## Facts

- Minnwest Bank held a perfected security interest in debtor Chadley Arends’s livestock and related collateral beginning in February 2005, securing indebtedness exceeding $8.2 million.
- New Vision Co-op supplied livestock feed to Arends from about February 2009 through July 2009.
- Arends did not pay for certain feed deliveries, leaving an unpaid balance of $281,504.04.
- On June 29, 2009, New Vision filed a UCC-1 financing statement to perfect a livestock production input lien under Minn. Stat. § 514.966.
- To obtain priority over Minnwest’s earlier perfected security interest, the statute required New Vision to send a lien-notification statement to the lender by certified mail “in an envelope marked ‘IMPORTANT–LEGAL NOTICE.’”
- On July 7, 2009, New Vision mailed Minnwest a lien-notification statement, but the envelope was not marked “IMPORTANT–LEGAL NOTICE.”
- After the livestock was sold, Minnwest and New Vision asserted competing claims to the sale proceeds based on their respective interests.

## Issues

1. Whether a perfected livestock production input lien holder can obtain priority over a prior perfected security interest without strict compliance with Minn. Stat. § 514.966, subd. 3(b), including the requirement that the notice be mailed in an envelope marked “IMPORTANT–LEGAL NOTICE.”

## Decision

- The Minnesota Court of Appeals affirmed summary judgment for Minnwest.
- The court held that New Vision did not obtain priority over Minnwest’s preexisting perfected security interest because it failed to comply with the envelope-marking requirement of Minn. Stat. § 514.966, subd. 3(b).
- Because the statutory notice condition was not satisfied, Minnwest’s earlier perfected security interest remained senior to New Vision’s lien with respect to the livestock and proceeds.

## Legal Principles

- A livestock production input lien may be perfected under Minn. Stat. § 514.966, but statutory notice requirements must be strictly satisfied to shift priority ahead of a previously perfected security interest.
- When a statute uses mandatory language (such as “shall”) and prescribes specific steps to alter lien priority, those steps function as conditions precedent rather than optional formalities.
- Substantial-compliance and equitable arguments do not excuse noncompliance where the statutory text unambiguously conditions priority on specified notice procedures.

## Conclusion

The court held that a supplier’s failure to mail the lien-notification statement in an envelope marked “IMPORTANT–LEGAL NOTICE,” as required by Minn. Stat. § 514.966, subd. 3(b), prevents the supplier’s livestock production input lien from taking priority over a lender’s earlier perfected security interest.


Minnwest Bank, M.V. v. Arends, 802 N.W.2d 412 (Minn. Ct. App. 2011)