Ben Williams v. Peoples Bank of Paragould and Consolidated Grain and Barge Co.
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DIVISION IV
ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION
JOSEPHINE L INKER H ART, Judge
CA06-25
November 29, 2006
BEN WILLIAMS
APPELLANT
AN APPEAL FROM CLAY COUNTY
CIRCUIT COURT
[No. CV-2003-28]
v.
PEOPLES BANK OF PARAGOULD
and CONSOLIDATED GRAIN AND
BARGE CO.
APPELLEES
HONORABLE JOHN FOGLEMAN,
CIRCUIT JUDGE
REVERSED and REMANDED
This interlocutory appeal from the granting of a summary judgment involves a dispute
between appellant Ben Williams, who rented farmland to Jim Mathis, and appellee Peoples
Bank of Paragould, Mathis’s creditor, over the proceeds from the sale of two crops planted
by Mathis. The circuit judge found that the bank’s security interest in the crops has priority
over that of any landlord or ownership rights of appellant. Because genuine issues of
material fact remain, we reverse and remand this case for trial.
Mathis operated several farming corporations on land leased from appellant in Clay
County. On September 19, 2002, Mathis and appellant entered into a lease requiring Mathis
to pay rent on or before December 30, 2002, and giving Mathis the right to renew the lease
conditioned upon his payment of rent for the prior year. While appellant had filed a
financing statement to secure Mathis’s debt on April 17, 2002, he released the lien on
September 19, 2002, under circumstances that are in dispute. According to appellant and
Mathis, appellant did so at the bank’s request. Appellant asserts that the bank’s loan officer
assured Mathis that, if appellant released his lien, the bank would give Mathis crop loans in
2002 and 2003 and would authorize Mathis’s payments of rent to appellant. The bank denies
this allegation. After the fall 2002 harvest and the bank’s acquisition of the 2002 crop
proceeds, Mathis planted wheat that was harvested in June 2003. Because Mathis’s rental
checks drawn on the bank bounced, appellant and Mathis treated the lease as terminated.
Appellant harvested the wheat in June 2003 and delivered it to appellee Consolidated Grain
and Barge Company (CGB). Before CGB paid for the wheat, it learned of the bank’s claim
to the proceeds of the 2003 wheat crop and did not pay appellant the crop proceeds.
The bank filed this suit on July 7, 2003, against Mathis’s farms for payment of the
amounts due on fourteen promissory notes, asserting that it had a security interest in
Mathis’s crops and in the proceeds of the sale of the crops. The bank amended its complaint
to add CGB, appellant, and others involved in the 2003 wheat harvest as defendants. On
November 17, 2003, appellant filed a counterclaim against the bank and two of its officers
and a cross-complaint against CGB. Appellant alleged that Mathis had not paid rent on his
farms for one-half of 2001 or for all of 2002; that CGB had breached its contract with him;
that the bank had intentionally interfered with his contract with CGB; that CGB and the
bank had conspired to avoid paying him for the crops, resulting in the conversion of his
property; and that the bank and CGB had committed abuse of process in obtaining an ex
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parte temporary restraining order preventing CGB from paying appellant. In response, the
bank raised several affirmative defenses, including the statute of limitations. CGB responded
that appellant had failed to state a claim for relief.
The bank filed a motion to dismiss on December 2, 2003. On March 22, 2004, CGB
moved for summary judgment. Appellant amended his counterclaim on April 29, 2004,
adding a claim for fraud. The bank raised several affirmative defenses, renewed its motion
to dismiss, and moved for partial summary judgment against the Mathis farming
corporations. There was a hearing on July 1, 2004, at which the circuit judge asked the
parties to brief the issue of lien priority in the crop proceeds and to address whether the
description of the collateral on the security agreements and financing statements signed by
Mathis were sufficient. Appellant argued that Mathis had no power to transfer rights in the
2003 crop, because the lease had ended on December 31, 2002, when the rent was not paid.
The circuit court granted CGB summary judgment on appellant’s conspiracy and
abuse-of-process claims on August 9, 2004. On September 16, 2004, the court granted
partial summary judgment to the bank on appellant’s claims for tortious interference with
contract, conversion, conspiracy, and abuse of process and denied summary judgment as to
his fraud claim. The court further granted judgment to the bank on the loans to Mathis’s
farming corporations.
The court entered a second order for partial summary judgment on November 1,
2004. The court stated that the parties had settled their dispute as to $8,566.18 of the
proceeds totaling $37,267.09 from the June 2003 sale of wheat to CGB. The circuit court
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held that the bank had a valid perfected security interest in the wheat crop sold to CGB in
June 2003; that the bank’s security interest was properly described, and that it attached to
the wheat when it was planted; that the bank’s security interest was superior to the lien
asserted by appellant; and that the bank was entitled to the remaining $28,700.91 from CGB.
The court gave appellant thirty days within which to file an amended counterclaim.
