Maryott v. Oconto Cattle Co.

For many years, Ned Maryott (plaintiff) sold cattle to Oconto Cattle Co. (Oconto) (defendant). Maryott’s practice was to deliver cattle to Oconto and present invoices. Maryott was usually not immediately paid, but according to a possible industry standard, title to cattle did not pass until the seller of the cattle had been paid. Oconto had two lines of credit with its lender, Farm Credit, based on several promissory notes. All the notes were secured and cross-collateralized by security interests in all Oconto’s livestock and inventory at any time after the notes’ execution. Farm Credit’s security interests were perfected by proper legal processes. Under specified conditions, Farm Credit advanced funds to Oconto. In the summer of 1996, Maryott delivered 640 head of cattle to Oconto. Maryott was not immediately paid. In partial payment for the cattle, Oconto issued Maryott two sight drafts based on Oconto’s lines of credit. Subsequently, Farm Credit twice dishonored the sight drafts. Without specific knowledge of Maryott’s cattle, Farm Credit had canceled Oconto’s lines of credit because of Oconto’s noncompliance with the loan agreement. Oconto later filed for bankruptcy, and Maryott was not allowed to retake the cattle. Maryott initiated an action against Oconto and related parties (defendants) seeking the return of the cattle. Farm Credit intervened. A trial was held, and evidence showed that Maryott did not perfect any security interest in the cattle but may have reserved title until he was paid. The trial court entered a judgment in favor of Maryott for the cattle’s value. Farm Credit appealed, arguing that both Maryott and Farm Credit held security interests in the cattle under the Uniform Commercial Code (UCC) and Farm Credit’s perfected interest had priority.