Filed: Apr. 10, 2019
Latest Update: Mar. 03, 2020
Summary: Case: 18-10090 Document: 00514910089 Page: 1 Date Filed: 04/10/2019 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED April 10, 2019 No. 18-10090 Lyle W. Cayce Clerk FISHBACK NURSERY, INCORPORATED; SURFACE NURSERY, INCORPORATED, Plaintiffs - Appellants v. PNC BANK, NATIONAL ASSOCIATION, Defendant - Appellee Appeal from the United States District Court for the Northern District of Texas Before SMITH, DUNCAN, and ENGELHARDT, Circuit Judg
Summary: Case: 18-10090 Document: 00514910089 Page: 1 Date Filed: 04/10/2019 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED April 10, 2019 No. 18-10090 Lyle W. Cayce Clerk FISHBACK NURSERY, INCORPORATED; SURFACE NURSERY, INCORPORATED, Plaintiffs - Appellants v. PNC BANK, NATIONAL ASSOCIATION, Defendant - Appellee Appeal from the United States District Court for the Northern District of Texas Before SMITH, DUNCAN, and ENGELHARDT, Circuit Judge..
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Case: 18-10090 Document: 00514910089 Page: 1 Date Filed: 04/10/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 10, 2019
No. 18-10090
Lyle W. Cayce
Clerk
FISHBACK NURSERY, INCORPORATED; SURFACE NURSERY,
INCORPORATED,
Plaintiffs - Appellants
v.
PNC BANK, NATIONAL ASSOCIATION,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Texas
Before SMITH, DUNCAN, and ENGELHARDT, Circuit Judges.
STUART KYLE DUNCAN, Circuit Judge:
We confront a lien contest among three creditors of a bankrupt
commercial farm. Two of the creditors—Fishback and Surface—are nurseries
that sold the farm over a million dollars’ worth of trees and shrubs in Michigan,
Tennessee, and Oregon, and so claim agricultural liens in the farm’s assets.
The third creditor is a bank, PNC, that claims debtor-in-possession liens based
on financing it provided to keep the farm afloat during bankruptcy. The central
issue is whether the bank’s lien outranks the nurseries’ liens.
To settle that dispute, the district court had to decide first whether
Michigan, Tennessee, or Oregon law governed the nurseries’ liens. Ably
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No. 18-10090
navigating a knotty choice-of-law issue, the court ruled that the locale of the
plants dictated the pertinent lien law. Applying that law, the court found that
the nurseries’ liens were either unperfected or unenforceable. This meant the
bank’s lien was senior.
The nurseries appeal. We affirm.
I.
A.
The parties stipulated to the following facts. BFN was a wholesale
grower of trees, shrubs, and other plants, with headquarters in Texas and
offices in Michigan, Oregon, and Tennessee. BFN filed for bankruptcy in Texas
on June 17, 2016. Three of BFN’s creditors dispute the priority of their
respective liens on BFN’s assets. Two of those creditors, Appellants Fishback
and Surface, are commercial nurseries (collectively “Nurseries”), both located
in Oregon. The third creditor, Appellee PNC, is a national bank headquartered
in Pennsylvania.
The Nurseries are BFN’s creditors because they sold agricultural
products to BFN and took security interests in them. Fishback demands over
$1.1 million for products shipped to Michigan, Tennessee, and Oregon. As to
those products, Fishback filed Uniform Commercial Code (“UCC”) financing
statements 1 in Oregon and Michigan on June 21, 2016, and in Tennessee on
June 28, 2016. All three statements listed the debtor’s name as “BFN
Operations, LLC abn Zelenka Farms,” despite the fact that BFN’s founding
documents list its name as “BFN Operations LLC.” On August 29, 2016,
1 “Perfection by filing is by far the most common method of perfecting a security
interest under [UCC] Article 9.” 4 WHITE, SUMMERS, & HILLMAN, UNIFORM COMMERCIAL
CODE § 31:27 (6th ed. 2018). A UCC-1 financing statement must provide the name of the
debtor and the name of the secured party, and indicate the collateral covered by the financing
statement. Id. at §§ 31:28; 31:29, 31:30.
