Farm Landlords’ UCC Filing Was Not Tortious

On July 20, 2022, the Iowa Court of Appeals affirmed that a farmland owner’s Uniform Commercial Code (UCC) filing listing a farm tenant’s crops as collateral did not constitute “tortious conduct.” The farm tenant claimed that the UCC financing statement was false and interfered with his ability to obtain a loan after the lease terminated. The court disagreed with the tenant, instead finding that there was no genuine issue of material fact that the filing was false or that it caused the tenant’s injuries.

Background

A farm tenant rented two farms in 2016 and 2017. The leases gave a security interest to the landowners in “all growing or mature crops” on the property. By 2017, the farm tenant was unable to make payments. A year later, the landowners filed a UCC financing statement with the Iowa Secretary of State stating that the collateral was “$155,000 worth of soybeans, and earlage in white bags” stored at the tenant’s residence.[i] Two months later, the landowners sent a notice of default and gave the tenant an opportunity to cure. The tenant failed to make a payment and the lease terminated in April 2018.

The landowners brought this lawsuit alleging breach of contract. The tenant brought a counterclaim for “tortious conduct,” including slander of title, defamation, and interference with an existing or proposed contract. He alleged that lenders were unwilling to finance his 2020 farming operations because the UCC financing statement contained false information. As evidence, the tenant submitted a blank loan application and an email from a loan officer acknowledging that the parties discussed the UCC filing.

The landowners moved for summary judgment on their breach of contract claim and the tenant’s tortious conduct counterclaim. The court granted the landowners’ motion as well as the landowners’ request for attorney fees. The tenant appealed.

Tortious Conduct: Slander of Title

The Court of Appeals first considered whether the district court erred in dismissing the tenant’s slander of title counterclaim. To establish slander of title, the proponent must show, “(1) an uttering and publication of slanderous words; (2) falsity of those words; (3) malice; (4) special damages to the plaintiffs; and (5) an estate or interest of the plaintiff in the property slandered.” Brown v. Nevins, 499 N.W.2d 736, 738 (Iowa Ct. App. 1993).

The tenant argued that because the financing statement did not specify which crop years applied, it appeared to falsely create a lien on his crops after the lease ended. The court disagreed. The financing statement provided that the landowners had a “security interest in the crops raised on the leased land.” The lease was still in effect at the time of the filing. Because the lease ended in 2018, the court determined that the financing statement was not vague nor did it claim, falsely, to have an interest in the tenant’s crops after the lease terminated. The court noted that the tenant had the opportunity to state that no liens existed on his 2020 crop in the loan application.

The court also agreed with the district court that there no evidence of malice. Malice is a deliberate act without good cause with the intent to cause injury. The landowners refused to amend the UCC filing because they believed it was accurate. As a result, the court concluded that there was no evidence “they acted with deliberate knowledge of the statement’s falsity or with malice.”

Next, the court explained that in order to prove special damages, a plaintiff must show that the statement caused injuries. The tenant alleged that the lender told him that they “could not finance [him] as long as there was a UCC filing that might affect 2020 crops.” However, there was no evidence that the tenant applied for a loan or that the lender would have approved the application but-for the financing statement. The court noted that the tenant’s affidavit testifying that the lender could not finance him due to the UCC filing was insufficient because it was not made with personal knowledge. Iowa R. Civ. P. 1.981(5).

Tortious Conduct: Defamation

Defamation requires a false statement which hurts an individual’s reputation. Bauer v. Brinkman, 958 N.W.2d 194, 198 (Iowa 2021). Because the financing statement did not falsely claim an interest in the 2020 crops, the court concluded that no defamation occurred

Tortious Conduct: Interference with a Contract

To establish that interference with an existing or prospective contract occurred, the proponent must show, among other things, that there was a contract or prospective contract with a third party. Kern v. Palmer Coll. of Chiropractic, 757 N.W.2d 651 (Iowa 2008); Blumenthal Inv. Trs. v. City of W. Des Moines, 636 N.W.2d 255, 269 (Iowa 2001). The proponent must also show that there was improper interference with the contract or business relationship. Id. Here, there was no evidence that the tenant applied for financing. Even if an application existed, the financing statement could not have interfered because it did not claim to have a security interest in the 2020 crop.

Attorney Fees

Lastly, the tenant argued that the district court should not have included the costs of litigating the tenant’s counterclaims in the attorney fees awarded to the landowners. In general, a party to a lawsuit can only recover attorney fees if authorized by a statute or by a contract. Here, the leases stated that if the agreements were terminated because the tenant failed to pay rent, he must also pay all costs and attorney fees incurred by the landowner “to enforce collection or performance.”

The Court of Appeals determined that the fees to defend against the tortious conduct counterclaim arose because of the landowners’ attempt to secure collateral and enforce the collection or performance of payment. Therefore, the court affirmed the grant of trial attorney fees. It also remanded the case for the district court to determine a reasonable amount of appellate attorney fees. See Bankers Tr. v. Woltz, 326 N.W.2d 274, 278 (Iowa 1982).