{ "id": 140117, "name": "FIRST MIDWEST BANK, N.A., Plaintiff-Appellant, v. IBP, INC., Defendant-Appellee", "name_abbreviation": "First Midwest Bank, N.A. v. IBP, Inc.", "decision_date": "2000-05-23", "docket_number": "No. 3\u201499\u20140683", "first_page": "255", "last_page": "262", "citations": [ { "type": "official", "cite": "314 Ill. App. 3d 255" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "478 N.E.2d 526", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1985, "opinion_index": 0 }, { "cite": "132 Ill. App. 3d 969", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3441994 ], "year": 1985, "opinion_index": 0, "case_paths": [ "/ill-app-3d/132/0969-01" ] }, { "cite": "713 N.E.2d 178", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1999, "opinion_index": 0 }, { "cite": "306 Ill. App. 3d 131", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 1336059 ], "year": 1999, "opinion_index": 0, "case_paths": [ "/ill-app-3d/306/0131-01" ] }, { "cite": "7 U.S.C. \u00a7 1631", "category": "laws:leg_statute", "reporter": "U.S.C.", "weight": 7, "year": 1994, "pin_cites": [ { "page": "(e)", "parenthetical": "codified in Illinois as 810 ILCS 5/9 - 307 (West 1998)" }, { "page": "(e)" }, { "page": "(e)(1)(A)(iv)" }, { "page": "(a)" }, { "page": "(c)(4)(F)" }, { "page": "(c)(4)(F)" }, { "page": "(a)" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 646, "char_count": 15798, "ocr_confidence": 0.771, "pagerank": { "raw": 4.7817273071113374e-08, "percentile": 0.29946726623830194 }, "sha256": "f4fe04666fca984effd04d9c14731ab7b6f0b3c57c720255e9fcc14fbdb513d4", "simhash": "1:fa5d8717c9647242", "word_count": 2651 }, "last_updated": "2023-07-14T20:48:47.280070+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "FIRST MIDWEST BANK, N.A., Plaintiff-Appellant, v. IBP, INC., Defendant-Appellee." ], "opinions": [ { "text": "JUSTICE BRESLIN\ndelivered the opinion of the court:\nPlaintiff First Midwest Bank (Bank) sought a judgment against defendant IBR Inc. (IBP), in the amount of $34,239.51 for failing to honor its security interest when IBP purchased hogs from Ronald and Rhonda Przybylski. The trial court granted IBP\u2019s motion for summary judgment based upon its determination that the Bank\u2019s notice of its security interest, pursuant to section 9 \u2014 307 of the Illinois Uniform Commercial Code \u2014 Secured Transactions (Illinois Code) (810 ILCS 5/9 \u2014 307 (West 1998)), was valid for one year only. We affirm and hold that notice of a security interest pursuant to section 9 \u2014 307 of the Illinois Code is valid for only one year against a purchaser of farm products that are subject to the security interest.\nFACTS\nOn August 23, 1991, the Bank gave Ronald and Rhonda Przybylski a line of credit in the amount of $25,500 secured in part by livestock belonging to the Przybylskis. On April 8, 1992, the Bank gave the Przybylskis a $250,000 loan secured by the same livestock. On that same day, the Przybylskis signed a \u201cConsent to Payment of Proceeds from Sale of Livestock\u201d (Consent). They forwarded the Consent by certified mail to IBR a recent purchaser of their hogs. A representative of IBP signed the Consent in May of 1992.\nThe Consent provided notice of the Bank\u2019s security interest in the Przybylskis\u2019 hogs and provided that IBP could extinguish that interest by issuing checks payable jointly to the Przybylskis and the Bank whenever a purchase of the Przybylskis\u2019 hogs was made. IBP complied with the Consent requirements for approximately three years. In 1995, however, IBP began writing checks for the hogs payable to Ronald Przybylski only. Ronald would, at times, write the name of the Bank on the check; however, many checks remained payable exclusively to Ronald Przybylski. The amount of those checks not written jointly to the Przybylskis and the Bank totaled $34,239.51.\nWhen the Bank sued IBP for $34,239.51, the trial court determined that IBP had received a valid notice of the Bank\u2019s security interest in the hogs in compliance with section 1631(e) of the United States Code (7 U.S.C. \u00a7 1631(e) (1994) (codified in Illinois as 810 ILCS 5/9 \u2014 307 (West 1998))). The court found, however, that the Bank\u2019s notice was valid for one year only, until May of 1993. Having lost its suit due to its expired notice, the Bank appeals.\nANALYSIS\nThe single issue before us is whether the trial court erred when it determined that notice of a security interest in farm products pursuant to section 9 \u2014 307(4) of the Illinois Code is valid for one year only. Statutory construction is a question of law subject to our de novo review. E&E Hauling, Inc. v. Ryan, 306 Ill. App. 3d 131, 713 N.E.2d 178 (1999).