MEMORANDUM OF DECISION

URBOM, District Judge.

The United States of America has a general lien on all cattle owned by Larry Vencill. Mid-States Sales Company, Inc., the only remaining defendant, has a purchase money mortgage on some of the same cattle, and the issue in these cases is which of these lienholders is entitled to the proceeds of sales of certain cattle.

FINDINGS OF FACT

Applicable to Civ. 1793 L and Civ. 1794 L

The United States of America, acting through the Farmers Home Administration, made three loans to Larry D. and Carole A. Vencill (hereinafter called the borrowers), between January 31, 1967, and May 28, 1969, in the total principal amount of $25,400.00. The loans were secured by security agreements executed by the borrowers dated March 10, 1967, January 12, 1968, and November 20, 1968. These security agreements were made applicable to these loans, either by reference to the specific loans therein or by the future advance clause. They covered the livestock which is the subject of these actions under the clause, "All livestock (except poultry kept primarily for subsistence purposes), fish, supplies and other farm products now owned or hereafter acquired by Debtor, together with all increases, replacements, substitutions, and additions thereto, . . ." These security agreements were properly perfected by the filing of a financing statement in the County Clerk's office of Lincoln County, Nebraska, on March 10, 1967. As of November 9, 1971, a balance still remained on the account of the borrowers with the plaintiff, United States of America, in the principal amount of $17,922.10, with interest accrued to that date of $1,442.27, and with interest accruing from that date at the daily rate of $2.2458.

On or about April 29, 1968, the defendant, Mid-States Sales Company, sold 24 Holstein heifers to the borrower Larry Vencill and took a purchase money security agreement on those 24 Holstein heifers, which purchase money security agreement and financing statement was properly perfected by filing in the office of the County Clerk of Lincoln County, Nebraska, on May 1, 1968. The 24 Holstein heifers referred to in the financial statement and security agreement were taken as security for a promissory note given by the borrower to Mid-States on April 29, 1968, in the amount of $9,720.00, which amount was the purchase price of the cattle described therein.

On or shortly before January 8, 1969, the borrower purchased 51 head of Holstein heifers from the defendant, Mid-States Sales Company, Inc., for the amount of $21,828.00. On January 8, 1969, the borrower executed a promissory note payable to Mid-States Sales Company, Inc. for that amount. On January 8, 1969, the borrower Larry Vencill executed a financing statement and security agreement mortgaging the 51 head of Holstein heifers to Mid-States, which financing statement and security agreement was a purchase money mortgage. This security instrument was properly perfected by filing in the office of the County Clerk of Lincoln County, Nebraska, on January 15, 1969.

The borrowers were delinquent and in default on their promissory notes and security instruments at all times subsequent to August 20, 1969, to the plaintiff United States of America and to the defendant, Mid-States Sales Company, Inc. The United States had a security interest in all of the livestock owned by Vencill. This security interest was subject only to the purchase money security interest of the defendant Mid-States on the livestock which was the subject of Mid-States' purchase money security agreement. The 21 head of cattle which are the subject of Civ. 1793 L and the 41 head of cattle which are the subject of Civ. 1794 L were all owned, subject to respective security interest of the plaintiff and defendant, by Vencill at the times of the sale or repossession referred to in the complaints.

On or about May 28, 1969, the borrowers were advised by the plaintiff that further loans would not be made to the borrowers for the purpose of feed or other operating expenses unless the borrowers showed great improvement in money management, feed production, adequate facilities, and dairy production management.

Applicable to Civ. 1793 L

The borrower, Vencill, delivered 22 head of cattle to Western Livestock Auction Company on September 4, 1969, for sale on September 5, 1969. One of the 22 cows contained a brand for which brand clearance had not been released, and that cow is not subject to this action. The remaining 21 head of cattle were sold at public auction at Western Livestock Auction Company on September 5, 1969. The total net amount gained as a result of the sale, less the amount of the sale of the branded cow, is $4,449.03. After the sale, the defendant Mid-States informed Western Livestock Auction Company of its claim to an interest in the proceeds of the sale and the amount of the proceeds has been paid into the registry of this court.

All 21 cows sold at the auction were owned by the borrower, Larry Vencill, and therefore were subject to the general lien of the United States of America, but there is no substantial evidence that any of the 21 cows was purchased by Vencill from the defendant Mid-States, except one, which bore ear tag No. 42BAX9465. As to that one, the United States has renounced in open court any claim to it. The remaining 20 cows, therefore, were not subject to the purchase money mortgage held by Mid-States.

Applicable to Civ. 1794 L

By late summer, 1969, Vencill had expended the principal amount of the loan of May 28, 1969, which had been made by the United States in the approximate amount of $2,600.00 for the purpose of buying feed for his cattle. Sometime in early August, 1969, Vencill notified Mid-States that he was out of hay to feed the cattle and asked Mid-States to take the cattle covered by its mortgages because he was unable to feed them. Perhaps ten days or two weeks thereafter Carl M. Wilson of Mid-States went to Vencill's farm and Vencill said that he would separate the 41 cattle which he had purchased from Mid-States and put them in a separate corral. Wilson then reached Dr. Robert Bohlender, a veterinarian, and asked Dr. Bohlender to prepare the cows for shipment to Colorado. On about August 22, 1969, which was approximately two weeks after Vencill had told Mid-States that Mid-States should pick up its security, Dr. Bohlender tested for brucellosis and tuberculosis the 41 cows, which Vencill had isolated into a separate corral. Of the 41, two possessed the brand of Roger Smith, who had transferred to Vencill title to those Holstein cows on or about April 10, 1969. Of the 41 cows, 25 bore ear tags which had been placed in the ears before Vencill acquired ownership. Dr. Bohlender placed ear tags on the 16 which had no ear tags when he made his tests. At the time of the testing the 41 cows were, according to Dr. Bohlender, in "good" general condition, but, according to Wilson and Vencill, were in "poor" condition because they needed