North Platte State Bank v. Production Credit Association

In 1967 Gerald Tucker applied for and received an operating loan for his cattle business from Production Credit Association (PCA) (defendant). The loan was renewable each year. Tucker signed a security agreement that contained an after-acquired clause granting PCA a security interest in all his livestock and any later acquired by any means. PCA perfected this security interest by filing a financing statement. In 1968 in either October or November, Tucker engaged in an oral contract with D. M. Mann to purchase 79 pregnant Angus heifers with no collateral. Mann and Tucker agreed that Tucker could take delivery of the cows before the start of the new year. However, Tucker would not need to pay for the heifers, and the bill of sale would not be provided, until after January 1, 1969. Tucker took delivery on November 30, 1968, and later received the bill of sale dated January 12, 1969. On January 13, 1969, Tucker gave Mann a check for $17,775 to pay for the heifers, but the check bounced for lack of funds. Mann contacted North Platte State Bank (the bank) (plaintiff) and learned that Tucker had been in discussion with the bank for a loan and that if Tucker would complete the loan paperwork, a loan would be given. Tucker completed the paperwork and received a $20,000 loan, and the bank honored Mann’s check. Also, Tucker executed a security agreement that gave the bank a security interest in the 79 heifers, which the bank perfected by filing a financing statement on February 5, 1969. Before Tucker renewed his annual loan with PCA, PCA learned of the additional cattle. When PCA renewed Tucker’s loan, PCA required Tucker to execute a security agreement that specifically granted PCA an interest in the 79 heifers, which PCA perfected on March 24, 1969. In December 1969, Tucker defaulted on PCA’s loan. That is when PCA discovered the bank’s financing statement. PCA removed all Tucker’s cattle from his ranch, including the 79 heifers. With both parties claiming priority, the bank and PCA agreed that Tucker’s cattle would be sold with the proceeds held in escrow until a court determined who had priority. A district court determined PCA had priority as the first to file a financing statement. The bank appealed.