\nTo understand section 9 \u2014 307(4) of the Illinois Code, we must first understand the history predating this provision. Under section 9 \u2014 307(1) of the Uniform Commercial Code (UCC) (Uniform Commercial Code \u00a7 9 \u2014 307(1), 3A U.L.A. 256 (1992)), a buyer in the ordinary course of business \u201ctakes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence.\u201d This provision, however, excepts persons who buy farm products from one engaged in farming operations. Thus, under section 9 \u2014 307(1) of the UCC, buyers of farm products are subject to the continuing interest of a secured lender.\nDuring the late 1970s and the 1980s, numerous farm loan defaults resulted from large loan burdens, depressed land values, and low farm prices. D. Kershen & J. Hardin, Farm Products Financing and Filing Service Preface (1991). When farmers became unable to pay their loans, lenders began to seek payment from the purchasers of the farm products that had served as the collateral for the farm loans. Debate ensued regarding the justification for a lender\u2019s recovery against the purchaser of the secured farm products. Congress responded by enacting section 1631, commonly known as the \u201cFood Security Act\u201d (Act). 7 U.S.C. \u00a7 1631(e) (1994). Section 1631 now prevails over the farm products exception of the UCC as it applied to farm products purchasers. D. Kershen & J. Hardin, Farm Products Financing and Filing Service Preface (1991).\nSection 1631 provides in relevant part:\n\u201c(e) Purchases subject to a security interest A buyer of farm products takes subject to a security interest created by the seller if\u2014\n(1)(A) within 1 year before the sale of the farm products, the buyer has received from the secured party or the seller written notice of the security interest organized according to farm products that\u2014\n* * *\n(iv) will lapse on either the expiration period of the statement or the transmission of a notice signed by the secured party that the statement has lapsed, whichever occurs first[.]\u201d (Emphasis added.) 7 U.S.C. \u00a7 1631(e)(1)(A)(iv) (1994).\nCongressional findings in the Act indicate that state laws at the time section 1631 was adopted often permitted a secured lender to enforce liens against the purchaser of farm products even though the purchaser was unaware that the sale of the products violated the lender\u2019s security interest. Such laws subjected the purchaser to double payment for the products: first at the time of purchase and again when the seller of the farm products failed to repay the lender. Congress determined that this exposure of purchasers of farm products to the risk of double payment inhibited free competition and constituted a burden on interstate commerce. Thus, Congress provided for the requirement of notice to the purchaser and for the eventual lapse of that notice. 7 U.S.C. \u00a7 1631(a) (1994).\nIllinois responded by codifying section 1631(e) of the Act at section 9 \u2014 307(4) of the Illinois Code (810 ILCS 5/9 \u2014 307(4) (West 1998)).\nThe language in section 1631(e)(l)(A)(iv), quoted above and also found in section 9 \u2014 307(4) (a) (iv) of the Illinois Code, indicates that there are two ways in which a valid notice of a security interest lapses: (1) upon the expiration period of the statement, or (2) upon transmission of a notice by the secured party that the statement has lapsed.\nThere is no debate between the parties that no correspondence was sent by the Bank to IBP indicating that the notice had lapsed. Both parties also ostensibly agree that the phrase \u201cthe expiration period of the statement\u201d refers to the expiration of the financing statement. Section 1631(c) defines a \u201cfinancing statement\u201d as follows:\n\u201c(c) Definitions\nHi * *\n(4) The term \u2018effective financing statement\u2019 means a statement that\u2014\n$ $ $\n(F) remains effective for a period of 5 years from the date of filing, subject to extensions for additional periods of 5 years each by refiling or fifing a continuation statement within 6 months before the expiration of the initial 5 year period!.]\u201d 7 U.S.C. \u00a7 1631(c)(4)(F) (1994).\nThis language reveals that the Act anticipates that states will maintain a central filing system. A central filing system provides a mechanism whereby financing statements are filed with a state\u2019s Secretary of State. Once filed, the financing statement has a five-year life unless one of the other provisions in subsection (F) occurs. The difficulty in our case arises because Illinois does not maintain a central filing system; rather, Illinois is a direct notice state.