Wyoming State Farm Loan Bd. v. Farm Credit System Capital Corp.

• Decision Date: 21 July 1988
• Docket Number: No. 87-173,87-173
• Citation: 759 P.2d 1230
• Parties: 7 UCC Rep.Serv.2d 243 WYOMING STATE FARM LOAN BOARD, an Agency of the State of Wyoming, Appellant (Defendant), James R. Rumery and Sharon L. Rumery, husband and wife, A & I Equipment, First Interstate Bank, and Louise Rumery (Defendants), v. FARM CREDIT SYSTEM CAPITAL CORPORATION, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 1230

759 P.2d 1230

7 UCC Rep.Serv.2d 243

WYOMING STATE FARM LOAN BOARD, an Agency of the State of Wyoming, Appellant (Defendant) James R. Rumery and Sharon L. Rumery, husband and wife, A & I Equipment, First Interstate Bank, and Louise Rumery (Defendants), v. FARM CREDIT SYSTEM CAPITAL CORPORATION, Appellee (Plaintiff).

No. 87-173.

Supreme Court of Wyoming.

July 21, 1988.

Joseph B. Meyer, Atty. Gen., Clinton D. Beaver, Asst. Atty. Gen., Cheyenne, for appellant (defendant).

Les Bowron of Donald R. Winship & Associates, P.C., Casper, for appellee (plaintiff).

Before CARDINE, C.J., THOMAS, URBIGKIT and MACY, JJ., and BROWN, J. (Retired).

BROWN, Justice. ¹

Appellant Wyoming Farm Loan Board (Board) challenges an order granting partial summary judgment in favor of appellee Farm Credit System Capital Corporation (FCSCC). The trial court found that certain gated plastic irrigation pipe was not a fixture to the debtor's real property, and found FCSCC owned the pipe. FCSCC's interest in the pipe is based on both an "after acquired property" clause in a 1969 security interest in farm and ranch equipment that was perfected and properly continued, and a 1985 security interest in the pipe that attached, but does not appear to have been perfected. The Board's interest in the pipe is said to arise from language in a real estate mortgage covering the pipe as a fixture to the real property it irrigated. The Board frames its sole issue as:

"Has the gated pipe irrigation system in question become a fixture by virtue of its installation and use?"

We affirm.

THE PIPE

The gated pipe involved in this dispute is plastic pipe with gates, or windows on one side that can be opened to regulate water flow onto a field. This pipe comes in lengths of twenty or thirty feet and diameters of six, eight and ten inches. A farmer or rancher uses the pipe by moving the needed lengths to the field on a special trailer, and laying them out end-to-end in the proper location. The pipe is then connected to riser pipes that are permanently attached to water lines buried underground. While the installation of the water mainline and the riser pipes clearly involves substantial earthwork, the gated pipe is specifically designed to be lightweight and portable for use in more than one field. A farmer or rancher using this system needs the gated pipe to irrigate. However, any farmer or rancher with a riser pipe connection could attach the gated pipe and irrigate his field with it. The pipe remains above ground at all times, and it is stored away from the field when not in use. One of FCSCC's affidavits in support of the motion for summary judgment suggests that the Rumerys' gated pipe was not always stored on their property. One of the Board's affiants states that the pipe is worth about $11,310.

THE TRANSACTIONS

FCSCC is the present owner of all right, title and interest in two security agreements, executed in 1969 and 1985, between its predecessor in interest, the Wyoming Production Credit Association (WPCA) and James and Sharon Rumery. ² The 1969 security agreement is evidenced in the record by a financing statement filed by WPCA on December 24, 1969, perfecting a security interest in "All of the Debtor's farm and ranch machinery and equipment." ³ This security interest remains valid today as a result of continuation statements filed in 1974, 1979 and 1984. Perfected security interests in other specific farm and ranch equipment, not involved in this case, were executed on June 20, 1979, and May 20, 1983.

In March 1985, the Rumerys borrowed $379,400 from WPCA, securing the debt with feed, hay, grain, other crops and "Any and all machinery and equipment * * * " they owned. The March 4, 1985, security agreement included an appendix listing specific farm and ranch equipment considered collateral under the agreement. The gated pipe is on that list. The agreement also contains a dragnet and future-advance clause. On October 12, 1985, the Rumerys received an additional loan of $10,000 from WPCA secured as a future advance under the 1985 security agreement. The record does not show that this latter security agreement has ever been perfected.

