Cornerstone Bank and Trust v. Consolidated Grain and Barge Company
2011 IL App (4th) 100715
Ill. App. Ct.2011Background
- Bank loaned Beiermanns $985,143 across five notes secured by farm products; perfected by financing statements under UCC 9-310(a).
- Beiermanns contracted with Consolidated to sell 55,000 bushels of corn (2005–2007 contracts) with price fixed by contract; Consolidated engaged in buying farm products.
- Bank sent a July 2008 Notice of Security Interest by certified mail naming Beiermanns and identifying farm products as all corn, soybeans, and wheat for the 2008 crop year.
- Beiermanns defaulted; Consolidated began offsetting proceeds and modifying/cancelling contracts; Bank sought to enforce security interest against Consolidated.
- Trial court ruled (a) 1631 preemption did not apply; (b) Bank failed to perfect under 9-320(f) due to lack of county-descriptor; (c) Consolidated prevailed on its security-rights defense.
- Bank appeals challenging preemption, perfection, and amendment denial; Consolidated cross-appeals on preemption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 1631 preempt conflicting UCC provisions? | Cornerstone argues 1631 preempts conflicting UCC rules. | Consolidated argues Act protections for farm-product buyers prevail. | Yes, 1631 preempts conflicting UCC provisions. |
| Was Consolidated a buyer in ordinary course under 1631(c)(1)? | Bank contends Consolidated is not ordinary-course buyer due to creditor-like offset. | Consolidated is a purchaser in the ordinary course of business. | Consolidated qualifies as a buyer in ordinary course; Act preempts UCC claims. |
| Did Bank fail to satisfy 1631(e) notice requirements (and 9-320(f)) to protect its interest? | Bank complied with notice requirements; counties need not be specified. | Failure to specify counties defeats protection for Bank's security interest. | Bank failed to comply with notice requirements; protections do not apply. |
| Was the Bank properly allowed to amend count I after summary judgment? | Amendment would cure defects and clarify notice. | Amendment would not cure notice deficiencies; prejudice possible. | Trial court did not abuse discretion; amendment denied. |
Key Cases Cited
- First Midwest Bank, N.A. v. IBP, Inc., 314 Ill. App. 3d 255 (Ill. App. 2000) (preemption context for farm-product protections)
- Royal Heights, 871 P.2d 592 (Wash. 1994) (commission merchant as secured lender; not protected to the full extent of 1631)
- Food Services of America v. Royal Heights, Inc., 871 P.2d 590 (Wash. 1994) (discussion of 1631 preemption implications)
- West Bend Mutual Insurance Co. v. Norton, 406 Ill. App. 3d 741 (Ill. App. 2010) (summary-judgment standards; de novo review)
- Benson v. Stafford, 407 Ill. App. 3d 902 (Ill. App. 2010) (summary judgment standard of review)