U.S. v. Southeast Mississippi Livestock Farmers Ass'n
| Decision Date | 18 June 1980 |
| Docket Number | 79-2466,Nos. 78-3330,s. 78-3330 |
| Citation | 619 F.2d 435,29 U.C.C.Rep. 311 |
| Parties | 29 UCC Rep.Serv. 311 UNITED STATES of America, Plaintiff-Appellant, v. SOUTHEAST MISSISSIPPI LIVESTOCK FARMERS ASSOCIATION etc., et al., Defendants-Appellees. UNITED STATES of America, Plaintiff-Appellant, v. James A. RESTER et al., Defendants, Pine Burr Packing Company, A Division of Merchants Company, and Southeast Mississippi Livestock Farmers Association, Defendants-Appellees. Summary Calendar. * |
| Court | U.S. Court of Appeals — Fifth Circuit |
Joseph E. Brown, Jr., Asst. U. S. Atty., Robert E. Hauberg, U. S. Atty., Jackson, Miss., for plaintiff-appellant in both cases.
John B. Clark, Jackson, Miss., for defendants-appellees in both cases.
L. A. Smith, III, Asst. U. S. Atty., Jackson, Miss., for plaintiff-appellant in No. 79-2466.
Aultman, Pope, Aultman & Tyner, Bruce C. Aultman, Hattiesburg, Miss., for the Merchants Co.
Daniel, Coker, Horton, Bell & Dukes, Jackson, Miss., for Southeast Livestock in No. 79-2466.
Appeals from the United States District Court for the Southern District of Mississippi.
Before HILL, GARZA and THOMAS A. CLARK, Circuit Judges.
These cases are before us on appeal by the United States of America acting through the Farmers Home Administration (FmHA). On the Government's unopposed motion, these cases have been consolidated since they present a single issue: Are the descriptions of the collateral contained in the financing statements and security agreements legally sufficient to put the auction company, Southeast Mississippi Livestock Farmers Association ("Southeast Mississippi"), and the hogbuyer, the Merchants Company ("Merchants"), d/b/a Pine Burr Packing Company, on notice of the Government's security interest in swine allegedly "converted" by Southeast Mississippi and Merchants? In directing a verdict for Southeast Mississippi and Merchants in No. 78-3330 and granting summary judgment in favor of the same parties in No. 79-2466, the district court held that the descriptions of the collateral in the security agreements and financing statements were not legally sufficient to perfect the Government's security interest in the swine. We reverse and remand.
In the late 1960's and early 1970's Defendant James A. Rester (in No. 79-2466) and third-party defendant Kenneth R. Rester, Sr. (in No. 78-3330) financed their Mississippi hogfarming operations through a series of loans from the Farmers Home Administration. To secure the loans, security agreements and financing statements were executed by the parties, and the financing statements were filed in the debtors' county of residence.
Subsequently, from 1971 to 1973 the Resters separately engaged in a series of sales of their swine. Some of the sales were made directly to Merchants. Other sales were made through the auction facilities of Southeast Mississippi, which acted as the farmers' agent. In both cases, Southeast Mississippi and Merchants had no actual knowledge of the Government's security interest in the swine. Of the hogs sold, apparently none were the hogs listed on the security agreements. Rather, they were "increases" or "products" of the brood sows. Each brood sow could produce between ten and twenty pigs each year, and pigs were marketed at about five and one-half months of age.
Upon default by the borrowers the FmHA instituted these proceedings alleging that all of the Resters' swine sold by Southeast Mississippi or bought directly by Merchants were covered by the security agreements, the security interests were perfected by the filing of valid financing statements, and the sales were made without the knowledge or consent of the FmHA.
On appeal, the FmHA contends that the security agreements and financing statements adequately described the farmers' swine which secured the Government's loans; the Government's security interests were perfected; and Southeast Mississippi and Merchants had constructive notice of the Government's security interests in the swine.
Both Southeast Mississippi and Merchants contend the district court was correct in holding that the descriptions of the collateral were inadequate, as a matter of law, to perfect the Government's security interest in the swine. Accordingly, they assert they were not on notice, in any form, of the security interest in the Resters' hogs when the sales occurred. In the alternative, Southeast Mississippi and Merchants contend that even if the descriptions of the collateral in the security agreements and financing statements were adequate, the FmHA is estopped from maintaining its actions in conversion because the Government waived its security interest in the swine.
