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Farmers State Bank v. Webel





Appeal from the Circuit Court of Pike County; the Hon. Richard F. Scholz, Jr., Judge, presiding.


Plaintiff sued defendant in the circuit court of Pike County for the conversion of collateral said to be subject to its security interest. A jury trial was convened on the matter and at the close of the plaintiff's evidence, the trial court directed a verdict in favor of the defendant. Plaintiff appeals and we affirm.

There are three principal parties involved in the dispute: the plaintiff-creditor, Farmers State Bank, Pittsfield, Illinois (Bank); the debtor, Pigs Unlimited, Inc. (Pigs); and the defendant, George Webel, d/b/a Webel Feed Mill (Webel).

Pigs' basic business was that of buying and selling "feeder pigs"; incidentally, it sometimes fattened them as described below. The "feeder pig" enterprise consisted of purchasing newly weaned pigs and bringing them up to an average of about 120 to 130 pounds. They would then be sold to purchasers who would make such disposition of them as they chose. During its existence, Pigs sold to the public approximately 72,000 feeder pigs. It was licensed by the Department of Agriculture of Illinois as a feeder swine dealer. The original base of operations was on a farm in Pike County; later it leased two facilities on farms located in Hancock County and two facilities in Schuyler County.

In the fattening operation the pigs were retained and brought up to a "market" weight of 200-250 pounds and then sold to packing houses, such as Swift & Company, which was joined as an original defendant but dismissed by the Bank prior to trial. This would occur when, apparently because of market conditions, a feeder pig would remain unsold and exceed the weight of 120 to 130 pounds. It would then be retained, fattened to market weight, and sold to a packing house. This constituted about 5% of Pigs' operation.

Pigs entered into financing arrangements with the Bank. During the period from September 1975 to November 1976 it furnished the Bank with 21 notes totaling approximately $800,000. It was understood that the line of credit was $100,000 maximum, against which Pigs would draw from time to time, evidenced by short term notes. The proceeds of sale were to be deposited by Pigs in the Bank and the record contains no indication that this was not done. In fact, about $3,700,000 was so deposited. Also, from time to time as notes became due, they would be renewed upon payment of the accrued interest.

In connection with the loans the Bank took two security agreements and filed financing statements based thereon in each of the three counties in which Pigs conducted operations. A summary of the financing statements is as follows:

Filed March 29, 1976, for the "Pittsfield" location in Pike County — "1200 head mixed pigs averaging 90 lbs. (90-150 range) located on farm land situated 7 miles west of Pittsfield and owned by Donald Sperry and Dave Doerring, running along route 54 and any and all livestock acquired hereafter.

The above security is to cover all indebtedness either now or any in the future dating from January 19, 1976."

Filed June 16, 1976, for the "Pittsfield" location Pike County — "1280 head hogs located on land owned by Donald Sperry located in South East Quarter of Section 31, Township 5, South Range 4 West Pike County, Illinois."

Filed June 16, 1976, for the "Carthage" (Sutton & Whitcomb land) and "Dallas City" (Rohn land) located in Hancock County. "1070 head hogs located in Hancock County on the following tracts of land: land belonging to Don Rohn located in the Southwest Quarter, Section 3, Twp 7, North Range 6W; Paul Sutton in NE 1/4, Sec. 26, 5N, 6W & SE 1/4, 5N, 6W Sect. 26; Ron Whitcomb — SE 1/4 Sect. 34, 5N, 7W. All the above property is located in Hancock County and belonging to respectively above named persons."

Filed June 16, 1976. The Bank claims that this filing covers livestock in the "Camden" location on land 8 miles away and that described here in which is owned by a man named Eck. "1000 head hogs located on land belong to J.W. Byers located in Schuyler County SE 1/4, Sec. 9, 2N, 9W."

One of Pigs' customers was defendant Webel, who owned and operated a feed mill at Pittsfield. From time to time Webel purchased feeder pigs and either placed them on his own farm for fattening for market, or on the farms of others with whom he had a fattening arrangement.

In addition to purchasing feeder pigs, Webel also entered into a special fattening arrangement with Pigs. The nature of this arrangement was such that Webel would pay Pigs for a number of feeder pigs which were either already located on one of the above lots controlled by it, had been purchased by Pigs but had not yet arrived, or were then obtained and delivered to one of the lots of Pigs. Feeder pigs were bought COD and most of the time they were sold, and the money deposited, before they arrived. Not more than 25% of the pigs Webel purchased would have already been in Pigs' lots. Its records would not differentiate among the pigs.

Webel would provide the feed for the pigs. Pigs provided the facilities, the day-to-day care, and would decide when to take the hogs to market. Upon receipt of the settlement check, Pigs would bring it to Webel, who would deduct out the original price advanced, the feed cost, and any profit would be split between Webel and Pigs. Any loss would be born by Webel.

Under this arrangement Webel did not remove the animals from the premises. Webel's records did indicate how many and in which pens his pigs were located among the Pigs' facilities. Webel had no security agreement, or any written agreement concerning this arrangement. He did not investigate to see whether or not anyone else did. He posted no signs or other notice to the public at large concerning his interest, nor were the pigs identified to the public as being Webel's property. By March 8, 1977, all of the pigs located in Pigs' ...

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