## Facts

- Merchants & Planters Bank made agricultural loans to Lee Vaughn Clark, Sr. and Wilma Clark and took a security interest that included the Clarks’ crops.
- The Bank perfected its crop security interest by filing financing statements in 2001.
- In 2002, the Clarks bought seed and other farming supplies from Searcy Farm Supply, L.L.C. (and related appellants) for the 2002 crop.
- Searcy took and perfected a purchase-money security interest in the seed and farming supplies in 2002, after the Bank’s 2001 filing.
- The Clarks’ farming operation failed, and they defaulted on obligations owed to both the Bank and Searcy.
- The Bank sued to enforce its security interest in the crops and proceeds; Searcy claimed priority by arguing the crops were “identifiable proceeds” of its seed and supplies collateral.
- The circuit court ruled the Bank’s lien was first, prior, and paramount, and awarded damages to the Bank based on crop proceeds evidence.

## Issues

1. Whether crops grown from seed and farming supplies are “identifiable proceeds” of those inputs, giving the input seller PMSI priority under Ark. Code Ann. § 4-9-324.
2. If not, whether Ark. Code Ann. § 4-9-322’s first-to-file-or-perfect rule gives priority to the Bank’s earlier perfected crop lien.
3. Whether the circuit court’s damages award to the Bank was clearly erroneous or excessive.

## Decision

- The Arkansas Supreme Court affirmed the circuit court.
- The court held the crops were not “identifiable proceeds” of the seed and other farming supplies for purposes of PMSI priority under Ark. Code Ann. § 4-9-324.
- Because PMSI priority did not apply, the court applied Ark. Code Ann. § 4-9-322 and held the Bank had priority based on its earlier filing/perfection in 2001.
- The court upheld the damages award, concluding it was supported by credible evidence and not clearly erroneous.

## Legal Principles

- A PMSI in seed and farming supplies does not automatically extend, via “proceeds,” to crops grown using those inputs absent statutory or controlling authority treating the crop as the inputs’ “identifiable proceeds.”
- When multiple perfected security interests claim the same collateral and no special priority rule applies, priority is determined by the time of filing or perfection under Ark. Code Ann. § 4-9-322.
- Appellate review of a bench-trial damages award is deferential; the trial court’s findings will be affirmed if supported by credible evidence and not clearly erroneous.

## Conclusion

The court ruled that an input supplier’s perfected PMSI in seed and supplies did not convert the resulting crop into “identifiable proceeds” for priority purposes; applying the first-to-file rule, the Bank’s earlier perfected crop lien prevailed, and the damages awarded to the Bank were affirmed.


Searcy Farm Supply, L.L.C. v. Merchants & Planters Bank, 369 Ark. 487, 256 S.W.3d 496 (Ark. 2007)