Meyhoeffer v. Wallace, 35,025-CA.
| Decision Date | 11 July 2001 |
| Docket Number | No. 35,025-CA.,35,025-CA. |
| Citation | 792 So.2d 851 |
| Parties | Dr. Klaus MEYHOEFFER, Plaintiff-Appellant, v. Daniel E. WALLACE and Winnsboro State Bank and Trust Co., Defendants-Appellees. |
| Court | Court of Appeal of Louisiana — District of US |
Theo J. Coenen, III, Rayville, Counsel for Appellant.
Ann B. McIntyre, Winnsboro, Counsel for Appellee, Winnsboro State Bank & Trust Co., Inc.
Daniel E. Wallace, In Proper Person.
Before STEWART, CARAWAY and PEATROSS, JJ.
This appeal arises out of a dispute over the proceeds from the sale of crops grown in 1998 by farmer David Wallace on farm land located in Franklin Parish that Mr. Wallace leased from Dr. Klaus Meyhoeffer. Winnsboro State Bank & Trust Co., Inc. ("the Bank") had a security interest in the crops and crop proceeds granted to it by Mr. Wallace, under which it took possession of the entire 1998 crop proceeds. Dr. Meyhoeffer filed suit against Mr. Wallace and the Bank asserting his lessor's privilege and seeking the 1998 rental payment. The case was submitted on stipulated facts and the trial court held that the Bank's perfected security interest in the crop proceeds was superior to Mr. Meyhoeffer's lessor's privilege. Mr. Meyhoeffer's suit was, therefore, dismissed and he now appeals. For the reasons stated herein, we affirm.
On January 27, 1993, David Wallace leased 530 acres of farm land in Franklin Parish from Dr. Klaus Meyhoeffer. The lease agreement stated the annual rental as "one-fifth (1/5th) of the [annual] crop or $32,000.00, whichever is greater." The lease was recorded in the conveyance records of Franklin Parish on January 31, 1995. In 1998, Mr. Wallace obtained a loan from the Bank, for which he granted a security interest in the crops and crop proceeds of the leased farm land. The Bank perfected its security interest by filing a financing statement (UCC 1F) in the Louisiana Agricultural Central Registry ("LACR"), as required by La. R.S. 3:3654.1 A UCC search revealed security interests in the crops (and proceeds therefrom), and various equipment belonging to Mr. Wallace, beginning with filings dated February 28, 1995, and continuing through February 17, 1998. The lease from Dr. Meyhoeffer was not filed in the LACR. When Mr. Wallace could not meet his obligation to the Bank and pay rent to Dr. Meyhoeffer in 1998, the Bank took possession of the proceeds from the 1998 crops and applied them to Mr. Wallace's debt.
Dr. Meyhoeffer sued for 1998 rentals in the amount of $32,000, arguing that his lessor's privilege was superior to the Bank's security interest. The trial court disagreed and held that, since the Bank had taken the necessary steps to perfect its security interest in the crops and crop proceeds where Dr. Meyhoeffer had not (he did not file a financing statement or the lease in the LACR — only in the conveyance records of Franklin Parish), the Bank's interest in the property outranked Dr. Meyhoeffer's interest. Specifically, the trial court concluded that Dr. Meyhoeffer did not avail himself of the protection of La. R.S. 9:4521, which provides that the lessor's privilege outranks a perfected security interest only when the lessor's privilege is properly filed and maintained in accordance with the central registry provisions of La. R.S. 3:3651, et seq. As such, the trial court concluded that the Bank's perfected security interest outranked Dr. Meyhoeffer's lessor's privilege; and he was not, therefore, entitled to collect the rent for 1998 from the crop proceeds.
At the outset, we note that, in his petition, Dr. Meyhoeffer asserted a lessor's privilege on the "crops produced," and the proceeds therefrom, to secure payment of the rent. He further alleged that the Bank had constructive notice of the privilege and, therefore, should not have taken possession of the entire proceeds from the 1998 crops and should not have applied the entire crop proceeds to Mr. Wallace's loan. Nowhere in his petition did Dr. Meyhoeffer assert ownership of any portion or share of the crops or their proceeds.
After the trial court's ruling regarding the ranking of the interests, however, Dr. Meyhoeffer changed his argument for purposes of appeal, now asserting ownership of 1/5th of the crops under the lease. According to Dr. Meyhoeffer, since he retained ownership of 1/5th of the crops, Mr. Wallace did not have the authority to encumber this portion by granting a security interest in the same to the Bank and the Bank's retention of the proceeds from "his" 1/5th of the crops was improper. We acknowledge that this argument may have merit under certain circumstances; however, under the facts of this particular case and the terms of this particular lease agreement, as executed by the parties, we find Dr. Meyhoeffer's argument is without merit.
