F.D. Processing, Inc., In re

Decision Date23 July 1992
Docket NumberNo. 58275-1,58275-1
Citation832 P.2d 1303,119 Wn.2d 452
Parties.D. PROCESSING, INC., Debtor. Supreme Court of Washington, En Banc
CourtWashington Supreme Court

Hatch & Leslie, John R. Rizzardi, Seattle, for plaintiff Western Washington Milk Producers.

Halverson & Applegate, P.S., Timothy J. Carlson, Eric R. Hultman, Yakima, and Layman, Loft, Arpin & White, Michael Loft, Spokane, for plaintiff Cent. Washington Producers.

Miller, Nash, Wiener, Hager & Carlsen, Steven M. Hedberg, Portland, Or. and Peter S. Holmes, Seattle, for defendants.

JOHNSON, Justice.

F.D. Processing, Inc., is the subject of Chapter 7 bankruptcy proceedings in federal court. The federal court has certified to us the question whether liens filed by milk producers against F.D. Processing are valid under state law. We answer this question in the negative. The statutes in effect when the milk was delivered did not authorize the liens. Moreover, the statutory amendment in 1991 that expressly authorizes liens for milk deliveries does not retroactively apply to the facts of this case.

F.D. Processing, Inc., conducting business as Foremost Dairies Northwest (Foremost), was organized to purchase certain Washington assets of the Carnation Company on April 1, 1989. 1 Since that acquisition, Foremost has been involved in processing raw milk into pasteurized milk, butter, cottage cheese and other dairy products.

In 1989, U.S. Bank of Washington, National Association (U.S. Bank) extended approximately $25 million in credit to Foremost. U.S. Bank has a perfected security interest in Foremost's inventory and accounts receivable to secure the loan.

On July 10, 1990, U.S. Bank filed a complaint in King County Superior Court to foreclose on the loan and collateral. The file in that case was immediately sealed pursuant to the joint application of Foremost and U.S. Bank. On July 16, 1990, the Superior Court entered a stipulated judgment of foreclosure in an amount over $24 million.

On November 9, 1990, the Superior Court granted U.S. Bank's motion to appoint a receiver for Foremost. On that date, Foremost owed approximately $2.2 million for milk it had received since October 1, 1990, from dairy farms and dairy cooperatives in the Pacific Northwest. The parties have referred to these farms and cooperatives as the "milk producers". When the milk producers were not paid for raw milk delivered between October 1 and November 8, they filed liens against Foremost under the provisions of RCW 60.13.

The validity of the milk producers' liens was first challenged in the King County Superior Court action. Before a hearing could be held, however, three unsecured creditors filed an involuntary Chapter 7 bankruptcy petition against Foremost.

The effect of this bankruptcy filing, for purposes of this case, was to transfer to the federal court the litigation over the relative priority of the interests of U.S. Bank and the milk producers. The milk producers argued to the federal court that under RCW 60.13 their liens are valid and entitled to priority over the secured interest of U.S. Bank. U.S. Bank contended that the liens are not valid under Washington law.

The federal court certified to this court the following question:

Are milk producers who have not been paid for raw milk delivered to F.D. Processing, or its customers, entitled to processor and preparer liens under RCW 60.13.020 or 60.13.030?

We will not address two of the issues raised by this question, as they have not been briefed by the parties. First, the parties have not presented any arguments regarding liens for milk delivered to Foremost's customers. Second, the milk producers have not argued that they are entitled to preparer liens under RCW 60.13.030; the milk producers have argued only that they are entitled to processor liens under RCW 60.13.020. 2 The two statutes and the two liens are distinct; the liens apply in different situations and have different rules. 3 This court generally does "not engage in conjectural resolution of issues present, but not briefed." John Doe v. Puget Sound Blood Ctr., 117 Wash.2d 772, 785, 819 P.2d 370 (1991).

The analysis of processor liens in this case is essentially twofold. Did RCW 60.13 as it existed in 1990--at the time of the milk deliveries--enable the producers to claim processor liens? If not, did the subsequent amendment to RCW 60.13 in 1991--expressly extending lien protection to include the delivery of milk products--apply retroactively to cover the present case?

