Opinion
Civ. 99-4103
November 8, 1999
Patrick T. Dougherty, Dougherty Dougherty, Sioux Falls, SD Attorney for Marquette Bank.
Shane D. Buntrock, Teilborg, Sanders Parks, Phoenix, AZ Attorney for Gartner.
MEMORANDUM OPINION AND ORDER
PROCEDURAL HISTORY
Defendant White Hills, Inc. ("White Hills") filed a Chapter 12 bankruptcy on March 19, 1993. White Hills obtained original confirmation of its bankruptcy plan on March 7, 1994. On April 20, 1999, the bankruptcy court dismissed the case subject to the outcome of this adversary proceeding to determine the validity, priority, and extent of a thresher's lien filed under South Dakota law by appellee Richard L. Gartner ("Gartner"). Appellant Marquette Bank ("the bank") challenges the bankruptcy court's determination that Gartner is entitled to a thresher's lien in the amount of $7,405.65 on White Hills' 1998 alfalfa crop and that this lien was superior to the bank's general crop lien filed against all of White Hills' 1998 crops. This Court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a).
The Honorable Irvin N. Hoyt, United States Bankruptcy Court for the District of South Dakota.
FACTS
The facts underpinning this appeal have been determined by the bankruptcy court and on the whole, do not appear to be in dispute. In the Spring of 1998, debtor White Hills was operating under a confirmed Chapter 12 bankruptcy plan. Because White Hills did not possess the necessary equipment to harvest its forthcoming alfalfa crop, its manager, Darrell Cwach ("Cwach"), made arrangements with Gartner to help windrow and bale alfalfa during the 1998 season.
Gartner was able to make four cuttings of the alfalfa during the 1998 season. The first cutting was completed at the end of May or the beginning of June, the second cutting was completed in early July, the third in late August, and the fourth cutting sometime in early October. Following the fourth and final cutting, Gartner billed White Hills for his work. When White Hills' failed to pay Gartner's bill by November 3, 1998, Gartner filed a thresher's lien in the amount of $17,207.27 against White Hills' entire 1998 alfalfa crop.
In December 1998, the bankruptcy court granted Gartner relief from the automatic stay in order to enforce his lien. Upon White Hills' motion, however, the order granting relief from the stay was vacated. As part of the reinstatement, White Hills, Gartner, and the bank agreed that any party could bring an adversary proceeding to determine the validity, priority, and extent of Gartner's thresher's lien.
On February 8, 1999, Gartner commenced the above entitled action in accordance with this agreement. A trial was held on April 14, 1999, following the bankruptcy court's denial of the bank's motion for summary judgment. Upon the conclusion of trial, the bankruptcy court issued its Memorandum of Final Decision in which it concluded that Gartner had a valid thresher's lien in the amount of $7,405.65 on White Hills' entire 1998 alfalfa crop and that this lien was superior to the more general 1998 crop lien held by the bank. It is from this final decision that the bank appeals.
STANDARD OF REVIEW
In reviewing the decision of the bankruptcy court, this Court must accept the bankruptcy judge's findings of fact unless they are clearly erroneous. See Fed.Bankr.R. 8013; Fed.R.Civ.P. 52(a); see also Hartford Underwriters Ins. Co. v. Magna Bank, N.A. (In re Hen House Interstate, Inc.), 177 F.3d 719, 721 (8th Cir. 1999); Alport v. Ritter (In re Alport), 144 F.3d 1163, 1166 (8th Cir. 1998). A bankruptcy court's conclusions of law, on the other hand, are subject to de novo review. See Berger v. Pokela (In re Berger), 61 F.3d 624, 626 (8th Cir. 1995) (citing Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1349 (8th Cir. 1990). This Court may not reverse the bankruptcy court's factual findings unless this Court is left with the "`definite and firm conviction that a mistake has been committed.'" See Waugh v. Eldridge (In re Waugh), 95 F.3d 706, 711 (8th Cir. 1996) (quoting _Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 SCt 1504, 1511, 84 L.Ed.2d 518 (1985)).
DISCUSSION
On appeal, the bank maintains that the bankruptcy court committed reversible error by concluding that (1) the bank had waived its affirmative defense that the thresher's lien was filed in violation of the automatic stay; (2) Gartner's thresher's lien was validly obtained under South Dakota law; and (3) Gartner's thresher's lien had priority over the bank's general crop lien. Because these arguments are without merit, the decision of the bankruptcy court shall be affirmed.