In vacating and remanding the judgment of this court in a case which considered the sufficiency of the description of collateral in an FmHA financing statement filed in Georgia, the Supreme Court held that, absent a Congressional directive to the contrary, the federal courts should determine the sufficiency of the FmHA's lending program under nondiscriminatory state laws. United States v. Kimbell Foods, Inc., 440 U.S. 715, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979), vacating and remanding United States v. Crittenden, 563 F.2d 678 (5th Cir. 1977). Therefore, to assess the legal sufficiency of the FmHA's security agreements and financing statements in the cases presently before us, we are obliged to apply Mississippi law to these proceedings.
At the outset, we note that Mississippi courts have not addressed the question of the sufficiency of the description of collateral in either security agreements or financing statements. Therefore, "(i)n the absence of controlling precedent, we must nonetheless decide this issue as we believe a Mississippi court would decide it." Green v. Amerada-Hess Corp., 612 F.2d 212, 214 (5th Cir. 1980).
Mississippi enacted the Uniform Commercial Code on March 31, 1966, to become effective March 31, 1968. For this appeal, the relevant UCC sections are § 9-110 (sufficiency of description), 1 § 9-203 (), 2 and § 9-402 (). 3 The sufficiency of the descriptions of the collateral in the FmHA security agreements and financing statements must be tested against the standards prescribed by these three provisions.
The security agreement in No. 79-2466 provided, in pertinent part: 4
DEBTOR HEREBY GRANTS to Secured Party a security interest in his interest in the following collateral, including the proceeds and products thereof:
Item 3. All livestock (except livestock and poultry kept primarily for subsistence purposes), fish, bees, birds, furbearing animals, other animals produced or used for commercial purposes, other farm products, and supplies, now owned or hereafter acquired by Debtor, together with all increases, replacements, substitutions, and additions thereto, including but not limited to the following:
Weight or Age or Brands
Line Kind- average age or other
No. Quantity sex Breed Color weight range identificati-
on
1 CALF GRADE BLACK 125 # 3 Mos.
82 SOWS DUROC- RED AND 250-550 # 1 4
YORKSHIRE RED AND
WHITE
4 BOARS YORKSHIRE WHITE 375 # 1 4
152 PIGS DUROC- WHITE, 25 # to 3 Weeks
RED AND 5 Months
WHITE
244 PIGS DUROC- WHITE, 100 to 2 Mos.
In outlining the formal requisites for the enforceability of Mississippi security interests, the Mississippi UCC states in § 9-203(1) that:
(A) security interest is not enforceable against the debtor or third parties unless . . . (b) the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops or oil, gas or minerals to be extracted, or timber to be cut, a description of the land concerned. In describing collateral, the word 'proceeds' is sufficient without further description to cover proceeds of any character.
Miss.Code Ann. § 75-9-203(1) (1972) (amended 1977).
Furthermore, for all secured transactions, § 9-110 provides that, "(A)ny description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described. . . . " Miss.Code Ann. § 75-9-110 (1972) (emphasis added).
We hold that the description of the farmers' swine in the FmHA security agreement, to wit, "All livestock . . . now owned or hereafter acquired by Debtor, together with all increases, replacements, substitutions, and additions thereto," reasonably identified the hogs either owned by the farmers at the time the loans were made or acquired thereafter, either by purchase, trade, procreation, or otherwise. United States v. Pirnie, 339 F.Supp. 702 (D.Neb.1972), aff'd, 472 F.2d 712 (8th Cir. 1973). Thus, the description of the collateral in the FmHA security agreement was sufficient under Miss.Code Ann. § 75-9-203(1) (1972) (amended 1977).
Southeast Mississippi and Merchants also challenge the sufficiency of the description of collateral in the financing statements which were filed, and properly so, in the farmers' county of residence, Pearl River County, Mississippi. The financing statement in No. 79-2466 included the following provisions: 5
(a) Crops, livestock, other farm products, farm and other equipment, supplies and inventory . . . .
We find the trial court erred in holding that the description was inadequate to perfect the Government's security interest.
In describing the formal requisites of a financing statement under the UCC, § 9-402 provides in part:
(1) A financing statement is sufficient if it is signed by the debtor and the secured party, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor, and...
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