Farmers National Bank v. Green River Dairy, LLC

318 P.3d 622 BANK, NATIONAL Plaintiff

FARMERS

Counterdefendant-Appellant, DAIRY, LLC;

GREEN RIVER Herculano Alves,

J. Alvеs and Frances M. husband wife, Dairy, dba River Defen Green Defendants-Respondents,

dants-Cross Hay Daniel dba

Ernest Carter Carter

Livestock; Becker; Lewis Jack MC

Call, Defendants-Counterclaimants- Claimants-Respondents,

Cross Farms, Inc.; Thornton,

Hull Tim

Defendants-Respondents.

No. 40101. Idaho,

Supreme Court of Falls,

Twin November 2013 Term.

Jan. AND PROCEDURAL

I. FACTUAL

BACKGROUND ten loans to Green River FNB made dairy River’s support and 2009 to Green loans, In connection with the operations.1 security a granted River FNB interest Green security dairy executing After a in its cows. UCC-1F, a properly FNB filed agreement, statement, financing with products farm Secretary May of State on Idaho agree properly parties All that FNB at- prop- in the tached its interest collateral erly through filing its interest perfected financing statement. of a sold commodities Green River Sellers Falls, Cluff, Coleman, for credit, hay Ritchie & Twin which included wheat and/or dairy argued. Ritchie as feed for Green River’s Stephen products, appellant. John conjunction with the sale of com- cows. Boise, Edson, P.A., respon- for Gery W. River, each seller filed lien modities to Green Farms, Gery argued. Hull Inc. Edson dent Secretary of with the Idaho State notices to I.C. 45-1804. pursuant PLLC, Office, Wright Law Twin Brothers repay- River defaulted on its loan Green Falls, Daniel respondents Ernest Carter for Accordingly, obligations to FNB. FNB ment Benjamin Wright McCall. Andrew and Jack dairy possession River’s cows took of Green argued. FNB sold the that secured FNB’s loans. by dairy cows at an auction held Producers Nye Gigray & Peterson Rossman White Association, Marketing pro- Livestock Nichols, P.A., Nampa, respondent Lewis $211,957.58. Despite ceeds of which totaled Becker. security in Green perfected FNB’s interest Falls, Office, for re- Hollifield Law Twin cows, dairy Sellers also claimed River’s spondent Tim Thornton. dairy proceeds and the interest cows dairy had