The Board's lien on the pipe is said to arise out of a mortgage on the real property owned by the Rumerys. On January 24, 1978, the Board loaned the Rumerys $87,000 to purchase and install an irrigation system on their property. That purchase included the gated pipe. The Board secured the debt on the loan by filing an "Irrigation Loan Mortgage" on the real property irrigated by the new system. This mortgage was recorded in the Fremont County Book of Deeds on January 24, 1978. The Board never filed on the pipe under the Uniform Commercial Code (U.C.C.)

On July 9, 1982, the Board loaned the Rumerys $143,000 to pay off the balance on the $87,000 Board loan and mortgage, and, to refinance some of their debt to WPCA. This loan was also secured by an Irrigation Loan Mortgage on the real property irrigated by the system. The mortgage includes the irrigated real property,

" * * * together with all buildings and improvements thereon and all other privileges, hereditaments, and appurtenances belonging unto said land or in any way thereto appertaining, and including all water and water rights, adjudicated or unadjudicated, stored, used upon, or appropriated for the above-described lands together with all irrigation reservoirs, ditches, laterals, canals, flumes, aqueducts and syphons complete, or any interest therein regardless of how owned or represented * * * with rights of way therefor, also all other irrigation works, drainage systems, artesian wells and water flowing therefrom, windmills and all other property and property rights of every kind and character, real and personal, pertaining to or used in connection with the irrigation and drainage of the lands mortgaged herein, or which may be appurtenant to said lands, whether owned by the MORTGAGOR at the date of this mortgage or hereinafter in any manner acquired by the MORTGAGOR during the life or term of this mortgage; it being understood that when the word "premises" is hereafter used it covers all property of every kind and character contained in this paragraph."

Again, the mortgage was recorded in the county Book of Deeds, and there was no U.C.C. filing.

By 1986 the Rumerys were in default on the two WPCA loans. FCSCC filed an action seeking foreclosure on certain mortgage deeds that had been executed between WPCA and the Rumerys as additional security for the loans, and seeking disposition of the collateral listed in the 1969 and 1985 security agreements on May 21, 1986. FCSCC later amended its complaint to include the Board as a defendant. The Board answered on October 7, 1986, asserting a superior lien in the pipe under the July 9, 1982, Irrigation Loan Mortgage.

FCSCC moved for partial summary judgment on January 5, 1987. The Board responded, asserting that the gated pipe had become a fixture on the irrigated land and was covered by the real estate mortgage. On May 14, 1987, the trial court entered partial summary judgment favoring FCSCC. Final judgment was entered on May 27, 1987, and this appeal followed.

FCSCC SECURITY INTERESTS AND FIXTURE FILING REQUIREMENTS

The Board, in its brief, has not set forth any explanation for the legal significance of its issue. We will discuss this briefly.

FCSCC relies primarily on its perfected 1969 security interest in after-acquired farm and ranch equipment. That interest was created when WPCA and the Rumerys executed a valid security agreement containing a general description of relevant collateral as after acquired farm and ranch machinery and equipment. ⁴ See §§ 34-21- 920, W.S.1977; 34-21-922, W.S.1977 (Cum.Supp.1987); 34-21-923(a)(b), W.S.1977, (Cum.Supp.1987); and Landen v. Production Credit Association of the Midlands, Wyo., 737 P.2d 1325, 1328-1330 (1987). The interest was properly perfected under §§ 34-21-931 and 34-21-951, W.S.1977 (Cum.Supp.1987), when WPCA filed a general financing statement showing a security interest in " * * * [a]ll of the Debtor's farm and ranch machinery and equipment * * *." Under our recent holding in Landen v. Production Credit Association of the Midlands, supra, this financing statement was sufficient notice to a subsequent lender that a security interest in after acquired equipment existed.

The existence of perfected security interest in after-acquired property provides the legal basis for the Board's issue. If the pipe has become a fixture on the irrigated real property, FCSCC's 1969 security interest can only establish priority in the pipe if there has been a timely fixture filing ⁵ under § 34-21-942(d), W.S.1977 (Cum.Supp.1987), which provides:

"(d) A perfected security interest in fixtures has priority over the conflicting interest of an encumbrancer or owner of the real estate where:

"(i) The security interest is a purchase money security interest, the interest of the encumbrancer or owner arises before the goods become fixtures, the security interest is perfected by a fixture filing before the goods become fixtures or within ten (10) days thereafter, and the debtor has an interest of record in the real estate or is in possession of the real estate; or

"(ii) The security interest is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the security interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the debtor has an interest of record in the real estate or is in possession of the real estate; or

"(iii) The fixtures are readily removable factory or office machines or readily removable replacements of domestic appliances which are consumer goods, and before the goods become fixtures the security interest is perfected by any method permitted by this article; or

"(iv) The conflicting interest is a lien on the real estate obtained by legal or equitable proceedings...