First National Bank of Omaha v. Farmers Co-Operative Society, Sioux Center, Iowa e

1On July 1, 2010, an order was entered granting First National Bank of Omaha’s Motion
to Substitute Attorney. Michael P. Flanagan of the firm of Ward and Smith, P.A. was substituted
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE:
COASTAL PLAINS PORK, LLC,
DEBTOR.
FIRST NATIONAL BANK OF OMAHA,
a National Banking Association,
Plaintiff,
vs.
FARMERS COOPERATIVE SOCIETY,
SIOUX CENTER, IOWA, and
COOPERATIVE ELEVATOR
ASSOCIATION,
Defendants.
CHAPTER 11
CASE NO. 09-08367-8-RDD
ADVERSARY PROCEEDING
NO. 09-00214-8-RDD
ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND
DENYING DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
Pending before the Court is the Plaintiff’s Motion for Summary Judgment and Incorporated
Memorandum of Law filed by Amos U. Priester IV, counsel for First National Bank of Omaha
(“FNBO”) 1 on February 3, 2010 (the “FNBO’s Motion”), and the Defendants’ Motion for Partial
SO ORDERED.
SIGNED this 23 day of July, 2010.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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for Amos U. Priester IV as counsel for First National Bank of Omaha.
2The parties do not dispute that FNBO is a financial institution as contemplated by Iowa
Code Chapter 570A.
2
Summary Judgment and Incorporated Memorandum of Law filed by Jennifer K. Bennington on
behalf of Cooperative Elevator Association (“CEA”) and Farmers Cooperative Society, Sioux
Center, Iowa (“FCS”) on February 26, 2010 (the “Defendants’ Motion”). The Court conducted an
initial hearing in Wilson, North Carolina on March 2, 2010 to consider the FNBO’s Motion and the
Defendants’ Motion. A second hearing on the motions was held on June 30, 2010 in Wilson, North
Carolina.
BACKGROUND
On September 28, 2009, Coastal Plains Pork, LLC (“Coastal Plains”) filed a bankruptcy
petition under Chapter 11 of the United States Bankruptcy Code. Prior to the filing of
bankruptcy, Coastal Plains operated a farrow-to-finish farm for the production of swine in
several states, including Iowa. In connection with its hog growing operation, Coastal Plains
obtained a loan from FNBO and purchased feed from FCS and CEA. Feed purchased and
received by Coastal Plains from FCS and CEA was consumed by the Coastal Plains’ swine and
hogs, in order for the animals to reach the appropriate market weight for sale. After the filing of
the petition, and in compliance with other orders of this Court, the hogs that consumed feed from
FCS and CEA were to be sold, and any liens, claims or other interests in the hogs would attach
to the proceeds of the sale. In addition, the proceeds were to be marshaled, accounted for, and
reported to this Court.
FNBO2 entered into two credit agreements and notes with Coastal Plains dated October 8,
2008; whereby FNBO loaned Coastal Plains funds for operations which were secured by security
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3Kalkowski Aff., docket entry 41, paragraphs 3 - 5.
3
interests and liens in substantially all of Coastal Plains’ assets, including livestock and any sale
proceeds (the “FNBO Prepetition Loans”).3 Funds from the FNBO prepetition loans were used
to finance the hog growing operation in Iowa. In connection with the loan given to Coastal
Plains, FNBO held a lien and security interest in the Coastal Plains hogs which consumed feed
supplied by FCS and CEA.
FNBO’s lien on the livestock and the proceeds from the sale of said livestock was
properly perfected by the filing of a UCC-1 financing statement with the North Carolina
Secretary of State on October 7, 2008, file number 200800903856. In order to maintain its
secured status, FNBO continued to file all necessary financing statements in the proper offices
and took all other necessary steps to maintain its perfected lien and security interest in its
collateral. The parties do not dispute that FNBO properly filed the UCC-1 and has a properly
perfected financial institution lien.