2
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Fishback also filed a notice of lien in Oregon for all orders. For its part, Surface
demands over $262,000 for products shipped to Michigan only. Surface filed a
UCC financing statement in Michigan on June 28, 2016, which also listed the
debtor’s name as “BFN Operations, LLC abn Zelenka Farms.” Surface also
filed a notice of lien in Oregon on July 13, 2016.
PNC is BFN’s creditor because, as early as May 2015, it loaned BFN
money and took a security interest in most of BFN’s assets. During the
bankruptcy proceedings, PNC also provided debtor-in-possession (“DIP”) 2
financing so that BFN could stay in business during bankruptcy. The
bankruptcy court ordered that the DIP financing would include PNC’s pre-
bankruptcy loan to BNF and that PNC’s DIP lien would outrank other liens
“subject and junior only to . . . valid, enforceable, properly perfected, and
unavoidable pre-petition liens[.]”
B.
The Nurseries sued PNC in federal district court in November 2016,
seeking a declaratory judgment that their liens on BFN assets were “valid,
enforceable, properly-perfected, unavoidable pre-petition liens,” senior to
PNC’s DIP lien, and asking the court to order PNC to turn over money to
satisfy their allegedly senior liens. PNC counterclaimed for a declaratory
judgment that the Nurseries lacked senior and enforceable liens. In August
2017, the parties filed cross-motions for summary judgment. The district court
ruled for PNC and against the Nurseries.
In its opinion, the district court first considered which choice-of-law
analysis should determine the law governing the lien dispute. As the court
2 A debtor-in-possession has the power “to continue to operate the debtor’s business
[during bankruptcy] without first having to go to the court to obtain an order authorizing the
operation.” 5 NORTON BANKR. L. & PRAC. 3d § 93:4 (2019); see also 11 U.S.C. § 1107(a)
(providing that a debtor-in-possession has many of the powers of a bankruptcy trustee).
3
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noted, it is an open question in this circuit as to whether courts exercising
bankruptcy jurisdiction 3 should apply forum or federal choice-of-law rules. See
In re Mirant Corp., 675 F.3d 530, 536 (5th Cir. 2012) (stating “[t]his circuit has
not determined whether the [federal] independent judgment test or the forum
state’s choice-of-law rules should be applied in bankruptcy”) (citing Woods-
Tucker Leasing Corp. of Ga. v. Hutcheson-Ingram Dev. Co.,
642 F.2d 744, 748
(5th Cir. 1981)). The circuits are split on this issue. See In re Sterba,
852 F.3d
1175, 1177 n.1 (9th Cir. 2017) (recognizing split). Some courts—drawing on the
rule that federal diversity courts must apply forum choice-of-law rules—have
held that federal courts in bankruptcy should also apply forum choice-of-law
rules. See Klaxon Co. v. Stentor Elec. Mfg. Co.,
313 U.S. 487 (1941); see also In
re Gaston & Snow,
243 F.3d 599, 605–07 (2nd Cir. 2001); In re Merritt Dredging
Co.,
839 F.2d 203, 206 (4th Cir. 1988). Other courts have held, to the contrary,
that “federal, not forum state, choice of law rules” apply in bankruptcy cases
because they are “federal question cases with exclusive jurisdiction in federal
court.” In re Lindsay,
59 F.3d 942, 948 (9th Cir. 1995); see also In re SMEC,
Inc.,
160 B.R. 86, 89–91 (M.D. Tenn. 1993) (explaining why federal choice-of-
law rules should apply).