The lease
After careful examination of the lease, we conclude that Dr. Meyhoeffer did not retain ownership of 1/5th of the crops under the terms of the lease. First, the lease is the standard form Farmers Home Administration's ("FmHA") "Crop-Share Farm Lease." The standard provisions of the form lease seem to contemplate joint ownership of crops between lessor and lessee, as evidenced by sections B(7) and (8), which provide space for the parties to add agreements as to the buying and selling of "jointly owned property" and provide for the division of such jointly owned property on termination of the lease. The form lease also provides space for the parties to define the "place of sale or delivery" of a portion of the crops due lessor as rent under section D(1), regarding the sharing of costs and returns and, specifically, defining rental rates. It is not, however, the blank standard form lease we are called upon to examine.
In this case, we find that the parties intended for the rental on the farm land to be a cash sum rather than the physical "delivery" of 1/5th of the crops to Dr. Meyhoeffer as rent. We draw this conclusion from several provisions of the lease. First, in section B(7), which provides for the buying and selling of "jointly owned property," the parties have written in that "[t]enant sell at his choice." Second, in section B(8), regarding the division of jointly owned property on termination of the lease, the parties have written in "N/A," indicating that this section is not applicable to the parties' intentions or agreement. Third, in section D(1), where the rental rate is specified, the parties failed to provide a "place for sale or delivery" of any portion of the crops to the lessor, which indicates that the lessor did not intend to own or to ever take possession of any part of the crops. Finally, the rental rate itself states that the "[r]ent due after [h]arvest 1/5th (sic) or $32,000 whichever greatest." We believe that it was only "after harvest" that the lessee was obligated to pay rent and that, after the lessee exercised its right to harvest and after the crops were sold by lessee, the lessor was left with a claim for cash rent specified in the lease. Stated another way, we find that this agreement reveals that the parties intended that there be a cash payment to Dr. Meyhoeffer of at least $32,000 per year, to be made after the fall's harvest. In the event that 1/5th of the crop proceeds exceeded $32,000, Dr. Meyhoeffer was entitled to a cash payment of the value of 1/5th of the crop proceeds. If 1/5th of the crop proceeds was less than $32,000, Dr. Meyhoeffer was still entitled to $32,000 cash payment as rent. In this regard, we also find telling that, in his original petition, Dr. Meyhoeffer characterized the rental agreement between him and Mr. Wallace as follows:
Under the terms of said lease, [Dr. Meyhoeffer] was entitled to rent in the amount of $32,000 at the very least, and in a greater amount if one-fifth (%) of the crops produced on the leased premises exceeded $32,000.
No provision of this lease contemplates physical possession or ownership of 1/5th of the crops by Dr. Meyhoeffer; and, according to the allegation in his petition, he intended to always receive a cash rent payment. Moreover, the practice of the parties supports this conclusion as well. Since the inception of this lease arrangement between Mr. Wallace and Dr. Meyhoeffer, the practice was that Mr. Wallace would sell the entirety of the crops (which the lease specifically authorizes him to do) and would then pay Dr. Meyhoeffer cash rent.
Dr. Meyhoeffer relies on three sources for support of his position that he retained ownership of 1/5th of the crops: section F(7)(b) of the lease; La. R.S. 9:3204; and Guaranty Bank and Trust Company of Alexandria v. Daniels, 399 So.2d 790 (La. App. 3d Cir.1981). First, section F(7)(b) of the lease provides as follows:
Landlord subordination. — In consideration of loan(s) to be made by the Farmers Home Administration (FmHA) the landlord hereby subordinates in favor of the FmHA any lien the landlord now has or may acquire in or on: . . . (b) the crops, livestock increase and livestock products of the tenant (except a lien on such property produced in any year for that year's rent);. . (Emphasis ours.)
Dr. Meyhoeffer argues that this provision, in which the lessor refuses to subordinate his lien on crop proceeds produced for rent, indicates that the lessee does not have the right to encumber that portion of the crops or proceeds. The fatal flaw in this logic, however, is that, if the lessor retains ownership of 1/5th of the crops, then the lessor would not have a lien on the crops to subordinate — he would own them. It is axiomatic that one does not have a lien on something one owns. To the contrary, we read this provision to apply to cases such as this, where the lessor does not retain ownership of the crops, but, rather, has a lien on the proceeds for the payment of rent. In this particular case, the lessor was not the only party with a security interest in the proceeds, hence, the ranking issue, which will be addressed later in this opinion....
To continue reading
Request your trial
-
In re Heigle, Bankruptcy No. 07-02012-NPO.
... ... Henry, 614 So.2d at 857; Meyhoeffer v. Wallace, 792 So.2d 851, 857-58 (La.Ct.App.2001). If the lessor's privilege is not so recorded, ... ...
- Slaughter v. Word of Faith Int'l Christian Ctr.
-
Secured Interests in Louisiana Crops: The 2010 Legislative Revision
...disposed of by the elevator. See also Bayou Pierre Farms v. Bat Farms Partners, III, 693 So. 2d 1158 (La. 1997); Meyhoeffer v. Wallace, 792 So. 2d 851 (La. Ct. App. 2d 2001). 86. Another possible explanation for the limitation of the statute to “ unharvested” crops might have been a desire ......