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Midkiff Implement Co. v. Worrall

OPINION FILED JULY 6, 1983.

MIDKIFF IMPLEMENT COMPANY, PLAINTIFF-APPELLANT,

v.

GRACE E. WORRALL, INDIV. AND AS ADM'R OF THE ESTATE OF DONALD L. WORRALL, DECEASED, ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Morgan County; the Hon. Gordon D. Seator, Judge, presiding.

JUSTICE MILLS DELIVERED THE OPINION OF THE COURT:

Uniform Commercial Code.

Does "all * * * farm machinery * * * now owned" mean just that in a security agreement?

It does.

We affirm.

Donald Worrall, a Morgan County farmer, found himself beset by the same plight that has befallen many farmers today — he bought farm machinery which he was unable to pay for. In April of 1977, he purchased a New Holland Model 850 round hay baler from the Midkiff Implement Company. In June of the same year, he purchased a 770 W forage pickup, a New Holland Model 80 bale carrier, and a New Idea Model 404 hay rake from Midkiff. Worrall executed a retail installment contract with each purchase and security agreements covering the items were recorded in Greene County, where Midkiff's business is located. Midkiff, however, failed to record its security interest in the items in Morgan County, where Worrall lived.

From time to time, Worrall and his wife, Grace, borrowed money from the First National Bank of Jacksonville, which subsequently merged with the Elliott State Bank of Jacksonville (the Bank). In April of 1979, Worrall and his wife executed a chattel mortgage (the security agreement) giving the Bank a security interest in certain collateral in order to secure their loans at the Bank. That security agreement contained the following description of collateral:

"First lien under the Uniform Commercial Code of Illinois on all machinery, equipment, including farm machinery and equipment, fixtures, inventory, crops growing or to be grown, livestock, accounts receivable and general intangibles now owned and hereafter acquired and all proceeds thereafter including but not limited to the attached Exhibit A." (Emphasis added.)

The attached Exhibit A did not list the four items Worrall purchased from Midkiff. Within 10 days, the Bank filed a financing statement — containing the same description of collateral — in the Morgan County clerk's office.

Worrall defaulted in his payments to Midkiff and then died in the summer of 1979. His widow was appointed administratrix of his estate. She hired attorney Ronald Kesinger and the Moss Auction Company to assist her in liquidating her husband's estate. After the sale of the decedent's farm machinery at public auction, both Midkiff and the Bank demanded the proceeds from the sale of the four disputed items: the hay baler, the forage pickup, the bale carrier, and the hay rake. Caught between the devil and the deep blue sea, the widow turned to her attorney for guidance. Kesinger advised Mrs. Worrall to pay the proceeds to the Bank, which she did.

Midkiff then filed a complaint in the circuit court of Morgan County against Mrs. Worrall (individually and as adminstratrix of her husband's estate), Kesinger, the Moss Auction Company, and the Bank (collectively the defendants). The complaint alleged that the defendants had illegally appropriated the proceeds from the sale of the four disputed items. All of the parties — Midkiff and each of the defendants — filed motions for summary judgment. Judge Seator granted the defendants' motions for summary judgment and Midkiff appeals.

We affirm.

On appeal, Midkiff admits that it failed to perfect its security interest in the four items by not filing a financing statement covering the items in Morgan County, the situs of debtor's residence. Midkiff maintains, however, that although it failed to perfect its security interest, it did at least attach a security interest to the four items by entering into a security agreement with Worrall. We agree. Midkiff did attach a valid security interest to the four items.

• 1 Midkiff then argues that it should have priority over the Bank to the proceeds because it attached a security interest to the items and the Bank did not. Midkiff bases its argument on the position that although the Bank entered into a security agreement with Worrall and did perfect first by filing in Morgan County, the description of the collateral in the Bank's security agreement — "all * * * farm machinery and equipment * * * now owned" — was too vague and therefore did not cover the four items. Here, we disagree. Although the collateral description in the Bank's security agreement was very broad, it was sufficient to cover the four items. Consequently, the Bank did have priority over Midkiff to the ...


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