Gibson County Farm Bureau Co-op. Ass'n, Inc. v. Greer

• Decision Date: 28 November 1994
• Docket Number: No. 26S01-9411-CV-1122,26S01-9411-CV-1122
• Parties: 25 UCC Rep.Serv.2d 954 GIBSON COUNTY FARM BUREAU COOPERATIVE ASSOCIATION, INC., Appellant, v. Norman GREER, Appellee, (Judgment Defendant below), and Miles, Inc., d/b/a Miles Farm Center, Appellee, (Garnishment Defendant below).
• Court: Indiana Supreme Court

Page 313

643 N.E.2d 313

25 UCC Rep.Serv.2d 954

GIBSON COUNTY FARM BUREAU COOPERATIVE ASSOCIATION, INC., Appellant, v. Norman GREER, Appellee, (Judgment Defendant below), and Miles, Inc., d/b/a Miles Farm Center, Appellee, (Garnishment

Defendant below).

No. 26S01-9411-CV-1122.

Supreme Court of Indiana.

Nov. 28, 1994.

Rehearing Denied April 26, 1995.

Christopher E. Baker, Rubin & Levin, Indianapolis, James G. McDonald, McDonald & McDonald, Princeton, for appellant.

C. Dean Higginbotham, Princeton, for appellee.

ON PETITION TO TRANSFER

SULLIVAN, Justice.

We grant a petition to transfer the decision of the Court of Appeals in Gibson County Farm Bureau v. Greer (1993), Ind.App., 622 N.E.2d 551, to address whether a financing statement may also serve as a security agreement under Article 9 of the Uniform Commercial Code.

Facts

The record reflects that Miles Farm Center (Miles) advanced $17,606.83 in credit to Greer in connection with Greer's farming operations. On June 19, 1991, Miles filed a standard UCC-1 financing statement covering Greer's corn and soybean crops. The financing statement 1) was signed by Greer as debtor; 2) identified Miles as a secured party; 3) identified the collateral as "all corn and soybeans, presently growing, or to be planted on the following farms, and not limited to, including any additional acreage cultivated in 1991. (See Exhibit A)"; and 4) identified the land on which the crops were to be grown in an attached "Exhibit A."

On October 8, 1991, Greer sold some of his crop to Consolidated Grain and Barge, Inc. (Consolidated Grain) and received a check from Consolidated Grain for $9,995.35. The check was jointly payable to the order of "Norman Greer & Miles Farm Supply, Inc./Miles Farm Center & Princeton Farms & Gibson County Farm Bureau."

After Greer received the check from Consolidated Grain, he endorsed it and delivered it to Miles. Miles contacted Princeton Farms and Gibson County Farm Bureau (Farm Bureau) about obtaining their endorsements. Princeton agreed to endorse the check; Farm Bureau refused and disputed the priority of Miles's right to the money represented by the check. The check remains in Miles's possession; the funds remain in Consolidated Grain's bank account.

On March 9, 1992, Farm Bureau obtained a default judgment against Greer in the amount of $35,351.74.

On March 18, Farm Bureau instituted proceedings supplemental against Greer and against Consolidated Grain as a garnishee-defendant. Consolidated Grain was required to answer Farm Bureau's interrogatories relating to Greer's assets that Consolidated Grain had in its possession.

On April 18, Consolidated Grain answered that it owed Greer one outstanding check and attached a photocopy of the check dated October 8, 1991 and drawn in the amount of $9,995.33.

On July 27, Farm Bureau instituted proceedings against Miles as an additional garnishee-defendant.

On September 28, in answer to interrogatories from Farm Bureau, Miles stated that it was in possession of the uncashed check for $9,995.33. Miles also stated that Greer owed it $17,606.83 on the basis of an "unpaid account."

On September 29, the Gibson Circuit Court held a hearing on Farm Bureau's claim. On January 28, 1993, the trial court found that Miles had a security interest in the proceeds from the sale of Greer's crops and it entered judgment for Miles, ordering Farm Bureau to endorse the check in favor of Miles.

Farm Bureau appealed the trial court's decision. The Court of Appeals reversed the trial court, deciding that as a matter of law Miles had no security interest in the money represented by the check, and that because Farm Bureau was a judgment lien creditor, Farm Bureau's interest was superior to that of Miles.

Standard of Review

The trial of this case was to the court sitting without a jury. Indiana Trial Rule 52(A) therefore governs our review of the trial court's decision. Trial Rule 52(A) provides in part:

On appeal of claims tried by the court without a jury or with an advisory jury, at law or in equity, the court on appeal shall not set aside the findings or the judgment unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of witnesses.

