In re Gary Stevens

307 B.R. 124 (2004)

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In re Gary Stevens

United States Bankruptcy Court for the Eastern District of Arkansas
307 B.R. 124 (2004)

Facts

On May 2, 2002, Gary Stevens obtained a substantial loan from Union Planters Bank (Union Planters) (creditor) for his farming operation. The loan was payable with interest on demand or on April 3, 2003, if no demand was made. As security for the loan, Stevens and his wife (debtors) granted Union Planters a security interest in their farming equipment and government payments. The security agreement contained an after-acquired-property clause, and Union Planters filed the requisite financing statements. On May 13, 2002, Congress enacted the Farm Security Rural Investment Act of 2002 (2002 Farm Bill). The sign-up period to receive government payments under the 2002 Farm Bill for the fiscal years 2002 and 2003 was October 1, 2002, to June 2, 2003. The 2002 Farm Bill determined eligibility for the government payments based on base acres and payment yields, which the government calculated using past production before 2003. On September 15, 2002, and October 11, 2002, the Stevenses and a Union-Planters representative respectively signed the documentation for the government payments. Subsequently, in February 2003, The Stevenses filed for bankruptcy. The Stevenses did not begin their farming operation in 2003 until March 2003, and the Stevenses used a separate-crop lender for the 2003 crops rather than the loaned money from Union Planters. During bankruptcy proceedings, Union Planters argued that it had a secured claim as to the Stevenses’ right to the government payments that the Stevenses were entitled to under the 2002 Farm Bill. The Stevenses argued that Union Planters’ security interest did not attach to the government payments because the Stevenses did not acquire rights in the payments until they planted the crops in March 2003, which was after the bankruptcy filing.

Rule of Law

Issue

Holding and Reasoning (Evans, C.J.)

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