of the auction because the cows agricultural products liened sold consumed HORTON, Justice. by to Green River. Sellers appeal court’s This is an from the district initiated this case on November FNB declaratory judgment in favor of grant of Complaint for Declara- when filed its LLC, Dairy, commodi- Green River and four tory Judgment. FNB that Green asserted Carter, Becker, ties dealers: Ernest Lewis $2,627,526.42. the bank River owed McCall, (collectively and Hull Farms Jack by claimed FNB exceeded the total amount “Sellers”). Appellant, Farmers National proceeds from the sale of the collateral. (FNB), argues Bank that the district Further, complaint pursu- stated that FNB’s misinterpreted a 28-9-101, had a senior ant to I.C. the bank and, result, provision, as a erred dairy perfected interest all cows priority a lien on collateral granting Sellers proceeds from by Green River and the owned securing previously by made FNB. We dairy a loan com- of those cows. FNB’s sale (1) agree FNB and vacate the district for: a plaint with asked the district court rights grant declaratory judgment respective priority in fa- court’s declaration pursu- parties in the of sale vor of Sellers. Court, Accordingly, on Jan- personally never filed. River were The loans made Green appeal proceed uary Alves. The backed Herculano Frances ordered that the Respondent’s brief of Green River and the Alves- briefing solely filed Sellers. on the 24, 2012; however, es was due on December 45-1801; Reg’l Ctr., and I.C. facts.” St. Med. ant to I.C. 28-9-101 Luke’s (2) Cnty., a that FNB’s UCC-1F inter- Ltd. v. Bd. Ada declaration Comm’rs properly perfected est the collateral was priority on Green first encumbrance cows; dairy declaration that River’s III. ANALYSIS pursuant to I.C. 45-1802 in liens created dairy commodity sales do not extend to the Statutory background agricultural A. for agricultural products that consume the cows commodity dealer liens. subject to the lien. Each defendant named primary The presented appeal issue this individually complaint in FNB’s filed an an- agricultural commodity is whether an swer. agricultural encumbers an ex- 5, 2012, FNB filed a motion On March tends to livestock that consume the liened summary a judgment and memorandum agricultural product. hinges This on the in- 2012, 8, support. May On the district court terpretation 45-1802, § of which pro- I.C. issued its Memorandum Decision Re: Plain- vides: Summary Judgment. tiffs Motion for The district court the issue before it framed as agricultural commodity producer An or commodity agricultural produc- “whether an agricultural commodity an dealer who sells, er’s lien created under I.C. 45-1802 contin- or delivers under contract or bail- upon ment, ues to exist the livestock that consume agricultural product has a lien on agricultural product.” Ultimately, or district court held that liens cre- agricultural product the sale of pro- as pursuant agricul- ated to I.C. 45-1802 on vided in section Idaho Code. The products tural did extend to livestock that chapter may lien created attach agricultural products. consumed the liened whether uses Accordingly, court the district denied FNB’s agricultural product purchased to in- summary judgment granted motion for crease the livestock or value of his whether declaratory judgment favor of Sellers. agricultural product purchased he uses the judgment The district court its final value, issued to maintain health or status of May timely appealed. 2012. FNB actually his livestock increasing without product. value of his II. OF STANDARD REVIEW Legislature what enacted would become reviewing grant a When of sum 1983; originally 45-1802 in as enacted mary judgment, employs this Court the same only the statute consisted of first sen- Cnty. standard as the court. district Boise 1,§ p. tence. 1983 Idaho L. ch. Sess. Mgmt. Cntys. Program, v. Idaho Risk Un ‍‌​​​​​​‌​​‌‌​‌‌‌​​‌‌‌‌​‌​​​‌‌‌‌​​​‌​‌‌​‌‌​‌‌​‌‌‌‍ However, 1989 derwriters, 901, 904, 265 P.3d by adding amended I.C. 45-1802 the sec- judgment Summary proper 517 ond sentence. Idaho Sess. L. ch. 1989 depositions, pleadings, when “the and admis 1, p. 746-47. file, affidavits, together sions on with the if “Agricultural product” is defined as: any, genuine no show there is issue as to [W]heat, corn, any oats, barley, rye, lentils, moving party material fact and that the judgment soybeans, grain dry is entitled to a as a matter of sorghum, law.” beans and 56(c). safflower, peas, beans, seeds, may grant I.R.C.P. A court sunflower “district mustards, flaxseed, summary judgment non-moving party rapeseed, legumi- tame seed, party any even if filed nous has not its own motion seed or other small or other Dairy commodity, including any with the court.” Aardema v. U.S. Inc., 785, 793, cleaned, Sys., foregoing, processed, 215 P.3d Talbert, treated, mixed, (quoting 513 or whether Harwood reconditioned (2001)). 672, 677, any Idaho rolled or combined in fashion or Additionally, freely any used Court reviews the means to create as “[t]his animal, interpretation application poultry and its or feed. of a statute fish meaning is so doubtful or obscure 45-1801(1). Notably, [T]he are not 1.C. might uncertain reasonable minds be in the definition included meaning. disagree as to its product.” merely be- ambiguity is not established prod- Statutory liens on B. possible interpretations are cause different § 45-1802 do under I.C. ucts created If the case presented to a court. this were that con- in livestock continue not subject of that are the then all statutes products. liened sume the ambigu- litigation could be considered ____ statute is not [A] ous concluded that district merely because an astute mind can devise unambiguous provided interpretation of it. than one more by I.C. created contin- that liens Boise, Investments, City Inc. v. BHA agriсul- that consumed liened in livestock ued (2003) (inter- P.3d relied The district court products. omitted). quotations nal citations from the second heavily on the term “uses” “triggering to it as a and referred argue sentence appeal, neither Sellers nor FNB On context, which, in created a read when § verb” is sentence of I.C. 45-1802 that the second agri- that consume the liened in livestock Rather, lien party each adheres to ambiguous. product. cultural interpretations of what the statute different § argues that I.C. 45-1802 means. FNB statutory objective of inter “The an agricultural an lien on does not extend legislative in give effect to pretation is to con- agricultural product to livestock that 471, Yzaguirre, 144 Idaho tent.” State agricultural product. Con- sume the liened (2007). 1183, 1187 475, 163 “Such intent P.3d versely, argue that the statute unam- Sellers reading of the from a be derived should in an biguously agricultural extends an Reg’l Luke’s Med. act at issue.” St. whole that con- agricultural to livestock Ltd., 755, Ctr., at 203 P.3d at 685. 146 Idaho agricultural product. liened sume the begins lit “Statutory interpretation with ‘the Investments, we stated in BHA As statute, language of the and this eral words Inc., interpreta fact that two different obvious, given plain, its and ration should be ” presented does not of a statute are tions Pac. Hide & Fur meaning.’ al Seward v. ambiguous. 138 Idaho alone make statute 509, 511, 531, Idaho 65 P.3d 533 Depot, 138 Rather, 358, at 484. the statute’s at 63 P.3d Jen-Rath, Co., Mfg. (quoting v. Kit Co. meaning be so doubtful or obscure must (2002)). 335, 48 P.3d 664 or be uncertain reasonable minds would unambiguous, statutory language “If is meaning. as to the statute’s Such doubtful legislative clearly expressed intent of the ‘the obscurity present in I.C. is not doubt effect, given and there is no body must be Accordingly, § we conclude 45-1802. of for a court to consider rules occasion ” only and use 45-1802 is not I.C. Reg’l Luke’s construction.’ St. Chapter Title 45 plain of Ltd., Ctr., 146 Idaho at 203 P.3d at Med. give effect to the intent order to Prop. (quoting Payette River Owners I.C. 45-1802.2 behind Valley Cnty., 132 v. Bd. Comm’rs Ass’n (1999)). argu- majority parties’ of the textual ments, court’s discus- as well as the district purpose asserted “[t]he This is because below, focused on the second sentence modify its sion enacting legislation cannot Accordingly, little attention 45-1802. meaning.” Alphonsus v. Saint I.C. plain Verska Ctr., 889, 892-93, sentence of the statute paid is to the first Reg’l Med. (2011). briefing. the first sen- ambig parties’ A statute is P.3d interpreting the see- tence is instrumental uous where: plain unambiguous lan- Bankruptcy and that the United States Court for 2. The precise agricultural before guage of Idaho faced the issue did not extend District statute Goedhart & agricul- Court in this case in In Re this Goedhart, that consumed liened liens to livestock case, In that 03.3 IBCR products. Id. at 170. tural bankruptcy concluded that I.C. sentence, and, Chapter product purchased Title 45 as a tural to maintain ond the val- whole, ue, scope health or because it delineates the status of his livestock without actually subject agricultural increasing agricul- an the value of what can be the his product.” import plain 45-1802. The lien. The of the first sentence of I.C. clear, language of the second way sentеnce no “[a]n 45-1802 is states expands scope of the commodity producer an com- Instead, created the first sells, sentence. modity dealer who or delivers under second sentence references “the lien bailment, created agricultural product contract or chapter,” in this which “agri- lien on an agricultural product or the has a lien on cultural proceeds or the of the sale proceeds agricultural prod- of the sale of the agricultural product” and clarifies that provided uct as 45-1804.” [I.C. ] the lien will attach of whether the plain language, Based on the the first sen- uses the tence creates a lien favor of a increase the value simply of his livestock or “agricultural prod- in an producer or dealer maintain their value. “proceeds uct” of the sale of the and/or Because the lien created above, “agri- agricultural product.” As noted only “agricultural products” extends to product” cultural is а defined term within “the sale of the agricultural product Title 45. An is: product,” the district court erred in conclud- oats, [Wjheat, corn, lentils, barley, rye, ing that agricultural products Sellers had an soybeans, grain sorghum, dry beans and lien on Green River’s livestock because live- beans, safflower, seeds, peas, sunflower agricultural products. stock are not mustards, flaxseed, rapeseed, legumi- tame seed, any nous seed or other small or other plain In addition to the language of I.C. agricultural commodity, including any of § supporting interpretation, 45-1802 FNB’s cleaned, foregoing, processed, Chapter Title when read in its entire- mixed, treated, reconditioned or whether ty, indicates that the lien created any by rolled or combined in fashion or § in I.C. 45-1802 does not extend to livestock any product means to create a used as that agricultural products. consume liened animal, poultry or fish feed. provisions We consider these additional comprise Chapter Title 45-1801(1). legis- because Thus, plain § I.C. lative “intent should be derived from a read- § of the first sentence of I.C. 45-1802 allows ing of the whole act at issue.” St. Luke’s commodity producer or dealer to obtain a Ctr., Ltd., Reg’l Med. 146 Idaho at any agricultural products lien on of the listed Specifically, §§ P.3d at 685. 45-1801(1) I.C. 45-1803 § proceeds I.C. or from support interpretation and 1805 FNB’s any agricultural products the sale of of the § by the lien created I.C. 45-1802 45-1801(1). does not Livestock, § listed in in- I.C. extend livestock. cows, cluding dairy are not an product may subject agri- be the of an “[tjhe § Idaho Code 45-1803 states that Accordingly, plain cultural lien. lan- 45-1802, Code, by lien created section guage § of the first sentence of I.C. 45-1802 agricultural product attaches to the and to provide any commodity does not basis for a proceeds subsequent sale of the producer right or dealer to maintain a lien agricultural product agricul- on the date the rights only livestock because the lien extend physically is delivered to the agricultural prоducts proceeds and the of purchaser any or on the date final payment is agricultural products. the sale of due, unpaid.” provision This reinforces 45-1802, by §

