Springfield Mercantile Bank v. Joplin Stockyards

• Court: U.S. District Court — Western District of Missouri
• Writing for the Court: RUSSELL G. CLARK, Senior
• Citation: Springfield Mercantile Bank v. Joplin Stockyards, 870 F.Supp. 278 (W.D. Mo. 1994)
• Decision Date: 17 October 1994
• Docket Number: No. 93-3468-CV-S-4.,93-3468-CV-S-4.
• Parties: MERCANTILE BANK OF SPRINGFIELD, Plaintiff, v. JOPLIN REGIONAL STOCKYARDS, INC., Defendant.

870 F. Supp. 278

MERCANTILE BANK OF SPRINGFIELD, Plaintiff, v. JOPLIN REGIONAL STOCKYARDS, INC., Defendant.

No. 93-3468-CV-S-4.

United States District Court, W.D. Missouri, Southern Division.

October 17, 1994.

Robert H. Brownlee, David A. Lander, Thompson & Mitchell, St. Louis, MO, for plaintiff.

Monte P. Clithero, Taylor, Stafford, Woody, Cowherd & Clithero, Springfield, MO, E. Lawrence Oldfield, Oak Brook, IL, for defendant.

ORDER

RUSSELL G. CLARK, Senior District Judge.

Several motions are pending before the Court. Plaintiff Mercantile Bank of Springfield ("Bank") filed a motion for partial summary judgment. Defendant Joplin Regional Stockyards ("Stockyard") responded to the motion and moved to strike its first affirmative defense from the Answer. In addition, Defendant filed a motion for summary judgment and responses have been filed. All motions are ready to rule. For the following reasons, the Defendant's motion to strike its first affirmative defense will be granted, Plaintiff's motion for partial summary judgment will be denied, and Defendant's motion for summary judgment will be granted.

Factual Background

On December 10, 1988, B.M. Orr, Max Lynn Orr, and Kalia Orr ("the Orrs") signed a promissory note in favor of Plaintiff Bank. In conjunction with the loan, the Orrs signed an agreement granting the bank a security interest in various farm products including, but not limited to: 350 mixed stock cows averaging 1000 pounds, 300 mixed calves averaging 400 pounds, 200 mixed steers averaging 750 pounds, 15 breeding bulls and 50 brood sows. Also listed as collateral are the "offspring" of the livestock. Plaintiff perfected its interest by filing the appropriate financing statements with the Recorder of Deeds for Lawrence County, Missouri and with the Missouri Secretary of State's Office. Under the terms of the security agreement, the Orrs were not to "sell, offer to sell, or otherwise transfer or encumber the collateral or any interest in the collateral without the prior written consent of Bank ..."

During the period of January 1, 1992, through October 29, 1992, Defendant Stockyard sold livestock named as collateral in the security agreement on behalf of the Orrs. Stockyard wrote the checks remitting the proceeds of the sales payable to either Max or B.M. Orr. Throughout this time frame, Plaintiff Bank knew the Orrs, without obtaining the Bank's prior written consent, were selling livestock in order to have funds with which to pay for operating expenses of their farm. The Orrs specifically told Mark Harrington, a Bank officer, of their actions. Harrington admits the Bank considered it to be "the ordinary course of business" to allow the Orrs to sell calves to pay for farm expenses. In addition, the Bank had notice of the sales as all of the checks remitting the sales proceeds were drawn on the Stockyard's account and were delivered by the Orrs to the Bank to make payments on their promissory note and to pay for expenses.

Plaintiff alleges the defendant is liable under the Food Security Act of 1985 ("the Act"), 7 U.S.C. § 1631, for the reasonable market value of the collateral sold. The Act provides that:

A commission merchant or selling agent who sells a farm product for others shall be subject to a security interest created by the seller in such farm product if ... within 1 year before the sale of such farm product the commission merchant or selling agent has received from the secured party or seller written notice of the security interest ...

7 U.S.C. § 1631(g)(2)(A).

Within one year before the sale of the livestock, the Bank sent notice to the Stockyard of its security interest in the collateral in accordance with the Act. In the notice the Bank instructed the Stockyard it could protect itself from being subject to the security interest by listing the Bank and the Orrs as joint payees on checks remitted to the Orrs in connection with the sale of collateral. 7 U.S.C. § 1631(g)(2)(A)(iv-v). Defendant Stockyard failed to list the Bank as a joint payee.

Plaintiff argues as a result of Defendant's failure to follow the instructions in the notice Defendant is now liable under the Act to Plaintiff for the reasonable market value of the collateral sold during the relevant time period. In response, Defendant argues Plaintiff waived its security interest in any collateral sold or proceeds therefrom by consenting to the sales and, therefore, the provisions of the Food Security Act have no bearing on this case.