Appellant filed an amended counterclaim on November 29, 2004, alleging that Mathis was
a holdover tenant, paying no rent, until June 2003. He requested unlawful detainer and
quantum meruit damages. The bank renewed its motion for summary judgment on
appellant’s fraud claim on January 7, 2005.
On March 10, 2005, the circuit court certified all prior orders granting summary
judgment under Ark. R. Civ. P. 54(b), leaving appellant’s breach-of-contract, fraud, and
quantum meruit claims to be addressed later. Appellant filed a notice of appeal from that
order. On March 29, 2005, the court granted summary judgment to CGB on appellant’s
conversion claim. On June 2, 2005, the circuit court entered an order amending the March
10 order, stating:
[T]he claims on which summary judgment was granted and denied raise substantial
issues on appeal and are the primary claims of Ben Williams.
The ownership of the grain in question and the priorities of any liens on this
grain are the central issues which tie all of the claims of Ben Williams, Peoples Bank
and Consolidated Grain together.
The findings of the Court which are being appealed eliminate much, if not all,
of Ben Williams’ damages in the remaining issue for trial.
If this case proceeds to trial on the remaining fraud claim, and then an appeal
is taken, a reversal on almost any point will require a re-trial of the fraud claim.
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The court executed a certificate pursuant to Rule 54(b), and appellant filed another notice
of appeal.
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Appellant challenges the circuit court’s determination that the bank had a valid and
perfected security interest in the 2002 and 2003 crop proceeds. He argues that the bank’s
security agreements and financing statements contained defective descriptions of the land
on which the crops were grown and, therefore, he had a superior claim to the crop proceeds.
Appellant states that the only land that the bank attempted to describe by section, township,
and range was referred to as Farm No. 5322, containing 1900 acres; however, appellant
argues, the only land he owns in those sections, townships, or ranges is a farm comprised
of only 80 acres. He also emphasizes that the only other financing statements that mention
him as the owner contain no legal description of any kind, identify the farm only by number,
and are inconsistent as to the acreage of each crop being grown. Appellant further argues
that Mathis had no interest in the 2003 wheat crop, and could not, therefore, convey a
security interest in that crop, because the lease had terminated for nonpayment of rent on
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December 31, 2002. Because we conclude that a question of fact remains as to the adequacy
of the legal descriptions in the security documents, we reverse and remand all matters raised
on appeal.
The version of Ark. Code Ann. § 4-9-203 (Repl. 2001) in effect in April 2002, when
the bank’s financing statements were filed, provided:
(a) A security interest attaches to collateral when it becomes enforceable
against the debtor with respect to the collateral, unless an agreement expressly
postpones the time of attachment.
(b) Except as otherwise provided in subsections (c) through (i), a security
interest is enforceable against the debtor and third parties with respect to the
collateral only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the power to transfer rights
in the collateral to a secured party; and
(3) one (1) of the following conditions is met:
(A) the debtor has authenticated a security agreement that
provides a description of the collateral and, if the security interest
covers timber to be cut, a description of the land concerned . . . .
Arkansas Code Annotated section 4-9-108 (Repl. 2001) stated:
(a) Except as otherwise provided in subsections (c), (d), and (e), a description
of personal or real property is sufficient, whether or not it is specific, if it reasonably
identifies what is described.
(B) Except as otherwise provided in subsection (d), a description of collateral
reasonably identifies the collateral if it identifies the collateral by:
(1) specific listing;
(2) category;
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(3) except as otherwise provided in subsection (e), a type of collateral
defined in the Uniform Commercial Code;
(4) quantity;
(5) computational or allocational formula or procedure;
(6) except as otherwise provided in subsection (c), any other method,
if the identity of the collateral is objectively determinable.
In First National Bank of Lewisville v. Bradley, 80 Ark. App. 368, 96 S.W.3d 773
(2003), we addressed the sufficiency of the description of the collateral (not crops) in a
security agreement and a financing statement. Applying Ark. Code Ann. § 4-9-108 (Repl.
2001), we stated that the test of sufficiency of a description is whether the description does
the job assigned to it — that it makes possible the identification of the thing described; that,
although the better practice is to describe the collateral by types or items when a security is
taken on inventory, the description need not be such as would enable a stranger to select the
property but is sufficient if it will enable third parties, aided by inquiries that the instrument
itself suggests, to identify the property; and that the adequacy of the description should be
considered in the light of the subsequent creditor’s actual knowledge. We explained that, if
a financing statement gives notice that a third person may have a security interest in the
collateral, and the source from which additional information may be obtained, the statement
is sufficient. In that case, we began our scrutiny of the documents in question by pointing
out that the determination of whether a description in a financing statement is adequate is
a question of fact. Accord Security Tire & Rubber Co. v. Hlass, 246 Ark. 1113, 441 S.W.2d
91 (1969). Given the ambiguities alleged by appellant, there is a question of fact as to the
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adequacy of the description of the collateral pledged by Mathis, and consequently, a question
of fact remains regarding whether the bank’s security interest attached or was perfected.
Thus, summary judgment was improper in this case.
Reversed and remanded.
V AUGHT and B AKER, JJ., agree.
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