I. THE STATUTES IN EFFECT IN 1990 DID NOT AUTHORIZE THE LIENS.

The statute governing processor liens is RCW 60.13.020, which provides in relevant part as follows:

Starting on the date a producer delivers any agricultural product to a processor or conditioner, the producer has a first priority statutory lien, referred to as a "processor lien." ... The processor lien attaches to the agricultural products[,] ... to the processor's or conditioner's inventory, and to the processor's or conditioner's accounts receivable....

(Italics ours.) If a producer files a statement with the Department of Licensing within 20 days of the date when payment becomes delinquent, the processor lien is superior even to an earlier perfected security interest in the same collateral. RCW 60.13.050.

The pivotal question addressed by the parties is whether milk qualifies as an "agricultural product". The statutes in place in 1990 defined "agricultural product" as follows:

"Agricultural product" means any unprocessed horticultural, vermicultural and its byproducts, viticultural, berry, poultry, poultry product, grain, bee, or other agricultural products, and includes mint or mint oil processed by or for the producer thereof and hay and straw baled or prepared for market in any manner or form and livestock. When used in RCW 60.13.020, "agricultural product" means horticultural, viticultural, and berry products, hay and straw, and turf and forage seed and applies only when such products are delivered to a processor or conditioner in an unprocessed form.

(Italics ours.) Former RCW 20.01.010(3), as cross-referenced in former RCW 60.13.010(1).

This statute supplies a broad definition that applies to most agricultural statutes, but the italicized portion of the statute provides a far more limited definition that applies specifically to RCW 60.13.020, which is the statute currently before the court. The definition that applies to this case is limited to horticultural products, 4 viticultural products, 5 berry products, hay and straw, and turf and forage seed. Milk does not fall within any of these categories.

In light of the statutory definition, it appears that the Legislature very deliberately intended that only certain "agricultural products" would be covered by the processor liens. Missing from this definition are many products commonly considered as agricultural, including beef, pork and poultry products. Thus, although milk would qualify as an "agricultural product" by a common understanding of that term, it does not qualify under the particular statutory definition applicable to this case. A legislative definition prevails over a dictionary definition or common understanding of any given term. See American Legion Post 32 v. Walla Walla, 116 Wash.2d 1, 8, 802 P.2d 784 (1991); State v. Hickok, 39 Wash.App. 664, 667, 695 P.2d 136 (1985); 1A N. Singer, Statutory Construction §§ 20.08, 27.02 (4th ed. 1985).

This court gives effect to the language in an unambiguous statute. See, e.g., Multicare Med. Ctr. v. Department of Social & Health Servs., 114 Wash.2d 572, 582, 790 P.2d 124 (1990). While sometimes the court will give effect to a statute's purpose if its literal language would lead to "absurd results", see Kirk v. Moe, 114 Wash.2d 550, 554, 789 P.2d 84 (1990), this principle has no application here. We can only conclude the Legislature's restriction of the applicability of processor liens was deliberate. The Legislature must have been aware that it was greatly narrowing the definition of "agricultural product" in the context of RCW 60.13.020; it enacted this narrow definition in the very same statute that it enacted the far broader definition applicable to the other agricultural statutes.

The milk producers present a number of arguments in an attempt to counter this interpretation of the statute. First, they argue that the provisions of RCW 60.13 are ambiguous. They point primarily to the fact that the statutes in effect in 1990 defined "processor" in terms of "agricultural crop", 6 while the same statutes defined the other key words used in RCW 60.13.020 in terms of "agricultural product". The Legislature has not defined the term "agricultural crop" in any manner in these statutes. We do not know, therefore, whether the Legislature intended "agricultural crop" to have the same limited meaning that "agricultural product" has in the context of processor liens under RCW 60.13.020. Nevertheless any ambiguity as to the meaning of "agricultural crop" cannot be extended to the expressly defined term "agricultural product". The Legislature took exacting pains to provide a particular definition of "agricultural product" solely for the purposes of the statute here at issue, RCW 60.13.020. Its application to the present case is unambiguous. 7

Second, the milk producers present arguments unrelated to the language used in the statute. For example, they argue that milk is generally considered to be an agricultural product; that the Legislature must have intended to extend the lien to dairy products because RCW 15.44 shows a legislative intent to protect the state's dairy industry; and that the milk producers are in a position where they will be harmed if they are not given the protection of a lien. Each of these arguments, however, carries little weight in light of the Legislature's deliberate narrowing of the term "agricultural product"...

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