The bank also argues that the bankruptcy court erred in concluding that Gartner had an equitable lien over the alfalfa and in determining that 11 U.S.C. § 349 would, in any event, reinstate the thresher's lien upon the dismissal of the original bankruptcy case. Because this Court finds the bankruptcy court's decision to be well grounded in both fact and law as to issues one through three, it need not address these remaining contentions.
Waiver of Affirmative Defense
In its Memorandum of Final Decision, the bankruptcy court dismissed as untimely the bank's contention (raised at trial) that Gartner's thresher's lien was invalid because it was filed in violation of the automatic stay. The bank asserts that it did not waive this defense because it was argued as an affirmative defense in the bank's original answer to Gartner's complaint. This Court disagrees.
At paragraph 6 of the bank's answer it states:
6. Marquette Bank states Plaintiffs alleged lien is invalid because the postpetition attachment and perfection of the thresher's lien violates the automatic stay because the hay is property of the estate.
There is no question that the bank originally pled this affirmative defense in its answer. Nonetheless, the bank failed to raise this dispositive issue again in any of its subsequent motions or pleadings, including its motion for summary judgment. This, despite the bankruptcy court's briefing schedule which mandated that all dispositive issues be presented to the bankruptcy court no later than April 2, 1999.
It is noteworthy that the briefing schedule contained the following warning: "A failure to comply with this Order may result in appropriate sanctions against the offending party."
In view of the bank's failure to comply with the bankruptcy court's briefing deadlines, the bankruptcy court determined that the bank had waived its ability to present this affirmative defense at trial. It is well within the authority of courts to set such deadlines and to determine when exceptions to these deadlines are appropriate. See Knoth v. Smith Nephew Richards, No. 98-6063, 1999 WL 977739, at *2 (8th Cir. Oct. 28, 1999). Accordingly, this Court will not disturb the bankruptcy court's determination on this matter.
Validity of the Thresher's Lien Under South Dakota Law
The bankruptcy court held that Gartner had a valid thresher's lien on White Hill's entire 1998 alfalfa crop pursuant to SDCL 38-17-14 and 38-17-15. The bank argues that this determination was in error. Specifically, the bank contends that because alfalfa is considered personal property under South Dakota law, Gartner was required to file his thresher's lien in accordance with both SDCL 38-17-15 (the provision for the filing of thresher's lien) and SDCL 44-2-4 (the provision pertaining to the filing of liens on personal property). This argument is without merit.
SDCL 38-17-15 provides in pertinent part:
Account filed by thresher or processor with register of deeds — Contents — Notice to purchasers and encumbrancers. Any person entitled to a lien under § 38-17-14 shall make an account in writing stating the kind of grain, and the quantity harvested, threshed, shelled, or otherwise processed, the price agreed upon for such work . . . the name of the person for whom said work was done, and a description of the land upon which said crop was grown, and after making an oath to the correctness of the account, shall file the same in the office of the register of deeds in the county in which the land from which said crop was produced is located . . . such filing shall operate as notice to all purchasers and encumbrancers subsequent to the date of filing.
In this case, however, the bank does not challenge Gartner's compliance with the steps required under SDCL 38-17-15 for the filing of a valid thresher's lien. Rather, the bank argues that SDCL 44-2-4 requires one additional step before a thresher's lien is perfected. SDCL 44-2-4 provides in pertinent part:
Lien statement covering personal property — Condition precedent to filing — Mailing of copy to owner of property. Before filing such lien statement, the person claiming the lien shall mail to the property owner at his last known post-office address . . . a copy of such lien statement and the post-office receipt for such mailing shall be attached to the lien statement and filed in the office of the register of deeds.
Relying on SDCL 44-2-4, the bank urges that Gartner's failure to mail a copy of the thresher's lien statement to White Hills prior to filing invalidates his lien. The addition of the condition contained in SDCL 44-2-4 to those conditions contained in SDCL 38-17-15 for the proper filing of a thresher's lien is simply unsupported by a reading of the statutes themselves and the timeworn principles of statutory construction.
Though an alfalfa crop is considered personal property under South Dakota law, this does not automatically require that a party wishing to file a lien on such crop must comply with SDCL 44-2-4 as well. When SDCL 44-2-4 is read in the context of its surrounding statutes, it becomes apparent that the requirements enunciated in SDCL 44-2-4 pertain only to the filing of liens on personal property where no other specific statutory lien (such as a thresher's lien) is available.
"Since statutes must be construed according to their intent, the intent must be determined from the statute as a whole, as well as enactments relating to the same subject ." Dahn v. Trownsell, 1998 SD 36, ¶ 14, 576 N.W.2d 535, 539 (emphasis added).
