Premier Community Bank v. Schuh
329 Wis. 2d 146, 789 N.W.2d 388, 2010 WI App 111 (2010)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A statutory lien for pasturing animals, whose effectiveness depends on the lienholder retaining possession, is a possessory lien under Wis. Stat. § 409.333 that has priority over a previously perfected security interest in the same animals.
Facts:
- Roger Schuh operated a farm where he kept and pastured livestock for others as a business.
- Since 2005, Schuh pastured cattle owned by Schuh Cattle Company, LLC (SCC), an entity whose members included his son and daughter-in-law, for an agreed-upon fee of $1.10 per day per animal.
- SCC stopped paying Schuh on March 1, 2006, and despite repeated demands for payment, accumulated a debt of approximately $15,934.
- In 2006, SCC used the livestock pastured on Schuh's farm as collateral to secure a loan from Premier Community Bank.
- SCC subsequently defaulted on its loan with Premier Community Bank.
- When Premier attempted to repossess the livestock, Schuh refused to surrender the cattle, asserting he had a right to keep them until SCC paid him for their care.
Procedural Posture:
- Premier Community Bank filed a lawsuit against Roger Schuh in the Wisconsin circuit court to enforce its security interest and recover the livestock.
- Schuh moved for summary judgment, arguing his possessory lien had priority over the bank's interest.
- The circuit court (trial court) granted summary judgment in favor of Schuh.
- Premier Community Bank, as the appellant, appealed the circuit court's order to the Court of Appeals of Wisconsin.
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 statutory lien for pasturing animals under Wis. Stat. § 779.43(3), which allows but does not require the lienholder to retain possession, qualify as a 'possessory lien' with priority over a perfected security interest under Wis. Stat. § 409.333?
Opinions:
Majority - Brunner, J.
Yes. A statutory lien for pasturing animals is a possessory lien that takes priority over a perfected security interest. The court interpreted Wis. Stat. § 779.43(3), which states a person 'shall have a lien thereon and may retain the possession thereof.' The court reasoned that while retaining possession is optional ('may'), the lien is lost if possession is relinquished. Therefore, the lien’s effectiveness depends on possession, which satisfies the definition of a 'possessory lien' under Wis. Stat. § 409.333(1). Under § 409.333(2), such possessory liens have priority over even perfected security interests. The court rejected the bank's argument that this creates a 'secret lien,' noting that secured lenders can contractually protect themselves from this known risk. It also found the transaction occurred in the 'ordinary course of business' despite the family relationship, as there was no evidence of non-standard terms.
Analysis:
This decision clarifies the priority rules between UCC Article 9 secured creditors and statutory lienholders, affirming the super-priority status of possessory liens in Wisconsin. It establishes that a lien's 'dependence on possession' is determined by whether the lien is extinguished upon surrender of the goods, even if the statute uses discretionary language about retention. The ruling places the burden on lenders to conduct due diligence and use contractual provisions to protect their collateral from subsequent possessory liens, rather than allowing them to rely solely on their filed security interest. This reinforces the principle that those who add value to property through labor or services and maintain possession have a superior claim.