Like the interpretation reiterating first sentence of I.C. FNB’s what products proceeds commodity the second sentence is also clear and unam- or lien “[tjhe biguous only § on its face. It states that attach to. The terms I.C. 45-1803 chapter may created attach allow for the attachment of a lien to an agricultur- “agricultural product” “proceeds of whether the uses the or the of the product purchased subsequent agricultural product,” al the value of sale of the increase Thus, agricul- § his livestock or whether he uses not livestock. I.C. 45-1803 echoes Accordingly, parties’ arguments re- agricul- that an ute. provides § 45-1802 and I.C. construction and only agri- lating attach to to various canons of can ture to this legislative history of the sale are irrelevant proceeds products or culturаl in this ease. Court’s determination products. of those Next, § 45-1805 states: I.C. Attorney fees. C. 45-1802, Ida- created section The lien attorney separately request fees Sellers security Code, to a lien or preferred is ho following statutory theories. under pur- of a creditor of the interest in favor Thornton, any argument, requests without chaser, the credi- regardless of whether §§ attorney pursuant fees to I.C. 45-1809 security interest attaches to or tor’s ‍‌​​​​​​‌​​‌‌​‌‌‌​​‌‌‌‌​‌​​​‌‌‌‌​​​‌​‌‌​‌‌​‌‌​‌‌‌‍lien 12-120(3). request Carter and McCall or §§ attorney pursuant fees to I.C. or before sale of the 12-120(3). requests attorney Becker created which the lien after the date on Hull pursuant to I.C. 45-1809. Farms fees Code, 45-1802, Idaho attaches. section attorney pursuant requests fees to I.C. I.C. 45-1805 also re- Like I.C. 12-120(3). Also, §§ re- 45-1809 and FNB interpretation of I.C. inforces FNB’s attorney pursuant § 45- quests fees to I.C. supports Idaho Code only gives interpretation FNB’s because priority prior over or agricultural liens liens Attorney pursuant § 12- fees I.C. prior where the lien or interests 120(3) in this cаse because are not awardable in an security interest was there was no commercial transaction between product” “proceeds sale Co., parties. See Carrillo v. Boise Tire Thus, not livestock. agricultural product,” Inc., supports § 45-1805 our conclusion that (2012). Rather, they simply have made not create a lien on 45-1802 does Accordingly, claims to identical collateral. livestock, only “agricultural products” requests attorney pursuant all fees to I.C. “proceeds of the sale of the 12-120(3) party merit. No are without product.”3 attorney fees under I.C. 45- entitled 1809. FNB is not entitled to an award of Chapter framework § attorney under I.C. 45-1809 because it fees 18, whole, legislative clear Title as a reflects commodity has not claimed an commodity liens intent that lien. Sellers are not entitled to award of products” only extend to § attorney under 45-1809 because fees “proceeds of to the of the sale they prevailed. have not products.” Had the wished to “agri- include livestock the definition of easily product” it could have. IV. CONCLUSION

cultural plain it did not. Based on the declaratory vacate the district court’s We 45-1802, 45, Chapter language of I.C. judgment favor of Sellers find whole, Title 18 as a we hold that the dis- Sellers, security FNB and FNB’s between concluding trict court erred that Sellers dairy supe- interest in Green River’s cows is dairy River’s cows that had a lien on Green attorney are rior to of Sellers. No fees security to FNB’s interest. was senior appeal. appeal on on to awarded Costs ambiguous,

Because I.C. 45-1802 is not FNB.

