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In re Montagne
United States Bankruptcy Court for the District of Vermont
417 B.R. 214 (2009)
Michael Montagne (debtor) had a dairy business—Montagne Heifers, Inc. (MHI)—and filed for Chapter 12 bankruptcy. In 2005, Ag Venture Financial Services, Inc (Ag Venture) (creditor) lent $457,000 to MHI, with a loan agreement and security agreement in favor of Ag Venture, listing collateral as including all livestock and the sale proceeds of any livestock. No financing statement was then recorded. In 2006, Michael separated from his wife, Diane. The separation agreement did not mention Diane having any right in the livestock or their sale proceeds. In September 2007, Ag Ventures released Diane from liability for the MHI debt. On November 13, 2007, Diane filed a financing statement regarding MHI, indicating a security interest in the livestock and their sale proceeds. On November 20, 2007, Michael executed and delivered a promissory note to John Montagne for $100,000 constituting consideration for his purchase of John’s shares of MHI. Michael also executed a security agreement in John’s favor, describing collateral as including all farm inventory and proceeds. On November 24, 2007, Michael sold a herd of MHI’s cows for $500,000. On November 28, 2007, Michael gave Diane a check for $240,000, part of the sale proceeds. On November 30, 2007, Ag Venture filed a financing statement for the 2005 loan. On December 4, 2007, John filed a financing statement for the November 20, 2007 loan. In the bankruptcy proceeding, a priority contest arose regarding the $240,000 check. John and Diane raised arguments against the validity or priority of Ag Venture’s security interest, largely contending that either or both parties were claiming purchase-money security interests (PMSI). John argued that Ag Venture had failed to record within 20 days of its security interest’s creation and that John should have priority, as his interest related back to his November 20 security-agreement execution rather than his December 4 financing-statement filing. John and Diane also argued that Ag Venture had waived its interest by releasing Diane and that Ag Venture’s failure to file before the cattle sale lost Ag Venture its perfection. Ag Ventures and John each sought summary judgment and priority status as to the $240,000 check.
Rule of Law
Holding and Reasoning (Brown, J.)
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