Court Opinion

ID: 9848085
Source: CourtListenerOpinion
Date Created: 2023-09-24 04:12:32.53375+00
Date Added: 2024-06-11T09:18:00.755868
License: Public Domain

LARSON, Justice
(dissenting).
The effect of the majority opinion is to exalt form over substance. While acknowledging that the purpose of the section 554.-9402(1) description is to aid purchasers and third-party creditors in identifying the secured crops, J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code § 23-16 at 964 (2d ed. 1980), and that the Iowa cases and Code Comments place “inquiry” responsibility on purchasers and third-party creditors, the majority absolves the purchaser here of any responsibility. Finding the description not to signal a need for further inquiry, the majority ignores the prior question of the need for any inquiry.
To protect itself from the claims of secured creditors, the cooperative here was entitled to rely on the description of the collateral in the financing statement. Checking with the Secretary of State’s filings, the cooperative could have found that crops belonging to Francis and raised on a certain parcel of land were encumbered. This would have put it on inquiry, and this is all that is required here.
The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs.
Official Comment to Iowa Code section 554.9402. See J. White & R. Summers, supra, at 961 and U.S. v. Big Z Warehouse, 311 F.Supp. 283, 285 (S.D.Ga.1970) (“Further inquiry by another party is necessary to disclose the complete state of affairs.”) It is important to note that the filings in the Secretary’s office are by name, not land description. Armed with the knowledge that Francis had encumbered grain, the cooperative’s only logical next step would be to ascertain whether the grain Francis was offering to sell came off the described land.
Such an inquiry would have revealed immediately the error, enabling the cooperative to make an accurate identification. Thus, the error in this case was not misleading as a matter of law and should not defeat the security interest absent a showing of prejudice. See Still Associates, Inc. v. Murphy, 358 Mass. 760, 267 N.E.2d 217 (1971).
The majority claims “the cooperative was not put on further inquiry because the description itself specifically defined and delineated the location of encumbered crops.” 342 N.W.2d at 471. But I cannot see how the presence of a specific, if flawed, description absolves the purchaser of all inquiry responsibility. The purchaser here should at a minimum be required to try to ascertain whether the grain was grown on the described land.
Throughout the majority’s opinion runs the implication that other crops were somehow encumbered, so as to distinguish the *473case from those where a less precise description was held not to void the encumbrance. E.g., Big Z Warehouse, 311 F.Supp. 283. The majority admits that in the latter case a third person would be expected to make an inquiry “to learn precisely what crops were encumbered.” 342 N.W.2d at 471. This conclusion is logical because when a wagon or truck load of grain arrives at the elevator there is no way to know from where it came without asking. But why is the cooperative excused from making that inquiry in the instant case? By what clairvoyant means did it know this grain had not been grown on either section 24 or 25?
The only function of the land description here, it is to be remembered, is to aid in the identification of the crops. U.L.A. Uniform Commercial Code, Vol. 3A at 51 (1981). The majority may be unconsciously relying on traditional real estate law doctrines under which the description is the identification.
The two Iowa cases relied upon by the majority are not directly relevant. In First State Bank of Nora Springs v. Waychus, 183 N.W.2d 728 (Iowa 1971), an erroneous real estate description did not prevent the enforcement of the security interest in hogs because no description is required to perfect a security interest in livestock. The dictum from this case quoted by the majority, 342 N.W.2d at 472, is dictum come uncomfortably home to roost. “Courts do not weary of cautioning counsel to distinguish dictum from decision. They must heed their own warnings.” Smith v. Hedges, 223 N.Y. 176, 184, 119 N.E. 396, 399 (1918) (Cardozo, J., dissenting).
The security interest in crops in the other case, In re Estate of Voelker, 252 N.W.2d 400 (Iowa 1977), was found not to have been perfected because the security instrument contained no land description whatsoever. With no description, no identification of the crops in question was possible.
But ours is not a case of lack of a description or of one overly broad; here the problem is mistake. This case more closely resembles those where a description misidentified collateral by a one or two digit error in a serial number. Courts there have typically upheld the security interest. E.g., Matter of Vintage Press, Inc., 552 F.2d 1145 (5th Cir.1977) (incorrect serial number on a printing press); Matter of Delta Molded Products, Inc., 416 F.Supp. 938, 941-42 (N.D.Ala.1976) (molding machine serial number C4424 instead of C4239; with other, accurate, information); Still Associates, Inc. v. Murphy, 358 Mass. 760, 267 N.E.2d 217 (1971) (mistake in last digit of serial number where truck also described by year, number of cylinders, and model); City Bank and Trust Co. v. Warthen Service Co., 91 Nev. 293, 295-297, 535 P.2d 162, 163-65 (1975) (Buick Wildcat serial number 66670X111904 instead of 466670X111904); Bank of North America v. Bank of Nutley, 94 N.J.Super. 220, 227 A.2d 535 (1967) (one digit error in eleven-digit automobile serial number where also identified by year, model, and make); Central National Bank and Trust Co. of Enid v. Community Bank and Trust Co. of Enid, 528 P.2d 710 (Okl.1974) (one digit mistake in vehicle serial number)); Appleway Leasing, Inc. v. Wilken, 39 Or.App. 43, 591 P.2d 382 (1979) (tractor correctly described except that a nonexistent serial number was listed); McGehee v. Exchange Bank and Trust Co., 561 S.W.2d 926 (Tex.Civ.App.1978) (correctly described make, length and serial number of boat; errors in model year, parts of engine numbers, and license registration number); and Adams v. Nuffer, 550 P.2d 181 (Utah 1976) (boat serial number listed as D.M.F.A. 0082 M-75L, when actually D.M.F.A. 0082 M-74L). In support, the Official Comment to section 554.9110 specifically rejects a “serial number” test. The majority distinguishes some of these cases because there was often other descriptive information that was accurate, and helped to identify the encumbered object. The same, of course, is true here, where the information was quite detailed and accurate except for one digit.
The majority claims this case “is different because nothing on the face of the bank’s land description suggested that *474crops located elsewhere were encumbered.” 342 N.W.2d at 471. But nor does anything on the face of the incorrect serial numbers suggest that other vehicles, machines, etc., were encumbered.
In these and in the instant case, an erroneous description may accurately describe a similar machine, vehicle, crop, etc., but not the one intended. As a result, however, a third party (in this case the cooperative) which is also unaware of the error, is not misled into concluding that the machine, vehicle, crop, etc., actually intended is not encumbered. Thus, the purpose of the description requirement, identification, would not be served by a finding of no perfection and unenforceability.
There is no hint that the cooperative was misled in any way. Neither does it appear that the mistake was the kind that would tend to inhibit the cooperative from ascertaining the actual facts. No matter how diligent the typist and proofreader, clerical errors are bound to creep in from time to time. It even happens in judicial opinions. When they occur in cases such as this, courts should prevent unjust enrichment from being the result. As it stands, this decision hands a pure windfall to the cooperative and defeats the reasonable expectations and reliance of the lender.
I cannot agree with the conclusion of the trial court, and the majority, that the financing statement and security agreement did not meet the requirements of the statute. I would reverse and remand.
HARRIS, McCORMICK, and McGIVE-RIN, JJ., join in this dissent.