FCS and CEA are both suppliers of feed to livestock as contemplated by Iowa Code
Chapter 570A. FCS and CEA admit that FNBO has a perfected security interest in the proceeds
from the sale of the disputed livestock at issue in this case. However, FCS and CEA both claim
they are entitled to first priority agricultural supply dealer liens, in front of FNBO, as suppliers
of feed to livestock under Iowa Code Chapter 570A. FCS claims it has a perfected agricultural
supply dealer lien as a supplier of feed to livestock. On September 11, 2009, FCS perfected an
agricultural supply dealer’s lien with respect to the pigs owned by Coastal Plains. CEA claims it
has a perfected agricultural supply dealer’s lien as a supplier of feed to livestock. The lien
applies to hogs owned by Coastal Plains, and said lien was perfected by a financing statement
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filed June 30, 2009 in the office of the Secretary of State for North Carolina. FCS and CEA
admit that neither requested the certification from FNBO as set forth in Iowa Code § 570A.2.
SUMMARY JUDGMENT STANDARD
“[S]ummary judgment is proper if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (internal quotations omitted). 	In making this determination,
conflicts are resolved by viewing all facts and all reasonable inferences in the light most favorable
to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). If there is no
genuine issue of material fact, and the issue to be decided is a matter of law, a ruling on a motion
for summary judgment is appropriate.
ISSUES BEFORE THE COURT
FNBO filed this adversary proceeding so that the Court could determine the relative
priorities between FNBO’s perfected security interest in Coastal Plains’ personal property, including
Coastal Plains’ livestock, and the agricultural supply dealer liens claimed by FCS and CEA under
Iowa Code § 570A. The Court is asked to decide the priority of the liens claimed against proceeds
from the post-petition sale of Coastal Plains’ livestock. FNBO asserts its Article 9 security interest
is superior, whereas, FCS and CEA claim that as agricultural supply dealers their liens take first
priority. FNBO relies on Iowa Code § 570A.2, to establish its senior Article 9 security interest. On
the other hand, FCS and CEA contend that Iowa Code § 570A.5(3) is controlling, and that because
FCS and CEA supplied livestock feed, Iowa Code § 570A.2(3) has no application.
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4Defined in Iowa Code § 570A.1(6) as “a request delivered by certified mail or registered
certified mail, in person if in writing and signed and dated by the respective parties, or in the
manner provided by the Iowa rules of civil procedure for the personal service of original notice.”
5Iowa Code § 570A.2(3) “Upon an action to enforce a lien secured under section 570A.3
against the interest of a financial institution secured to the same collateral as that of the lien, it
shall be an affirmative defense to a financial institution and complete proof of the superior
priority of the financial institution’s lien that the financial institution either did not receive a
certified request and a waiver signed by the farmer, or received the request and a waiver signed
by the farmer and provided the full and complete relevant financial history which it held on the
farmer making the purchase from the agricultural supply dealer on which the lien is based and
that financial history reasonably indicated that the farmer did not have a sufficient net worth or
line of credit to assure payment of the purchase price.”
5
The parties agree that there is no genuine issue of material fact. However, the legal issue
before the Court is the interpretation of Iowa Code § 570A, and the Court’s determination whether
FCS and CEA have perfected liens under this statute which would give them priority over the
properly perfected lien of FNBO. The parties agree that FCS and CEA did not prepare or send the
certified request 4 or any certified mailings to FNBO as required by Iowa Code § 570A.2. 	The
parties further agree that FCS and CEA did not send a statement of “the amount of the purchase and
terms of the sale” to FNBO. See Iowa Code § 570A.2(1). Further, the parties agree that FCS and
CEA did not send a waiver of confidentiality signed by the farmer or the $15.00 fee, as required by
the Iowa Code, to FNBO.