this Court has not and will not resort to statutory and Justices Pro Tem

methods of construction order to Justice EISMANN concur. legislative intent behind the stat- KIDWELL and SCHROEDER derive addition, ucts, priority plain language such a lien would not have over a In of I.C. a in the district court's prior perfected 1805 reveals serious flaw interest in analysis parties' competing priority rights. of language plain of I.C. 45-1805 because the 45-1802 Even if the second sentence of only gives priority agricul- liens in rights extend lien were somehow construed to products proceeds, or their not livestock. agricultural prod- livestock that consume liened

859 JONES, Justice, dissenting. legislative J. it, intent in enacting may which be implied from language used or inferred because, opinion I dissent from the Court’s grounds policy or reasonableness.” although the Court has articulated a sound Senator, Inc. Cnty. v. Ada Equal- Bd. conclusion, technical basis for its I believe ization, 566, 570, 45, 138 Idaho 67 P.3d legislative history of I.C. 45-1802 dic- (2003). Perhaps my tates a different outcome. view Legislature’s of the action is somewhat influ- Each important word used in a statute is grown having up enced in the cattle- and must be considered: feeding From that vantage point, business. It is well established that required we are arguments Respondents advanced give word, every effect to clause and respect with process are sentence of a statute ... and the construc- understandable, they apparently as were for tiоn of a statute should adopted be which judge, presides the district who in farm coun- does deprive provisions not of the statute decision, try. I would affirm his which con- meaning. of their Respondents’ tinued the feed liens into the George Family W. Watkins Messenger, v. cattle that consumed the liened feed. 537, 540, 1385, 118 Idaho 797 P.2d It acknowledged must be that the (1990). Furthermore: employed in I.C. 45-1802 is not ideal from [Tjhis Court “willnot construe a statute standpoint obviously of either side. It way a which makes surplusage mere would have been better from standpoint provisions included therein.” Bradbury v. Respondents Legislature spe- had the Council, 107, Idaho Judicial 149 Idaho cifically stated that the feed liens continued 116, (2009) 38, 233 P.2d (quoting [P.3d] into the animals that consumed the feed. Dean, 568, 571-72, Sweitzer v. 118 Idaho legislative history, Based on the clearly it 27, (1990)); 798 P.2d See also Twin appears that understanding this was the Choules, Lakes Canal Co. v. proponents intent legislation. of the of the 254 P.3d (holding standpoint Viewed from Appellant, that courts not interpret a statute a is hаrd to determine what the second manner that would nullity”). “render sentence would mean absent an intention to Klemann, preserve v. the secured Roesch pro- status of the feed Although ducer or dealer. 307 P.3d both sides con- “It is assumed tend in the first legislature instance that the when the statute is enacts or amends unambiguous, practically it is impossible knowledge statute it has full existing judicial read it in that fashion. decisions and case law of the state.” Watkins, 118 Idaho at 797 P.2d at 1388. Irrigation City Pioneer Dist. Cald- liens, As with types other well, Court liberally should construe I.C. 45- (2012),this Court stated: objects 1802 so as to promote effect its and If a statute is because more justice. Metropolitan See Ins. Co. v. Life exists, than interpretation one reasonable Idaho, 489, 493, First Sec. Bank 94 Idaho of we look to rules of construction (1971). 1261, 1265 491 P.2d guidance. Payette Prop. River Owners Ass’n v. Bd. A Valley Cnty., Legislature’s Comm’rs review of the action in of of 551, 557, amending 976 P.2d 45-1802 in 1989 is instruc- (1999). sponsor the event that this tive. The legislation, Court is of the former required engage Newcomb, in statutоry Representative proposed construc Bruce tion, may we ascertain intent RS 22816 to add a second sentence to the context, from public policy the statute’s the one-sentence statute. The RS read: statute, support of the and the statute’s 45-1802. LIEN CREATED —WHO MAY Rhode, legislative history. State v. agricultural An commodity produc- HAVE. 459, 462, Idaho 988 P.2d agricultural er or an commodity dealer goal in interpreting give Our a agricultural product statute is “to who sells an has a lien purpose effect to the of agricultural product the statute and the on the or the language will not that the He stated product until bad. of the of the sale He said the says it will do. full. The lien created do what made in payment is meanings to include stretch the may attach definitions chapter in this “agri- agricultur- feels the term products. uses He a lot of the value to increase a bad term. product purchased product” is al cultural he product or whether his to the House floor and reported wаs The bill product purchased to uses approved. value, status his health or maintain difficulty encountered some legislation The actually in- without Agricultural considered the Senate when his creasing the value of minutes reflect the The Affairs Committee. product. following: Thus, proposed to add Rep. Newcomb legislation spoke to Rep. Newcomb existing statute. language to the underlined chapter of the Idaho amends the lien which intention the Statement described his He validity that a lien has provide code to Legislation defines feed Purpose 4: “This if the feed fed to may ‍‌​​​​​​‌​​‌‌​‌‌‌​​‌‌‌‌​‌​​​‌‌‌‌​​​‌​‌‌​‌‌​‌‌​‌‌‌‍attach even lien is lien so that when feed filed value to the animal animal does not add be valid would domestic livestock re- just Rep. maintains it. Newcomb but just maintained the though the feed even that had refuted ferred to a court case (emphasis value.” rather than added concept. added). Thus, purpose we know attempting to may it in difficulty consider Smyser pointed statute out the Senator Legislature. The the intent of the understanding determine intent or the either the Senator, at 49. bill, Idaho at suggest- in the language contained “agricul- clarification of the words ed that designated legislation H.B. 314 was line 15 and product” was needed on and, House it was considered when line Committee, spon- Agricultural Affairs bill recorded as follows: presentation was Association, sor’s Jensen, Idaho Bankers Berne it has Rep. past organization said that in the could neither Newcomb stated that his industry legislation in the feed since support oppose been understood nor consumer, that the they feed was sold to to understand what when were unable suggested animal which the bill feed lien would attach to the bill is. He intent of the This being redrafting fed—it had to add value. for clarification. was needs says if it does not add legislation that even Collins, Bank- attorney for the Idaho Pat words, value, if In other it is still valid. Association, informed the committee ers rather than just maintained the livestock thаt the drafter of the bill members value, a filed on the livestock adding language problems faced with two a valid lien. would be (2) the court existing chapter, and attorney representing An the Idaho Bankers by Rep. Newcomb. ease referred to spoke opposition: Association feed the lien on the court assumed cattle; Association, to avoid Collins, into the order Bankers continued Pat in- court ruled it didn’t legislation. He that result spoke opposition to this cattle; therefore, the value of the the definitions crease poor it is feels State, 35, 44, 46, 232 P.3d purpose Although that accom Stuart the statement of (2010), always placed panies piece legislation not be on a we reliance intent, legislative determining determining for purpose the best source legislative statement to the statement of Here, this Court has often looked purpose legislative Statement of Pur- intent. the Development, guidance. LLC In KGF pose with statements made before is consistent 524, City of Ketchum, 236 P.3d 1284 sponsor, legislative the bill’s committees (2010), purpose