1 – Opinion and Order 

UNITED STATES DISTRICT COURT 

DISTRICT OF OREGON 

PORTLAND DIVISION

NORTHWEST BANK f/k/a NORTHWEST 

SAVINGS BANK, a Pennsylvania state-chartered 

savings association, 

Plaintiff, 

v. 

MCKEE FAMILY FARMS, INC. et al., 

Defendants. 

 3:15-cv-01576-MO 

 OPINION AND ORDER 

MOSMAN, J., 

Plaintiff filed two Motions for Summary Judgment [174, 182]. Defendant Integrated 

Seed Growers [173] and Creekside Valley Farms and KCK Farms [176] filed Cross Motions for 

Summary Judgment. On April 20, 2016, I heard oral argument from the parties on the motions. 

I requested supplemental briefing on three issue: 1) whether Northwest Bank was entitled to 

notice of the extensions of the growers’ grain producer liens; 2) whether the rule for possessory 

liens articulated in Yellow Manufacturng. Acceptance Corp. v. Bristol, 193 Or. 24, 236 P.2d 939 

(1951). applies to this case; and 3) whether this case should proceed to a bench trial or a jury 

trial. I write now to clarify my positions on these three issues. 

For the reasons I articulated at oral argument and outline below, I DENY Integrated Seed 

Growers’ Motion for Summary Judgment [173] and Northwest Bank’s Motion for Summary 

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2 – Opinion and Order 

Judgment Against Group 1 Defendants [174]. I GRANT in part and DENY in part Creekside 

Valley Farms’ and KCK Farms’ Motion for Summary Judgment [176]. I agree with Defendants’ 

argument in their supplemental briefing that the notice provisions for extending grain producer 

liens requires only that growers send notice to those who have filed with Oregon’s Secretary of 

State. Based on this, I GRANT in part Creekside’s Motion and find Creekside has a priority lien 

for the seed on which it had timely filed a proper extension even though it did not provide notice 

to Northwest Bank. I DENY Northwest Bank’s Motion for Summary Judgment against Group 2 

and Group 3 Defendants [182]. While I find that Yellow Manufacturing applies to this case, the 

agency role of the warehouses and the validity of the Bank’s security interest remain to be 

considered at trial. I also rule that the trial is to be a bench trial. 

Discussion 

A. Notice of Extension on Grain Producer Lien 

Plaintiff argues Defendants’ grain producer liens (“GPLs”) cannot have priority over 

Plaintiff’s security interest because Defendants did not properly notify Plaintiff when the 

Defendants extended their GPLs. Defendants argue the notice provisions of ORS § 87.762 and 

ORS § 87.252 only apply to entities which have to register with the Secretary of State. Since the 

parties agree the Bank did not have to register, it follows that it is not entitled to notice. I agree 

with Defendants that to properly extend their liens, the growers need only have notified those 

registered with the Oregon Secretary of State. 

There are two different ways of filing proper extensions with two slightly different 

requirements of notice. One notice requirement states “the lien claimant shall send a copy of the 

notice to all holders of security interests in the chattel to be charged with the lien who duly 

perfected such security interests by filing notice thereof with the Secretary of State.” OR. REV.

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3 – Opinion and Order 

STAT. ANN. § 87.252 (West) (emphasis added). Under this language, the Bank was not entitled 

to notice from the growers since it had not filed with the Secretary of State. 

The other notice statute says “[i]f an agricultural producer files a notice of lien under this 

section, the producer shall send notice to all persons that have filed a financing statement under 

ORS chapter 79 that perfects a security interest in all or part of the inventory of the purchaser or 

the proceeds from the sale of the inventory.” OR. REV. STAT. ANN. § 87.762(3) (West) (emphasis 

added). Plaintiff could argue Chapter 79 includes the choice of law provisions which directs 

Plaintiff to file in Pennsylvania and because the Bank did so, it would be an entity “that filed a 

financing statement under ORS Chapter 79.” 

However, this interpretation is significantly more strained than the one Defendants 

advance. For the most part, Chapter 79 explains how to file a financing statement in Oregon 

with the Oregon Secretary of State. The central topic of Chapter 79 is how to file in Oregon and 

suggests the notice provision by saying “persons that have filed a financing statement under ORS 

chapter 79” meant persons that have filed a financing statement in Oregon. This interpretation is 

further supported by a later part of the code which references the notice provision for GPLs and 

states “if the Secretary of State receives notice of a lien created under the [grain producer’s lien 

statute], the Secretary of State, upon request, shall furnish the person who filed the lien with a list 

of persons who have filed a financing statement under ORS 79.0501 that perfects a security 

interest in the inventory, proceeds or accounts receivable of the lien debtor or purchaser.” OR.

REV. STAT. ANN. § 87.930 (West). This statute, when read in conjunction with the statute on 

notice provision, adds context to “filed a financing statement under Chapter 79” which suggests 

the notice provision may apply only to those who have filed in Oregon. 

