Farm Credit Midsouth v. Farm Fresh Catfish
| Decision Date | 14 June 2004 |
| Docket Number | No. 03-3191.,03-3191. |
| Citation | 371 F.3d 450 |
| Parties | FARM CREDIT MIDSOUTH, PCA, formerly known as Eastern Arkansas Production Credit Association, Appellant, v. FARM FRESH CATFISH COMPANY, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Leigh M. Chiles, argued, Jonesboro, AR (Ralph W. Waddell, and D.P. Marshall Jr., Jonesboro, AR, on the brief), for appellant.
Jeffrey H. Moore, argued, Little Rock, AR (Jamie Huffman Jones, Little Rock, AR, on the brief), for appellee.
Before WOLLMAN, McMILLIAN, and RILEY, Circuit Judges.
Farm Credit Midsouth, PCA (Farm Credit) sued Farm Fresh Catfish Company (Farm Fresh) alleging Farm Fresh had converted Farm Credit's perfected security interest in catfish purchased by Farm Fresh. On summary judgment, the district court1 concluded Farm Fresh did not convert Farm Credit's security interest, because Farm Credit failed to comply with the direct notice exception of the Food Security Act of 1985(Act). 7 U.S.C. § 1631(e)(1) (2000); see Pub.L. No. 99-198, 99 Stat. 1354 (1985) (). Farm Credit appeals. We affirm.
Farm Credit financed Reece Contracting, Inc.'s (Reece) purchase and operation of an Arkansas catfish farm. To secure the financing, Reece granted Farm Credit a first priority security interest in Reece's catfish and catfish fingerlings. Farm Credit filed a financing statement with the Arkansas Secretary of State and the counties in which Reece raised catfish.
On July 2, 1998, Farm Credit sent Farm Fresh a letter informing Farm Fresh that Farm Credit was financing Reece's production costs, and Farm Credit had a first priority lien in all of Reece's catfish. On March 30, 2000, Farm Credit again sent Farm Fresh a letter containing the same information as the July 1998 letter.
Farm Fresh regularly purchased catfish from Reece. After Reece defaulted on its obligations, Farm Credit discovered Farm Fresh had allegedly not honored its payment obligations under the Act for forty-four payments to Reece, totaling $692,081.71. Although Farm Fresh usually paid with checks payable to Reece and Farm Credit, on these forty-four catfish purchases, the Farm Fresh checks listed only Reece as payee. Farm Credit sued Farm Fresh, contending Farm Fresh converted Farm Credit's security interest.
On cross motions for summary judgment, the district court granted judgment in Farm Fresh's favor, concluding Farm Credit and its letters did not strictly comply with the Act's direct notice exception. Farm Credit appeals, contending it need only substantially comply with the Act's direct notice exception, and its letters to Farm Fresh substantially complied with the direct notice exception.
"We review the district court's grant of summary judgment de novo." Interstate Cleaning Corp. v. Commercial Underwriters Ins. Co., 325 F.3d 1024, 1027 (8th Cir.2003). "We will affirm a district court's grant of summary judgment `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits ...' demonstrate that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law." Id. (quoting Fed.R.Civ.P. 56(c)).
We review a district court's interpretation of a statute de novo. Jessep v. Jacobson Transp. Co., 350 F.3d 739, 741-42 (8th Cir.2003). "In analyzing a statute, we begin by examining the text, not by `psychoanalyzing those who enacted it.' " Carter v. United States, 530 U.S. 255, 271, 120 S.Ct. 2159, 147 L.Ed.2d 203 (2000) (quoting Bank One Chicago, N.A. v. Midwest Bank & Trust Co., 516 U.S. 264, 279, 116 S.Ct. 637, 133 L.Ed.2d 635 (1996) (internal citation omitted)). We "assum[e] that the ordinary meaning of [a statute's] language accurately expresses the legislative purpose." Engine Mfrs. Ass'n v. South Coast Air Quality Mgmt. Dist., 541 U.S. 246, 124 S.Ct. 1756, 1761, 158 L.Ed.2d 529 (2004) (citation omitted).
Congress adopted the Act to protect farm products purchasers from double payment.2 See 7 U.S.C. § 1631(a)-(b). The Act provides:
Except as provided in subsection (e) ..., a buyer who in the ordinary course of business buys a farm product from a seller engaged in farming operations shall take free of a security interest created by the seller, even though the security interest is perfected; and the buyer knows of the existence of such interest.
Id. § 1631(d). According to the Act's plain meaning, subsection (d) provides that a farm products purchaser, unless the secured creditor complies with subsection (e), buys farm goods free of a secured creditor's security interest, even if the purchaser knows of the security interest.
Subsection (e) declares a farm products purchaser "takes subject to a security interest created by the seller if " (1) the secured creditor provided, within a year before the sale, the farm products purchaser with direct written notice of the secured creditor's interest (direct notice exception), id. § 1631(e)(1)(A); or (2) the secured creditor filed an effective financing statement covering the farm products if the state has established a central filing system that complies with the Act (central filing exception), id. § 1631(e)(2). Congress's use of "if" emphasizes the farm products purchaser takes the farm goods subject to the security interest only when the secured creditor complies with the direct notice exception or the central filing exception.
Farm Fresh and Farm Credit agree Arkansas law applies, and Arkansas has not established a central filing system that complies with the Act. Although only the Act's direct notice exception is applicable, a comparison of the two subsection (e) exceptions is instructive for our analysis.
To comply with the direct notice exception, a secured creditor must send the farm products purchaser a written notice listing (1) the secured creditor's name and address, (2) the debtor's name and address, (3) the debtor's social security number or taxpayer identification number, (4) a description of the farm products covered by the security interest and a description of the property, and (5) any payment obligations conditioning the release of the security interest. Id. § 1631(e)(1)(A)(ii)(I)-(IV) & § 1631(e)(1)(A)(v). The description of the farm products must include the amount of the farm products subject to the security interest, the crop year, and the counties in which the farm products are located or produced. Id. § 1631(e)(1)(A)(ii)(IV).
To comply with the central filing exception, the secured creditor must file a financing statement containing the same information as required in the written notice, except the secured creditor need not include crop year or payment obligation information. Compare id. § 1631(c)(4)(D)(i)-(iv) with id. § 1631(e)(1)(A)(ii)(I)-(IV) and § 1631(e)(1)(A)(v). Notwithstanding errors contained in the financing statement, a financing statement in a central filing state remains effective so long as the errors "are not seriously misleading." Id. § 1631(c)(4)(I).
Unlike the Act's definition of an effective financing statement in a central filing state, the Act's direct notice exception does not contain language indicating the required contents of the written notice are merely permissive or can be satisfied through substantial compliance (i.e., "are not seriously misleading"). By including substantial compliance language in defining an effective financing statement for the central filing exception and excluding such language from the direct notice exception, Congress presumptively and logically intended that a secured creditor must strictly comply with the direct notice exception. See Lutheran Soc. Serv. of Minn. v. United States, 758 F.2d 1283, 1289 (8th...
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