\nThe definition of a financing statement, quoted above from section 1631(c), does not similarly appear in the Illinois Code, presumably because Illinois is a direct notice state. Thus, the Bank did not, nor was it obligated to, file a financing statement that would expire after five years.\nAccordingly, we must determine under what time frame the Illinois legislature intended notice of a security interest to remain valid when it codified section 1631(e) of the Act as section 9 \u2014 307(4) of the Illinois Code. In so doing, we are mindful that a court may add, delete, modify or alter words so as to effectuate the intent of the legislature though it cannot read into the statute words that are not within the plain intention of the legislature as determined from the statute itself. Heritage Bank & Trust Co. v. Harris, 132 Ill. App. 3d 969, 478 N.E.2d 526 (1985).\nOn appeal, the Bank contends that the trial court erred in determining that its notice was effective for only one year. The Bank argues that section 9 \u2014 307(4) of the Illinois Code should be interpreted by this court to mean that the notice sent to a buyer by the secured party lapses only when that notice either contains an expiration period within it or when the secured party later sends notice of lapse.\nIBP submits that the word \u201cstatement\u201d found in subsection (4)(a)(iv) of section 9 \u2014 307 should refer back to the one-year time frame in subsection (4) (a) within which a secured party must notify a buyer of farm products of its security interest. Accordingly, under IBP\u2019s interpretation, notice of a security interest would expire after one year from the time it is given to the buyer of the farm products.\nWe agree with IBP Unlike in the Act, a definition of the word \u201cstatement\u201d in the Illinois Code does not appear immediately prior to the section we must now interpret. What does appear, however, is a one-year time frame within which a secured party has to notify a buyer of its security interest. In light of the fact that we may read into a statute only words that are within the plain intention of the legislature as determined from the statute itself, we hold that valid notice of a security interest in farm products lapses after one year. This is the most logical interpretation of section 9 \u2014 307(4).\nUnder the Bank\u2019s interpretation, a lender could conceivably enforce its security interest against a buyer of farm products ad infinitum without ever having to renotify such buyer of the interest if the lender does not put an expiration date in the notice. We do not believe that this scenario comports with a reasonable interpretation of the Illinois Code. Even the Act requires a lender in a central filing state to refile its notice of a security interest in the form of a financing statement every five years. See 7 U.S.C. \u00a7 1631(c)(4)(F) (1994). To require a purchaser of farm products to abide by one notice forever is an unrealistic, unreasonable burden given the history behind this provision.\nMoreover, the Bank\u2019s request for this court to order IBP to pay it the sum of $34,239.51, which sum IBP has already paid to the Przybylskis for the purchase of their hogs, is in direct contravention of the purpose of the notice requirement. See 7 U.S.C. \u00a7 1631(a) (1994). As noted previously, Congress was concerned that the risk of double payment by the purchaser of farm products inhibited free competition and constituted a burden on interstate commerce.\nIn their treatise entitled Farm Products Financing and Filing Service, the authors note their belief that notice of a security interest to the buyers of farm products lapses after one year in a direct notice state, rather than after five years when the financing statement lapses in a central filing state. D. Kershen & J. Hardin, Farm Products Financing and Filing Service \u00a7 10.07 (1991). They attach the phrase \u201cpresale notification system\u201d (PNS) to the notice required in a direct notice state. These authors note that the language at issue here, found in section 1631(e)(l)(A)(iv) of the Act, was transplanted from the definition of an effective financing statement (EES) into the presale notification system (PNS) without explanation by the Conference Committee. They contend:\n\u201c [A] 1 though \u2018expiration period\u2019 is not defined, it presumably refers to Subsections 1631(e)(1)(A) and 1631(g)(2)(A), which state that buyers, commission merchants, and selling agents take subject to a security interest if they receive a PNS notice covering the farm products \u2018within one year before the sale.