## Facts

- A rancher obtained an operating loan from a production credit association (PCA) and granted a security interest covering all livestock then owned or thereafter acquired, including by purchase and natural increase.
- PCA perfected by filing a financing statement covering all of the debtor’s livestock and did not file additional financing statements.
- The debtor later took physical delivery of 79 pregnant Angus heifers under an oral purchase arrangement providing that payment and a bill of sale would occur after a later date; a bill of sale was dated after delivery.
- The debtor’s check to the seller for the heifers was dishonored; the debtor then borrowed $20,000 from a bank, granted the bank a security interest in the 79 heifers, and the bank’s loan proceeds enabled payment to the seller.
- The bank filed its financing statement after the loan closed, more than ten days after the debtor had taken physical delivery of the heifers.
- PCA later required and received a new security agreement specifically listing the 79 heifers and filed a financing statement covering them.
- After the debtor defaulted, PCA repossessed and sold the cattle (including the 79 heifers); sale proceeds were escrowed while the secured creditors litigated priority.

## Issues

1. Whether PCA’s earlier-filed, after-acquired property security interest in livestock had priority over the bank’s later-filed claimed purchase-money security interest (PMSI) in the 79 heifers.
2. For non-inventory collateral, whether the U.C.C. ten-day PMSI perfection period runs from the debtor’s receipt of physical possession of the collateral or from the date the debtor becomes obligated to the purchase-money lender.
3. Whether the bank’s advance created a PMSI where the debtor had already taken delivery and obtained rights in the heifers before the bank made its loan.

## Decision

- The Nebraska Supreme Court affirmed judgment for PCA.
- PCA held priority under the notice-filing “first to file” rule because it filed first and its after-acquired property clause covered later-acquired livestock, including the heifers once the debtor obtained possession and rights.
- The bank did not obtain PMSI superpriority because it failed to perfect within the statutory ten-day period measured from the debtor’s receipt of possession of the heifers.
- The court treated the bank’s loan as financing that occurred after acquisition, not value used to enable the debtor to acquire rights in or use of the collateral within the PMSI priority exception’s limits.

## Legal Principles

- In an Article 9 notice-filing system, when two security interests are perfected by filing, priority goes to the interest covered by the financing statement filed first unless a specific Code exception applies.
- A secured party may perfect a “floating lien” in after-acquired livestock through a security agreement with an after-acquired property clause and a properly filed financing statement describing the collateral.
- A non-seller PMSI arises only to the extent the secured party’s value is used to enable the debtor to acquire rights in or the use of the collateral.
- For non-inventory collateral, the PMSI priority exception is strictly construed; the perfection grace period runs from the time the debtor receives possession of the collateral.
- Under the U.C.C. sales provisions, goods delivered to and physically received by the buyer are in the buyer’s possession, and absent explicit contrary agreement, the buyer acquires sufficient rights upon delivery for attachment and related priority rules.

## Conclusion

The court held that PCA’s earlier perfected security interest in all present and after-acquired livestock had priority over the bank’s later-filed claim because the debtor received possession and rights in the heifers upon physical delivery, triggering the PMSI perfection period; the bank’s filing occurred too late to obtain PMSI superpriority, so the first-filed financing statement controlled.


North Platte State Bank v. Production Credit Ass’n of N. Platte, 200 N.W.2d 1 (Neb. 1972)