FNBO argues that the statute provides it, as a financial institution, with an affirmative
defense against the enforcement of an agricultural lien by a supply dealer who did not first serve it
with a certified request or farmer’s confidentiality waiver, as FCS and CEA failed to do. See Iowa
Code § 570A.2(3). 5 FNBO asserts that having not received the certified request and waiver signed
by the farmer as provided in Iowa Code § 570A.2, FNBO’s lien is senior to and has priority to the
statutory liens of FCS and CEA, regardless of the provisions of Iowa Code § 570A.5(3). 	Therefore,
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FNBO argues it has an affirmative defense to FCS’ and CEA’s enforcement of their liens under Iowa
Code § 570A.5.(3). According to FNBO, this defense serves as “complete proof of the superior
priority” of FNBO’s security interest. Iowa Code § 570A.2(3).
In response to FNBO’s argument, FCS and CEA admit that they did not provide FNBO with
the certified requests and confidentiality waivers. FCS and CEA contend that Iowa Code § 570A.5,
read in its entirety, must be interpreted as giving a special priority to agricultural supply dealer liens
for livestock feed. 	Further, FCS and CEA assert that Iowa Code § 570A.5(3) provides that
livestock feed suppliers “shall have priority over an earlier perfected lien or security interest to the
extent of the difference between the acquisition price of the livestock and the fair market value of
the livestock at the time the lien attaches or the sale price of the livestock, whichever is greater.”
Finally they claim that this priority treatment is not susceptible to the affirmative defense provided
to financial institutions in Iowa Code § 570A.2(3) and asserted by FNBO.
ANALYSIS
Chapter 570A of the Iowa Code establishes agricultural supply dealer liens and provides for
priority of such liens whether perfected or unperfected. Crooked Creek Corp. v. Primebank, 427
B.R. 500, 505 (Bankr. N.D. IA. 2010). At the core of the dispute between the parties is whether in
order to establish a more favorable priority over FNBO’s prior perfected security interest, FCS and
CEA were required to provide FNBO with a certified request for a financial memorandum regarding
Coastal Plains, as well as, provide FNBO with a confidentiality waiver from the farmer as set forth
in Iowa Code § 570A.2(1). See Galva Holstein v. Holstein Dairy, No. EQCV014128 (Iowa Dist.,
June 21, 2010).
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Iowa Code § 570A.2 states:
570A.2 Financial institution memorandum to agricultural supply dealers.
1. Upon the receipt of a certified request of an agricultural supply dealer,
prior to or upon a sale on a credit basis of an agricultural supply to a farmer,
a financial institution which has either a security interest in collateral owned
by the farmer or an outstanding loan to the farmer for an agricultural purpose
shall issue within four business days a memorandum which states whether or
not the farmer has a sufficient net worth or line of credit to assure payment
of the purchase price on the terms of the sale. The certified request submitted
by the agricultural supply dealer shall state the amount of the purchase and
the terms of sale and shall be accompanied by a waiver of confidentiality
signed by the farmer, and a fifteen dollar fee. The waiver of confidentiality
and the certified request may be combined and submitted as one document.
If the financial institution states in its memorandum that the farmer has a
sufficient net worth or line of credit to assure payment of the purchase price,
the memorandum is an irrevocable and unconditional letter of credit to the
benefit of the agricultural supply dealer for a period of thirty days following
the date on which the final payment is due for the amount of the purchase
price which remains unpaid. If the financial institution does not state in its
memorandum that the farmer has a sufficient net worth or line of credit to
assure payment of the purchase price, the financial institution shall transmit
the relevant financial history which it holds on the person. This financial
history shall remain confidential between the financial institution, the
agricultural supply dealer, and the farmer.
2. If within four business days of receipt of a certified request a financial
institution fails to issue a memorandum upon the request of an agricultural
supply dealer and the request from the agricultural supply dealer was proper
under subsection 1, or if the memorandum from the financial institution is
incomplete, or if the memorandum from the financial institution states that
the farmer does not have a sufficient net worth or line of credit to assure
payment of the purchase price, the agricultural supply dealer may decide to
make the sale and secure the lien provided in section 570A.3.