The district court declined to choose one choice-of-law approach over the
other because, in its view, both would give the same answer. See, e.g., Woods-
Tucker Leasing Corp., 642 F.2d at 748–49 (“see[ing] no need to resolve” choice-
of-law approach because either analysis “would lead to the same result”) (citing
3 The district court found it had jurisdiction under 28 U.S.C. § 1334(b), which provides
district courts “original but not exclusive jurisdiction of all civil proceedings . . . arising in or
related to cases under title 11” of the Bankruptcy Code. See, e.g., In re Galaz, 765 F.3d 426,
430 (5th Cir. 2014) (discussing scope of “related to” bankruptcy jurisdiction under section
1334(b)) (citing In re Walker,
51 F.3d 562, 568–69 (5th Cir. 1995)). The district court declined
to resolve whether it also had diversity jurisdiction under 28 U.S.C. § 1332. The resolution of
that question did not affect the district court’s analysis, nor does it affect ours.
4
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Fahs v. Martin, 224 F.2d 387, 399 (5th Cir. 1955)); see also In re Morris,
30
F.3d 1578, 1582 (7th Cir. 1994) (same). Texas’ choice-of-law rule would
determine lien priority according to the law of the states where BFN received
the products. See TEX. BUS. & COM. CODE § 9.302 (providing, “[w]hile farm
products are located in a jurisdiction, the local law of that jurisdiction governs
perfection, the effect of perfection or nonperfection, and the priority of an
agricultural lien on the farm products”). 4 The federal choice-of-law analysis
would look to the UCC and the Second Restatement of Conflicts of Law to
determine which state has the “most significant relationship” to the case. See,
e.g.,
Mirant, 675 F.3d at 536 (relying on the Second Restatement); Woods-
Tucker, 642 F.2d at 748–49 (relying on the UCC). Under that approach, the
district court found, lien priority would also look to the law of the products’
location. See, e.g., U.C.C. § 9-302 (same rule for lien priority as Texas rule);
RESTATEMENT (SECOND) OF CONFLICTS OF LAW § 251(2) (absent “effective
choice of law by the parties,” giving “greater weight . . . to the location of the
chattel at the time that the security interest attached”). In sum, either choice-
of-law approach, forum or federal, would end up determining lien priority
under the law of the respective state where the farm products were located.
The district court next addressed the merits of the lien dispute. As to the
Michigan and Tennessee products, the court found the Nurseries lacked
perfected liens due to defective financing statements. Their statements
incorrectly listed the debtor’s name as “BFN Operations, LLC abn Zelenka
4 The parties do not dispute that the products are farm products, nor that the liens
are agricultural liens. See id. § 9.102(a)(34) (“farm products” include “goods, other than
standing timber, with respect to which the debtor is engaged in a farming operation [and are]
crops grown, growing, or to be grown, including . . . crops produced on trees, vines, and
bushes”);
id. § 9.102(a)(5) (an “agricultural lien” is “an interest in farm products” that secures
payment or performance for “goods or services furnished in connection with a debtor’s
farming operation”). Additionally, the parties stipulated that the products were delivered to
BFN’s farms in Michigan, Tennessee, and Oregon.
5
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Farms,” instead of the name listed on its founding documents, “BFN
Operations LLC.” That is insufficient under Michigan and Tennessee law,
which require listing the debtor’s name exactly as it appears on the public
documents creating the entity. See MICH. COMP. LAWS § 440.9503(1)(a); TENN.
CODE ANN. § 47-9-503(a)(1). Nor would “savings clauses” help the Nurseries,
the court found. Those clauses validate an incorrect financing statement only
if a database search using the debtor’s correct name would produce the
statement with the incorrect name. See MICH. COMP. LAWS § 440.9506(2);
TENN. CODE ANN. § 47-9-506(b), (c). But it was undisputed that, under the
strict search logics in these states, searching with BFN’s correct name would
not uncover the incorrectly named liens. See MICH. ADMIN. CODE r. 440.510;
TENN. COMP. R. & REGS. 1360-08-05-.04 (setting out UCC search logics).
Because the Nurseries lacked perfected liens on the Michigan and Tennessee
products, the district court concluded those liens were not senior to PNC’s lien.
As to the Oregon products, the district court found Fishback failed to
extend its lien under Oregon law. Unlike Michigan and Tennessee, Oregon
does not require filing a notice to perfect an agricultural lien. See OR. REV.