Ind.Trial Rule 52(A). See also Egly v. Blackford County Dep't of Public Welfare (1992), Ind., 592 N.E.2d 1232, 1234-35. When a trial court has made special findings of fact, as it did in this case, its judgment is clearly erroneous only if 1) its findings of fact do not support its conclusions of law or 2) its conclusions of law do not support its judgment. Estate of Reasor v. Putnam County (1994), Ind., 635 N.E.2d 153, 158, reh'g denied; Kaminszky v. Kukuch (1990), Ind.App., 553 N.E.2d 868, 870, trans. denied. Findings are clearly erroneous only when the record contains no facts to support them either directly or by inference. Reasor, 635 N.E.2d at 158.

Discussion

This case presents the single question of whether Miles had a security interest in the crops that Greer sold to Consolidated Grain. ¹ The answer to that question depends entirely on whether the UCC-1 financing statement that Miles properly filed with the Recorder of Gibson County ² also served effectively as a security agreement. If it did, then Miles had a perfected security interest in the proceeds from Greer's sale of his crops, and its claim had priority over Farm Bureau's.

I.

In order to perfect a security interest in Greer's crops, the UCC requires Miles to have done two things. First, Miles had to have a security interest to perfect. Citizens Nat'l Bank of Evansville v. Wedel (1986), Ind.App., 489 N.E.2d 1203, 1205. See also In re R. & L. Cartage & Sons, 118 B.R. 646, 649 (Bankr.N.D.Ind.1990). The UCC provides: "A security interest attaches when it becomes enforceable against the debtor with respect to the collateral. Attachment occurs as soon as all of the events specified in subsection (1) have taken place unless explicit agreement postpones the time of attaching." § 9-203(2). Subsection (1) provides in part:

[A] security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:

(a) the collateral is in the possession of the secured party pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops growing or to be grown or timber to be cut, a description of the land concerned;

(b) value has been given; and

(c) the debtor has rights in the collateral.

§ 9-203(1).

Second, having fulfilled the requirements of § 9-203 and having thereby acquired a security interest in the crops, Miles had to perfect that interest either by filing a financing statement as required by § 9-302(1), or by taking possession of the collateral as required by §§ 9-302(1)(a) and 9-305. Wedel, 489 N.E.2d at 1205.

Although usually the filing of a financing statement will occur only after a security interest has attached under § 9-203, the UCC specifically provides that a party may file a financing statement before a security interest has attached. § 9-402(1). When a party does file before the attachment of a security interest, the UCC provides that perfection occurs at the time the security interest attaches. § 9-303.

It is clear that in the usual case the UCC contemplates the existence of two documents before a security interest can be perfected. In re Bollinger Corp., 614 F.2d 924, 926-27 (3d Cir.1980). Before a security interest attaches, either the collateral must be in the possession of the secured party pursuant to some agreement between the parties or the debtor must have signed a security agreement describing the collateral and the land concerned if the collateral is crops. § 9-203(1). The UCC defines a security agreement as "an agreement which creates or provides for a security interest." § 9-105(1)(l).

Unless perfection is achieved either automatically or by possession of the collateral, for a security interest to be perfected a financing statement must be filed. § 9-302(1). With respect to what is required of a financing statement, the UCC provides A financing statement is sufficient if it gives the names of the debtor and the secured party, is signed by the debtor, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor, and contains a statement indicating the types, or describing the items, of collateral.... When the financing statement covers crops growing or to be grown, the statement must also contain a description of the real estate concerned.

§ 9-402(1). The UCC also provides that a security agreement may serve as a financing statement if it contains the information required of a financing statement and is signed by the debtor. ³ § 9-402(1). The UCC is silent, however, about whether a financing statement may serve as a security agreement, and it is this question we must now decide.

II.

The parties do not dispute that the UCC-1 financing statement filed by Miles met the formal requirements of financing statements in general as set out in § 9-402(1). Norman Greer's name and address appeared in a box labeled "Debtor(s) (Last Name First) and Address(es)." Thus, it contained the name and mailing address of the debtor. "Miles Farm Center" appeared, together with its address, in a box labeled "Secured Party(ies) and Address(es)." Thus it contained an address of the secured party from which information concerning the security interest might be obtained. It also contained a statement indicating the types, or describing the items, of collateral in a box labeled "This Financing Statement covers the following types (or items) of property (include description of real estate when collateral is crops)." That statement read: "All corn and soybeans, presently growing, or to be planted on the following farms,...