3. Upon an action to enforce a lien secured under section 570A.3 against the
interest of a financial institution secured to the same collateral as that of the
lien, it shall be an affirmative defense to a financial institution and complete
proof of the superior priority of the financial institution's lien that the
financial institution either did not receive a certified request and a waiver
signed by the farmer, or received the request and a waiver signed by the
farmer and provided the full and complete relevant financial history which
it held on the farmer making the purchase from the agricultural supply dealer
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on which the lien is based and that financial history reasonably indicated that
the farmer did not have a sufficient net worth or line of credit to assure
payment of the purchase price. (emphasis added).
FNBO argues that the language of Iowa Code § 570A.2(3) gives FNBO an affirmative
defense to the claims of FCS and CEA. According to the statute, an agricultural supply dealer who
is considering selling a farm supply to a farmer on credit, may, prior to or upon the sale of the
supplies, make a certified request to a financial institution, including a bank such as FNBO, which
has a security interest in collateral owned by the farmer. Crooked Creek Corp., 427 B.R. at 506.
Once the financial institution receives the certified request, the financial institution “shall” issue,
within four business days, a “memorandum which states whether or not the farmer has a sufficient
net worth or line of credit to assure payment of the purchase price on the terms of the sale.” Id.
(citing Iowa Code § 570A.2(1)). In order for FCS and CEA to have gained favorable priority over
the FNBO lien, it appears to the Court that FCS and CEA were first required to provide certified
requests and also to request the memorandum referred to in Iowa Code § 570A.2(1) set forth above.
The failure to make such a request serves as a complete bar to any claims made by FCS or CEA
against collateral already encumbered by FNBO. Although, FCS and CEA still have a perfected
agricultural feed supplier lien, their failure to follow the procedures set forth in Iowa Code §
570A.2(1) prevents them from obtaining a superior lien position over the properly perfected security
interest of FNBO.
As such, absent an exception, or exclusion that would negate the provisions and protections
afforded a financial institution under § 570A.2(3), it would appear that FNBO has a complete bar
to the claims of FCS and CEA. Galva Holstein v. Holstein Dairy, No. EQCV014128 (Iowa Dist.,
June 21, 2010) .
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6Agricultural supply dealers are defined as, “a person engaged in the retail sale of
agricultural chemicals, seed, feed, or petroleum products used for an agricultural purpose.”
Iowa Code § 570A.1(5).
9
However, FCS and CEA argue that their liens are superior and rely on a different section
of the Iowa Code. There is no dispute that both FCS and CEA are agricultural supply dealers as
defined by Iowa Code § 570A.1(5). 6 The Iowa Code sets out the lien rights available to
agricultural supply dealers in Iowa Code § 570A.3. FCS and CEA, as agricultural supply
dealers, are seeking to enforce their lien rights created by Iowa Code § 570A.3. Despite FCS’
and CEA’s failure to provide FNBO with a certified request and waiver of confidentiality, as set
forth in Iowa Code § 570A.2(1), they assert that the language of Iowa Code § 570A.5(3), in fact,
negates FNBO’s superiority as a first priority creditor.
Iowa Code Chapter 570A provides:
570A.5 Priority of lien.
Except as provided in this section, an agricultural supply dealer lien that is
effective or perfected as provided in section 570A.4 shall be subject to the
rules of priority as provided in section 554.9322. For an agricultural supply
dealer lien that is perfected under section 570A.4, all of the following shall
apply:
1. The lien shall have priority over a lien or security interest that applies
subsequent to the time that the agricultural supply dealer lien is perfected.
2. Except as provided in section 570A.2, subsection 3, the lien shall have
equal priority to a lien or security interest which is perfected prior to the time
that the agricultural supply dealer lien is perfected. However, a landlord's lien
that is perfected pursuant to section 570.1 shall have priority over a
conflicting agricultural supply dealer lien as provided in section 570.1, and
a harvester's lien that is perfected pursuant to section 571.3 shall have
priority over a conflicting agricultural supply dealer lien as provided in
section 571.3A.
