Summary of a Recent
Judicial Development in
Secured Transactions

Revised Article 9 "Agricultural Lien"
Retroactively Corrected in Illinois

Jeffrey A. Peterson
National AgLaw Center Graduate Assistant

In Schweickert v. AG Services of America, Inc., 823 N.E. 2d 213 (Ill. Ct. App. 2005), the Appellate Court for the Third District of Illinois ruled in favor of landowners who argued that their lien in a tenant's crops had priority over the security interest of the tenant's secured creditor. The court found that the amended statute, which did not require landowners to file a financing statement, was procedural and could be applied retroactively. Id. at 217.

Richard J. Schweickert, Joseph Helland, and Janet Helland (collectively "Landowners") owned farmland which, in 2002, was leased on a cash basis to William Myre, Sr. ("Tenant"). Id. at 214. To finance his farming operation, the Tenant borrowed funds from AG Services of America, Inc. ("Financier") and pledged a security interest in the crops grown on the leased farmland to the Financier. Id. The Tenant failed to pay rent to the Landowners and defaulted on his obligations to the Financier. Id. In spring 2003, the Landowners filed a declaratory judgment action to recover the proceeds of the crops, claiming their statutory liens had priority over the Financier's security interest. Id. at 215. The Financier argued that the Landowners failed to properly perfect their statutory "agricultural liens" under revised Article 9. Id. The trial court granted summary judgment in favor of the Financier. Id.

Prior to July 1, 2001, the Illinois statutory landlord's lien automatically had priority over all other liens. Id. In July 2001, the Illinois legislature adopted revised Article 9 in whole, including § 9-316 which requires a landlord to file a financing statement to perfect a landlord's lien. Id. In August 2002, the legislature amended § 9-316 to reflect the language prior to July 2001, which did not require the filing of a financing statement. Id. The Landowners argued that the current version of § 9-316 applied retroactively. Id. In Illinois, if the statute is silent, the amendments may be applied retroactively if the amendments are "procedural." Id. The Court held that revised § 9-316

is not part of the law which creates or defines the right. [The Bank] has a perfected security interest in the crops pursuant to [§ 9-322]. [The Landowners] have landlord liens for the faithful performance of their cash rent lease created by the general provisions of section 9-316 of the Code. The 2002 amendment to section 9-316 did not alter those rights. The amendment merely altered the method by which a landlord could enforce that right. Id. at 216.

The Court held that the 2002 amendment to § 9-316 was procedural and did not have a retroactive impact, and therefore may be retroactively applied to allow the Landowners to have a first and priority statutory lien in the 2002 crops. Id. at 217.

The case was decided on January 31, 2005; this summary was posted September 27, 2007.