Standards for Summary Judgment

There are well settled principles in ruling a motion for summary judgment. Summary judgment is appropriate when there is no genuine issue of material fact present in the case and judgment should be awarded to the party seeking the motion as a matter of law. Fed.R.Civ.P. 56(c); Langley v. Allstate Insurance Co., 995 F.2d 841, 844 (8th Cir.1993); Camp v. Commonwealth Land Title Ins. Co., 787 F.2d 1258, 1260 (8th Cir.1986). Summary judgment is granted only when "the moving party has established the right to a judgment with such clarity as to leave no room for controversy." Westchem Agr. Chemicals, Inc. v. Ford Motor Co., 990 F.2d 426, 429 (8th Cir.1993), reh. denied, May 6, 1993; Vacca v. Viacom Broadcasting of Mo., Inc., 875 F.2d 1337, 1339 (8th Cir.1989). However, as the Supreme Court noted in Celotex Corp. v. Catrett, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole." 477 U.S. 317, 328, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986).

Once the moving party produces credible evidence demonstrating there is no genuine issue of material fact, in order to defeat the motion, the nonmoving party must set forth specific facts demonstrating the existence of a genuine issue of material fact for every element of the case on which the nonmovant bears the burden of proof. Fed. R.Civ.P. 56(e); Rath v. Selection Research, Inc., 978 F.2d 1087, 1091 (8th Cir.1992); Buford v. Tremayne, 747 F.2d 445, 447 (8th Cir.1984). If a party fails to make a showing sufficient to establish the existence of an element essential to its case, summary judgment is mandated against that party. Celotex, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). For purposes of summary judgment, a dispute is genuine when evidence is such that a reasonable jury could return a verdict for the nonmoving party. Westchem, at 429; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986). In weighing the evidence, the Court views all facts and reasonable inferences in the light most favorable to the nonmoving party. Johnson v. Minnesota Historical Society, 931 F.2d 1239, 1245 (8th Cir.1991); Agristor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir.1987). The Court is not to decide material factual issues, rather it determines whether or not they exist. Parmenter v. Federal Deposit Ins. Corp., 925 F.2d 1088, 1092 (8th Cir.1991); Columbia Union Nat'l Bank v. Hartford Accident & Indem. Co., 669 F.2d 1210, 1212-13 (8th Cir.1982). Where the only disputed issues of fact are immaterial to the resolution of the legal issues, summary judgment is appropriate. Get Away Club, Inc v. Coleman, 969 F.2d 664, 666 (8th Cir. 1992).

Motion for Partial Summary Judgment

Plaintiff filed a motion for partial summary judgment on the issue of Plaintiff's compliance with the pre-sale notification requirements set forth in the Food Security Act of 1985, 7 U.S.C. § 1631. In its first affirmative defense, Defendant alleges it did not receive notice pursuant to the Act. In its response to Plaintiff's motion for partial summary judgment, Defendant moves to strike this defense. The Court will grant the motion to strike Defendant's first affirmative defense from its answer. Further, once this defense is stricken, Plaintiff's motion for partial summary judgment is moot as the issue of notice under the Act is no longer in dispute. Therefore, Plaintiff's motion for partial summary judgment will be denied.

Motion for Summary Judgment

Defendant moves for summary judgment arguing the Bank acquiesced or consented to the sale of livestock, thus waiving any secured interest rights in the collateral. In opposition to the motion, Plaintiff contends state law waiver concepts are inapplicable in cases involving the Food Security Act because the state and federal laws are contradictory and incompatible. Plaintiff argues the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Plaintiff quoting International Paper Company v. Ouellette, 479 U.S. 481, 492, 107 S.Ct. 805, 811, 93 L.Ed.2d 883 (1987). As a result, Plaintiff argues, the Supremacy Clause of the U.S. Constitution, Article VI requires the state laws to be preempted. It is further argued the pre-sale notice provisions of the Act were designed to provide farm product lenders with a means of insuring the preservation of their farm product liens and if the Court allowed defendant to successfully argue the Bank waived its rights to the secured interest, the purpose of the Act would be defeated.

State Law Waiver and Preemption

In determining whether the federal Act preempts state common law regarding waiver, the Court follows a three-pronged analysis set forth by the United States Supreme Court. Under the Supremacy Clause, federal law may pre-empt state law when: (1) the federal law explicitly states that particular state laws are preempted; (2) a court may infer from the comprehensive scope of the legislation that Congress did not intend to leave room for state laws to supplement regulation in the area; or (3) the state law actually conflicts with the federal law. International Paper Company v. Ouellette, 479 U.S. at 491, 107 S.Ct. at 811; Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 2375, 85 L.Ed.2d 714 (1985).

Upon analysis...