the statement of we looked to op- Legislature. respected of the While member Legisla accompanying a bill to determine efficacy position of the statements focus on statute, city’s as well as a ture’s intent behind accomplish language the stated the bill to purpose deter for an ordinance to statement of intent, dispute intended no as to the there is Id. at the intent behind ordinance. mine purpose of the bill. Likewise, 528-29, 236 P.3d at 1288-89. cattle. there is no lien Mr. Collins 45-1802. LIEN CREATED —WHO agricultural that he does not believe that the MAY An commodity stated HAVE. producer lien continues in the cattle that eats the or an feed; that has been dealer who sells an product added has a lien on the assumes that this lien does continue. It is of the sale opinion responding his that the bill is to an of the payment until court decision and is made in full. The ill-advised does not ac- chapter lien created in complish sponsor may attach what he thinks the seeks accomplish. uses agricultural product purchased to in- reported bill was Senate floor for crease the value his livestock or whether amendment, following amendment. agricultural product purchased he uses the suggestion Smyser, of Senator read: value, to maintain the health or status of actually his livestock without increasing SENATE AMENDMENTS product. value his TO H.B. NO. 314 Laws, 299, 1,§ 1989 Idaho Sess. pp. eh. AMENDMENTS TO SECTION instructs, Irrigation As Pioneer we bill, page printed On line of the ascertain intent from a statute’s ” “agricultural product delete: and insert: context. 153 Idaho at 288 P.3d at 814. “livestock”; “agricul- line delete testimony In legislators, his Rep. New- ” and insert: “livestock”. understanding comb stated the in the feed industry to be that “the feed lien would TITLE CORRECTIONS TO attach to the animal which being was fed.” Rep. Both Newcomb and the Idaho Bankers bill, page printed On line 5 of the Collins, attorney, Association Pat referenced delete “AGRICULTURAL PRODUCT” a court decision that “assumed that the lien “LIVESTOCK”; and insert: and in line cattle,” on the feed continued into the but delete “AGRICULTURAL PRODUCT” only when the feed increased the value of the and insert: “LIVESTOCK”. cattle. Absent an increase the value of the amendment, With that H.B. passed cattle, the feed lien did not continue. Unfor- Senate and was enacted into law. The title tunately, party neither identified the court legislation and text of the are as follows: decision. any event, purpose the stated AN ACT legislation was to amend I.C. 45-1802 “so RELATING TO AGRICULTURAL COM- that when a feed lien is filed on domestic DEALER MODITY OR PRODUCER livestock, the lien would be valid though even LIENS; AMENDING SECTION just the feed maintained the livestock rather CODE, IDAHO TO PROVIDE than added Having value.” been raised in THAT A LIEN MAY ATTACH industry, the livestock it is not difficult to THE WHETHER PURCHASER OF understand legislation. the context of this THE AGRICULTURAL PRODUCT industry obviously Those understood IT USES TO INCREASE THE VAL- that a feed lien is of little value if it is UE OF HIS LIVESTOCK OR extinguished at the moment the in- feed is HE WHETHER IT TO USES MAIN- gested by industry the animal. Those in the STATUS, THE TAIN CURRENT appear to have understood that the feed HEALTH, OR VALUE OF HIS LIVE- animal, ingested by incorporated into the STOCK. body, animal’s and added over and value Be It Enacted price аbove the of the animal. While feed State of Idaho: fat, obviously does not convert to muscle and ratio, 1. That SECTION Section Ida- on a bone one-to-one some of the feed Code, be, ho hereby undeniably bodily and the same is converts to substance and amended to read as follows: enhances the value the livestock. Of inter- H.B. 314 was considered the Sen- time H.B. 314 When that at the same est is the fact Committee, Smyser pointed out ate Senator way through legislative the making was its understanding difficulty of the intent of 45-1801(1) the process § was in the process, I.C. “agri- the new second sentence based on the specifically by H.B. 191 to being of amended language. product” cultural The Idaho as animal ... feed” product “a used include agreed. H.B. Association witnesses Bankers “agricultural prod- within the definition to substitute “live- 314 was then amended 1, Laws, ch. Idaho Sess. uct.” 1989 “agricultural product” in two stock” for final H.B. 191 received pp. 64445. provided that a places. legislation The then Aрril and H.B. No. 314 approval on “may regardless of the lien attach” legislative approval the follow- received final buyer “uses” it to increase the of the feed ing day. of his livestock or whether he “uses” it value industry was not alone in The value, maintain the health or status of his to understanding that a feed lien holding the context, livestock. In the cattle this would cattle, into the livestock consumed continued weight the and val- cover both feeder Pappas, the Honorable Jim D. by consumption the feed. As ue of which are increased feed, cattle, value, Bank- dairy then the District of Idaho’s Chief U.S. the whose by eating in a ruptcy Judge, observed case cited health and status are maintained The used in the second parties: the feed. both amended, is certain- sentence of H.B. as commodity also [a dealer] Evans Grain ly accomplish purpose the stated not ideal to given to argues that deference should be adequate. says it The statute that a but Sеcretary interpreta- of State’s the buyer may “attach” if the feed “uses” the tion of Idaho Code 45-1802. Secre- the value of his to increase tary form to used published of State the be say value. It not or to maintain their does by agricultural commodity pro- dealers “if to the feed is intended be used” for either perfect a lien. That ducers to assert forward-looking usage. purpose, indicating a designate claimant to form allows the lien Rather, employs present the tense. Simi- among milk the kinds of both livestock and larly, contemporaneously amended defini- property which the lien is asserted.5 product” specifically in- tion of cluded a “used” as animal feed. Goedhart, In Re Goedhart & 03.3 IBCR but, Again, past not “to be used” tense (Bankr.D.Idaho 2003). Judge While title of the enacted “used.” Pappas give any legal weight to to declined theme, indicating bill continues this that I.C. Secretary interpretation of State’s of I.C. designed provide “to that a 45-1802 was 45-1802, belief of Idaho’s obviоus attach whether grand prominent old stockman and most agricultural product it to uses increase the sheepherder a feed lien continued into —that value of his livestock or whether he uses the animal to which it was fed—demon- status, health, maintain the current or value reliability strates the truth and of the indus- of his livestock.” Newcomb, try understanding by Rep. stated pur- nature of the stat- It is difficult to determine what the as well as of I.C. 45-1802 pose ute. of the second sentence prescribe Judge likely referring require Secretary Pappas Secre- of State to C-l, filing agricultural commodity tary copy of an lien. of State’s then-current Form form for Laws, p. placed by Appellant. ch. which was in the record A 2000 Idaho Sess. form, July designed pro- Previously, filed with the of that such liens had been 2001 version pursuant county recorder. There is no evidence in the vide notice of liens 45-1802, variety record to indicate what information was re- to I.C. includes a wide filings county prior “proceeds” agricul- quired recorder under an with the animals covered as what Appellant to 2001. Nor does the record show lien. notes that the Secretary adopt prompted of State to in March of 2004 to delete Form C-l was revised might proceeds listings. likely C-l. It be It is that the Secre- March 2004 version Form observed, however, tary July the Goedhart decision of Stale devised 2001 version amend- response came out in 2003 and the Form C-l was form in to I.C. which was Legislature’s shortly ed amended in the 2000 session thereafter.

