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Bayer CropScience LP v. Texana Rice Mill, Ltd.

United States District Court, E.D. Missouri, Eastern Division

March 19, 2018

BAYER CROPSCIENCE LP, et al., Plaintiffs,
v.
TEXANA RICE MILL, LTD., et al., Defendants.

          MEMORANDUM OPINION

          CATHERINE D. PERRY, UNITED STATES DISTRICT JUDGE

         Bayer brought this interpleader action to determine its obligations with regard to a settlement reached with Texana Rice Mill in another suit.[1] Bayer and Texana settled Texana's claims in that action (the Bayer Settlement), but Texana's creditors had competing interests in the settlement funds. Bayer therefore paid the funds into this Court's registry. After disbursement of certain undisputed amounts and receipt of a partial refund, the registry now contains the principal sum of $977, 269.90, representing the Net Settlement to be disbursed in this action. The two remaining claimants, Stearns Bank National Association and Amegy Bank National Association, each assert claims greater than the Net Settlement.

         The matter is before me on remand from the Eighth Circuit Court of Appeals. Bayer CropScience, LLC v. Stearns Bank Nat'l Ass'n, 837 F.3d 911 (8th Cir. 2016). On Stearns Bank's appeal of my grant of summary judgment to Amegy Bank, the Eighth Circuit held that Stearns Bank had a continued interest in the Bayer Settlement to the extent the settlement was payment for damage to Stearns Bank's original collateral, regardless of its foreclosure on the collateral. Id. at 915. The court of appeals therefore remanded the matter for me to determine what part of the sum in the registry constitutes proceeds of Stearns Bank's original collateral and what part does not. Id. at 917.

         Upon remand, the issue was tried to the Court in a bench trial. Upon consideration of the evidence and testimony adduced at trial, this Court's own orders and records, and the law, I conclude that 39.78% of the Bayer Settlement - or $765, 267.75 - constitutes the proceeds of Stearns Bank's original collateral for which Stearns Bank has a priority interest as payment for damage to the original collateral. Accordingly, Stearns Bank shall recover $765, 267.75 of the Net Settlement from the Court's registry. Amegy Bank shall recover the amount of Net Settlement that does not constitute proceeds of Stearns Bank's original collateral, that is, $212, 002.15.

         My findings of fact and conclusions of law follow.

         Findings of Fact

         In 2006, Texana Rice Mill, Ltd., and Texana Rice, Inc. (collectively, Texana), sued numerous Bayer entities and associated entities (collectively, Bayer) relating to the spread of Bayer's genetically modified rice into the United States rice supply. Texana asserted several tort claims alleging that Bayer's conduct caused Texana to suffer, inter alia, lost profits and damage to its equipment, facilities, and goodwill (the Bayer Suit). Texana and Bayer settled the case in September 2012, whereupon Bayer agreed to pay a total of $2, 137, 500 in exchange for Texana's agreement to release its claims. Ten percent (10%) of this agreed payment was not considered to be part of any recovery, proceeds, or assets of Texana, however, but instead was to be held back and set aside for common benefit fees and costs under the MDL's Common Benefit Order.[2] Accordingly, the amount of the settlement that represented Texana's damages was $1, 923, 750 (the Bayer Settlement).

         When the Bayer Suit settled, Texana owed separate debts to Stearns Bank and Amegy Bank arising from the following transactions and events:[3]

September 13, 2002-Stearns Bank made a $2.65 million loan to Texana.
This loan was secured, in part, by a Commercial Security Agreement covering:
All Fixtures All Chattel Paper, Equipment and General Intangibles (EXCLUDING
INVENTORY AND ACCOUNTS RECEIVABLE)
[including] all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies, replacements of and additions to any of the collateral described herein, whether added now or later.
(B) All products and produce of any of the property described in this Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, or other disposition of any of the property described in this Collateral section.
(D) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral section, and sums due from a third party who has damaged or destroyed the Collateral or from that party's insurer, whether due to judgment, settlement or other process.
(E) All records and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of Grantor's right, title and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media.
Stearns Bank perfected its security interest by filing a Uniform Commercial Code (UCC) Financing Statement with the Texas Secretary of State.
February 1, 2006-Amegy Bank loaned Texana $2 million. Texana defaulted on the Amegy Bank loan in 2006.
November 8, 2006-Texana brought its state court action against Bayer for the contamination of Texana's inventory and property by the genetically modified rice.
June 8, 2007-Texana executed a written Forbearance Agreement with Amegy Bank. Pursuant to this agreement, Amegy Bank agreed to forbear on certain of its contractual and legal rights, and Texana in return gave Amegy Bank a security interest in its Bayer Suit, a commercial tort claim.
June 13, 2007-Amegy Bank perfected its security interest in the commercial tort claim by filing a UCC Financing Statement of public record.
January 21, 2010-A Texas state court entered final summary judgment against Texana for Texana's default on the Stearns Bank loan.
June 1, 2010-Stearns Bank foreclosed on its Deed of Trust and security agreement. It later purchased all of the existing collateral sold at the ...

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