Charterbank Butler v. Central Cooperatives, Inc.

Decision Date13 March 1984
Docket NumberNo. WD,WD
Parties38 UCC Rep.Serv. 354 CHARTERBANK BUTLER, Respondent, v. CENTRAL COOPERATIVES, INC., Appellant. 34442.
CourtMissouri Court of Appeals

John C. Gage, Gage & Tucker, Kansas City, for appellant.

James H. Biddle, McNabb & Pursley, Butler, for respondent.

Before PRITCHARD, P.J., and SHANGLER and BERREY, JJ.

BERREY, Judge.

Plaintiff, CharterBank Butler, [hereinafter bank], brought this action against defendant, Central Cooperatives, Inc., [hereinafter Co-op], for conversion of soybeans in which plaintiff alleged a security interest. Following a non-jury trial the Circuit Court of Bates County entered judgment for the bank in the amount of $37,825.45--interest and costs included. The judgment is reversed.

Daniel and Charles Gardner, dba Gardner Brothers Farms, operated farms in three different Bates County townships. The Gardners owned 500 acres of farmland and leased an additional 1,300 acres in Deepwater, Spruce and Grand River townships. The leases were not recorded with the Bates County Recorder of Deeds.

To finance their business, the Gardners obtained agricultural loans from the bank [formerly Butler State Bank] commencing in the late 1960's. Collateral for the loans included, among other chattels, cash crops grown in Bates County.

On October 26, 1981, the Gardners executed a security agreement, which renewed an antecedent promissory note, for $250,000. A financing statement was filed with the Recorder of Deeds in Bates County on October 30, 1981, covering "all growing crops and proceeds from such crops after harvest on real estate owned and/or rented by Daniel T. and/or Clarence J. Gardner located primarily in Deepwater, Spruce, and Grand River townships, Bates County, Missouri." (emphasis added.)

Mr. Van Slyke, senior vice-president and a 17 year employee of the bank, visited the farm prior to the note's renewal in October, 1981 and again in early January, 1982. During the later visit he noticed that "[t]he only crop growing was wheat that had been planted that fall."

In January, 1981, the bank had also executed and recorded a security agreement and financing statement covering all growing wheat. The Gardners had received proceeds from the sale of wheat in the summer of 1981. The proceeds were paid to the bank and subsequently loaned back to the Gardner brothers. The Gardner brothers also received a Commodity Credit Corporation disaster payment of $20,000 which was not paid to the bank, but was deposited in their account and used by the Gardner brothers as operating monies.

At the time the renewal note was executed the beans were already being combined and the Gardner brothers had sold $29,600.46 worth to the defendant Co-op before the agreement was recorded.

Mr. Teddy Koontz, the agriculture loan officer for the bank, visited the Gardner brothers on October 16, 1981, to see "[h]ow their crop harvesting progress was coming ..."

Teddy Koontz testified at trial that:

Our normal procedure is to allow the customers to make his own marketing decision unless we specify what manner we want the crop marketed. It is normal to allow the customer to market his own crop and his payment is expected from that crop at the time the note matures. At that time we would expect to have payment on the note.

The bank, according to the testimony, had instructed the Gardner brothers to bring in the proceeds from the sale of any collateral. Defendant's counsel then asked, "[b]y that did you mean it was all right for them to sell the grain as long as they brought the proceeds in?" Mr. Koontz responded, "I think normal course of business with agriculture customers, that would have been a common practice, yes. It had been their practice prior to this time." (emphasis added.)

The land which the Gardner brothers farmed was not only in three townships, but consisted of several different tracts leased from various owners. Koontz testified that he could find the land they owned, but to locate their leased land he "would have to refer to the map and list in the file." A standard township consists of 36 sections of 640 acres each.

Throughout the entire history of the loan, the Gardner brothers continued to market grain and sell mortgaged personal property, and in due course take the proceeds to the bank and either deposit them in their account, or present the proceeds to a bank officer who would write out a deposit slip and credit the Gardner brothers's account. The Gardner brothers would then give a check back to the bank.

On or about December 23, 1981, with the note two days past due, Mr. Koontz, went back to the farm. The harvest was complete except for some late milo.

Koontz then left the farm and checked several local elevators regarding the sale of grain and determined that Central Co-op of Adrian, Missouri, had purchased some soybeans from the Gardner brothers. Koontz asked for and was subsequently supplied a list of the sales and payments. After advising the Co-op of the bank's lien, Koontz requested that any further checks be made payable jointly to the bank and the Gardner brothers. Prior to that time no such request had ever been made of Co-op by Koontz. At the time of Koontz' visit the Co-op did not have in its possession either soybeans or any proceeds of soybeans sold by the Gardner brothers.

The Co-op assigns several unique points as yet undecided in Missouri, such as what constitutes a growing crop and sufficient identification of real estate. There was evidence presented that the soybeans in question were matured and were a "standing crop" as opposed to a "growing crop." There was also evidence that the particular lands upon which the crops were grown could only be identified by reference to documents not a part of the recorded instrument. Since the case is reversed on other grounds, the court leaves these questions to another time and case.

The trial court in its well drawn Findings of Facts and Conclusions of Law properly states the facts but misapplies the law. The trial court found that:

It was the policy of the bank and practice with the Gardner brothers for the Gardner brothers to sell their crops and bring the check from the proceeds of the sale to the bank officer who would deposit the check to the account of the Gardner brothers and receive a check back from them to reduce the loan. It was certainly the policy and practice of the bank to allow the debtor to sell their crops, cattle and other security.

The Co-op contends that the bank's course of conduct permitting the Gardner brothers to sell mortgaged property,...

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16 cases
  • Springfield Mercantile Bank v. Joplin Stockyards
    • United States
    • U.S. District Court — Western District of Missouri
    • October 17, 1994
    ...expressed that selling of collateral is the normal course of business with agriculture customers. Charterbank Butler v. Central Cooperatives, Inc., 667 S.W.2d 463, 464 (Mo.App.1984). Given these facts, courts found there was a waiver of the bank's security interest. See Neu Cheese, at 1273;......
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    ...interest and must look to the debtor personally for payment.) (Personal property case.) Accord Charterbank Butler v. Central Cooperatives, Inc., 667 S.W.2d 463, 466 (Mo.App.1984) (Same.).4. Even if HDSB had a lien, it was unperfected. It is clear to the Court that the lien on proceeds that ......
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    ...(Iowa 1984); Peoples Nat'l Bank & Trust v. Excel Corp., 236 Kan. 687, 695 P.2d 444 (Kan.App.1985); and Charterbank Butler v. Central Cooperatives, Inc., 667 S.W.2d 463 (Mo.App.1984). Third, where one of two entities must suffer by the act of a third, the one which enabled such entity to occ......
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