## Facts

- Ag Services loaned C.M.R., Inc. $240,000 and took a security interest in C.M.R.’s farm products, inventory, and harvested or stored crops.
- Ag Services filed financing statements in the county where the crops were grown, identifying the relevant farmland.
- C.M.R. later leased farmland from Empfield; the lease contemplated that Empfield could take a chattel mortgage in crops to secure rent.
- Empfield did not file any financing statement or otherwise perfect a security interest arising from the lease.
- After the 1995 harvest, C.M.R. stored harvested corn in Empfield’s bins located on Empfield’s land.
- C.M.R. paid the first rent installment but defaulted on the second installment (about $27,750).
- Empfield sold the stored corn and received $32,175, applying the proceeds to unpaid rent and other claimed amounts.
- C.M.R. remained indebted to Ag Services in an amount exceeding the corn-sale proceeds.
- Ag Services sued Empfield for conversion based on its perfected security interest; the trial court granted summary judgment for Ag Services.

## Issues

1. Whether Ag Services’ perfected security interest in the corn had priority over Empfield’s unperfected interest asserted under the lease.
2. Whether Empfield’s sale of the corn constituted conversion as against Ag Services.
3. Whether Empfield could rely on unjust enrichment/equitable theories to defeat Ag Services’ claim, despite not pleading them as an affirmative defense.

## Decision

- The Nebraska Supreme Court affirmed summary judgment for Ag Services.
- Ag Services’ perfected security interest had priority over Empfield’s unperfected claim under the U.C.C. first-to-file/perfect rule.
- Empfield’s sale of the corn was an exercise of dominion inconsistent with the secured party’s rights and therefore constituted conversion as to Ag Services.
- Unjust enrichment was unavailable because it was an affirmative defense that was not properly pleaded, and equity could not override the statutory priority scheme.

## Legal Principles

- A secured party who is first to file or perfect has priority over competing unperfected security interests, even with actual or constructive knowledge of the unperfected claim.
- When property is subject to a security interest, exercising dominion or control over it inconsistent with the secured party’s rights constitutes conversion as to that secured party.
- Affirmative defenses must be pleaded to be considered by the trial court and on appeal.
- Equitable theories do not displace the U.C.C.’s statutory priority rules where the statute directly governs priority.

## Conclusion

The court held that the lender’s properly perfected crop security interest defeated the landlord’s unperfected lease-based claim, making the landlord liable for conversion when he sold the collateral, and it rejected unjust enrichment because it was not pleaded and could not override Article 9 priority rules.


Ag Servs. of Am., Inc. v. Empfield, 255 Neb. 957, 587 N.W.2d 871 (Neb. 1999)