Esparza, In re
| Decision Date | 09 January 1992 |
| Docket Number | No. 57337-9,57337-9 |
| Citation | 821 P.2d 1216,118 Wn.2d 251 |
| Court | Washington Supreme Court |
| Parties | , 16 UCC Rep.Serv.2d 1217 . In re Cipriano ESPARZA and Domingo Esparza, husband and wife, Debtors. TUCKER STARBUCK, a partnership, Plaintiff, v. Cipriano ESPARZA, J.R. Simplot Company, an Idaho Corporation, d/b/a Simplot Soil Builders, Central Valley Bank, a Corporation, the Federal Land Bank of Spokane, a Corporation, Lewis Longley, Inc., and Crop Hail Management, Defendants. Supreme Court of Washington, En Banc |
Schwab, Kurtz, Hurley & Lara, Frank L. Kurtz, Yakima, for defendant Esparza.
Lyon, Beaulaurier, Weigand, Suko & Gustafson, Robert M. Boggs, Yakima, for defendant J.R. Simplot Co.
Halverson & Applegate, P.S., Timothy J. Carlson, Yakima, for defendant Lewis Longley, Inc.
The United States Bankruptcy Court judge for the Eastern District of Washington certified five questions of unsettled Washington law; the questions arose in a Chapter 12 bankruptcy proceeding and from an allied adversary proceeding in that court. RCW 2.60; RAP 16.16.
The Order of Certification lists 20 documents and records which the bankruptcy judge deemed material for our consideration. Order of Certification, at 4-5.
Also, we note that the bankruptcy court has held:
(1) That, as against the bankruptcy estate of Cipriano Esparza, et ux., the statutory landlord lien held by Tucker Starbuck is void; and
(2) That the statutory lien is preserved as against the remaining creditors, for the benefit of the bankruptcy estate of Cipriano Esparza, et ux.
In effect, this means that the landlord lien rights formerly asserted by plaintiff Tucker Starbuck in this lawsuit are property rights of the Chapter 12 estate of Cipriano Esparza and these rights are now represented in this lawsuit by defendant Cipriano Esparza as debtor-in-possession.
Order of Certification, at 4. This puts the controversy in perspective and explains why Cipriano Esparza's brief takes positions and argues for or against the various claims of the four contestants.
The certified record includes a statement of the following facts:
A. The Crop, Its Harvest, and Its Proceeds. The crop and the proceeds which are liened (or argued to be liened) are a potato crop grown during calendar year 1988, on property commonly referred to as Circle 311 of Sandpiper Farms in Benton County. Other farm crops grown elsewhere by the debtor are not at issue in this litigation. Defendant Esparza had two contracts with the J.R. Simplot Company, Food Division, for the sale of potatoes grown by the debtor in 1988. Harvest of the potatoes in question began between September 10, 1988 and September 15, 1988, and was completed by September 25, 1988. All said potatoes were delivered to J.R. Simplot plants in Hermiston, Oregon and/or Caldwell, Idaho for processing by September 26, 1988 and were fully commingled with other potatoes and were not identifiable.
Defendant Esparza was entitled to proceeds from the Simplot Food Division in the approximate amount of $106,000.00. Pursuant to the contracts, the debtor was to receive half of the proceeds within thirty (30) days of delivery and the remaining half by February 1, 1989. Defendant Esparza received checks totalling approximately $53,000.00 before the end of October, 1988. Before the remaining proceeds could be distributed in February, 1989, a dispute arose amongst the various lien claimants over entitlement to the proceeds. Subsequently, the debtor filed a petition for relief under Chapter 12 of Title 11 on April 3, 1989. At the present time, J.R. Simplot Company, Food Division, has placed in a trust account the remaining proceeds. Defendant Esparza never cashed the checks he received in October of 1988, and those funds have also been paid into trust.
B. Tucker Starbuck Company's Claim. On December 18, 1987, Esparza leased approximately 125 acres of farm property from Tucker Starbuck. The lease was for a period of one crop year, and, according to its terms, expired "after harvest." Rent in the amount of $84,265.00 was due December 20, 1988, regardless of crop yield. Starbuck recorded the lease in Benton County eleven (11) days after it was executed. In the fall of 1988, Esparza harvested and sold the potato crop. Starbuck, on December 18, 1988, filed a form UCC-4 with the Washington State Department of Licensing. The statement was filed prior to the rent due date as provided in the lease and during the period when the lease was in effect. The lien filed by Tucker Starbuck contained a typographical error, made by an employee of Tucker Starbuck, and the surname of the debtor was misspelled as follows: ESPARSA (correct spelling is "ESPARZ A".)
