Opinion ID: 2196679
Heading Depth: 2
Heading Rank: 2

Heading: Present Sale.

Text: Even assuming FTI is a buyer in the ordinary course of business, PCA claims FTI is not protected by subsection 554.9307(4)(a) because the sale of corn occurred after FTI received the required notice of its security interest in McGraw's crop. See Iowa Code § 554.9307(4)(a) (buyer must receive written notice within one year before the sale of farm products). FTI contends that the contracts represented present sales of crops then growing; thus the sales occurred prior to PCA's notice. Id. §§ 554.2106(1), .2107(2). PCA counters that a sale does not occur until title passes to the buyer and title usually passes at the time of the delivery of the goods. Id. §§ 554.2106(1), .2401(1), (2). Under this record PCA is correct. In August 1991 McGraw executed two grain contracts with FTI. The first contract provided that McGraw Farms has this day contracted and sold 5000 bushels of corn ... to be delivered October 91. The second contract was for 15,000 bushels, also for October delivery. The contracts consisted of one page preprinted forms where the parties filled in most of the blanks with the terms and signed at the bottom of the page. Payment would be made after delivery. On September 12 FTI received written notice of PCA's security interest in McGraw's crops. The corn was delivered on three occasions in October. Article 2 of the UCC is controlling on this issue. See id. §§ 554.2101-.2725 (sales of goods). Under section 554.2106(1) a contract for the sale of goods includes both a present sale of goods and a contract to sell goods at a future time. A sale consists in the passing of title from the seller to the buyer for a price (section 554.2401). A present sale means a sale which is accomplished by the making of a contract. Further, title to goods cannot pass until the goods are both existing and identified. Id. §§ 554.2105(2), .2401(1), .2501(1). Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes the seller's performance with reference to the physical delivery of the goods.... Id. § 554.2401(2). Therefore, a present sale of growing crops can be made by identification of the particular goods as goods to which the contract refers and by either delivery of the goods or by an express agreement that title will pass at the time the contract is executed. A present sale of goods by contract is often used where nonmovable goods are involved. See, e.g., Lubecki v. Omega Logging, Inc., 674 F.Supp. 501, 506-07 (W.D.Pa. 1987) (title to standing timber passed when contract was made because parties intended severance to begin immediately); Groth v. Stillson, 174 N.W.2d 596, 598 (Mich.App. 1969) (same). The intent to effectuate a present sale must be expressly stated in the contract. Iowa Code § 554.2401(1), (2); see, e.g., Cullipher v. Lindsey Rice Mill, Inc., 730 F.Supp. 970, 972 (W.D.Ark.1990) (The undersigned seller of the grain indicated on this contract fully understands that he or she is transferring title of said grain to the buyer and is relinquishing all control of the grain to the buyer.). We find no evidence of this requisite intent except the rather plain and usual terms of the invoice.... Crocker Nat'l Bank v. Ideco Div. of Dresser Indus., Inc., 660 F.Supp. 186, 190 (S.D.Tex.1987). Further, there is no language in the contracts identifying the corn to be sold or even describing the land upon which the crops are growing. Iowa Code § 554.2501(1); see also In re Sunriver Farms, Inc., 27 B.R. 655, 664 (Bankr.D.Or.1982). Even fungible goods must be identified as a portion of an identified bulk of fungible goods. Iowa Code § 554.2105(4); see also Reeves v. Pillsbury Co., 229 Kan. 423, 625 P.2d 440, 445 (1981). We conclude FTI's grain contracts failed to satisfy either requirement of a present sale. Thus, FTI received notice of PCA's security interest before the sale occurred. The court therefore correctly concluded that section 554.9307(4)(a) did not permit FTI to take the 1991 crop proceeds free of PCA's security interest.