Osteroos v. Norwest Bank Minot, NA

Decision Date18 December 1984
Docket NumberCiv. No. A4-84-201.
Citation604 F. Supp. 848
PartiesOdd A. OSTEROOS and Dorothy E. Osteroos, individually and d/b/a Hesnault Ranch and Hesnault Irrigation; and Odd L. Osteroos and Garvin Osteroos, individually and d/b/a Hesnault Irrigation, Debtors and Appellees, v. NORWEST BANK MINOT, N.A., f/k/a First National Bank in Minot, Appellant.
CourtU.S. District Court — District of South Dakota

Michael G. Sturdevant, Minot, N.D., for debtors and appellees.

Max D. Rosenberg, Bismarck, N.D., for appellant.


VAN SICKLE, District Judge.

Norwest Bank Minot (Norwest) appeals from an August 8, 1984 order of the Bankruptcy Court for the District of North Dakota. In that order, the Bankruptcy Court determined that the Debtors were entitled to proceeds of grain received under the federal Payment-In-Kind (PIK) program free of any claim of Norwest.


The parties entered into a stipulation of the following relevant facts. In a May 19, 1982 security agreement, the Debtors pledged to Norwest as security for loans "all farm products of Debtor, whether now owned or hereafter acquired, including but not limited to all crops, whether annual or perennial, and the products thereof, and all feed, seed, fertilizer, medicines and other supplies used or produced by Debtor in farming operations." In a financing statement filed April 26, 1982, Norwest claimed a security interest in "all crops or other plant products now planted, growing or grown, or which are hereafter planted or become growing crops and the proceeds and products of such crops."

The Debtors harvested 86,735 bushels of corn from their 1982 farming operation, which they entered into the federal grain storage program. In 1983, the Debtors enrolled in the PIK program. Under the PIK program, in return for their agreement not to raise corn during the 1983 season, the Debtors received the corn which they had put into the federal grain storage program in 1982. The Debtors then sold that corn.

On May 9, 1983, the Debtors filed a voluntary petition under Chapter 11 of the Bankruptcy Code. On September 28, 1983, the Debtors initiated an adversary proceeding to obtain a determination of the nature and extent of Norwest's claims against the Debtors. By stipulation of the parties, that proceeding was limited to a determination of Norwest's interests in payments received under the 1983 PIK program.

The Bankruptcy Court determined that, because it held no security interest in the Debtors' "general intangibles," Norwest was entitled to none of the proceeds of the 1983 PIK payments.


On appeal, Norwest advances four theories in support of reversal of the Bankruptcy Court's order: 1). that Norwest is entitled to the PIK payments solely by reason of its lien on the Debtors' 1982 crops, 2). that Norwest is entitled to the PIK payments under that portion of the security agreement that covered "all farm products ... and the products thereof," 3). that Norwest is entitled to the PIK payments as "substitution or replacement" for the Debtors' 1983 crop, and 4). principles of equity.

The Bankruptcy Court, in reaching its decision, relied on In Re Sunberg, 729 F.2d 561 (8th Cir.1984). In Sunberg, the court found that a security interest in "existing or hereafter acquired ... crops, growing crops, livestock, farm products, equipment, inventory, fixtures, contract rights, accounts and general intangibles" gave the creditor a security interest in PIK payments. The Bankruptcy Court interpreted Sunberg to give a secured creditor an interest in PIK payments only if a security agreement covered "general intangibles." While the court in Sunberg relied on a clause in the security agreement covering "general intangibles" in determining that a creditor held a valid security interest in PIK payments, the Sunberg decision does not preclude finding a valid security interest in PIK payments where the security agreement does not apply to "general intangibles."

Norwest asserts that its lien attached to the Debtors' crop when it was grown in 1982, and that the PIK payments were in effect proceeds of the 1982 crop. This theory does not account for an intervening event: when the Debtors placed the 1982 crop in storage, they received payment for it. Norwest may have had a lien on that payment. But the PIK payments were not received as...

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12 cases
  • Karle v. Visser
    • United States
    • Idaho Supreme Court
    • July 22, 2005
    ...to attach to government payments for cattle destroyed under a Dairy Termination Program (DTP). Relying on Osteroos v. Norwest Bank Minot, N.A., 604 F.Supp. 848, 849 (D.N.D.1984), the Washington Supreme Court held that the government payments "constitute general intangibles as a category of ......
  • Farmers and Merchants Nat. Bank, Fairview v. Sooner Co-op., Inc.
    • United States
    • Oklahoma Supreme Court
    • November 22, 1988
    ...232, 521 N.E.2d 300 (1988); O'Briant v. Sweetwater Prod. Credit Ass'n, 745 S.W.2d 412 (Tex.Ct.App.1988).3 See Osteroos v. Northwest Bank Minot, N.A., 604 F.Supp. 848 (D.N.D.1984); In re Kingsley, 73 B.R. 767 (Bankr.D.N.D.1987); In re Patsantaras Land & Livestock Co., 60 B.R. 24 (Bankr.D.Col......
  • United States v. Carolina Eastern Chemical Co.
    • United States
    • U.S. District Court — District of South Carolina
    • May 8, 1986
    ...Credit Assoc., 614 F.Supp. 119, 123 (S.D.Ohio 1985) (PIK entitlements are "proceeds" of crop collateral) and Osteroos v. Norwest Bank Minot, N.A., 604 F.Supp. 848, 849 (D.N.D.1984) (PIK payments are analogous to disaster relief payments and can be considered "crop proceeds") with In re Krus......
  • Sweetwater Production Credit Ass'n v. O'Briant
    • United States
    • Texas Supreme Court
    • December 14, 1988
    ...payments are proceeds. Apple v. Miami Valley Prod. Credit Ass'n, 614 F.Supp. 119, 123-24 (S.D.Ohio 1985); Osteroos v. Norwest Bank Minot, N.A., 604 F.Supp. 848, 849 (D.N.D.1984); In re Judkins, 41 B.R. 369, 370-73 (Bankr.M.D.Tenn.1984); In re Cupp, 38 B.R. 953, 954-55 (Bankr.N.D.Ohio 1984);......
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