Meyhoeffer v. Wallace
792 So. 2d 851 (2001)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under Louisiana law, a lessor's statutory privilege on crops and their proceeds is subordinate to a creditor's perfected security interest in the same collateral if the lessor fails to file notice of the privilege in the state's central agricultural registry.
Facts:
- On January 27, 1993, Dr. Klaus Meyhoeffer leased 530 acres of farmland to farmer David Wallace.
- The lease agreement specified the annual rent as 'one-fifth (1/5th) of the [annual] crop or $32,000.00, whichever is greater' and gave Wallace the right to sell the crops at his choice.
- Meyhoeffer recorded the lease in the local Franklin Parish conveyance records in 1995, but not in the Louisiana Agricultural Central Registry (LACR).
- In 1998, Wallace obtained a loan from Winnsboro State Bank and Trust Co. ('the Bank') and granted it a security interest in the crops and crop proceeds from the leased land.
- The Bank properly perfected its security interest by filing a financing statement in the LACR.
- In 1998, Wallace failed to meet his obligations to both Meyhoeffer and the Bank.
- The Bank took possession of all proceeds from the sale of the 1998 crops and applied them to Wallace's outstanding debt.
Procedural Posture:
- Dr. Klaus Meyhoeffer filed suit against Daniel E. Wallace and Winnsboro State Bank and Trust Co. in a Louisiana trial court, seeking payment for 1998 rent from crop proceeds.
- The case was submitted to the trial court on stipulated facts.
- The trial court held that the Bank's perfected security interest was superior to Meyhoeffer's lessor's privilege and dismissed Meyhoeffer's suit.
- Meyhoeffer, as Plaintiff-Appellant, appealed the trial court's judgment to the Court of Appeal of Louisiana, Second Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a lessor's statutory privilege on crops and their proceeds have priority over a bank's perfected security interest in the same collateral when the lessor has not filed notice of the privilege in the central agricultural registry as required by state law?
Opinions:
Majority - Peatross, J.
No. A lessor's statutory privilege does not have priority over a properly perfected security interest unless the lessor complies with the statutory filing requirements. The court first rejected Meyhoeffer's argument that he retained an ownership interest in one-fifth of the crops, finding that the lease was for a cash rent, not a crop-share. Evidence for this included lease terms giving the tenant sole authority to sell the crops, the inapplicability of 'jointly owned property' clauses, and the parties' past practice of cash rent payments. Since Wallace owned the entire crop, he could grant the Bank a security interest in it. The court then addressed the priority dispute, holding that La. R.S. 9:4521 governs the ranking of interests in crops. This statute grants a lessor's privilege priority over a perfected security interest only if the lessor files notice of the privilege in the Louisiana Agricultural Central Registry (LACR). Because the Bank perfected its interest by filing in the LACR and Meyhoeffer failed to do so, the Bank's perfected security interest outranked Meyhoeffer's unperfected lessor's privilege.
Analysis:
This decision clarifies the intersection of traditional real property privileges and modern commercial law concerning secured transactions. It establishes that a landlord's historical privilege over crops for rent is not self-perfecting against third-party creditors under the UCC-influenced statutory scheme. The ruling serves as a crucial warning to agricultural lessors that to protect their interest in rent payments from crop proceeds, they must adhere to the same central filing requirements as commercial lenders. Failure to do so subordinates their statutory privilege to any creditor who has properly perfected their security interest, significantly altering the risk profile for landlords in agricultural leases.
Unlock the full brief for Meyhoeffer v. Wallace