United States v. Big Z Warehouse

• Decision Date: 03 April 1970
• Docket Number: Civ. A. No. 576.
• Citation: 311 F. Supp. 283
• Parties: UNITED STATES of America, Plaintiff, v. BIG Z WAREHOUSE, a partnership, Defendant.
• Court: U.S. District Court — Southern District of Georgia

311 F. Supp. 283

UNITED STATES of America, Plaintiff, v. BIG Z WAREHOUSE, a partnership, Defendant.

Civ. A. No. 576.

United States District Court, S. D. Georgia, Waycross Division.

April 3, 1970.

Richard C. Chadwick, Asst. U. S. Atty., Savannah, Ga., for plaintiff.

Larry E. Pedrick, Waycross, Ga., for defendant.

ORDER ON MOTION FOR SUMMARY JUDGMENT

LAWRENCE, Chief Judge.

Plaintiff moves for summary judgment in this action for conversion by defendant of the 1964 tobacco crop of Oscar B. Chancey which was pledged as security for loans made to him by Farmers Home Administration in 1962 and 1963. The indebtedness was secured by bills of sale to secure debt covering certain farm machinery, livestock and all crops growing or to be grown on the debtor's 90 acre farm located 1 mile from Offerman, Ga.¹ After the Uniform Commercial Code went into effect a new security agreement was executed describing the same indebtedness and collateral and a financing statement was filed. Prior to the adoption of the Code liens on unplanted or growing crops were limited to the calendar year. Ga.Code § 67-1101. The 1964 security agreement and financing statement listed "crops."

During the selling season in 1964 the defendant acting as agent for Chancey auctioned 4,136 pounds of tobacco delivered to the warehouse by the debtor to be auctioned to the highest bidder. The total sales price was $2,602.30 and the proceeds less commissions were paid to Chancey by Big Z Warehouse. The Government realized nothing.

In opposing plaintiff's motion for summary judgment the defendant has raised several issues.

I

Is the Uniform Commercial Code, which became law in Georgia on January 1, 1964, applicable to a pre-Code indebtedness secured by a bill of sale to secure debt where a security agreement was substituted and a financing statement was filed after the Commercial Code went into effect? The Code covers "transactions entered into and events occurring on and after" the effective date.² I know of no reason why a debtor and creditor cannot convert a pre-Code transaction into an Article 9 transaction.

II

The defendant's principal contention seems to be that where additional collateral is given to secure an antecedent debt new value is necessary before a security interest will attach. See § 109A-9-204. Counsel says that no new or present value was given for the 1964 tobacco crop. He argues that the debtor had no rights in the collateral at the time of the Code transaction since the tobacco was not planted until later in that year. The requirement of an advance or other present value for perfection of a security interest on goods other than the original collateral is illustrated, says counsel for defendant, by § 109A-9-108. That Section deals with what is "new value" as distinguished from security for an "antecedent debt" in certain cases. I do not think that § 9-108 was ever intended by the authors of the Code to apply to situations like the present. It is "of importance principally in insolvency proceedings under the Federal Bankruptcy Act or state statutes which make certain transfers for antecedent debt voidable as preferences." Official Comment; 2 Anderson's Uniform Commercial Code, § 108:1, p. 490.

Perhaps present value, if necessary, is to be found in the mutual agreement of the parties to subject the secured loan to a different law than that which previously governed the transaction. However, the point is that no new value is necessary.³ Under § 109A-9-204

(3) a security agreement may provide that collateral whenever acquired shall secure all obligations covered by the security agreement and this includes crops becoming such within seven years after the security agreement is executed. If no new value is necessary there, why here? Upon execution of the Article 9 security agreement in January, 1964, there was a completed transfer of a security interest in a future crop acquired by the debtor and no new consideration was necessary. "Value" is all that is necessary in such a case and under the Commercial Code value is given for rights if they are acquired as security for a pre-existing debt. § 109A-1-201(44) (b).

III

Defendant challenges the adequacy of the description of the crop and the land. The collateral consisted of "crops" growing or to be grown on:

                "Farm(s)            Approximate     Direction and Distance
                                      Acreage         From a Named Town
                Oscar R. Chancey            90                 1 Mi. North of Offerman, Ga
                     All in the County of Pierce, State of Georgia"
                

Notice filing contemplates that the financing statement shall indicate "merely that the secured party who has filed may have a security interest in the collateral described." Further inquiry by another party is necessary to disclose the complete state of affairs. See Official Code Comment, Section 9-110:2. "Any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described." § 109A-9-110. According to § 109A-9-402(3), the financing statement shall describe the real estate in which the "described crops are growing or are to be grown." Security agreements covering crops must contain "a description of the land concerned." § 109A-9-203(1) (b).

In Piggott State Bank v. Pollard Gin Company, 243 Ark. 159, 419 S.W.2d 120, the Supreme Court of Arkansas found the following description in the Financing Statement and the Security Agreement legally wanting:

"CROPS. All of the following crops to be planted or growing within one year from the date hereof on the lands hereinafter described: 7 acres of cotton and 53 acres of soybeans to be produced on the lands of * * * Mary Gilbee; 4½ acres of cotton and 11 acres of soybeans to be produced on the lands of George Nixon; all of the above crops to be produced in Clay County, Arkansas during the year 1965."

The description in the present case is much more explicit. It would have sufficed under the chattel mortgage law. Read Phosphate Company v. Weichselbaum Company, 1 Ga.App. 420, 58 S.E. 122; First National Bank of Rome v. Rome Mercantile Co., 14 Ga.App. 99, 80 S.E. 210; Peterson v. Vidalia Chemical Company, 42 Ga.App. 490, 156 S.E. 468.⁴ In Yancey Brothers Co. v. Dehco, Inc., 108 Ga.App. 875, 134 S.E.2d 828 the Court of Appeals said that the description in the security instrument must raise a warning flag, as it were, providing a key to the identity of the property." By way of a footnote dictum, Judge Eberhardt added that the Uniform Commercial Code "does not appear to work any change in this rule."

A crop does not have to be described as a tobacco crop when all crops grown on the land are collateral for the debt. The description reasonably identifies what is described. It is adequate.

IV

In a special defense Big Z Warehouse says that any security interest the Government had in the crop was lost under the facts and circumstances. Defendant urges that plaintiff did not notify the defendant warehouseman of its lien and impliedly authorized its debtor to take the crop to the warehouse where it knew that under prevailing custom the tobacco would be sold at auction. Had the present case arisen this year the defense would have been...