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4 – Opinion and Order 

Finally, the existence of a parallel notice provision of ORS § 87.252 requiring notice only 

to those who have filed with the Oregon Secretary of State suggests ORS § 87.762(3) should be 

similarly restricted. It would make little sense for one statute to require growers to pursue 

financing statements in every state while another statute requires growers only to consider 

financing statements filed in Oregon. Because of the text, the surrounding statutes, and the 

alternative notice provision, I find the growers were only required to notify those who had filed a 

financing statement with the Oregon Secretary of State. 

B. Possessory Liens and Relinquishment of Possession 

At oral argument, the parties disagreed about whether relinquishment of actual 

possession of the radish seeds fatally compromised the Defendants’ possessory liens. In 

particular, I asked the parties to reconcile the approach of Yellow Manufacturing. Acceptance 

Corp. v. Bristol, 193 Or. 24, 236 P.2d 939 (1951) and McGregor Co. v. Heritage, 291 Or. 420, 

631 P.2d 1355 (1981). 

Our case straddles the issues presented in McGregor and Yellow Manufacturing. The 

question in McGregor was whether the assignment of a claim rooted in a possessory lien, 

together with a transfer of possession of the collateral that supported the claim, destroyed the 

priority of the possessory lien. The question in Yellow Manufacturing was whether a lienholder 

returning possession of the collateral to the debtor destroyed the priority of the lienholder’s lien. 

If at trial I determine McKee is CCS’s agent, our case will be a mirror to Yellow Manufacturing 

because the lienholder will have delivered the collateral to the debtor and the growers will likely 

have forfeited their possessory lien. However, if at trial it becomes clear that McKee is neither 

an agent of CCS nor of the growers, then the question is whether a creditor’s transfer of the 

collateral to a third party destroys that creditor’s priority status with respect to other creditors. 

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5 – Opinion and Order 

Yellow Manufacturing is clear that “the common-law lien . . . on a chattel can be asserted 

against a third person only when the property is retained in the actual and continuous possession 

of the lien claimant, his agent or servant.” Yellow Manufacturing, 193 Or. at 40 (quoting Rahm v. 

Viall, 185 Ill. App. 425 (1914)). However, the ultimate question before the Yellow 

Manufacturing court was whether transferring the collateral to the owner destroyed priority with 

respect to a third party. 

Defendants argue McGregor addresses the question at issue in our case: whether transfer 

to a third party (rather than to the debtor) also destroys the initial lienholder’s priority. The 

McGregor court distinguishes Yellow Manufacturing based on to whom the collateral was 

transferred. McGregor noted that in Yellow Manufacturing “the claimant of the lien returned the 

collateral to the debtor, whereas in this case at the same time that the claim was assigned, the 

security in the possession of the assignor was transferred to the assignee along with it and was 

not returned to the debtor.” McGregor, 291 Or. at 426. However, relying on this dicta to 

establish McGregor as the baseline rule for the relationship between third party transfers and 

possessory liens is to ignore the importance of the language “at the same time that the claim was 

assigned.” Id. The assignment of the creditor’s claim is vitally important to the logic of 

McGregor. In McGregor the creditor both transferred possession of the collateral and assigned 

its interest in the lien to the same third-party. Id. The appellate court in McGregor 

acknowledges this difference when it states “[t]his is not a case where the security in which the 

claimant asserts a possessory lien is transferred to a third party and separated from the claim.” 

McGregor Co. v. Heritage, 49 Or. App. 489, 502, 620 P.2d 488, 495 (1980), modified, 291 Or. 

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420, 631 P.2d 1355 (1981). By contrast, in our case the growers have only transferred 

possession and are still claiming rights in the lien.1

 

Indeed, the law applied by the Oregon Supreme Court in McGregor suggests the Court 

focused its analysis on the assignment rather than the transfer of possession. The Court noted 

“as for reliance . . . upon the rule as stated in [Corpus Juris Secundum], we prefer the reasoning 

of the Court of Appeals . . . which . . . adopted in substance . . . the rule as stated in Restatement 

of Security.” McGregor, 291 Or. at 426. The CJS language directly contemplated only transfer 

of possession of the collateral; in contrast the Restatement of Security looked only at the 

assignment of claims secured by possessory liens. Id. Since there is no assignment of claim in 

our case, the logical underpinnings that lead the McGregor court to its holding that “the lien was 

not lost by the assignment of that claim, together with a transfer of possession of the funds” is 

limited, at best. Id. at 426-27. I do not consider it binding precedent on the question of whether 

a transfer of collateral to a third party destroys a creditor’s possessory lien. 

Defendants try to distinguish Yellow Manufacturing on four other grounds. First, by 

arguing that possession had not been relinquished because it was “only for the limited purposes 

of cleaning or testing.” Possession had been relinquished when the growers gave up the seed, 

whatever the reasons. Defendants argue relinquishment of possession did not occur; they do not 

make, and I do not address, the argument that possession has only been conditionally

relinquished. 

Second, Defendants argue Yellow Manufacturing was based on a statute that was more 

protective toward possessory liens than the common law. In actuality, Yellow Manufacturing 

relied extensively on the common law. See Yellow Mfg. at 40 (“the common-law lien . . . on a 

 

1

 One could argue that for Group 2 defendants, the claim and the possession have been reunited. No party has 

argued that, once extinguished, combining the claim and the possession of collateral will re-establish priority. 

