Leger Mill Co., Inc. v. Kleen-Leen, Inc.
| Decision Date | 12 April 1977 |
| Docket Number | No. 46046,INC,KLEEN-LEE,46046 |
| Citation | 563 P.2d 132 |
| Parties | 21 UCC Rep.Serv. 896 LEGER MILL COMPANY, INC., and Sheffield Smith Elevator and Supply, Inc., Appellees, v., and First State Bank of Altus, Oklahoma, Appellants. |
| Court | Oklahoma Supreme Court |
Harbison & Weber, Altus, for appellee, Leger Mill.
Ryan Kerr, Altus, for appellee, Sheffield Smith.
McClelland, Collins, Sheehan, Bailey & Bailey, Oklahoma City, for appellant, Kleen-Leen, Inc.
Garrett & Harlan, Mangum, for appellant, First State Bank.
Bob Scarbrough ventured into the swine breeding business 1 in October, 1969. In February, 1971, the business failed and this appeal results from a dispute between certain of his creditors regarding their priority in the proceeds from the sale of the swine.
Two creditors, Kleen-Leen, Inc., and First State Bank of Altus (Bank) had perfected their security interests in the swine by filing under the Uniform Commercial Code. On February 19, 1971, with Scarbrough's permission, they took possession of the 1094 remaining swine and sold them for $35,384.82. Subsequently, they divided the proceeds between themselves; $23,000 to Kleen-Leen and $12,384.82 to Bank.
Two other creditors, Leger Mill Company, Inc. (Leger Mill), and Sheffield Smith Elevators and Supply, Inc. (Sheffield), brought action against Kleen-Leen and Bank for conversion of the swine, asserting priority by reason of 'feedman's' liens under 4 O.S.1971, § 192. Later, Leger Mill and Sheffield amended to allege that the secured creditors converted the proceeds upon which they had a first and prior lien for the amounts due for feed furnished to Scarbrough for the swine. Leger Mill (plaintiff) and Sheffield (cross-petitioner) sought judgment against the secured creditor defendants for the total amount of indebtedness owed them by Scarbrough. Leger Mill prayed for judgment in the amount of $16,595.59 and Sheffield sought judgment for $8,982.19. All parties filed pleadings against all other parties. Although Kleen-Leen and Bank had conflicting claims in the proceeds, it was agreed that any question of priority between their claims would be determined, if necessary, by separate action.
The cause then proceeded to trial with Leger Mill and Sheffield as plaintiffs against Kleen-Leen and Bank.
The trial court held in favor of the feedmen, finding they had valid feeders' liens which were prior and superior to any right or claim of Kleen-Leen and Bank in the swine or proceeds. The Court granted feedmen judgments in the full amounts prayed for and also awarded them attorney's fees in the amounts of $3,000 to Leger Mill, and $1,500 to Sheffield under authority of 42 O.S.1971, § 176.
Secured creditors, Kleen-Leen and Bank, appeal contending that the trial court erred in holding the 'feedman's' liens prior to their own secured interests and that the court erred in awarding feedmen attorney fees.
We reverse the trial court.
The relevant facts are these. In October, 1969, Bob Scarbrough entered into a contractual arrangement with Kleen-Leen whereby Kleen-Leen furnished swine breeding stock on a lease basis. Essentially, the contract provided that Kleen-Leen retained ownership of the original breeding herd and the progeny of the first farrowing. Scarbrough would then retain ownership of the progeny of subsequent farrowings subject to a first lien thereon by Kleen-Leen. Kleen-Leen filed its financing statement with the Jackson County Court Clerk on November 18, 1969, covering 'all swine presently or hereinafter located' on lessee's farm. The first shipment of swine was delivered to Scarbrough in January, 1970, and, through subsequent shipments, a total of 322 hogs were delivered to Scarbrough. In February, 1971, when the repossession took place, Scarbrough was indebted to Kleen-Leen in the amount of $33,274.87.
It was undisputed that as part of its 'management and feeding' program, Kleen-Leen required its producers, such as Scarbrough, to feed the swine Ralston Purina feed. It was also undisputed that the Ralston Purina Company owned 60% Of the outstanding stock of Kleen-Leen.
Leger Mill was the authorized Ralston Purina dealer in Altus. Leger Mill began furnishing feed and feed supplement to Scarbrough in January of 1970, and continued to furnish him feed until February 15, 1971. As mentioned above, by February, 1971, Scarbrough owed Leger Mill $16,595.59 for feed supplied.
