941 N.W.2d 876
Iowa2020Background
- MidWestOne obtained a prior perfected security interest in Justin and Ashley Harker’s "farm products" and proceeds via a UCC‑1 financing statement and an agricultural security agreement covering all crops and proceeds.
- The Harkers sold grain to Heartland Co‑op under contracts that allowed Heartland to dry, store, and sell the grain; Heartland deducted drying and storage charges from sale proceeds on six transactions (2014–2017), withholding $79,895.68 in total.
- Heartland issued statements to the Harkers reflecting the deductions but neither the Harkers nor Heartland provided those statements to MidWestOne; the bank claims the withheld sums as proceeds subject to its lien.
- MidWestOne sued March 16, 2018 for the withheld amounts. The district court applied Iowa Code § 614.1(10) (two‑year limitations for secured interests in farm products) but invoked the discovery rule to allow recovery for older transactions, and it granted summary judgment to MidWestOne while denying Heartland’s unjust enrichment claim.
- The Iowa Supreme Court held § 614.1(10) controls over the general five‑year § 614.1(4); it held the discovery rule does not apply to § 614.1(10); and it affirmed that MidWestOne’s perfected security interest defeats Heartland’s unjust enrichment claim on the facts (no evidence MidWestOne initiated or encouraged the deductions).
Issues
| Issue | Plaintiff's Argument (MidWestOne) | Defendant's Argument (Heartland) | Held |
|---|---|---|---|
| Which statute of limitations applies to MidWestOne’s conversion claims? | § 614.1(4) five‑year general statute for injuries to property governs. | § 614.1(10) two‑year special statute for secured interests in farm products controls. | § 614.1(10) applies; the special two‑year rule overrides the general five‑year rule. |
| Does the discovery rule toll § 614.1(10)? | Yes — bank did not learn of deductions until 2017, so claims older than two years should be timely. | No — discovery rule should not apply; the statute triggers from date of sale. | Discovery rule does not apply to § 614.1(10); limitations run from date of sale. |
| Can Heartland recover for drying/storage costs under unjust enrichment despite MidWestOne’s perfected lien? | MidWestOne: its prior perfected security interest precludes equitable recovery by Heartland. | Heartland: unjust enrichment (or equitable relief) available because Heartland preserved collateral and industry practice justified deductions. | Court affirmed summary judgment for MidWestOne; Heartland’s unjust enrichment claim fails on this record (no evidence the bank initiated/encouraged deductions or waived rights). |
| Did MidWestOne waive its lien or impliedly consent by cashing checks? | MidWestOne: no waiver or acquiescence; no clear, unequivocal conduct showing waiver. | Heartland: industry practice should put bank on notice; cashing checks without inquiry amounts to waiver. | No waiver: waiver requires clear, knowing, intentional relinquishment; record lacks such evidence. |
Key Cases Cited
- Husker News Co. v. Mahaska State Bank, 460 N.W.2d 476 (Iowa 1990) (declining discovery rule application in certain UCC contexts to preserve finality and predictability)
- Farmers Coop. Co. v. Swift Pork Co., 602 F. Supp. 2d 1095 (N.D. Iowa 2009) (interpreting § 614.1(10) as a specific exception to § 614.1(4))
- Oyens Feed & Supply, Inc. v. Primebank, 808 N.W.2d 186 (Iowa 2011) (specific statutes control over general ones where conflict exists)
- K & W Elec., Inc. v. State, 712 N.W.2d 107 (Iowa 2006) (articulating the discovery rule standard)
- Ninth District Production Credit Ass’n v. Ed Duggan, Inc., 821 P.2d 788 (Colo. 1991) (permitting limited unjust enrichment recovery against a secured creditor where creditor initiated or encouraged value‑enhancing transactions)
- First State Bank v. Clark, 635 N.W.2d 29 (Iowa 2001) (enforcing bank’s security interest in sale proceeds)
- Peoples Tr. & Sav. Bank v. Sec. Sav. Bank, 815 N.W.2d 744 (Iowa 2012) (rejecting waiver by course of conduct absent clear, unequivocal evidence)
- Schultze v. Landmark Hotel Corp., 463 N.W.2d 47 (Iowa 1990) (declining application of discovery rule where statute fixes triggering event)