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First Midwest Bank, N.A. v. IBP, Inc.

Case Date: 05/23/2000
Court: 3rd District Appellate
Docket No: 3-99-0683

23 May 2000

No. 3--99--0683

IN THE APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2000

FIRST MIDWEST BANK, N.A.,
Plaintiff-Appellant,

v.

IBP, INC.,
Defendant-Appellee.

Appeal from the Circuit Court
for the 9th Judicial Circuit,
Knox County, Illinois

No. 98--LM--206

Honorable
James B. Stewart
Judge, Presiding

JUSTICE BRESLIN delivered the opinion of the court:

Plaintiff First Midwest Bank (Bank) sought a judgment againstdefendant IBP, Inc. (IBP), in the amount of $34,239.51 for failingto honor its security interest when IBP purchased hogs from Ronaldand Rhonda Przybylski. The trial court granted IBP's motion forsummary judgment based upon its determination that the Bank'snotice of its security interest, pursuant to section 9-307 of theIllinois Uniform Commercial Code Secured Transactions (IllinoisCode) (810 ILCS 5/9-307 (West 1998)), was valid for one year only. We affirm and hold that notice of a security interest pursuant tosection 9-307 of the Illinois Code is valid for only one yearagainst a purchaser of farm products that are subject to thesecurity interest.

FACTS



On August 23, 1991, the Bank gave Ronald and Rhonda Przybylskia line of credit in the amount of $25,500 secured in part bylivestock belonging to the Przybylskis. On April 8, 1992, the Bankgave the Przybylskis a $250,000 loan secured by the same livestock. On that same day, the Przybylskis signed a "Consent to Payment ofProceeds from Sale of Livestock" (Consent). They forwarded theConsent by certified mail to IBP, a recent purchaser of their hogs. A representative of IBP signed the Consent in May of 1992.

The Consent provided notice of the Bank's security interest inthe Przybylskis' hogs and provided that IBP could extinguish thatinterest by issuing checks payable jointly to the Przybylskis andthe Bank whenever a purchase of the Przybylskis' hogs was made. IBP complied with the Consent requirements for approximately threeyears. In 1995, however, IBP began writing checks for the hogspayable to Ronald Przybylski only. Ronald would, at times, writethe name of the Bank on the check; however, many checks remainedpayable exclusively to Ronald Przybylski. The amount of thosechecks not written jointly to the Przybylskis and the Bank totaled$34,239.51.

When the Bank sued IBP for $34,239.51, the trial courtdetermined that IBP had received a valid notice of the Bank'ssecurity interest in the hogs in compliance with section 1631(e) ofthe United States Code (7 U.S.C.