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Ohio Department of Agriculture v. Central Erie Supply & Elevator Association

Court of Appeals of Ohio, Sixth District

July 12, 2013

Ohio Department of Agriculture Appellee
v.
Central Erie Supply & Elevator Association, et al. Defendants

Trial Court No. 2010-CV-0780

Mike DeWine, Ohio Attorney General, and James R. Patterson, Assistant Attorney General, for appellee.

David C. Barrett, Jr., Troy A. Callicoat and Kristi Kress Wilhelmy, for appellant.

DECISION AND JUDGMENT

OSOWIK, J.

{¶ 1} This is an appeal from a judgment of the Erie County Court of Common Pleas, which granted summary judgment in favor of the Ohio Department of Agriculture ("ODA") in connection to the disposition of assets stemming from the failure of an agricultural commodity handler. For the reasons set forth below, this court affirms the judgment of the trial court.

{¶ 2} Appellant, the Citizens Banking Company ("Citizens"), sets forth the following two assignments of error:

I. The trial court erred in concluding that Appellee Ohio Department of Agriculture's lien under R.C. 926.01 has priority over Appellant The Citizens Banking Company's perfected security interest.
II. The trial court erred in determining the amount of Appellee Ohio Department of Agriculture's priority lien and Appellant The Citizens Banking Company's liability therefore.

{¶ 3} The following undisputed facts are relevant to this appeal. Central Erie Supply and Elevator Association ("Central Erie") formerly operated a grain elevator and farm commodity related business in Sandusky, Ohio. Accordingly, Central Erie was in the business of being an agricultural commodity handler. Such businesses are governed by R.C. 926.

{¶ 4} In the course of its normal business operations, Central Erie took possession of certain farm commodities, such as grain, from area farmers. Central Erie would then handle the subsequent sale of the commodity to a third party. Regardless of whether the farmers directed Central Erie to have the commodity sold immediately or at some indeterminate point in the future, a statutory lien in favor of the farmer of origin of the agricultural commodity attached and became effective at the time the commodity was delivered to Central Erie. These statutorily preferred liens do not terminate until the monies owed to the farmer of origin who furnished the agricultural commodity to an agricultural commodity handler, such as Central Erie, are paid. R.C. 926.021(C).

{¶ 5} In conjunction with the above, it is statutorily established that should the business of an agricultural commodity handler, such as Central Erie, fail, the director of the Ohio Department of Agriculture is vested with exclusive statutory authority to enforce lien claims and allocate proceeds in connection to the business failure. R.C. 926.021(D).

{¶ 6} Most significantly to the instant case, it is further statutorily established that in the event of a conflict between directives of R.C. 926 and contrary results directed by R.C. 1307 and 1309, the R.C. 926 provisions "take precedence." R.C. 926.33. Thus, by the plain meaning of R.C. 926.33, R.C. 926 eliminates any conflict with R.C. 1307 and 1309 when a given scenario would lead to contrary results with respect to those statutory provisions. R.C. 926.33(A) definitively establishes, "Any provisions of this chapter that conflict with Chapters 1307 and 1309 of the Revised Code shall take precedence over those chapters."

{¶ 7} As applied to the instant case, the failure of an agricultural commodity handler, which as referenced above is explicitly governed by R.C. 926, lies at the heart of the matter. In the summer of 2010, Central Erie defaulted on various loans issued to it by Citizens. In September 2010, the ODA determined that Central Erie, an agricultural commodity handler, had failed. Accordingly, the ODA exercised its express and exclusive R.C. 926.021(D) statutory authority. The ODA filed a complaint against Central Erie and Citizens seeking to enjoin the disposition or transfer of commodities or proceeds from commodities entrusted to Central Erie by various farmers and to likewise bar Citizens from physically seizing the commodities or proceeds from the commodities.

{¶ 8} Based upon the express statutory power granted to the ODA, delegating to the ODA the exclusive authority over lien enforcement and the priority of allocation of proceeds in the event of the failure of an agricultural commodity handler such as Central Erie, ODA filed for summary judgment requesting a priority secured claim in the amount of $425, 691.40. The claimed amount correlated to the proceeds connected to the sale of agricultural commodities handled by Central Erie from July 31, 2010, the date of the business failure, to the time of filing the complaint. On March 27, 2012, the trial court granted summary judgment in favor of the ODA. The trial court determined that the ...


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