STAT. § 87.705(2). The lien, however, expires 45 days after final payment is
due, unless the producer files an extension supported by affidavit and
containing specified information. Id. § 87.710(1), (2). The undisputed facts
showed that Fishback’s lien extension was due August 11, 2016, but no
extension was filed until August 29, 2016—too late under Oregon law.
Fishback countered that it “substantially complied” with the extension
requirement by filing a UCC financing statement in Oregon on June 21, 2016.
The district court rejected this argument, however, finding the UCC statement
met virtually none of Oregon’s extension requirements and would mislead
third-party creditors if allowed to substitute for the required notice. Because
6
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Fishback’s lien had expired under Oregon law, the district court concluded that
it was unenforceable and so could not be senior to PNC’s lien.
The district court therefore denied the Nurseries summary judgment and
granted PNC summary judgment. The Nurseries appeal.
II.
“We review an order granting summary judgment de novo, applying the
same standards as the district court.” Cooley v. Hous. Auth. of City of Slidell,
747 F.3d 295, 297 (5th Cir. 2014) (citation omitted); FED. R. CIV. P. 56(a).
III.
A.
We first consider the choice-of-law issue. The Nurseries argue on appeal
that the district court erred by applying the law of the jurisdictions where the
farm products were located (Michigan, Tennessee, and Oregon, respectively).
Instead, they contend Oregon law should govern the lien dispute as to all
products, essentially for two reasons: (1) contracts between Fishback and BFN
contain a choice-of-law provision selecting Oregon law; and (2) alternatively, a
proper application of both Texas and federal choice-of-law principles point to
Oregon law. We address each argument in turn.
First, the district court correctly rejected application of any contractual
choice-of-law clauses. The only such clauses identified by the Nurseries appear
in the Fishback–BFN invoices. 5 But here we do not have a contractual dispute
between Fishback and BFN, to which the choice-of-law clause might apply. See,
e.g., Energy Coal. S.P.A. v. CITGO Petroleum Corp., 836 F.3d 457, 459–60 (5th
Cir. 2016). Instead we have a dispute between the Nurseries and a third party
5 The clauses provide that “[a]ll matters regarding these transactions shall be
governed by Oregon law including but not limited to [OR. REV. STAT.] § 87.700 et seq.” The
Surface–BFN invoices contain no choice-of-law provision. So, even if such a provision
somehow applied to PNC, how that would help Surface is a mystery.
7
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(PNC) over lien priorities in BFN assets. The Nurseries identify no authority
for applying a choice-of-law provision in a contract to a lien dispute with a third
party. Doing so, as the district court pointed out, would be unfair to parties
who are strangers to the contract containing the choice-of-law provision,
“including third-party creditors in lien disputes like this one.” That is why
Texas choice-of-law rules (adopted from the UCC) limit parties’ ability to
contract around the law governing priority and perfection of “security interests
and agricultural liens.” 6 See, e.g., Carlson v. Tandy Computer Leasing, 803
F.2d 391, 394 (8th Cir. 1986) (applying similar provision under Missouri UCC
to “prohibit choice of law agreements when the rights of third parties are at
stake,” in contrast to “situations where only the rights of parties privy to the
initial choice of law agreement are implicated”). The district court thus
correctly rejected the Nurseries’ argument that any choice-of-law provision in
the Fishback–BFN contracts should control the law applicable to the
Nurseries’ lien dispute with PNC.
Second, the Nurseries fail to show that the district court misapplied
either the Texas or federal choice-of-law rules. As to the Texas rules, the
Nurseries say the district court should have applied the test in “section 188 of
the Restatement (Second) of Conflict of Laws” and determined that Oregon law
applied. They are mistaken. As the Nurseries’ own authorities explain, that
section applies to “evaluating choice-of-law issues in contractual disputes.”