3. A lien in livestock feed shall have priority over an earlier perfected lien
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or security interest to the extent of the difference between the acquisition
price of the livestock and the fair market value of the livestock at the time the
lien attaches or the sale price of the livestock, whichever is greater.
Iowa Code § 570A.5 (emphasis added).
There is no dispute that the FCS and CEA are trying to enforce their lien rights against
the interest of a financial institution, FNBO, which is secured by the same collateral as that of
FNBO’s lien. However, FCS and CEA contend that Iowa Code § 570A.5(3) should be
interpreted in a way that would allow agricultural supply liens to obtain a more favorable priority
over a previously perfected security interest in the same collateral as that of a financial
institution regardless of their failure to comply with Iowa Code § 570A.2. FCS and CEA argue
that Iowa Code § 570A.5(3) should be read independently of Iowa Code § 570A.2.
The Iowa Supreme Court has set forth the rules of statutory construction as outlined by
the United States District Court for the Northern District of Iowa in Farmers Coop. v. Swift Pork
Co. and L.O.L. Finance Company, 602 F.Supp.2d 1095, 1107-08 (Dist. N.D. IA. 2009) wherein
it stated:
...As the Iowa Supreme Court has recently explained, when confronted with the task
of determining the meaning of a statute, we have stated:
The goal of statutory construction is to determine legislative intent. 	We
determine legislative intent from the words chosen by the legislature, not what it
should or might have said. Absent a statutory definition or an established meaning
in the law, words in the statute are given their ordinary and common meaning by
considering the context within which they are used. Under the guise of construction,
an interpreting body may not extend, enlarge or otherwise change the meaning of the
statute. Auen v. Alcoholic Beverage Div., 679 N.W.2d 586, 590 (Iowa 2004)
(citations omitted). The interpretation of a statute requires an assessment of the
statute in its entirety, not just isolated words or phrases. State v. Young, 686 N.W.2d
182, 184-85 (Iowa 2004). Indeed, ‘we avoid interpreting a statute in such a way that
portions of it become redundant or irrelevant.’ T& K Roofing Co. v. Iowa Dep’t. of
Educ., 593 N.W.2d 159, 162 (Iowa 1999)(citation omitted). We look for a reasonable
interpretation that best achieves the statute’s purpose and avoids absurd results.
[Schandendorf v. Snap-On Tools Corp., 757 N.W.2d 330, 337-38 (Iowa 2008);]
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Harden v. State, 434 N.W.2d 881, 884 (Iowa 1989). Thus, the court’s role is, first,
to determine whether the meaning of the statute is plain, and if so, to give effect to
that plain meaning. [ ]State v. Public Employment Relations Bd., 744 N.W.2d 357,
360-61 (Iowa 2008) [ ]When we interpret a statute, our primary goal is to ascertain
the legislature’s intent. State Pub. Defender v. Iowa Dist. Co., 663 N.W.2d 413, 415
(Iowa 2003). To determine the legislature’s [ ]intent, we first examine the language
of the statute. Id. ‘If the statutory language is plain and the meaning clear, we do
not search for legislative intent beyond the express terms of the statute.’Horsman v.
Wahl, 551 N.W.2d 619, 620-21 (Iowa 1996)[ ]‘If the statute’s language is clear and
unambiguous, we apply a plain and rational meaning consistent with the subject
matter of the statute.’ [Birchansky Real Estate, L.C. v. Iowa Dep’t. of Public Health,
737 N.W.2d 134, 139 (Iowa 2007)](quoting ABC Disposal Sys., Inc. v. Dep’t. of
Natural Res., 681 N.W.2d 596, 603 (Iowa 2004). See Farmers Cooperative[, 602
F.Supp.2d 1095, 1107-08.][ ]
Galva Holstein v. Holstein Dairy, No. EQCV014128, p. 11 (Iowa Dist., June 21, 2010).