C. J.R. Simplot Company's Claim. J.R. Simplot Company furnished fertilizer and other agricultural chemicals to Mr. Esparza for his 1988 potato crop on Circle 311. From March 4, 1988 to August 30, 1988, on numerous occasions Mr. Esparza placed orders for fertilizer and chemicals with Simplot based upon recommendations made by Simplot. Each transaction was separate and Simplot was under no obligation to sell to Mr. Esparza. The total unpaid value of the products delivered during the above period of time was $69,786.50.
On June 16, 1988, J.R. Simplot filed its crop lien pursuant to RCW 60.11.040. The lien form (UCC-4) that was filed by Simplot had a space preceded by a dollar sign ($____). The person preparing the UCC form for Simplot wrote the number $34,924.61 in that space.
D. Central Valley Bank's Claim. On March 9, 1987, Central Valley Bank filed a UCC financing statement claiming an interest in all of the debtor's crops; crops of every kind, whenever and wherever located, to be grown, growing, or that have been produced, accounts, contract rights and general intangibles arising from the sale of the collateral and afteracquired collateral. All collateral under the financing statement is to secure present and future loans and advances. On December 30, 1987, Central Valley Bank loaned 1988 farm operating funds to Esparza. At that time, Central Valley and Esparza executed a security agreement granting the bank a secured interest in, among other things, all crops grown on specifically described real property, all inventory, all chattel paper, all accounts and contract rights, all general intangibles, and all crops, including after acquired collateral and proceeds. The bank loaned the debtor approximately $23,000.00. The December 30, 1987, security agreement, however, omits any legal description of Circle 311. Instead, it describes other farming property of the debtor. Central Valley Bank claims a perfected security interest in the proceeds of Circle 311's severed crops.
E. Lewis Longley, Inc.'s Claim. In April of 1988, Lewis Longley, Inc. furnished $16,463.79 of Russett Burbank potato seed to Esparza, which seed was used entirely on Circle 311. The seed price was $6.00 C.W.T., which was the market price at that time and location. On September 9, 1988, Lewis Longley, Inc. sent its crop lien to the Department of Licensing and the lien was filed on September 12, 1988. Lewis Longley also sent Esparza a copy of its lien statement by certified mail, return receipt requested, within ten days after the filing, which copy conformed to the requirements of RCW 60.11.040(2).
Order of Certification, at 5-8.
The Order of Certification poses the legal issues as follows:
In order to dispose of the above referenced case and adversary proceeding pending in the Bankruptcy Court for the Eastern District of Washington, it is necessary to ascertain the local law on the following questions:
(1) Is the landlord lien of Tucker Starbuck valid and perfected, despite the fact that Cipriano Esparza's name was misspelled on the lien statement?
(2) Is the landlord lien of Tucker Starbuck valid and perfected, despite the fact that it was not filed until after the crop was harvested?
(3) Does Central Valley Bank have a perfected security interest in Circle 311's severed and harvested crops or the accounts generated by the sale of those crops?
(4) Is the amount of defendant J.R. Simplot's lien claim $69,786.50 plus interest, or is it limited to $34,924.61 plus interest?
(5) What are the relative priorities among and between the parties?
The local law on these questions has not been clearly determined.
The statute prescribes the contents of a claim of lien. It provides: "The statement shall be in writing ... and shall contain in substance the following information: ... (b) The name and address of the debtor [tenant here]". (Italics ours.) RCW 60.11.040(2)(b).
The correct spelling of the debtor's name is Esparza. The claim of lien incorrectly spelled the name with an "s" rather than a "z", i.e., Esparsa, rather than Esparza.
The modifying phrase "in substance" must be given meaning. Obviously, the intent is to validate something less than absolute exact precision of spelling. The whole purpose of requiring the filing of a claim of lien and prescribing its contents is to give notice to those who do, or should do, a reasonable search of the appropriate records. Thus, is a lien claim which names the debtor as Esparsa in substance sufficient to impart notice to one searching the correct spelling under Espara.?a.?
There are two principles, one statutory and one of the common law, which mandate the conclusion that this minor misspelling does not invalidate the lien.
The Uniform Commercial Code (U.C.C.) is helpful in establishing the applicable standard. The U.C.C. is not applicable to landlord liens, but there is a direct interrelationship, and by analogy the U.C.C. is helpful. First, the crop lien statute contemplates uniform search procedures under the crop lien statute and the U.C.C. The crop lien statute, RCW 60.11.040(3), specifically references filing of and...
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