United States Bankruptcy Appellate Panel of the Ninth Circuit
In re: CHARLES A. GROGAN, d/b/a Silver Bells Tree Farm and SARAH A. GROGAN, Debtors.
HARVEST CAPITAL COMPANY; DEMETER AG, LLC, Appellees. CHARLES A. GROGAN; SARAH A. GROGAN, Appellants, Bk. No. 11-65409-TMR Adv. No. 11-06276-TMR
Argued and Submitted on July 25, 2013 at Butte, Montana
Appeal from the United States Bankruptcy Court for the District of Oregon Honorable Thomas M. Renn, Bankruptcy Judge, Presiding
Laura J. Walker, Esq., of Cable Huston Benedict Haagensen & Lloyd LLP, argued for appellants,
Charges A. Grogan and Sarah A. Grogan; Todd L. Friedman, Esq., of Stoel Rives LLP, argued for appellee Harvest Capital Company; Aaron J. Bell, Esq., of Bell Law Firm, PC appeared for appellee Demeter Ag, LLC.
Before: JURY, TAYLOR, and PAPPAS, Bankruptcy Judges.
Chapter 11 debtors, Charles A. Grogan and Sarah A. Grogan, own and operate a Christmas tree farm. Debtors commenced an adversary proceeding against appellees, Harvest Capital Company (Harvest) and Demeter Ag, LLC (Demeter) (collectively, Harvest and Demeter are referred to as Defendants), asserting that:
(1) the collateral description in Defendants' security agreements did not include Christmas trees or, if they did,
(2) the collateral description in Defendants' financing statements did not include Christmas trees and, therefore, their liens were not perfected and avoidable under § 544. Debtors filed a motion for summary judgment (MSJ) on these issues, and Defendants filed cross-motions for summary judgment.
The bankruptcy court denied debtors' MSJ and granted Defendants' cross-motions finding that, as a matter of law, the collateral description reasonably identified the Christmas trees as Defendants' collateral under Oregon's version of the Uniform Commercial Code (UCC). As a result, the court concluded that Defendants' notes were secured by properly perfected unavoidable security interests in debtors' Christmas trees and their proceeds. This appeal followed. We AFFIRM.
Debtors own and operate, as a sole proprietorship, Silver Bells Tree Farm, located in Marion County, Oregon, where they plant and grow Christmas trees. Approximately twelve years after being planted, the Christmas trees are harvested for sale. At various times, debtors took out secured loans with Defendants.
A. The Harvest Loans
In September 2006, debtors borrowed $7 million from Harvest as evidenced by two promissory notes: one for $5, 500, 000 (Note A) and the other for $1, 500, 000 (Note B). Both notes were secured by a combined mortgage/security agreement (Harvest Security Agreement), which was recorded in the Marion County real property records.
The Harvest Security Agreement provides in relevant part:
To secure payment of the Indebtedness and performance of all obligations of mortgagor under this Mortgage, mortgagor mortgages and conveys to Lender the following:
(4)All trees, bushes, vines and other permanent plantings now or hereafter located on the real property (the "Plantings");
(5)All intellectual property rights now or hereafter held by Mortgagor with respect to Plantings now or hereafter growing on the Real Property, including, without limitation, the SILVER BELLS BLUE' NOBLE FIR trademark and other labels, logos, patents or patent licenses and trademark rights (the "Intellectual Property Rights"); . . . .
Mortgagor presently assigns to Lender all of Mortgagor's right, title and interest in and to all rents, revenues, income, issues and profits (the "Income") from the Real Property, the Plantings, the Personal Property . . ., whether now or hereafter due.
Mortgagor grants Lender a security interest in the Income, Plantings, the Water Rights, the Personal Property, . . . .
Section 8 of the agreement, entitled "Security Agreement, Security Interest" further provides:
8.1 Security Agreement. This instrument shall constitute a security agreement with respect to the Income, Plantings, Water Rights, Personal property, . . . .
On September 20, 2006, and September 2, 2009, respectively, Harvest filed an original and amended UCC financing statement with the Oregon Secretary of State (Harvest Financing Statements). Exhibit B to each of the Harvest Financing Statements stated that the collateral included, among other things:
2.All improvements, fixtures, equipment, construction materials, and other articles of personal property now owned or hereafter acquired by the Debtor that now or hereafter are located on, affixed or attached to, or incorporated in the Land, including all irrigation pumps, motors, pipes, sprinklers and other irrigation equipment.
3. All trees, bushes, vines and other permanent plantings now or hereafter located on the Land.
4. All intellectual property rights of Debtor with respect to Christmas trees, vines or other permanent plantings now or hereafter growing on the Land, including, without limitation, the SILVER BELLS BLUE' NOBLE FIR trademark and all ...