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United States v. Myers

United States District Court, D. South Carolina, Florence Division

January 31, 2017

United States of America, Plaintiff,
v.
Rodney Neil Myers, Jr., Kenneth McKenzie, Defendants.

          ORDER AND OPINION

          Bruce Howe Hendricks United States District Judge

         This matter is before the Court on the Motion for Summary Judgment filed by the United States of America (“Plaintiff”). (ECF No. 23.) For the reasons set forth in this order, Plaintiff's motion is denied.

         BACKGROUND

         This dispute arises out of three security agreements executed on December 20, 2006, February 21, 2007, and December 19, 2007. Defendant Rodney Neil Myers, Jr. (“Myers”) signed these agreements as security for two promissory notes he executed with Plaintiff, acting through the United States Department of Agriculture (“USDA”). The first promissory note was Dated: December 20, 2006, with a loan given in the principal amount of $60, 000. Myers also signed a security agreement on the same day, in which he agreed to use the following assets as collateral: one bed shaper, one bush hog (3 pt. hitch), one tobacco setter, one tobacco sprayer (pull type), one tobacco stripper, one New Holland tractor #264000M, one MF tractor, and one MF tractor (2wd, with canopy) #B07305, as well as interest in certain crops grown on McKenzie's acreage located in Williamsburg County, South Carolina.

         The second promissory note was signed on February 21, 2007, with a loan given in the principal amount of $20, 000. On this same day, Myers signed a security agreement in which he agreed to use the same above-listed assets as collateral, and also agreed to use any and all crops grown on McKenzie's acreage as collateral. On December 19, 2007, Plaintiff and Myers rescheduled the February 21, 2007 promissory note. They executed another security agreement that same day. The agreement establishes as collateral one bed shaper, one bush hog (3 pt. hitch), one New Holland tractor #264000M, and any and all crops grown on McKenzie's acreage. The agreement also notes that the other above-listed assets were sold in October 2008.

         Plaintiff perfected its security interest by the filing of two financing statements and one continuation statement, which were recorded with the Office of the Secretary of State of South Carolina on December 14, 2006, February 12, 2007, and June 23, 2011. Notably, McKenzie did not sign any of the promissory notes, security agreements, or financing statements-only Myers.

         Myers defaulted on the promissory notes, and Plaintiff elected to accelerate the debt owed. Plaintiff sent Myers three written notices of right to cure the delinquent loan balance on January 12, 2012, May 30, 2012, and June 5, 2012. On September 28, 2015, Plaintiff commenced this action for Claim and Delivery of the collateral and other relief. Myers failed to answer or otherwise respond to the complaint, and Plaintiff moved for default judgment against him, which the Court granted. (ECF Nos. 22; 27.)

         Plaintiff also moved for summary judgment against McKenzie to collect on the collateral. (ECF No. 23.) Attached to Plaintiff's motion is an affidavit from Vince Pace (“Pace”), a Farm Loan Officer for the USDA, averring that he met with Myers and McKenzie twice in 2006 and that McKenzie understood that his property served as collateral for Myers' loans. (ECF No. 23-10.) McKenzie responded to the motion, attaching his own affidavit averring that he met with Pace only once and that he did not give Myers permission to use his equipment as collateral for the loans. (ECF Nos. 24; 24-2.) This motion has been fully briefed and is ripe for the Court's review.

         LEGAL STANDARD

         A court should grant summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(a). In deciding whether a genuine issue of material fact exists, the evidence of the non-moving party is to be believed and all justifiable inferences must be drawn in his favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party bears the initial burden of demonstrating that summary judgment is appropriate; if the party moving for summary judgment carries its burden, then the burden shifts to the non-moving party to set forth specific facts showing that there is a genuine issue for trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). “[W]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, disposition by summary judgment is appropriate.” Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 119 (4th Cir.1996). “Summary judgment is proper only when it is clear that there is no dispute concerning either the facts of the controversy or the inferences to be drawn from those facts.” Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). The court must determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52.

         DISCUSSION

         “A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral.” S.C. Code § 36-9-203(a). A “debtor” means, among other things, “a person having an interest, other than a security interest or other lien, in the collateral.” S.C. Code § 36-9-102(a)(28)(A). A security interest is enforceable against the debtor and third parties with respect to the collateral when: (1) value has been given; (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and (3) the debtor has authenticated a security agreement that provides a description of the collateral. S.C. Code § 36-9-203(b).

         Plaintiff, recognizing that McKenzie did not sign any of the promissory notes, security agreements, or financing statements, argues that Myers' pledge of McKenzie's equipment as collateral was nevertheless binding. Plaintiff first argues that McKenzie “was aware” of Myers' execution of the promissory notes and security agreements, citing Pace's affidavit. (ECF No. 23-1 at 3-4.) Plaintiff appears to assert that this awareness is sufficient to establish its security interest in the equipment.[1]

         Pace's affidavit indicates that McKenzie did in fact consent to the use of his equipment as collateral. Pace avers that he first met with Myers and McKenzie in November 2006 to discuss a loan Myers wanted to obtain from the Farm Service Agency (“FSA”). (ECF No. 23-10 ¶ 2.) In this meeting, McKenzie stated that he gifted a New Holland tractor to Myers and agreed to allow Myers to use the tractor as collateral for the loan. (Id. ¶ 3.) Pace further avers that he met with the men again on December 20, 2006, at which time Myers executed a promissory note as well as a security agreement establishing that McKenzie's equipment would serve as collateral. (Id. ¶ 4.) According to Pace, he “made annual chattel inspections of the secured equipment at McKenzie's farm.” (Id. ΒΆ 7.) Pace states that when ...


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