863 be, by if not to continue the lien into the counsel for one Respondents. would A livestock, decision, consuming Bingham County as the district de- also from farm convincing argument country, by termined. No has been written the Honorable Jon Shin- durling, is well anything that it clarifies or otherwise reasoned and therefore made wor- thy quoting: any meaningful purpose, if not read as has Respondents ‍‌​​​​​​‌​​‌‌​‌‌‌​​‌‌‌‌​‌​​​‌‌‌‌​​​‌​‌‌​‌‌​‌‌​‌‌‌‍Appellant’s posi- The contend. ambiguous second sentence of tion would render second sentence of I.C. provides 1802 for attachment in the lien essentially meaningless nulli- 45-1802 agricultural “used”, even if product —a is ty contrary statutory construction which in — the case of livestock feed would principles articulated in Roesch. Id. at 177- mean it if attaches even the feed is “eat- 78, 307 P.3d at 194-95. As the district court en”. provides that the “lien out, points Appellant’s interpretation Code, created at- the second sentence of the statute “adds agricultural taches to product ... on nothing, nothing,” and clarifies and is “the agricultural the date product physi- is very being superfluous.” definition of cally delivered to the or on the any payment due, date final is and un- hand, On the other the district court did paid (Em- ... whichever occurs last.” Respondent’s interpretation find the added.) phasis If the lien were to attach convincing: sentence to second be payment when the final unpaid, is due and convincing The most factor to this court is then to be consistent with I.C. implements how the second sentence which allows the lien to attach word, above, “uses.” As identified “uses” product “eaten,” of whether the is there triggering is the verb in the second sen- very likely possibility exists a por- that a tence; however, agricultural once the if tion not all of the already feed would product is “used” increase or maintain have been consumed the livestock when livestock, agricultural the value of the lien attaches. product longer is no in a state of livestock Common sense legislature dictates that the ingested feed —it has been and is not dis- would not extend a lien feed if the lien tinguishable from the livestock in- rights literally disappear would into the gested it. The second sentence indicates belly they of the cow before could attach to lien attaches even the feed. This would abe ridiculous result when triggering event occurs. To the strip and such a construction would court, this means that the any meaning sentence of whatsoever. feed, attaches to the if and continues сom- statute, interpreting a the Court is to mingled with through the live- “seek a sensible construction that will stock’s use —or consumption regardless — avoid an absurd result.” Gavica v. Han- in- son, 101 Idaho 608 P.2d value, creased the or maintained livestock’s (1980) (overruled grounds by on other its value. Bloom, Sterling v. above, As noted the definition of (1986)).6 contemporaneously amended Farms, Feld, Stander Inc. Bingham v. Todd specifically 1989 to include “a used County District Court Case No. CV-02-1506 as animal ... feed.” The second sentence of (December 2002). expand 45-1802 was intended to provided in the first sentence to attach Judge Shindurling goes on to make anoth- to animals that used the feed. good point: er strengthened by same conclusion was reached anoth- This conclusion analogy placed er district court decision statutorily the record to another created quote effectuating principle 6. The Gavica reads in full: "In Idaho at 608 P.2d at 863. This intent behind an stat- statutory construction was reiterated in Pfau ute, should, possible, indulging the Court if avoid Inc., Holdings, Comair in a construction which would cause P.3d Gavica, unduly absurd or harsh results.” § 28-9- pro- their unmanufactured states.” I.C. “agister lien” statute lien. Idaho’s 102(a)(34)(B) (D). Judge Shindurling pasturing livestock “persons vides compen- kind, provisions ... for their any have a lien then concludes that under these feeding pasturing] security such type [or in ... lien a sation “an is provided (I.C. § If the liens as herein livestock. in by interest created statute in favor person case) ... whose paid are not supplier in of the feed this favor may proceed to is created special such hen can be an interest in the debtor’s livestock public live- property at a licensed sell the (as product in an un- and milk a livestock ...” I.C. 45- auction market stock state.)” manufactured 805(b). time, Judge Shindurling At did not judge supports parallel com- The district in have the benefit of our decision Karle v. Vernon, v. 121 parison by citation to Killeen Visser, 804, 118 (2005), in P.3d 136 94, 97, P.2d 994 where Idaho 822 gave reading a broad to the which the Court said, ambiguous a statutе contains we “when “proceeds” definition of I.C. 28-9- UCC the other statutes in the language, we look to 102(a)(64). expand noted this to be “an We subject mat- relating act to the same title or proceeds” pro ed definition of and held para in an ter and read them in materia security promissory of a interest in a ceeds legislature what the in- effort to determine right note included the to collect on the note §§ Both 45-805 and 45-1802 tended.” I.C. 141 at and to file a suit for collection. Idaho within the same title of the are contained 806, 808, Judge 118 P.3d at 141. When statutory and both deal with Idaho Code Shindurling’s analysis light is considered in by a agister, liens. An who obtains lien Karle, holding in expansive of the rather is a in the feeding livestock does not have convincing proceeds somewhat more the—if but, rather, that con- feed the livestock right promissory of a note extend to the the feed.7 It is reasonable to sumes/uses note, collecting suing on the it is not that the intended a sim- conclude such a stretch to chаracterize the livestock § 45-1802. ilar result with I.C. proceeds a that consume feed to be the Legislature obviously intended that a The feed lien. producer or dealer who sold feed to a stock- theory accepts one that the Whether a if man would retain lien even the stockman proceeds considered the livestock should be party. the feed to another Idaho were to sell feed, theory or the that the lien contin- specifically grants a lien in Code animal that con- ues in and attaches to the proceeds. Respon- Counsel for feed, early of this sumes the an decision vigorously dent Hull Farms asserted this Court, Raymond, Hoebel means the lien follows the feed into the ani- (1928), tips P. 433 the balance favor of the “proceeds” mal and the animal is the pre-UCC a Respondents. This case involved attaches. little ex- which the lien promissory given by the lessee of farm note provided planation of this contention was ei- attorney, by a chattel land his secured briefing argument. or oral In his ther mortgage crop hay growing on the on a case, Judge in the Farms decision Stander property. Idaho at 266 P. at leased Shindurling performed a con- rather more Thereafter, court-appointed receiver theory. vincing analysis He possession management over took provides first noted that I.C. 28-9-109 including property, the leased almost