Law School Case Brief
Farmers Coop. Elevator Co. v. Union State Bank - 409 N.W.2d 178 (Iowa 1987)
"Purchase money security interests" are defined in Iowa Code § 554.9107: A security interest is a purchase money security interest to the extent that it is: (a) taken or retained by the seller of the collateral to secure all or part of its price; or (b) taken by a person who, by making advances or incurring an obligation, gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used.
Union State Bank loaned money to Rodger Cockrum and took a security interest covering, among other things, the livestock. Subsequently, Cockrum entered into several purchase money security agreements with Farmers Cooperative Elevator Company (CO-OP), the feed seller for livestock feed. As such, the CO-OP had a purchase money security interest covering the feed and the products and proceeds thereof. When Cockrum defaulted, the CO-OP filed an action seeking possession of the collateral and joined Union State Bank as a party. On the CO-OP’s motion to adjudicate law points, the district court ruled that Union State Bank's security interest in the livestock was prior and superior to that of the CO-OP.
Was the security interest of Union State Bank prior and superior to that of the CO-OP?
The Court affirmed, finding that while the CO-OP held a purchase money security interest in the feed, such interest did not continue in the livestock that consumed the feed. Ingestion and biological transformation of feed was not a type of "other disposition" within the contemplation of Iowa Code § 554.9306, nor did the feed become commingled with the livestock within the meaning of Iowa Code § 554.9315.
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