In light of the above principles, the Court believes that Iowa Code §570A.5(3) cannot
stand or be read alone. Galva Holstein v. Holstein Dairy, No. EQCV014128, p. 11 (Iowa Dist.,
June 21, 2010). The rules of statutory construction require the Court to read the statute as a
whole and give effect to the plain meaning of the statute, where the meaning of the statute is
plain. Id. Taken as a whole, this statute is a well organized scheme for the creation, perfection,
priority and enforcement of liens to secure the sale of agricultural supplies in Iowa. Crooked
Creek, 427 B.R. at 505.
This Court in reviewing Iowa Code § 570A.5 in its entirety, and in conjunction with the
other provisions of Chapter 570A of the Iowa Code, concludes that the protection given a
financial institution in Iowa Code § 570A.2(3) applies to all actions to enforce agricultural
supply dealer liens against the interest of a financial institution secured by the same collateral,
regardless of the type of agricultural supply the agricultural supply dealer has provided the
farmer. Galva Holstein v. Holstein Dairy, No. EQCV014128 (Iowa Dist., June 21, 2010) .
Therefore, the affirmative defense afforded to a financial institution set forth in Iowa Code §
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570A.2(3) applies to the lien which may be claimed under Iowa Code § 570A.5(3). Galva
Holstein v. Holstein Dairy, No. EQCV014128 (Iowa Dist., June 21, 2010) .
In looking at the statute as a whole, Iowa Code § 570A.5(3) deals with the determination
of the priorities between agricultural supply dealer liens, and not as against the priority of the
financial institution. The caption of Iowa Code § 570A.5 is entitled “Priority of Lien.” Had the
legislature intended Iowa Code § 570A.5(3) to grant a priority lien over the lien of a financial
institution, it would have explicitly said so by referring to the perfected lien or security interest
as the financial institution lien, similar to the language in Iowa Code § 570A.2. In addition, the
legislature would have stated in Iowa Code § 570A.2, that § 570A.5(3) was an exception to the
affirmative defense set forth in § 570A.2(3). Such explicit exception language does not exist.
Therefore, the general reference in Iowa Code § 570A.5(3) to the perfected lien or
security interest is to the agricultural supply dealer lien and not to the lien of the financial
institution. Section 570A.5(3) of the Iowa Code simply determines priority among competing
agricultural supply dealers liens, not between the lien of the financial institution and agricultural
supply dealer lien. Further, the caption of Iowa Code § 570A.2 is entitled “Financial Institution
Memorandum to Agricultural Supply Dealers.” Such caption and placement of the caption in
Iowa Code § 570A.2 effectively serves as a warning and reminder to agricultural supply dealers
of the necessary requirements they must satisfy to avoid an affirmative defense of the financial
institution. This interpretation is bolstered by the language of Iowa Code § 570A.2(3) which
makes reference to “the complete proof of the superior priority of the financial institution’s lien.”
Such language shows the intent of the Iowa legislature that the lien of the financial institution be
superior unless the agricultural supply dealer follows the requirements of Iowa Code § 570A.2.
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7See Answer to Complaint filed by FCS and CEA, paragraph 13; Kalkowski Aff., docket
entry 41, paragraph 7.
8FCS and CEA do not dispute FNBO properly filed its UCC-1 and has a lien superior to
their lien unless they are entitled to the agricultural supply dealer lien pursuant to Iowa Code §
570A.5(3).