6 See TEX. BUS. & COM. CODE §§ 1.301(b), 9.302 (providing laws on perfection and
priority of “security interests and agricultural liens” in, inter alia, § 9.302, “govern[ ]” and “a
contrary agreement is effective only to the extent permitted by the law (including the conflict
of laws rules) so specified”); id. § 1.301 cmt. 5 (explaining that § 1.301(b) places “essential
limitations on the parties’ right to choose the applicable law,” especially because “parties
taking a security interest . . . must have sure ways to find out whether and where to file and
where to look for possible existing filings”). Texas adopted this approach from the UCC. See
UCC § 1-301(c)(8);
id. cmt. 4. Michigan and Tennessee have done the same. See MICH. COMP.
LAWS § 440.1301(3)(g) & cmt. 4; TENN. CODE ANN. § 47-1-301(c)(7) & cmt. 4.
8
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Minn. Mining & Mfg. Co. v. Nishika Ltd., 953 S.W.2d 733, 735–36 (Tex. 1997)
(emphasis added). 7 This case—as we have taken pains to emphasize—involves
not a contractual dispute but rather a dispute over competing lien priorities in
a bankrupt company’s assets. Analysis of choice-of-law in lien priority disputes
begins, not with section 188, but with the “most significant relationship” test
in section 6. See Sommers Drug Stores Co. Emp. Profit Sharing Tr. v. Corrigan,
883 F.2d 345, 353 (5th Cir. 1989) (observing “Texas has adopted the ‘most
significant relationship’ test of the Restatement (Second) of Conflict of Laws
§ 6 (1971) for resolving choice of law issues”) (citing Duncan v. Cessna Aircraft
Co.,
665 S.W.2d 414, 421 (Tex. 1984)). 8 And the section 6 test is quite simple
to apply where, as here, “Texas . . . has a statute which specifically controls the
choice of law issue.”
Sommers, 883 F.2d at 353. That statute is section 9.302 of
the Texas Business and Commerce Code, which, as the district court
recognized, specifies that agricultural lien perfection and priority are governed
by the law of the jurisdiction where “farm products are located.” TEX. BUS. &
7 Section 188 provides that the rights and duties of parties “with respect to an issue
in contract” are determined by state law “which, with respect to that issue, has the most
significant relationship to the transactions and the parties” under the general section 6
principles. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188(1). It also lists specific
contacts to inform section 6, absent a choice of law by the parties. Id. § 188(2).
8 Section 6 provides as follows:
(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own
state on choice of law.
(2) When there is no such directive, the factors relevant to the choice of the applicable rule
of law include
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states
in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6(1), (2).
9
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COM. CODE § 9.302; see also, e.g., RESTATEMENT (SECOND) OF CONFLICT OF
LAWS § 6 cmt. a (noting courts generally “must apply a local statutory provision
directed to choice of law,” and citing as “[a]n example of [such] a statute . . . the
Uniform Commercial Code”). We therefore reject the Nurseries’ argument that
the district court incorrectly applied Texas choice-of-law rules.
As to the federal choice-of-law rules, the Nurseries argue that—to the
extent we follow their confusing argument—the district court “erred by relying
on Section 6 of the Restatement” in its choice-of-law analysis. But our
precedent instructs that the section 6 factors are a touchstone for the federal
test. See, e.g., Mirant, 675 F.3d at 536 & n.2 (explaining that the federal
“independent judgment test is essentially synonymous with the most
significant relationship approach adopted by the [Second Restatement]” and
referring to the section 6 factors) (internal quotes and citations omitted). And,
as explained above, section 6 is easy to apply where a statute controls the
choice-of-law issue. 9 The Nurseries also argue, puzzlingly, that the district
court erred by relying on “UCC–Article 9” principles in the federal choice-of-
law analysis. But this again ignores our precedent, which has referred to UCC
principles as a key factor in the analysis. See, e.g.,
Woods-Tucker, 642 F.2d at
749 (observing that, in federal choice-of-law analysis, the UCC “‘should
generally be considered as the federal law of commerce including secured
transactions’” (quoting In re King-Porter Co.,
446 F.2d 722, 732 (5th Cir. 1971)).
Finally, the Nurseries make the bizarre argument that the district court erred
by applying “on multiple occasions . . . section 251 of the Restatement (Second)
9 Although recognizing that the specific UCC and Texas choice-of-law provisions
essentially settled the question, the district court also analyzed the section 6 factors and
determined that the states with the “most significant relationship” to the case were those
where the products were located. See, e.g., Sommers, 883 F.2d at 353 & n.2 (discussing section
6 factors). While not strictly necessary—given the specific statutory provisions pointing to
the same result—we find no error in the district court’s comprehensive analysis.
