Summary of a Recent
Judicial
Development in
Secured Transactions
Statute Gives CCC Super-Priority Liens
Against Sugar and Proceeds from Sugar
Walt McCarterNational AgLaw Center Research Associate
Summary of Decision
In Bair v. Pacific Northwest Sugar Co., 85 F.App'x 555 (9th Cir. 2003), the Ninth Circuit Court of Appeals held that a statute governing priority of security interest obtained by the Commodity Credit Corporation (CCC) from the execution of a security agreement by a processor of sugarcane and sugar beets gave the CCC a super-priority lien on refined sugar and the proceeds from that sugar.
Background
Sugar beet growers that had supplied beets to Pacific Northwest Sugar Company (PNSC) brought an action against PNSC and the CCC, seeking a declaration that their liens were superior to those of the CCC. Id. at 557. The district court granted summary judgment in favor of the CCC, and the growers appealed. Id.
Arguments
The growers argued that the CCC's liens were not superior to theirs and that the CCC failed to obtain adequate assurances from PNSC that PNSC would pay certain amounts to the growers. Id.
Analysis and Holdings
The court interpreted 7 U.S.C. § 7284(d) as being dispositive in favor of the CCC, because it clearly states that a security interest held by the CCC as a result of the execution of a security agreement by the processor of sugarcane or sugar beets shall be superior to all other liens on raw cane sugar and refined beet sugar and all liens on the crops of sugarcane and sugar beets from which the sugar was derived. Id. at 558. The court therefore affirmed the judgment of the district court granting summary judgment to the CCC. Id. at 560. In her dissent, Judge Fletcher opined that "in enacting 7 U.S.C. § 7284(d) Congress intended to give priority to those security interests that the CCC properly perfected," but that "here the CCC failed to follow its own regulations in the administration of the loans it made to PNSC, as well as congressional enactments intended to protect sugar growers," and should not be allowed to use that provision to correct its own deficiencies. Id.
The case was decided on September 16, 2003.