Summary of a Recent
Judicial
Development in
Secured Transactions
Landlord's Lien Trumps
All Other Liens Against Crops
Walt McCarterNational AgLaw Center Research Associate
Summary of Decision
In Czerkies v. AG Acceptance Corp., 820 N.E.2d 1133 (Ill. Ct. App. 2004), the Appellate Court of Illinois held that a landlord's lien was superior to all other security interests, including those that were preexisting, in a debtor's crops.
Background
Debtors executed a promissory note in favor of AG Acceptance Corporation (AGAC) in 2000. Id. at 1134. The debtors granted AGAC a security interest in "all crops growing or to be grown by the [debtors] on the property owned by the [plaintiff landlords] and the proceeds thereof." Id. The debtors failed to pay rent on the leased property, and the plaintiffs had a statutory landlord's lien upon the crops. Id. Prior to July 2001, it was not necessary to file a financing statement to perfect a landlord's lien; it automatically trumped any other perfected security interests, even preexisting ones. Id. An amendment to the statute, effective July 1, 2001, required filing of financial statements at any time when the landlord's lien was in existence to perfect the lien. Id. That amendment was in effect at the time the crops were planted. Id. A second amendment, effective August 1, 2002, deleted the filing requirement, essentially returning the statute to its original form. Id. That amendment came into effect prior to harvest. Id. The plaintiffs filed financing statements in January 2003, and then filed a complaint seeking determination of the priority of their lien. Id. The trial court determined the plaintiffs' landlord's lien had priority over all other liens against the crops, and AGAC appealed. Id.
Arguments
AGAC argued that unless the August 21, 2002, amendment to the statute was retroactive, its security interest had priority over the plaintiffs' landlord's lien. Id. at 1135.
Analysis and Holdings
The court found that regardless of whether the amendment to the statute was retroactive, the plaintiffs' lien was superior. Id. The landlord's lien statute states that the lien shall continue for six months after the lease expires. Id. The court reasoned that since the lease ended in February 2003, the lien continued until August 2003, and therefore since the plaintiffs filed a financing statement in January 2003 while the lien was in existence, their lien had priority. Id.
The case was decided on December 9, 2004.