agri- application of Article 9 of the UCC to subject attorney’s 28-9-109(a)(2). hay tons of that was to the in- cultural liens. He mortgage. attorney notified the re- Id. The dicates that an I.C. 45-1802 lien fits permitted that he would not be to feed ceiver definition of lien” hay possession without products,” to livestock his 9-102—an interest in “farm which “livestock, attorney. providing accounting Id. term is defined as born or un- born,” promised hay, account for the “products crops or livestock The receiver incorporated building. Similarly, a house or other does not lose his lien into materialman building upоn materialman’s lien attaches to the under I.C. lien, another Title 45 incorporation simply of his materials are of the liened material. because some by leads to an statute] which thereafter was consumed the live- absurd or unreasonably at 434. The result Id. at 266 P. receiver harsh disfavored.” stock. Hickman, attorney had State v. that the waived his contended 1098, 1104 allowing hay P.3d mortgage security by to be attorney that the to the livestock and fed Legislature clearly protect intended to from held payment entitled to funds not producers and deal- had been realized the receiver. The funds by providing ers them a that would take that consumed the sale of the cattle from priority lenders, over interests of hay. Id. The district held even where the was sold attorney lien in preferred had a the funds buyer. their It is to think that absurd receiver, by deducting the after certain held Legislature in place would the hands of the outstanding against amounts for labor liens buyer ability unilaterally the to terminatе the hay Supreme crop. the Id. The Court af- rights producer or simply the dealer According judgment. firmed the to the by feeding I am his livestock. aware of no Court: other lien or interest available under hay It was shown and found that the was the laws of the of Idaho that State can be fed, honestly [debtor’s] that the live stock unilaterally at the sole terminated instance of preserved improved thereby, were and and simply the debtor. That does not make that from the the fund [realized livestock] adopt Appellant’s sense. To interpreta- the improvement. was the of such direct result statute, Legislature tion of engaged the the property That in all an- was conscience meaningless by in a somewhat act enacting impressed swerable for the and with a debt chapter 18 of place, Title 45 the first running mortgagee____ lien or trust to the except in the where instance the case, proceeds hay the instant the buyer kept either commodity, or sold the and by were the receiver converted into beef passage the merely of H.B. No. was an horseflesh, subject and were ... and to in futility. exercise the trust Id. at 266 P. undertaken. I read Rep. this situation otherwise. New- legislation remedy comb introduced to his Thus, against attorney’s hay the the by concern raised decision. As he continued that into the livestock consumed stated, it had been understood the indus- and, hay further, proceeds the into the try that a feed lien continued into the animal sale of the livestock. The same result should that understanding consumed the feed. This here, regardless obtain of whether one may by well have been aided the Hoebel theory adopts the asserted Hull decision, Legislature presumed which the theory Farms or the that the feed lien con- to have known about when I.C. tinued into that the livestock consumed the initially was enacted in 1983. 1983 Idaho feed. Laws, 202, § p. Session ch. A judge Further, the apparently the fact that lien continues had held that the lien did not proceеds upon into the of the feed would continue into the unless the sale animal value of that support Legislature Rep. the the the animal conclusion was enhanced. Newcomb’s feed, legislation designed that when intended the consumed was allow the lien to incorporated animal attach the and some of into of whether the feed en- bodily structure, subject still hanced the animal simply the to the value of the possible Legis- lien. What could the maintained upon reason its health and value. Based continuing representations, lature have lien if his had for the had a sold, terminating legislation feed is it if choice. It but the feed is could to ac- enact Use/consumption complish purpose represented by Rep. consumed? of feed is its or, purpose, obviously having It what intended not resale. Newcomb learned the under- was, standing industry gone could have assumed the lien would continue into the Otherwise, way legislation adopted animal that ate the an еx- the other feed. obtain, ceedingly contrary contrary. Legislature approved leg- harsh result would Legislature has principle construction islation. The amended I.C. “[a] [of (2000 remedy, the stat- problem was intended two times —once 1133) Laws, p. purpose, industry understanding, ch. Idaho Sess. ed (2001 Laws, ch. Idaho Sess. in 2001 once intent it is not difficult to read the 127980), pur- both for technical pp. by Rep. to be as stated Newcomb and as Legis- occasion did the poses on neither by Respondents. contended —but change opportunity lature take Irrigation leg- Pioneer also instructs that by Rep. in 1989 understanding expressed public intent be derived from islative Otherwise, we don’t know how Newcomb. support policy the statute. 153 Idaho at because, applied been unfor- has statute at Respondents point 814. As parties placed evidence tunately, none of regard. in that out: in the record Secretary that the of State We do know dairy operation If a farm or other livestock in 2001 that confirmed the adopted a form feed, adequate cannot obtain its livestock understanding legislation’s proponent produce products will not or off- the two district court decisions spring and will not maintain their value. of this brought to the attention Court —one producers commodities Shindurling pres- in 2002 and the by Judge directly and dealers to the value of “[add] by Judge Bevan 2012—ruled ent one property by providing the of another” the out, Respondents point As the same fashion. livestock need to “main- materials owners interpretation only plausible of their live- tain” or “increase” the value accomplished by H.B. 314 is that amendment why legisla- explains stock. This also of whether a feed lien it addresses the issue provide ture would for the lien to needed to increase the value livestock priority competing security over a take They argue to the livestock. order to attach If the lien did interest 45-1805. upon predicate “the fact that this is based priority сompeting not take over a lien does in fact attach to the that the feed interest, it would be of little value because If it did not attach to the live- livestock. in the event of a default the seller of stock, why if would matter the livestock paid get livestock feed could never unless maintained, added, weight?” or lost It paid Granting loan was in full. bank’s kept should be mind that H.B. 191 was higher priority provides an in- to the lien legislative process very at the time H.B. suppliers provide inputs centive for to 314 was under consideration. H.B. necessary operation to clause, for the livestock emergency ap-

