## Facts

- Gary and Julie Schley operated a pig-farming business and filed for Chapter 12 relief.
- Cooperative Credit Company (CCC) obtained and perfected (and later continued) a security interest in the debtors’ livestock and related collateral beginning in 2004.
- Peoples Bank made loans totaling about $1.36 million in 2008–2009 and perfected a security interest in the debtors’ livestock and proceeds.
- Watonwan Farm Service (WFS) supplied feed in early 2010 and asserted an Iowa agricultural supply dealer lien; it also claimed rights under a security agreement and financing statement.
- In June 2010, the debtors sold hogs and placed $209,412.24 of sale proceeds into escrow.
- Peoples Bank made certain payments directly to WFS in 2010, creating a dispute over whether the feed attributable to the sold hogs had been paid.
- The debtors filed an adversary proceeding to determine lien validity and priority in the escrowed proceeds; CCC, Peoples Bank, and WFS filed cross-motions for partial summary judgment.
- Material factual disputes included whether the sold hogs consumed WFS-supplied feed (a statutory predicate to lien attachment) and whether amounts due for that feed had been paid.

## Issues

1. Whether an Iowa agricultural supply dealer lien on livestock extends to proceeds from the sale of the livestock when the statute does not expressly mention “proceeds.”
2. How any such agricultural lien interacts with prior perfected Article 9 security interests in livestock and proceeds held by institutional lenders.
3. Whether WFS proved, on summary judgment, that its lien attached to the specific hogs sold and remained unpaid so as to reach the escrowed proceeds.

## Decision

- The court held, as a matter of law, that an Iowa agricultural supply dealer lien can extend to proceeds of the sale of the livestock that consumed the feed.
- The court denied summary judgment to WFS on entitlement to the escrowed proceeds because genuine disputes of material fact existed concerning feed consumption by the sold hogs and whether the relevant feed charges were paid.
- To the extent the other parties’ requested priority determinations depended on those unresolved attachment/payment facts, the court declined to enter final priority relief on summary judgment.

## Legal Principles

- Iowa Code chapter 570A may be construed to allow an agricultural supply dealer’s lien to follow livestock into identifiable sale proceeds, even if the statute is silent on proceeds.
- Statutory interpretation may consider legislative purpose and avoid readings that would render a statutory lien largely ineffective in ordinary commercial practice (e.g., livestock sold before disputes are resolved).
- An agricultural supply dealer lien under chapter 570A attaches only to livestock that consumed the dealer’s feed and is limited or defeated if the farmer “paid all amounts due” for that feed.
- Even where the legal scope of a statutory lien includes proceeds, lien attachment and the effect of payments are fact-dependent and may preclude summary judgment.

## Conclusion

The court recognized that Iowa agricultural supply dealer liens can reach livestock sale proceeds, but it refused to award the escrowed funds on summary judgment because disputed facts remained about whether the sold hogs consumed WFS feed and whether those feed charges had been paid.


In re Schley, 509 B.R. 901 (Bankr. N.D. Iowa 2014)