Court Opinion

ID: 9689972
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:50:37.159798+00
Date Added: 2024-06-11T18:18:52.958782
License: Public Domain

Riley, C.J.
(concurring). While I agree with the majority that Articles 7 and 91 of the Uniform Commercial Code do not protect plaintiff in the instant case, I write separately because I disagree with its decision to avoid classifying the collateral (the livestock) as either farm products or inventory for purposes of Article 9.2
It is axiomatic that in order to determine the priority of a debtor’s creditors under Article 9, we must first classify the collateral. As the majority notes, classifying the livestock as either farm products or inventory determines whether the "farm products” exception within § 9-307(1) exempts the Michigan Livestock Exchange from the general language of § 9-307(1) which provides that "a buyer in the ordinary course of business . . . takes free of a security interest created by his . . . seller . . . In the instant case, unless the "farm products” exception exempts the exchange from § 9-307(1), then Article 9 arguably shelters the exchange from conversion liability.
However, in my opinion, livestock owned by a debtor, but temporarily in the hands of an auctioneer, does not destroy an otherwise valid perfected security interest. See First Nat'l Bank in Lenox v *309Lamoni Livestock Sales Co, 417 NW2d 443 (Iowa, 1987); In re Roberts, 38 BR 128 (D Kan, 1984); but see United States v Progressive Farmers Marketing Agency, 788 F2d 1327 (CA 8, 1986). Presumably, in order to conclude that the livestock constituted inventory, the majority would have to rely upon Official Comment 4 to § 9-109.3 Two federal courts interpreting state law reached this result.
For example, in Progressive Farmers, supra, the Court of Appeals for the Eighth Circuit concluded under Iowa law that Official Comment 4 expressed the intention of the drafters to reclassify collateral in the hands of an auctioneer as inventory, rather than farm products. I disagree.
In the year following the Progressive Farmers decision, the Iowa Supreme Court expressly rejected the rationale and conclusion reached by the Progressive Farmers court. First Nat'l Bank in Lenox, supra. See also In re Roberts, supra. I prefer to adopt the reasoning of the Iowa Supreme Court’s interpretation of § 9-307(1) rather than the attempt by the Court of Appeals for the Eighth Circuit to speculate how the Iowa Supreme Court would decide the issue.
Similarly, the revised version of § 9-307 in Michigan, 1985 PA 199, supports the conclusion that the legislators intended to classify livestock in the hands of auctioneers as farm products and not inventory under the older version of § 9-307. In addressing the proposed amendment to § 9-307, the Journal of the House referred to HB 362 (1985 PA 199) as the "clear title exception under certain circumstances for all farm products; provided for.” 1985 Journal of the House 4524 (emphasis added). Similarly, §§9-307(9), (11) and (12) continuously describe collateral in the possession of a commis*310sion merchant as farm products and not inventory. For example, as § 9-307(9) states, " 'buyer’ includes a commission merchant or selling agent who sells farm products in the ordinary course of business for a person engaged in farming operations.” (Emphasis added.) See also §§ 9-307(11) and (12). Whereas, the majority’s interpretation would render the term "farm products” within these provisions incongruous with the provisions themselves because it classifies the livestock as inventory while § 9-307 refers to the livestock as farm products. If the Legislature intended to classify collateral in the temporary possession of an auctioneer as inventory, it could have done so rather than specifically referring to the collateral as farm products.
Accordingly, I would classify livestock in the instant case as farm products and not inventory for purposes of Article 9. Therefore, I agree with the majority that Articles 7 and 9 do not protect the exchange from liability for conversion of the debtor’s livestock.
Griffin, J., concurred with Riley, C.J.

 Before amendment by 1985 PA 199.

 I recognize that this Court need not resolve this issue in order to subject defendant to conversion liability. However, because I conclude that livestock in the hands of the defendant constitutes farm products, rather than inventory, I find it unnecessary to discuss the interrelationship between United States v Hext, 444 F2d 804 (CA 5, 1971), and Article 9 because I conclude that the livestock in the instant case fit within the farm products exception of § 9-307(1). Accordingly, I will only briefly address the issue.

 "Goods are 'farm products’ only if they are in the possession of a debtor engaged in farming operations.”