Pork Congress 2012 - Iowa Pork Producers Association

Feed suppliers prevail in Iowa Supreme
Court feed lien ruling
By Eldon McAfee, IPPA legal counsel, Beving, Swanson & Forrest, P.C.
In the case of Oyens Feed & Supply,
Inc. v. Primebank, a decision
of major importance to feed
suppliers and lenders as well as
livestock producers, the Iowa
Supreme Court ruled on Dec.
30, 2011, that Iowa’s feed lien is
superior to a secured lender’s
security interest even though a
certified notice of the feed lien is
not sent to the lender.
Iowa and federal courts have
issued conflicting rulings on the
priority of feed supplier liens
vs. a lender security interest
in a producer’s livestock. Four
judges have ruled that a feed
supplier’s lien for feed sold to a
pork producer had priority over
the producer’s bank’s lien, while
two other judges ruled exactly
opposite and found that the pork
producers’ banks’ liens had priority
over the feed suppliers’ liens. In the
court decisions, the feed suppliers
properly filed their liens with the
Iowa secretary of state but did not
send a certified notice to the bank.
The judges then had to determine
who had priority, the banks or the
feed suppliers.
To briefly recap the problem,
Iowa law provides a lien to
businesses that sell ag supplies
such as fertilizer, pesticides,
seed, feed or petroleum products
used for an ag purpose. This
lien must be filed with the Iowa
secretary of state within 31 days
after the farmer purchases the ag
supply. The disputed part of the
law provides that the supplier is
to send a certified letter to the
farmer’s lender. The lender
must then respond
whether the farmer has
sufficient finances to
assure payment of the ag
supply and provide a full
and complete relevant
financial history. A
supplier who sells an
ag supply and files
an ag supply
lien
will lose to the lender’s lien if the
lender either did not receive the
certified letter or received the
letter and responded, along with
the necessary financial history, that
the farmer did not have sufficient
finances to cover the price of the
ag supply. If the lender responded
that the farmer had sufficient
finances, the ag supplier and the
lender have equal priority under
their liens. However, the law also
states that for feed, the ag supplier
will have priority in livestock
sales proceeds for the difference
between the livestock’s purchase
price and the greater of the value
of the livestock when the feed was
sold or the livestock’s sales price.
This section of the law dealing
with feed does not specifically refer
to the section of the law requiring
a certified notice be sent to the
lender. Because of this omission,
the analysis is that for a feed lien,
the supplier is not required to send
a certified letter to the lender.
With this background, the Iowa
Supreme Court in the Oyens
case first noted if the certified
letter sections of the law were
intended to apply to feed liens, the
Legislature “would have expressly
said so as it did” for the other ag
supply liens. The court went on to
rule:
50 March 2012