which had an was stay in It proved by Legislature April on business. is reasonable infer H.B. It legislature protect and went into effect before 314. that intended to prod- amended the definition of provide interests of farmers who feed to specifically include commodities that livestock, uct” and that its 1989 owners “mixed, any rolled or combined in fash- were that amendment was intendеd to ensure by any means to create a used ion or the lien would attach to the livestock or to animal, poultry Combining as or fish feed.” products regardless of how the any reasonably interpreted fashion can be feed was used. combining bodily to mean structure words, provided In other the feed farmers an animal to which the feed was fed. This keeps dealers the animals ‍‌​​​​​​‌​​‌‌​‌‌‌​​‌‌‌‌​‌​​​‌‌‌‌​​​‌​‌‌​‌‌​‌‌​‌‌‌‍alive fact that the supported conclusion is and enhances their value to the benefit of “used,” defined feed as a lender. It is both the owner the secured not “to be used.” Feed is used when is fed interesting Appellant to note that the amount animal, Then, to an not before. H.B. 314 live- received from the sale of some of the utilizes this revised definition of ($211,957.58) slightly more than stock product to state that the lien attaches re- ($185,- Respondents furnished in feed gardless of how the “uses” the 404.71). Respondents Had the not furnished product. Again, the tense of the word is feed, may not have survived the livestock importаnt. one considers the words When legislation, to sale time. used the context Having grown up cattle-feeding in the 318 P.3d 636 business, Respondents’ argument certainly Idaho, Plaintiff-Respondent, STATE of father, Jones, My Henry rings pur- true. wheat, barley, chased animal and corn feed— (for OSTERHOUDT, Franklin Ward silage) produc- hundreds of feed —from Defendant-Appellant. ers. The feed enhanced the value of the any lending cattle well above monies that No. 39287. purchase institutions have advanced to Appeals Court of of Idaho. interpretation An them. of I.C. disregards the value of the enhancement Nov. livestock, or even the maintenance of their Review Denied Feb. value, shortchanges producers. these feed however, argues, Appellant lending industry plagued by to the livestock will be

uncertainty instability protection if some producers.

is afforded to feed as out,

Respondents point “lending institutions stronger position

are in a much protect suppliers,

themselves than feed who more not, simply opera-

often than run small farm

tions whose continued depends existence

payment year’s They for that crops.” note lender can “[a] obtain financial informa- prior

tion from the making borrower money

loan and confirm that the it lends for actually spent

feed is prior on feed.” With a

perfected security livestock, interest placed

the lender is entitled to have its name any payment

on check for feed and therefore leverage

has some supplier. vis-a-vis the feed

And, industry since the appar- has

ently operating been in accord with the dis- holding, likely

trict court’s great is not

instability uncertainty injected will be system practice

into the if the continues. reasons, foregoing

For the I would affirm

the district court. it would cer-

tainly upon be incumbent par- interested bring

ties to Legisla- this matter back to the

ture certainty so as to obtain absolute as to producers

the status of lenders and feed

this issue.

Case Details

Case Name: Farmers National Bank v. Green River Dairy, LLC

Court Name: Idaho Supreme Court

Date Published: Jan 24, 2014

Citation: 318 P.3d 622

Docket Number: 40101

Court Abbreviation: Idaho