment,"" general intangibles," "account," "proceeds," or such, includes the very property at issue and the debtor, bankruptcy trustee or other creditor(s) assert the contrary. Disputes of this nature should also be resolved by the Code's two-stage analysis: could the description plausibly be read to include the property claimed, and if so, did the parties so intend? In these cases, most courts resolve the problem solely as one of law.
4 White & Summers, Uniform Commercial Code § 31-3 (5th ed 2002).
[¶ AUTONUM 9. ] To determine whether the description was sufficient, we must look to SDCL 57A-9-108. Pursuant to subsection (a), the "test" for sufficiency is whether the description (specific or not) "reasonably identifies what is described." In the instant case, the description was "livestock." This is an example of an identification of collateral by category, which is specifically permitted under 57A-9-108(b)(2). ("Except as otherwise provided in subsection (d), a description of collateral reasonably identifies the collateral if it identifies the collateral by . . . (2) category[.]") Comment 2 to UCC § 9-108 states:
The purpose of requiring a description of collateral in a security agreement under Section 9-203 is evidentiary. The test of sufficiency of a description under this section, as under former Section 9-110, is that the description do the job assigned to it: make possible the identification of the collateral described. This section rejects any requirement that a description is insufficient unless it is exact and...
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