\u2019 Unlike the EPS expiration, which is a five-year period measured from the \u2018date of filing\u2019 forward, PNS notice effectiveness is measured one year from the sale date backward.\u201d D. Kershen & J. Hardin, Farm Products Financing and Filing Service \u00a7 10.07 (1991).\nWe find this discussion of section 1631 of the Act to be persuasive. We conclude that a one-year expiration period for notices of a security interest is the most reasonable interpretation of section 9 \u2014 307(4) of the Illinois Code. Therefore, the Bank\u2019s notice to IBP of its security interest in the Przybylskis\u2019 hogs expired after one year from the date the notice was served upon and acknowledged by IBP in May of 1992. Accordingly, we affirm the trial court\u2019s grant of IBP\u2019s motion for summary judgment.\nFor the foregoing reasons, the judgment of the circuit court of Knox County is affirmed.\nAffirmed.", "type": "majority", "author": "JUSTICE BRESLIN" }, { "text": "LYTTON, J.,\nconcurs.", "type": "concurrence", "author": "LYTTON, J.," }, { "text": "JUSTICE HOLDRIDGE,\ndissenting:\nI respectfully dissent. At issue here is the time period during which a perfected security interest in farm products remains in effect. The Uniform Commercial Code provides that a buyer takes farm products subject to a security interest if:\n\u201cwithin one year before the sale of the farm products, the buyer has received from the secured party or the seller written notice of the security interest organized according to farm products that:\nHe * Hi\n(iv) will lapse on either the expiration period of the statement or the transmission of a notice signed by the secured party that the statement has lapsed, whichever occurs first[.]\u201d 810 ILCS 5/9 \u2014 307 (West 1996).\nHere, IBP acknowledged receipt of a written statement of the Bank\u2019s security interest in the hogs raised by the Przybylskis. The statement informed IBI) as a potential buyer, that a security interest existed in the Przybylskis\u2019 hogs \u201cuntil Purchaser [IBP] is otherwise notified in writing by Lender [Bank].\u201d\nI cannot agree with the majority\u2019s conclusion that notice of the secured party\u2019s interest expires after one year when language of the statute clearly states that such notice lapses only upon the expiration date contained in the written statement or upon the secured party\u2019s written transmission that its interest has been satisfied. I agree with the Bank\u2019s contention that the plain language of section 9 \u2014 307(4) of the Uniform Commercial Code (810 ILCS 5/9 \u2014 307(4) (West 1996)) can only be interpreted to mean that notice sent to a buyer by a secured party lapses only when the notice either contains an expiration period within it or when the secured party sends notice that its interest has been satisfied. I see no need to resort to interpretation of the federal statute where the language of our Illinois statute is quite clear.\nUnlike the majority, I see no unrealistic or unreasonable burden for a purchaser that has been given direct notice of a security interest by a specific secured party to secure a release from that secured party prior to making payment to the secured party\u2019s debtor. For example, in the instant matter, IBP honored the Bank\u2019s security interest even after the alleged one-year effective date had expired and it did so without any \u201cunrealistic or unreasonable burden.\u201d Likewise, it could have, without burden, continued to honor the Bank\u2019s security interest by making the checks payable to both the Przybylskis and the Bank.\nFor the foregoing reasons, I would reverse the judgment of the circuit court of Knox County and remand for entry of judgment for the plaintiff Bank.", "type": "dissent", "author": "JUSTICE HOLDRIDGE," } ], "attorneys": [ "Steven L. Nelson (argued), of Snyder, Schwarz, Park & Nelson, of Rock Island, for appellant.", "E. Lawrence Oldfield (argued), of Oak Brook, and John W. Robertson (argued), of Barash & Stoerzbach, of Galesburg, for appellee." ], "corrections": "", "head_matter": "FIRST MIDWEST BANK, N.A., Plaintiff-Appellant, v. IBP, INC., Defendant-Appellee.\nThird District\nNo. 3\u201499\u20140683\nOpinion filed May 23, 2000.\nHOLDRIDGE, J., dissenting.\nSteven L. Nelson (argued), of Snyder, Schwarz, Park & Nelson, of Rock Island, for appellant.\nE. Lawrence Oldfield (argued), of Oak Brook, and John W. Robertson (argued), of Barash & Stoerzbach, of Galesburg, for appellee." }, "file_name": "0255-01", "first_page_order": 273, "last_page_order": 280 }