M & I Marshall & Ilsley Bank v. Kinder Morgan Operating L.P.
| Decision Date | 19 March 2012 |
| Docket Number | No. ED 96761.,ED 96761. |
| Citation | 76 UCC Rep.Serv.2d 722,368 S.W.3d 160 |
| Court | Missouri Court of Appeals |
| Parties | M & I MARSHALL & ILSLEY BANK, Respondent, v. KINDER MORGAN OPERATING L.P. “C,” et al., Appellants. |
OPINION TEXT STARTS HERE
Application for Transfer
Denied July 3, 2012.
Booker T. Shaw, Stephen A. D'Aunoy, St. Louis, MO, Patricia W. Prewitt, Navasota, TX, for appellants.
Clark H. Cole, Sara F. Melly, St. Louis, MO, for respondent.
In this case, we are asked to determine the priority between a warehouse lien and a perfected security interest. Kinder Morgan Operating L.P. “C” (KMO) and Kinder Morgan Amory, L.L.C. (KM Amory) (collectively, Kinder Morgan) appeal the trial court's grant of partial summary judgment granting M & I Marshall & Ilsley Bank's (M & I) perfected security interest priority over Kinder Morgan's two warehouse liens. Applying the Uniform Commercial Code (UCC),1 we conclude that under the facts presented here, the 2006 warehouse lien has priority over the 2007 perfected security interest, which in turn has priority over the 2008 warehouse lien. Affirmed in part, and reversed and remanded in part.
Kinder Morgan operates facilities, referred to as terminals, for the storage and transportation of various products. KMO is located in Arkansas, and KM Amory is located in Mississippi. Jomico L.L.C. (Jomico) is a distributor 2 of coal with headquarters in St. Louis, Missouri. On January 11, 2006, KMO and Jomico entered into a terminal agreement (KMO Terminal Agreement), which provides as follows. KMO agreed to provide storage and handling for Jomico's coal and coal products at KMO's Arkansas terminal, for a fee of $67,083 per month through April 30, 2016. In the section entitled “Liens,” the KMO Terminal Agreement states:
At all times to the extent permitted by law, [KMO] shall have all applicable statutory liens upon all [coal] at any time in the Terminal for the charges set forth herein whether incident to [coal] then on the Terminal or otherwise and in connection with any and all other agreements between [KMO] and [Jomico]....
The KMO Terminal Agreement anticipated that Jomico would begin depositing coal on or about May 1, 2006. Todd Jones, Commercial Director for both KMO and KM Amory warehouses, attested that as of September 1, 2010, Kinder Morgan had been providing processing, storage, and transportation services to Jomico for four years.3
On June 4, 2007, Jomico entered into a commercial security agreement (Security Agreement) with M & I,4 granting M & I a security interest in its collateral—described as, inter alia, all inventory, equipment, accounts, and money—to secure a bank loan. The Security Agreement provides as follows, in relevant part:
Location of the Collateral Except in the ordinary course of Grantor's [Jomico's] business, Grantor agrees to keep the Collateral ... at Grantor's address [on Washington Avenue] or at such other locations as are acceptable to Lender [M & I]. Upon Lender's request, Grantor will deliver to Lender ... a schedule of real properties and Collateral locations relating to Grantor's operations, including without limitation the following ... (3) all storage facilities Grantor owns, rents, leases, or uses, and (4) all other properties where Collateral is or may be located.
Removal of Collateral Except in the ordinary course of Grantor's business, including the sale of inventory, Grantor shall not remove the Collateral from its existing location without Lendor's prior written consent....
Transactions involving Collateral Except for inventory sold or accounts collected in the ordinary course of Grantor's business ..., Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default under this Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who qualify as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor's business does not include a transfer in partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided for in this Agreement, without the prior written consent of Lender....
Title Grantor represents and warrants to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens and encumbrances....