10
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Conflict of Laws which specifically addresses UCC conflict of laws issues.” But
the district court was exactly right to refer to section 251: Squarely applicable
to the conflicts puzzle here, section 251 advises courts to give “greater
weight . . . to the location of the chattel at the time that the security interest
attached than to any other contact in determining the state of the applicable
law.” RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 251(2). That is just what
the district court did, giving precedence to the products’ location in
determining lien priority rules. We find no error in the district court’s
application of the federal choice-of-law analysis.
In sum, we reject the Nurseries’ arguments that the district court erred
in determining the law applicable to the parties’ lien dispute.
B.
We turn to the merits. At the outset, we note that the Nurseries do not
contest on appeal the district court’s conclusion that the Michigan and
Tennessee liens were not properly perfected under those states’ laws. They
have therefore waived any error as to those issues. See, e.g., Bailey v. Shell
Western E&P, Inc., 609 F.3d 710, 722 (5th Cir. 2010) (“Issues not briefed on
appeal are waived.”). The Nurseries argue only that the district court erred in
determining that they failed to extend the lien on the Oregon farm products.
The district court ruled that (1) Fishback’s 10 Oregon lien expired because
Fishback failed to timely file the notice required by Oregon law to extend the
lien beyond expiration, and (2) Fishback’s previous filing of a UCC financing
statement did not “substantially comply” with the notice requirement.
Fishback contests both points, arguing that the UCC statement should either
10Our discussion in this section pertains only to Fishback because, as already noted,
only Fishback shipped products to Oregon.
11
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count as the lien extension or, at a minimum, should constitute “substantial
compliance” with the notice requirement.
Under Oregon law, an agricultural producer has a lien for the price or
value of produce that attaches the date the produce is delivered. OR. REV. STAT.
§ 87.705(1). While the producer “need not file any notice in order to perfect the
lien,” id. § 87.705(2), the lien expires “no later than the end of the 45th day
after the date that the final payment to the agricultural producer is originally
due, unless the producer extends the lien” by filing a notice of lien or notice of
claim of lien.
Id. § 87.710(1), (2); see also
id. § 87.705(2) (producer “must file a
notice of lien as provided in ORS 87.710 or a notice of claim of lien as provided
in ORS 87.242 to extend the lien beyond the normal expiration date”). The
notice of lien under section 87.710 may be filed “only during the period after
the date that payment for the agricultural produce is originally due and no
later than the 45th day after the date that the final payment for the produce
is due.”
Id. § 87.710(2). The notice “must be supported by affidavit and contain”
the following information:
(a) a true statement of the agricultural producer’s demand after
deducting all credits and offsets;
(b) the name of the purchaser that received the agricultural produce
to be charged with the lien;
(c) a description of the produce delivered or transferred by the
producer sufficient to identify the basis for the lien;
(d) a statement that the amount claimed is a true and bona fide
existing debt as of the date of the filing of the notice of lien;
(e) the date that the final payment to the producer was originally
due; and
(f) such other information as the Secretary of State may require.
12
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Id. Additionally, within 20 days of the filing, the producer must send the notice
to all persons who have perfected security interests under Oregon law in the
same products.
