Bank's Security Interest in Farmer's Crops Maintains Priority Over PMSI
The long dispute over Lee and Wilma Clark's failed farming venture finally came to a close in Searcy Farm Supply, LLC v. Merchants & Planters Bank, No. 06-892 (5/3/07).
In 2001, the Clarks obtained loans from Merchants & Planters Bank, which perfected its security interests in the Clarks' crops. In 2002, the Clarks purchased corn seed and materials from Searcy Farm Supply, which obtained a purchase money security interest. The Clarks defaulted on all their obligations, and this action was initiated in August 2002.
Searcy Farm Supply argued that, pursuant to A.C.A. § 4-9-324, the crops were proceeds from the seeds and materials. Under this theory, the PMSI extended to the crops, giving Searcy Farm Supply priority over Merchants & Planters. The trial court disagreed and granted judgment to Merchants & Planters. The supreme court affirmed, readily dismissing this argument for lack of persuasive authority:
Appellants fail to cite any case law or statutory authority that defines crops as the identifiable proceeds of seeds, and without such authority, we decline to do so.
Unfortunately the gap between what lawyers, legislatures, and bankers believe is an easy to follow lien notice system, many farmers still are uneducated in the lien system and are not getting correct advice from their banker's on how to perfect their liens. Surely in the age of technology a more user friendly system should be available.
Jeanelle R. Lust
www.knudsenlaw.com