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7 – Opinion and Order 

chattel can be asserted against a third person only when the property is retained in the actual and 

continuous possession of the lien claimant, his agent or servant.”). However, even without the 

statements in Yellow Manufacturing, the common law does not support the idea of constructive 

possession (as would be necessary to succeed on this argument). See 53 C.J.S. Liens, s 17d(3) 

(1948) (a “lien dependent on possession is waived or lost by the lienholder voluntarily and 

unconditionally parting with possession or control of the property to which it attaches; and such 

lien cannot be restored thereafter by resumption of possession”). 

Third, Defendants argue Yellow Manufacturing looked at a possessory lien in conjunction 

with a chattel mortgage which, they argue, has heightened protections. Looking exclusively at 

possessory common law liens it is still true that “there is no doctrine of constructive possession 

that will support a common-law, possessory lien, except when actual possession has been 

involuntarily relinquished.”

 53 C.J.S. Liens § 12. 

Finally, Defendants argue I should give their liens priority because they “substantially 

complied” with the statutes as did the lienholder in McGregor. In McGregor, the lienholder put 

down the individual’s name “doing business as” the corporation rather than just naming the 

corporation. McGregor Co., 291 Or. at 424. All parties were aware of whom the lienholder was 

referencing. The court found it was a de minimus violation and found the lienholder should 

retain priority because of substantial compliance with the requirements. Id. Failure to retain 

possession is more than a de minimus violation of a possessory lien. I find that Yellow 

Manufacturing applies and Defendants have forfeited their possessory liens unless they can show 

McKee is their agent. 

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8 – Opinion and Order 

C. Bench Trial 

Declaratory judgment actions are inherently neither equitable nor legal; the nature of the 

underlying dispute determines whether a jury trial is available. See Beacon Theatres, Inc. v. 

Westover, 359 U.S. 500 (1959). Therefore, this case will be a bench trial if the priority of liens is 

an equitable question, but a jury trial if it is a legal question. 

Defendants first argue this case should be defined as one for the recovery of personal or 

real property. This argument ignores the long history of examining actions involving liens as 

something other than simply the recovery of personal properly. Perera Co. v. Goldstone, 491 

F.2d 386, 387 (9th Cir. 1974) (“the enforcement of liens is a long established and well 

recognized function of the courts of equity”); Exact Software N. Am., Inc. v. DeMoisey, 718 F.3d 

535, 546 (6th Cir. 2013) (“actions to enforce liens remain equitable actions, even when the 

dispute that led to the lien implicates the meaning of the underlying contract.”); Damsky v. 

Zavatt, 289 F.2d 46, 53 (2d Cir. 1961) (“foreclosure of the mortgagor’s equity of redemption was 

an established head of equity jurisdiction well before 1791”). 

The Ninth Circuit has declared an enforcement action of a lien is an equitable action. 

Perera Co., 491 F.2d at 387. Other district courts have specifically found determining the 

priority of liens to be an equitable question. See In re Plaza Resort at Palmas, Inc., 488 B.R. 50, 

56 (D.P.R. 2013) (“determining priority of [a] lien is still equitable even though it is influenced 

by state law”); In re Glen Eagle Square, Inc., 132 B.R. 106, 114 (Bankr. E.D. Pa.), aff’d sub 

nom. Matter of Glen Eagle Square, Inc., 132 B.R. 115 (E.D. Pa. 1991) (noting the “clearlyequitable issue of the priority of liens”); In re Fox Bros., Inc., 142 B.R. 320, 322 (Bankr. E.D. 

Ark. 1992) (holding the case as a whole required a jury trial “despite the fact that the intervenor 

also requests equitable subordination and determination of lien priority”). I find that the 

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9 – Opinion and Order 

underlying dispute is determining the validity and priority of different liens and, as such, presents 

an equitable question to be resolved by a bench trial. 

Conclusion 

For the foregoing reasons, as well as the reasons I articulated at oral argument, I DENY 

Integrated Seed Growers’ Motion for Summary Judgment [173] and Northwest Bank’s Motion 

for Summary Judgment Against Group 1 Defendants [174]. I GRANT in part and DENY in part 

Creekside Valley Farms’ and KCK Farms’ Motion for Summary Judgment [176]. I agree with 

Defendants’ argument in their supplemental briefing that the notice provisions for extending 

grain producer liens requires only that growers send notice to those who have filed with 

Oregon’s Secretary of State. Based on this, I GRANT in part Creekside’s Motion and find 

Creekside has a priority lien for the seed on which it had timely filed a proper extension even 

though it did not provide notice to Northwest Bank. I DENY Northwest Bank’s Motion for 

Summary Judgment against Group 2 and Group 3 Defendants [182]. While I find that Yellow 

Manufacturing applies to this case, the agency role of the warehouses and the validity of the 

Bank’s security interest remain to be considered at trial. I also rule that the trial is to be a bench 

trial. 

DATED this 12 day of May, 2016. 

 /s/ Michael W. Mosman 

 MICHAEL W. MOSMAN 

 Chief United States District Judge 

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