United States v. FIRST NATIONAL BANK IN OGALLALA, NEB.

• Decision Date: 04 January 1973
• Docket Number: No. 72-1208.,72-1208.
• Citation: 470 F.2d 944
• Parties: UNITED STATES of America, Appellant, v. FIRST NATIONAL BANK IN OGALLALA, NEBRASKA, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

470 F.2d 944 (1973)

UNITED STATES of America, Appellant, v. FIRST NATIONAL BANK IN OGALLALA, NEBRASKA, Appellee.

No. 72-1208.

United States Court of Appeals, Eighth Circuit.

Submitted December 5, 1972.

Decided January 4, 1973.

Eloise Davies, Atty., Dept. of Justice, Washington, D. C., for appellant.

David A. Johnson, Omaha, Neb., for appellee.

Before MATTHES, Chief Judge, and GIBSON and HEANEY, Circuit Judges.

MATTHES, Chief Judge.

The question presented for decision in this case is whether the description of collateral in the controverted security agreement is adequate under §§ 9-110 and 9-203(1) (b) of the Uniform Commercial Code U.C.C. to create a security interest in certain property. We answer that question in the affirmative and therefore reverse the judgment of the District Court.

The situation generating this litigation can be briefly described. On January 13, 1964, a Mr. and Mrs. Contryman obtained through the Farmers Home Administration F.H.A. a loan from the United States in the amount of $35,000.00. In September of 1965, the U.C.C. became effective in Nebraska, the situs of the Contrymans' farm, and the Contrymans, at the request of the government, executed a new security agreement in order to secure the unpaid balance on the loan in compliance with the U.C.C. This agreement described the collateral, insofar as is pertinent here, as:

"All farm and other equipment (except hand tools and horse-drawn and hand equipment) now owned or hereafter acquired by Debtor, together with all replacements, substitutions, additions, and accessions thereto, including but not limited to the following. . . ."

Certain items of equipment were then enumerated, including pipe and a pump with motor. This security agreement was filed on April 7, 1967. Thereafter, the Contrymans acquired certain devices which together formed farm irrigation equipment. This equipment was attached to the well on the farm described in the aforementioned agreement.

On April 25, 1968, the Contrymans conveyed this farm to the defendant bank in satisfaction of debts. The bank then refused to allow the F.H.A. to take the farm irrigation equipment in partial satisfaction of the Contrymans' debt to the F.H.A. and in June of 1970 the bank sold the farm without accounting to the United States for the value of the irrigation equipment. This suit by the United States for the value of the equipment ($1,862.00), alleging conversion of it, followed.¹

The District Court rendered judgment for the defendant bank, holding the United States had no security interest in the irrigation equipment because the aforementioned description of collateral was insufficiently specific to satisfy U. C.C. §§ 9-110 and 9-203(1)(b).² This appeal followed.

The statute applicable to this controversy is Vol. 6 § 9-203 Neb.Rev. Stat.,³ which provides in pertinent part:

"(1) . . . a security interest is not enforceable against the debtor or third parties unless

(a) . . .

(b) the debtor has signed a security agreement which contains a description of the collateral. . . ."

The Official Comment to § 9-203 states in pertinent part:

"Here as elsewhere in this article, . . . formal requisites are reduced to a minimum. . . . The only requirements . . . are . . . (c) a description of the collateral or kinds of collateral. As to the type of description which will satisfy the requirements of this section, see section 9-110 and comment thereto." (emphasis supplied) (parenthetical reference deleted).

Section 9-110 and its comment state:

9-110. Sufficiency of description.

"For the purposes of this article any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described."

Comment.

"The requirement of description of collateral is evidentiary. The test of sufficiency of a description laid down by this section is that the description do the job assigned to it — that it make possible the identification of the thing described. Under this rule courts should refuse to follow the holdings, often found in the older chattel mortgage cases, that descriptions are insufficient unless they are of the most exact and detailed nature. . . ." (parenthetical reference omitted.)

The question for decision is whether the description of collateral set out above satisfies these statutory provisions. In urging a negative answer to that question, the defendant bank, as did the District Court, relies almost entirely upon a decision which had been criticized by two commentators on the subject,⁴ Mammoth Cave Production Credit Assoc. v. York, 429 S.W.2d 26 (Ky.1968). In that case the security agreement and financing statement described the collateral as "All farm equipment" presently owned or thereafter acquired. The Kentucky Court held this description inadequate to encompass an after-acquired tractor, saying

"The description in the security agreement, `All farm equipment\' . . . seems so vague and indefinite that it is doubtful that `it reasonably identifies what is described.\' It could include anything from a screw driver or garden hoe to the largest machinery. In light of this vague provision it seems doubtful that it was really agreed that tractors and other large farm equipment were to be security for the loan. This seems more like a provision inserted by an over-anxious lending officer to encompass as much security as possible, rather than an actual agreement that a security interest was to attach on all farm equipment."

429 S.W.2d at 29. See also In re Lehner, 303 F.Supp. 317 (D.Colo.1969), aff'd, 427 F.2d 357 (10th Cir. 1970) (all consumer goods); In re Fuqua, 330 F. Supp. 1050 (D.Kan.1971), aff'd, 461 F. 2d 1186 (10th Cir. 1972) (all personal property).

However, we are not convinced that the requirement in Section 9-203, supra, that the collateral be described, is a device for minimizing the amount of collateral a creditor can secure. That may be a laudable goal, but it is not encompassed by § 9-110. As the Comment to that section makes clear, the purpose of a description of collateral in a security agreement is only to evidence the agreement of the parties and therefore it need only "make possible the identification of the thing described." Comment, § 9-110 Neb.Rev.Stat. For example, in James Talcott, Inc. v. Franklin Nat'l Bank of Minneapolis, 292 Minn. 277, 194 N.W.2d 775 (1972), a case in which the Permanent Editorial Board for the U.C.C. appeared as amicus curiae, the collateral was described as

"all goods (as defined in Article 9 of the Uniform Commercial Code) whether now owned or hereafter acquired."

194 N.W.2d at 778. The Minnesota Court held the description adequate under § 9-110, saying:

"If the debtor himself is willing to give a

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