Iowa Court Analyzes Harvester Lien Statute

On November 27, 2019, the Iowa Court of Appeals ruled that a farmer who had solicited the services of a harvester was a “debtor” subject to a harvester lien because he was the person for whom the services were rendered.

Background

The farmer owned or rented 14,000 acres of farmland with his son. The farmer and his son had a custom farming arrangement where the farmer completed all farming services for his son. When the farmer did not have the ability to complete the 2016 harvest, he hired a harvester to remove almost 2,000 acres of corn. At that time, the farmer showed crop-insurance maps which identified his son as the insured party. The farmer conducted all the negotiations with the harvester and gave the harvester directions to deliver the grain to his facilities and in what amounts.

The harvester began working in November 2016, but was unable to complete the job until April 2017 due to weather delays. Neither the farmer nor his son paid the harvester within ten days of completion. The harvester filed a financing statement with the Secretary of State within the required ten days of finishing the job and listed both the farmer and the son as debtors. In May, the farmer notified the harvester he was refusing to pay and raised an alleged performance issue. Soon after, the harvester sent a demand letter to the farmer. In June, the farmer and his bank requested the harvester remove the farmer’s name from the financing statement because it prevented him from obtaining funds to meet a margin call on a commodity futures trading account. At the end of June, the son paid the harvester for his services. The harvester immediately terminated the financing statement.

In August, the farmer filed suit against the harvester for wrongfully filing a financing statement, alleging that he did not qualify as a “debtor” under Iowa Code section 571.1B as a matter of law. The farmer claimed his commodity contracts were involuntarily liquidated and he incurred financial damage when reestablishing his place in the grain trading market after the harvester terminated the financing statement. In response, the harvester sought a declaration that the filing of the financing statement was authorized under Iowa law. The district court ruled that the farmer met the definition of “debtor,” and the farmer appealed.

“Debtor” Defined

Before making its decision, the appellate court reviewed applicable Iowa law. Section 571.1B authorizes a harvester to file an agricultural lien against the person for whom they harvest:

A harvester shall have an agricultural lien as provided in section 554.9102 for the reasonable value of harvesting services. The harvester is a secured party and the person for whom the harvester renders such harvesting services is a debtor for purposes of chapter 554, article 9. The lien applies to crops harvested by the harvester.

The court then ruled that the farmer was a “person for whom the harvester render[ed] such harvesting services” and therefore fell within the meaning of “debtor” for purposes of Iowa Code section 571.1B

Although the farmer claimed that he was merely acting as his son’s agent, the court found that the farmer was the one who hired the harvester and gave specific instructions on harvesting and delivering the grain. There was no evidence that the son and harvester ever spoke about the harvesting services. The farmer was not merely an agent representing his son’s interests, but was more akin to a contractor hiring a subcontractor. Therefore, the farmer was a debtor for purposes of the harvester lien statute.