Supreme Court Summaries
Opinions filed February 22, 2013
State Bank of Cherry v. CGB Enterprises, Inc., 2013 IL 113836
Appellate citation: 2012 IL App (3d) 100495.
JUSTICE GARMAN delivered the judgment of the court, with opinion.
Chief Justice Kilbride and Justices Thomas, Karmeier, and Theis concurred in the judgment and opinion.
Justice Freeman specially concurred, with opinion, joined by Justice Burke.
Consolidated Grain and Barge Enterprises, the defendant here, maintains a grain elevator in La Salle County. It sold the crops of Lawrence Rogowski, of Utica, and delivered to him the proceeds of that sale by checks paid directly to him. He is not a party to this action.
However, the State Bank of Cherry, the plaintiff here, had lent money to Rogowski for which he signed a promissory note. He granted the plaintiff a security interest in his crops and any proceeds of their sale. Plaintiff bank notified defendant grain elevator of its lien by two separate written notices, one covering the crop years of 2004 and 2005 and the other covering the years 2005 and 2006. The notices listed as covered agricultural commodities “all grain on hand, all growing crops,” without listing their amount or location.
Plaintiff bank obtained a deficiency judgment against Rogowski in 2008, which remains unsatisfied. It filed this action in the circuit court of La Salle County, seeking payment from defendant grain elevator, which, it alleged, had failed to protect plaintiff’s lien by making payments directly to Rogowski.
This case is governed by the Federal Food Security Act of 1985, which provides how notices of security interests such as this are to be worded. The circuit court had ruled in favor of the plaintiff, but the appellate court reversed and the supreme court, in this decision, agreed with the appellate court and its acceptance of defendant grain elevator’s argument that the notices of security interest were insufficient for failing to strictly comply with the Act. The statute provides that there must be a statement of “each county or parish in which the farm products are produced or located,” but this was not done here. The Supreme Court of Illinois construed this as a requirement that must be strictly complied with. The United States Supreme Court has not spoken on this issue, and the federal appellate court for the Eighth Circuit has construed the Act as calling for strict, rather than substantial, compliance. Despite plaintiff’s arguments that substantial compliance should be sufficient, the Illinois Supreme Court rejected this view, ruling that a secured party must strictly comply with the “direct notice” provisions of the Act in order to recover. The appellate court’s ruling that defendant grain elevator took free of the security interest of which plaintiff had attempted to give notice was affirmed.