LIVESTOCK SECURITY INTEREST STATEMENTS

A recent SD Supreme Court decision highlights a precaution that producers should take prior to allowing a third party to care for livestock. In American Bank & Trust and South Dakota Wheat Growers Association vs. Nathan Shaull and Deborah Shaull, et. al. the SD Supreme Court ruled that livestock producers need to file uniform commercial code security interest statements to protect their ownership interest in livestock that are in someone else's care.

In the case, the third party that was caring for the animals acquired a loan from American Bank & Trust using the cattle owned by the other party as collateral. The owner of the livestock had not given public notice of his ownership interest in the cattle which he could have done by filing a document known as a financing statement with the Secretary of State's office in South Dakota. The filing of such a document is specifically authorized by South Dakota Codified Law (SDCL) 57A-9-505. Therefore, American Bank and Trust had no knowledge of the livestock owner's interest in the livestock being cared for by the bank's borrower.

To read the Supreme Court's opinion go to: http://www.sdjudicial.com/index.asp?category=opinions&nav=5391&year=2004&month=3&record=1266

To read an article covering the case as printed in the UCC Filing Flash. Click Here.

If you are in the livestock business and your livestock are in the care of a third party you should make sure your ownership interest is protected. Make sure that:

    • Your lender is aware of where the livestock are located.
    • You file a financing statement with the Secretary of State's office in the state the person caring for the livestock resides and, if applicable, in the state where the livestock are located.

The UCC I Livestock form is available at: uccpdfs/livestock/SDUCC1F_Livestock.pdf

The UCC III Livestock form is available at: uccpdfs/livestock/SDUCC3f_LiveStock.pdf

The Caretaker Authorization form is available at: uccpdfs/livestock/Caretaker_Authorization.pdf

INSTRUCTIONS FOR LIVESTOCK OWNERS TO FILE A UCC STATEMENT.

1. When filing any type of UCC, there must be a signed agreement between both parties pursuant to SDCL 57A-9-509. The signed agreement does not need to be filed, but a signed agreement must exist for the UCC filing to be effective.

If you choose to file a UCC record with an EFS (effective financing statement), you will need to attach a caretaker authorization form with your EFS or sign the EFS you will be submitting to our office for filing. The EFS notifies purchasers of farm products to place the livestock owner's name or any sales proceeds check for livestock described in the EFS. We have provided an authorization form to assist you with this requirement.

2. You are the livestock owner on the UCC I.
    • Complete box 1 on the South Dakota UCC I form (your name and address)

3. The person caring for your livestock is the caretaker.
    • Complete box 3 on the South Dakota form. If there is more than one caretaker, complete box 4 as well. South Dakota requires social security numbers or tax ID numbers on all listed caretakers. Be sure to include this.
    • Should the caretaker be an organization, you will need to complete the organization box and include the information in boxes E, F&G. Box “E” would be the type of organization such as corporation, LLC, LP, etc. Box “F” would be “SD” for South Dakota if the business is organized in South Dakota. Box “G” would be a number that is assigned to them when the organization papers are filed with the Secretary of State. If they are a partnership or a sole proprietor, then you would select the “none” box.

4. Collateral portion is where you will describe the type of livestock.
    • Complete box 5 on the South Dakota form. You should describe the livestock being place with the third party as completely as possible in this portion of the record.
    • The description may include quantity, type, breed, brand, ear tags, and any other information that will assist in identifying your livestock.

If you do not have a security agreement authorizing you to file records for your caretaker, you will have the caretaker sign on the line indicated and you will sign on the line indicated for the livestock owner.

The fee for a one-page record with one caretaker is $20.00. If there are additional caretakers, add $2.00 for each additional caretaker listed. If there are any attachments to the first page, add a flat fee of $4.00. Mail to: Secretary of State, 500 E. Capitol, Pierre, SD 57501.

These forms are available by going to the Secretary of State’s web site and clicking on the livestock link or by calling the Secretary of State's UCC department at 605-773-4422.