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Taxes, Assessments and Liens Grantor will pay when due all taxes, assessments and liens upon the Collateral.... Grantor may withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized in Lenders' sole opinion. If the Collateral is subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate to provide for the discharge of the lien ... that could accrue as a result of foreclosure or sale of the Collateral.
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GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS ... Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement....
On June 18, 2007, M & I filed a UCC Financing Statement with the Missouri Secretary of State identifying Jomico as the debtor and substantially describing Jomico's personal property, including, without limitation, all current and after-acquired inventory.
On February 15, 2008, KM Amory and Jomico entered into a terminal agreement (KM Amory Terminal Agreement), whereby KM Amory agreed to provide storage, handling, and processing for Jomico's coal and coal products in their Mississippi terminal,5 for a fee of $178,750 per month for the first two years and $294,938 per month for the next eight years. Similar to the KMO Terminal Agreement, the KM Amory Terminal Agreement also provides that “[a]t all times to the extent permitted by law, [KM Amory] shall have all applicable statutory ... liens upon all [coal] at any time in the Terminal for the charges set forth herein whether incident to [coal] then in or on the Terminal or otherwise and in connection with any and all other agreements between [KM Amory] and [Jomico]....”
Jomico defaulted on the Security Agreement with M & I, and failed to make payments to both KMO and KM Amory under the respective terminal agreements. On or about February 2010, KMO was storing over 6,000 tons of coal and coal products in their Arkansas terminal, and KM Amory was storing over 2,300 tons of coal and coal products in their Mississippi terminal.
Kinder Morgan asserted warehouse liens against the coal, and stated its intent to sell the coal to cover the warehouse costs. M & I filed the underlying petition for declaratory judgment, contending it had a perfected security interest in the coal with priority over Kinder Morgan's warehouse liens, and objecting to the proposed sale. Both M & I and Kinder Morgan filed motions for summary judgment. The trial court granted partial summary judgment to M & I, finding that M & I's perfected security interest had priority over Kinder Morgan's warehouse liens. This appeal follows.
We review a trial court's grant of summary judgment de novo. ITT Commercial Fin. Corp. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Summary judgment is appropriate where the moving party demonstrates a right to judgment as a matter of law based on facts about which there is no genuine issue of material fact. Id. at 378. A genuine issue exists where the record contains competent materials that evidence two plausible, but contradictory, accounts of the essential facts. Id. at 382. When considering an appeal from summary judgment, we view the record in the light most favorable to the party against whom judgment was entered, and we afford the non-movant the benefit of all reasonable inferences from the record. Cardinal Partners, L.L.C. v. Desco Inv. Co., 301 S.W.3d 104, 108–09 (Mo.App. E.D.2010).
In its first point on appeal, Kinder Morgan argues that the trial court erred in finding that its warehouse lien did not have priority over M & I's perfected security interest, in that the trial court incorrectly determined the perfected security interest predated the warehouse liens. We agree in part and disagree in part.
In support for Point I, Kinder Morgan contends that its 2006 KMO Terminal Agreement predates the 2007 M & I Security Agreement, and that under U.C.C. § 7–209, any coal deposited after the loan can be used to secure unpaid charges incurred before the loan, even if the coal had already been delivered. U.C.C. § 7–209(a) (2003); see alsoSection 400.7–209(1), RSMo. (2000). Kinder Morgan's argument presumes that the 2006 charges incurred at KMO in Arkansas can be secured by the coal stored at KM Amory in Mississippi. In response, M & I asserts that Kinder Morgan admitted to having delivered the coal deposited in 2006 and replacing it with coal after June 18, 2007, the date of the UCC filing statement that perfected M & I's interest. Because the UCC gives priority only to goods in the warehouse's possession at the time the security interest is perfected, the coal here, which was delivered after June 18, would not have priority over M & I's secured interest.
Despite Kinder Morgan's apparent assumption, we do not view the 2006 warehouse lien between Jomico and KMO, and the 2008 warehouse lien between Jomico and KM Amory as a single warehouse lien. A warehouse lien is only available on goods for which a valid warehouse receipt has been...
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