Opinion ID: 1188848
Heading Depth: 1
Heading Rank: 8

Heading: the district court properly granted summary judgment on the issue of the priority of the competing security interests

Text: The district court ruled that the Bank was entitled to the money in the trust fund as a matter of law according to I.C. § 28-9-312(5) because the Bank was the first to file its financing statement. [1] The district court implicitly rejected the Shireys' argument that the Bank's priority in the cattle would be subordinated to the Shireys' once the initial $185,000 was repaid and that it was, in fact, repaid when the Bank renewed the Allens' loan, by extending the priority to the future advances made by the Bank to the Allens. Similarly, the district court implicitly rejected the Shireys' argument that the new monies advanced to the Allens beyond the original $185,000 were not contemplated by the sale agreement and thus did not enjoy the same priority date represented by the original financing statement. The Shireys challenge the district court's position, asserting that the Bank's legitimate priority in the cattle has long since expired, and the Bank's illegitimate priority in the equipment has also expired with the renewal of the original loan. The district court relied on I.C. § 28-9-312(7) to extend the Bank's priority to the future advances made to the Allens in the amount of more than $500,000. Idaho Code § 28-9-312(7) provides that [i]f future advances are made while a security interest is perfected by filing ..., the security interest has the same priority for the purposes of subsection (5) with respect to the future advances as it does with respect to the first advance. Idaho Code § 28-9-204 provides that obligations covered by a security agreement may include future advances or other value. The official comment to the statute stresses that the security agreement must so provide. In this case, the Bank's security agreement mentions all livestock and feed now owned or hereinafter acquired. The district court equated the term after-acquired with the term future advances, reasoning that the latter was used to purchase the former. Thus, according to the district court, the security agreement provided for future advances. We hold that the after-acquired property clause is not sufficient to cover future advances, but that a related clause in the security agreement, namely, that the security interest is to secure payment and performance of the liabilities and obligations of Debtor to Secured Party of every kind and description ... due or to become due, now existing or hereafter arising[,] is sufficient. Given this fact, coupled with the undisputed fact that the Bank properly filed the first security interest in the collateral, the district court did not err in ruling that the Bank had a priority interest in the collateral as a matter of law and that the priority extended to future advances.