This conclusion is called for by the language of SDCL 44-2-4 which includes the phrase "[b]efore filing such lien statement . . . ." The term "such lien statement," however, only refers to the immediately preceding statute (SDCL 44-2-3) dealing with liens on personal property where no other statutory method for filing a lien is provided; it does not refer to the provision pertaining to thresher's liens found in an entirely different chapter of the code. See Gregory's Inc. v. Haan, 1996 SD 35, ¶ 11, 545 N.W.2d 488, 492 (observing that the language "such a lien" contained in SDCL 44-2-9 "unmistakably refers" to the immediately preceding statutes dealing with liens on personal property and refusing to apply its terms to the materialman's lien provision found in a different chapter). SDCL 44-2-3 provides in pertinent part:
Public record notice of claim of lien on personal property — No other method provided — Lien statement — Contents. In all cases where no other provision is made by statute for giving public record notice of any claim of lien on personal property any person claiming such lien may give public record notice thereof by sworn statement executed in writing. . . .
In this case, a specific method for protecting Gartner's right to payment was available — that is, Gartner could and did file a thresher's lien pursuant to the specific requirements set forth in SDCL 38-17-14 and 38-17-15. Because a specific lien was provided by South Dakota law, the additional filing requirements found in SDCL 44-2-4 were not triggered. Accordingly, the bank's reliance on SDCL 44-2-4 to invalidate Gartner's thresher's lien is misplaced.
Priority of the Thresher's Lien Under South Dakota Law
Finally, the bank ascribes error to the bankruptcy court's determination that Gartner's thresher's lien had priority over the banks general crop lien. Specifically, the bank argues that each cutting of alfalfa must be considered a separate "crop" under South Dakota law. Under this interpretation, therefore, the bank asserts that Gartner was required to file a separate thresher's lien within 30 days of completing each alfalfa cutting in order to assure his right to the proceeds from each cutting. Because Gartner only filed one thresher's lien at the end of the 1998 alfalfa season, the bank urges that this lien does not relate back to encumber the previous three cuttings of alfalfa — a result which places the bank's general crop lien ahead of Gartner's thresher's lien in priority. This argument is also without merit.
SDCL 38-17-16 states:
Priority of threshers' and processors' liens. Any lien under § 38-17-14 has priority over all other liens and encumbrances upon the grain, if filed within thirty days from the day on which the harvesting, threshing, shelling, or other processing was completed.
It is a well settled rule of statutory construction that words and phrases contained in a statute must be given their plain meaning and effect. See Zoss v. Schaeffers, 1999 SD 105, ¶ 6, 598 N.W.2d 550, 552. In sum, an interpreting court must "assume . . . that statutes mean what they say and that legislators have said what they meant." Id.; see also South Dakota SIF v. CRE, 1999 SD 2, ¶ 17, 589 N.W.2d 206, 209; Delano v. Petteys, 520 N.W.2d 606, 608 (SD 1994).
SDCL 38-17-16 provides a thresher's lien with priority over all other liens if it is filed "within thirty days from the day on which the harvesting, threshing, shelling, or other processing is completed." In interpreting this phrase, the bankruptcy court stated: "There appears to be no reason, however, to stray from its ordinary meaning of when the work was finished or done." Consequently, the bankruptcy court concluded that the harvesting of the alfalfa could not have been completed as contemplated by SDCL 38-17-16 until after the final cutting in October 1998. On this basis, the bankruptcy court further concluded that Gartner's timely filed thresher's lien had priority over the bank's general crop lien.
This Court is without good reason to assign an interpretation to SDCL 38-17-16 other than the one outlined by the bankruptcy court. While there may be three to four "cuttings" during an alfalfa season, only one "crop" is ultimately generated. See In re Beck, 61 B.R. 671 (Bankr.D.Neb. 1985) (post petition security interest attaches to all hay cuttings, not just the first cutting). To require a thresher of alfalfa to file a lien within thirty days of each cutting — though his bill be not tendered until the entire crop is harvested — would achieve a prohibitively absurd result. See Verry v. City of Bell Fourche, 1999 SD 102, ¶ 27, 598 N.W.2d 544, 549 (citing presumption that absurd results were not contemplated by the legislature); see also Zoss v. Dakota Truck Underwriters, 1998 SD 23, 575 N.W.2d 258. The bankruptcy court's interpretation of SDCL 38-17-16, therefore, must stand.
CONCLUSION
Upon careful review of the record in this case, as well as all pleadings and briefs, this court finds no matters of reversible error in the decision of the bankruptcy court. Accordingly,
it is hereby
ORDERED that the decision of the bankruptcy court is in all respects affirmed.