13
Furthermore, this Court’s interpretation of the statute is supported by dicta in Wilkin Elevator
v. Bennet State Bank, 522 N.W.2d 57 (Iowa 1994), a decision of the Iowa Supreme Court. In Wilkin
Elevator, Wilkin Elevator brought several claims against the bank after having had not been paid
for supplying hog feed to a married farm couple who were bank borrowers. Crooked Creek Corp.,
427 B.R. at 510 (summarizing the facts of Wilkin Elevator, 522 N.W.2d 57) . As in the present case,
both the bank and the agricultural supplier believed they had a priority claim to the proceeds of the
sale of the farmer’s hogs. Id. The Iowa Supreme Court noted: “[a]ny lien under that statute was
ineffective as against the bank, however, because of the feed store’s failure to provide the bank with
the required documentation. Iowa Code § 570A.2(3) (1991).” Wilkin Elevator, 522 N.W.2d at 62
n.3. Even though dicta in a footnote, this reference is the only reference found to the interpretation
of this statute by the Iowa Supreme Court.
With FCS and CEA having both admitted they did not provide FNBO with a certified request
or confidentiality waiver and FNBO having testified that none were ever received,7 it is clear that
FCS and CEA failed to comply with the requirements of the Iowa Code. As a result of their failure
to provide a certified request and confidentiality waiver, FNBO has a complete affirmative defense
to the agricultural supply dealer liens and has conclusively established the superior priority 8 of its
lien over any liens claimed by FCS and CEA as a matter of law.
The Iowa legislature has set forth a process by which agricultural feed suppliers can obtain
priority over a financial institution with a prior perfected lien under Chapter 570A. 	Such a
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legislative policy provides protection to the agricultural supply dealer which is trying to determine
whether to extend credit to the farmer. Said policy also provides notice to the financial institution
of the farmer’s need for credit from a supplier. Compliance with Iowa Code § 570A.2 not only
furthers the legislative goal of protecting the credit interests of the agricultural supply dealer, but
also protects the financial institution’s interest in the farmer and its collateral and the interest of the
farmer in obtaining feed through credit. The Iowa legislature has attempted to balance all of these
interests and by following the specific requirements of the statute, FCS and CEA could have
protected their interests, while also giving FNBO notice of Coastal Plain’s need for not only feed,
but also credit to purchase the feed.
Questions were raised at the hearings as to whether agricultural supply dealers in fact comply
with Chapter 570A of the Iowa Code in the course of conducting business. However, regardless of
current business practices, the law is clear. In order for an agricultural feed supplier to obtain a
superior position to a financial institution with a prior perfected lien, the feed supplier must follow
the specific procedures set forth in Iowa Code § 570A.2(3). An agricultural supply dealer must
make a certified request to the financial institution “stating the amount of the purchase and the terms
of the sale and shall be accompanied by a waiver of confidentiality signed by the farmer, and a
fifteen dollar fee.” Iowa Code § 570A.2(1). Failure to follow this procedure will result in the failure
of the agricultural supply dealer to obtain a priority position over the financial institution and would
provide an affirmative defense to any agricultural supply dealer lien if raised by the financial
institution.
Therefore, after a thorough review of the facts in this proceeding and a careful reading of
Chapter 570A of the Iowa Code, the Court concludes that in order for the agricultural supply dealer
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liens of FCS and CEA to trump the superior lien position of FNBO’s perfected security interest, FCS
and CEA must first have submitted a certified request for a financial memorandum accompanied by
a confidentiality waiver and the fifteen dollar fee. FCS and CEA both admit that they did not make
such a request. As such, FNBO has a senior, perfected lien and is superior to any agricultural
supplier lien obtained by FCS or CEA.
CONCLUSION
Therefore, the Motion for Summary Judgment filed by First National Bank of Omaha is
GRANTED and the Motion for Partial Summary Judgment filed by Farmers Cooperative Society,
Sioux Center, Iowa, and Cooperative Elevator Association is DENIED. The counterclaims of FCS
and CEA are DISMISSED. It is hereby ordered, adjudged, and decreed that the perfected security
interest of FNBO in the collateral of Coastal Plains and any proceeds of the sale of such collateral
has priority and is superior to the agricultural supply dealers liens of FCS and CEA.
Upon entry of this order, the Clerk is hereby directed to enter judgment in favor of FNBO
as set forth above.
SO ORDERED.
END OF ORDER
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