Sheffield began to sell Scarbrough grain for the hogs on July 11, 1970, and continued to furnish grain until February, 1971, at which time Scarbrough's account totaled $8,982.19.
Bank loaned Scarbrough $30,912.50 to finance his swine breeding venture. To secure the notes, Scarbrough executed a security agreement and financing statement covering 'all sows, hogs and pigs now owned and hereinafter acquired . . . subject to Kleen-Leen lease agreement.' The financing statement was filed in the Jackson County Court Clerk's office on September 11, 1970, and with the Court Clerk of Oklahoma County on September 14, 1970. By February, 1971, Scarbrough owed Bank $32,175.07.
The feedman's lien at issue here is found at 4 O.S.1971, § 192, and provides that:
'Any person, partnership, firm or corporation in this State, or in any border county of the adjacent States, furnishing or providing to the owner of such domestic animals any corn, feed, forage or hay, for the sustenance of such domestic animals, shall have a lien on said animals for the amount due for such corn, forage, feed and hay.'
The narrow issue presented for our determination is whether these statutory liens take priority over security interests properly perfected under the Uniform Commercial Code.
We have held our feedman's lien to be non-possessory and not dependent on possession. National Bank of Commerce v. McDaniel, 71 Okl. 6, 174 P. 286 (1918).
The Uniform Commercial Code controls only the priority of certain possessory liens in relation to recorded security interests. 12A O.S.1971, § 9--104, provides:
'This Article does not apply
(c) to a lien given by statute or other rule of law for services or materials except as provided in Section 9--310 on priority of such liens; * * *.'
12A O.S.1971, § 9--310, provides:
'When a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.'
It is clear that the Uniform Commercial Code does not control the question of the priority between non-possessory liens and perfected security interests.
The secured parties, appellants here, contend that by the exclusion of non-possessory liens, the intent of the Code was to make them inferior in all instances to secured interests.
Appellees argue that even though non-possessory liens are not included in the Code's priority coverage, the stated purpose of § 9--310 to give priority to liens '. . . securing claims arising from work intended to enhance or preserve the value of collateral' will be served by giving priority to appellees' claims.
We are of the opinion that the Uniform Commercial Code is totally inapplicable to non-possessory liens and that the question of their priority in relation to secured interests must be determined by existing statutes and pre-code case law. We note that this is the position taken by the majority of other jurisdictions faced with the question 2 and we consider it the correct interpretation of the Code. 3
The feedman's lien statute set forth above is silent as to priorities and therefore we must depend entirely on case law.
The general rule, of course, is that a valid recorded chattel mortgage takes precedence over any later acquired feedman's lien. Fletcher v. Bank of Meeker, Okl., 376 P.2d 263 (1962). This 'first in time, first in right' rule would appear to assure Kleen-Leen's priority in the proceeds, but appellees contend that the facts of this case place their liens within an exception to the rule. This exception is that the lien of a person who furnishes feed to the owner of animals with the knowledge and consent of the mortgagee is superior to the lien of the mortgage although the feed was furnished after the mortgage was filed. Appellees rely upon National Bank of Commerce v. McDaniel, supra; and Cather v. Spencer, 55 Okl. 511, 154 P. 1130 (1916), wherein we held the liens of feedmen were entitled to priority over chattel mortgages because the facts and circumstances showed that feed was furnished with the knowledge and consent of mortgagee.
We do not agree that the facts of this case place appellees within the exception of McDaniel, supra, and Cather, supra. In McDaniel, supra, one Hoff had been hired by McDaniel to care for his cattle, which McDaniel later mortgaged to Bank. After Bank repossessed the cattle, Hoff attempted to enforce liens on the cattle under both the feedman's lien statute at issue here, and the closely related 'agister's' statute (4 O.S. § 191). Hoff prevailed and the clear basis of the Court's decision granting Hoff's feedman's lien priority over the bank rested upon the actions of the bank which induced Hoff to spend his own money to buy feed for McDaniel's cattle.
The following statements from that opinion make the rationale of the decision clear:
'During the fall and winter grazing upon the ranch became short, and, Mr. McDaniel making no adequate provision for paying for or procuring feed for the herd elsewhere, Mr. Hoff performed these duties, and during this time, from about October or November, until January, when the cattle were taken by the bank, he had several conversations with the officials of the bank as to ways and means of protecting, caring for, and feeding the cattle. * * *
* * * The bank officials told Hoff to go ahead and buy fodder and...
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