Janitell v. State Bank of Wiley

Mark and Kelly Janitell (plaintiffs) leased land in Colorado to Janitell Grain & Cattle Company (Janitell Grain) (plaintiff). The lease provided that Janitell Grain would pay the Janitells cash rent, but the Janitells had no interest in any crops Janitell Grain grew on the property. The Janitells subsequently defaulted on a promissory note secured by a deed of trust on the land, and foreclosure proceedings ensued. While those proceedings were pending, Janitell Grain planted wheat on the land. State Bank of Wiley (State Bank) (defendant) held a junior deed of trust and redeemed the property during the foreclosure proceedings. The Janitells sued State Bank, seeking to invalidate the foreclosure action. State Bank answered the complaint and joined Janitell Grain as a party. The parties then entered a settlement stipulation providing that State Bank was entitled to receive a deed to the land from the public trustee. However, the stipulation also provided that the Janitells had the option to purchase the land by a certain date. If the Janitells failed to exercise that option, the stipulation required the Janitells and Janitell Grain to vacate the land. The Janitells neither exercised the purchase option nor vacated the land, so the trial court had the Janitells and Janitell Grain evicted. State Bank then sold the land, and the new owners harvested the wheat that Janitell Grain had planted. Meanwhile, United Land Holdings, LLC (ULH) (plaintiff) moved to intervene in the Janitells’ action, asserting that ULH was entitled to the proceeds of the wheat crop as the assignee of another creditor’s judgment and security interest against the Janitells. The financing statement that had accompanied the original security agreement covered crops presently or thereafter planted and grown on the land. The trial court concluded that ULH had no security interest in the wheat because the security agreement had been extinguished or merged into a subsequent judgment obtained by the assignor. The trial court further concluded that Janitell Grain had no interest in the wheat because of the stipulation with State Bank. The trial court thus determined that State Bank was entitled to the wheat. The Janitells, Janitell Grain, and ULH appealed. One issue on appeal was whether ULH had a valid security interest in the wheat that was superior to State Bank’s interest.