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Decision Grants Priority to Agister Liens Over Prior Perfected Security Interests in Idaho

Added by Hawley Troxell in Articles & Publications, Banking Law on August 18, 2014

The Idaho Supreme Court (the “Court”) recently provided clarification as it relates to priority of agister liens in Idaho.

In J & M Cattle Company, LLC v. Farmers National Bank et. al., No. 41023 (Aug. 1, 2014), the Court considered whether Idaho law provides priority to an agister lien over a prior perfected security interest. In this case, Farmers National Bank had provided multiple operational loans over a number of years to Green River Dairy to sustain operations, and had taken a security interest in the dairy cattle. Subsequently, Green River Dairy delivered the dairy cattle to J & M Cattle Company to feed, care for, and offer other services necessary to raise cattle. Green River Dairy later defaulted on its obligations to both parties, the dairy cattle were sold, and the parties sought a judgment to determine priority of the proceeds from the sale as there was insufficient funds to satisfy the obligations owed to either party.

Generally, a possessory lien (including an agister lien) has priority over a prior perfected security interest pursuant to I.C. §28-9-333(b), however, this priority preference may be modified if a statute expressly provides otherwise.The court sought to determine if I.C. § 45-805 expressly modified the priority preference with respect to agister liens.

I.C. §45-805 provides in part that, “Livery or boarding or feed stable proprietors, and persons pasturing livestock of any kind, have a lien. . . for their compensation in caring for, boarding, feeding or pasturing such livestock.” I.C. § 45-805(b). The person in whose favor such special lien is created may proceed to sell the property to satisfy the lien. However, in this case, the language of I.C. § 45-805(c) creates an argument that the statute expressly modifies the order of priority providing in part that, “[t]he proceeds of the sale must be applied to the discharge of any prior perfected security interest, the lien created by this section and costs; the remainder, if any, must be paid over to the owner.” I.C. § 45-805(c). The Court determined that this language was ambiguous and that the statute leaves open the issue of priority as there is no express modification of the general rule, and therefore, the agister lien as a possessory lien maintains the priority status given it under I.C. § 28-9-333(b).

It is important for lenders, farmers and ranchers, agriculture commodity dealers/producers and agisters to be aware of recent Court decisions which provide insight into the priority of certain agriculture liens in Idaho.

For more information contact our Banking group or call 208.344.6000