Case Title: Gold Kist, Inc. v. Farmers and Merchants Bank

Citation: 425 So. 2d 452

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1983-01-14T00:00:00Z

Document:
425 So. 2d 452 (1983)
GOLD KIST, INC.
v.
FARMERS AND MERCHANTS BANK.
81-928.

Supreme Court of Alabama.
January 14, 1983.
John Earle Chason of Chason & Chason, Bay Minette, for appellant.
Margaret G. Thomas of Murchison & Thomas, Foley, for appellee.
TORBERT, Chief Justice.
The plaintiff below, Farmers and Merchants Bank (Farmers), instituted these proceedings against Harry Hedges and Gold Kist, Inc. This appeal concerns only the disposition of the case against Gold Kist.
In 1980, Gold Kist purchased soybeans from Harry Hedges. Farmers asserted that the soybeans, purchased by Gold Kist, were collateral for a loan to Hedges, that they were subject to a perfected security interest in favor of Farmers, that the sale to Gold Kist was improper, and that Gold Kist's actions amounted to a conversion of the property. The trial court held that Gold Kist was liable to Farmers in the amount of $10,457.30 for conversion of the soybeans.
Testimony at the trial indicated that Hedges executed two notes to Farmers, one of which was secured by "two hundred fifty acres of soybeans." The security agreement described the collateral as: "All crops grown and harvested in 1980 (specifically 250 acres of soybeans) on land rented or leased in Baldwin County, Alabama, but not limited to the above." Farmers filed a financing statement which contained the same description. At issue here is whether the security agreement and financing statement gave Farmers a valid perfected security interest in the soybeans grown by Hedges and purchased by Gold Kist.
The UCC makes the following provisions for the creation of a security interest in crops:
Code 1975, § 7-9-203. That security interest is perfected by filing a financing statement which includes the following information:
Code 1975, § 7-9-402(1). (Emphasis added.) As can be seen from these two provisions, in the case of crops, the description of the real estate is required to create a security interest; and for perfection, both the name of the record owner and the description of the real estate is required.
In the case before us, the description is 250 acres of soybeans on land rented or leased in Baldwin County. Gold Kist asserts that this description is insufficient to create and perfect a security interest in these crops. We agree.
Farmers, relying on the following provisions of the Code, maintains that the description given suffices.
Code 1975, § 7-9-110.
Code 1975, § 7-9-402(5). The Alabama cases have generally rejected any requirement that a description of collateral be extremely exact and detailed. See e.g., Associates Capital Corp. v. Bank of Huntsville, 49 Ala.App. 523, 274 So. 2d 80 (1973). However, in the case of farm products, greater specificity in the description of the real estate appears justified.
Virtually all courts which have considered a description such as this one have held the description to be insufficient. In Piggott State Bank v. Pollard Gin Co., 243 Ark. 159, 419 S.W.2d 120 (1976), the court held the following description to be insufficient:
419 S.W.2d  at 121.
The same result was also reached in Chanute Production Credit Ass'n v. Weir Grain and Supply, Inc., 210 Kan. 181, 499 P.2d 517 (1972). In that case, the following description had been used:
499 P.2d  at 518.
The appellee has not called to our attention any case concerning crops in any jurisdiction which has held that a description of this nature suffices to either create a valid security interest, or to perfect it. Sections 7-9-110 and 7-9-402(5), while calling for a liberal reading, do not allow the secured party this kind of latitude with the description. Further it is clear that for perfection, in addition to the description, the name of the record owner is required. The documents completely fail to name the record owner of the real estate.
Thus, we hold that the trial court was in error in holding that Farmers had a perfected security interest and that Gold Kist was liable in the amount of $10,457.30. This case is due to be reversed and remanded.
REVERSED AND REMANDED.
MADDOX, JONES, SHORES and ADAMS, JJ., concur.