JEFFERSON CTY. CO-OP. v. NE KANSAS PROD. CREDIT

• Decision Date: 08 October 1982
• Docket Number: Bankruptcy No. 81-40116.,No. 81-4225,81-4225
• Citation: 73 BR 3
• Parties: JEFFERSON COUNTY COOPERATIVE ASSOCIATION, Appellee, v. NORTHEAST KANSAS PRODUCTION CREDIT ASSOCIATION, Appellant. In re Thomas Michael RAGAN, Debtor.
• Court: U.S. District Court — District of Kansas

73 B.R. 3 (1982)

JEFFERSON COUNTY COOPERATIVE ASSOCIATION, Appellee, v. NORTHEAST KANSAS PRODUCTION CREDIT ASSOCIATION, Appellant In re Thomas Michael RAGAN, Debtor.

No. 81-4225, Bankruptcy No. 81-40116.

United States District Court, D. Kansas.

October 8, 1982.

Everett Fritz, Kansas City, Kan., for appellee.

Lloyd C. Swartz, Topeka, Kan., Trustee.

Cary L. Standiferd, Topeka, Kan., for debtor.

Marlin A. White, Holton, Kan., Richard O. Skoog, Skoog & Latimer, Ottawa, Kan., Ralph E. Skoog, Topeka, Kan., for appellant.

MEMORANDUM AND ORDER

ROGERS, District Judge.

This is a bankruptcy appeal brought by appellant Northeast Kansas Production Credit Association (PCA). PCA had a security interest in the grain and crops of debtor Thomas Michael Ragan after March 29, 1979.¹ In April and May 1980, the debtor bought seed, herbicides, insecticides and fertilizer for his milo crop from the appellee, Jefferson County Cooperative Association (Coop). The crop was later stored with the Coop. This appeal requires this court to review the decision of the bankruptcy court that the Coop has a warehouseman's lien for charges on the seed, herbicides, insecticides and fertilizer which takes priority over PCA's security interest.²

The parties agree with the opinion of the bankruptcy court that K.S.A. 84-9-310 grants priority to statutory liens over security interests under certain circumstances. The parties also agree that storage charges on the debtor's milo crop are covered by the Coop's warehouseman's lien pursuant to K.S.A. 34-266 and have priority over PCA's security interest under K.S.A. 84-9-310. The parties disagree, however, over what other charges are covered by the warehouseman's lien.

The bankruptcy court held that the credit advanced by the Coop to the debtor for the seed, herbicides, insecticides, and fertilizer for crops eventually stored with the Coop are covered by the warehouseman's lien. We disagree.

K.S.A. 34-266 provides:

A warehouseman shall have a lien on grain deposited or on the proceeds thereof in his hands for all lawful charges for storage and preservation of the grain; also for all lawful claims for money advanced, interest, insurance, transportation, labor, weighing, cooperage and other charges and expenses in relation to such grain; also for reasonable charges and expenses for notice and advertisements of sale, and for sale of grain where default has been made in satisfying the warehouseman\'s lien.

In construing this statute, we begin with the proposition that statutory liens should be strictly construed. See Goodyear Tire & Rubber Co. v. Jones, 317 F.Supp. 1285, 1288 (D.Kan.1968) aff'd, 433 F.2d 629 (10th Cir.1970) (citing Bridgeport Machine Co. v. McKnab, 136 Kan. 781, 786, 18 P.2d 186, 188 (1933)). "Those claiming such a lien must bring themselves clearly within the provisions of the statute authorizing it." Id. We do not consider strict construction to contradict the mandate of the Kansas Legislature that the law providing for grain warehouseman's liens be "liberally interpreted and construed to effectuate its general purpose." K.S.A. 34-2,103. The general purpose of the Kansas Legislature in 1931 was to regulate the activity of warehousing. Unless the charges covered by the lien allowed under K.S.A. 34-266 are confined to those relating to warehousing, we do not believe the "general purpose" of the statute is effectuated.

The bankruptcy court held that the Coop's charges for seed, herbicide, insecticide, and fertilizer constituted "other charges and expenses in relation to such grain" under K.S.A. 34-266. For the reasons which follow, we believe this interpretation of the warehouseman's lien statute is too broad.

"Public warehouseman" is defined in K.S.A. 34-223 as "a person lawfully engaged in the business of storing grain for the public." It is consistent with the objectives of the warehouseman's lien statute and the strict construction of that law to limit the claims covered by the statute to those related to stored grain and the business of storing grain. While there is no question that the Coop is a warehouseman, we do not believe the charges for seed, herbicide, insecticide and fertilizer relate to stored grain or the business of storing grain.³ Growing crops and storing grain are two separate activities. Expenses involved with growing crops do not concern warehousing and should not be covered by a warehouseman's lien.

"Grain" is defined as "wheat, corn, oats, barley, rye, soybeans, grain sorghums and any grains upon which federal grain standards are established, also seeds generally stored by warehouses, if special permission is granted by the chief grain inspector." K.S.A. 34-223. It is clear from this definition as well as from the context of the entire act that "grain" is considered to be wheat, corn, et cetera after harvest. The term "such grain" as used in the warehouseman's lien statute refers to "grain deposited" with the warehouseman, i.e., harvested grain. Hence, "other charges and expenses in relation to such grain" means charges and expenses related to harvested grain deposited with a warehouseman. It does not refer to expenses involved with growing grain.

We do not dispute that some relationship exists between money spent for fertilizer, for example, and the grain stored in a warehouse. A similar relationship exists between stored grain and the money spent for fuel, farm machinery and other farm supplies. In our opinion, however, it is simpler and more practical to limit...