Id. § 87.710(3), (4). 11
In this case, it was stipulated that final payment from BFN to Fishback
was due “within ninety (90) days from the date of invoice.” The invoice date
was March 29, 2016. Final payment was thus due 90 days later on June 27,
2016. Under Oregon law, Fishback’s lien would therefore expire 45 days after
that, on August 11, 2016, unless Fishback filed the required notice before that
date. Id. § 87.710(1). Fishback, however, concedes it did not file its notice of
lien until August 29, 2016—too late under the statute. 12
Fishback invites us to ignore all this and treat a different document—its
UCC financing statement filed June 21, 2016 13—as the notice required by
Oregon law. We decline. Fishback points us to no authority for treating the
UCC statement as a notice of lien, and to do so would contravene the plain
terms of Oregon law. The relevant statute provides that, in order to “extend
the [agricultural] lien beyond the normal expiration date,” the producer “must
file a notice of lien as provided in [Or. Rev. Stat. §] 87.710 or a notice of claim
of lien as provided in [Or. Rev. Stat. §] 87.242.” Id. § 87.705(2) (emphases and
brackets added). Fishback does not even claim that its UCC statement was
filed pursuant to these specific Oregon statutes. Nor could it: In Oregon, UCC
11The “notice of claim of lien” has slightly different requirements, see OR. REV. STAT.
§ 87.242(2), but they would not change the result here and are, in any event, immaterial since
Fishback’s late notice expressly referenced the notice provision of section 87.710.
12 Fishback’s notice of lien filed August 29, 2016 states that payment from BFN was
originally due August 31, 2016. But the stipulated facts state that final payment was due
within 90 days from the invoice date, and the invoices are all dated March 29, 2016. Ninety
days from March 29, 2016 is June 27, 2016. Fishback does not contest any of these dates, nor
does it contest the district court’s assessment that its August 29 filing was untimely.
13The district court opinion states the UCC statement was filed July 13, 2016, but the
record reflects it was filed June 21, 2016. The discrepancy makes no difference to the analysis.
13
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financing statements are filed under a different chapter altogether. See OR.
REV. STAT. § 79.0501 et seq. We therefore reject Fishback’s argument equating
a UCC statement with the required notice of lien.
Undaunted, Fishback argues that the UCC financing statement should
be treated as “substantial compliance” with the extension requirement. The
district court correctly rejected this argument. Under Oregon law, substantial
compliance requires complying with “‘the essential matters necessary to assure
every reasonable objective of the statute.’” Rogers v. Roberts, 717 P.2d 620, 622
(Or. 1986) (quoting Sabatini v. Jayhawk Constr. Co., Inc.,
520 P.2d 1230, 1234
(Kan. 1974)). Courts consider the “degree of noncompliance,” the “policy which
underlies the particular statutory provision,” and any “prejudice” to others.
McGregor Co. v. Heritage,
631 P.2d 1355, 1357 (Or. 1981) (internal quotes and
citation omitted). As the district court found, “Fishback’s degree of
noncompliance was high.” It filed a statement prescribed by an entirely
different provision of Oregon law, see OR. REV. STAT. § 79.0502, that was not
supported by the required affidavit, see
id. § 87.710(2), that was not “in a form
prescribed by the Secretary of State,” see
id. § 87.736(1), that was filed too
early, see
id. § 87.710(2), and that did not contain the information required in
a notice of lien. Compare
id. § 79.0502(1) (financing statement’s required
contents) with
id. § 87.710(2) (notice of lien’s required contents). Moreover, as
the district court observed, allowing the UCC statement to “pull double duty”
as a notice of lien would cause prejudice by failing to notify others that a lien
has been extended: “Searchers of Oregon’s lien index cannot determine the
duration of a lien just by looking at a financing statement.” Instead, that is the
notice of lien’s purpose, which is why Oregon law specifically requires it to
warn others that a lien has been extended beyond the usual 45-day expiration
date. See
id. § 87.710(1) (providing that, “[i]f the agricultural producer extends
14
Case: 18-10090 Document: 00514910089 Page: 15 Date Filed: 04/10/2019
No. 18-10090
the lien, the lien expires no later than the 225th day after the date that the
final payment to the producer is originally due”).
We thus conclude that Fishback failed to comply, substantially or
otherwise, with Oregon’s notice requirement via a UCC financing statement.
IV.
In sum, we find no error in the district court’s ruling that the Nurseries’
liens were not senior to PNC’s lien on the bankrupt company’s assets. The
district court therefore correctly granted PNC summary judgment.
AFFIRMED.
15
