It’s Not Purdy, But It’s Not A Per Se Security Agreement

In Sunshine Heifers, LLC v. Citizens First Bank (In re Purdy), 763 F.3d 513 (6th Cir. 2014), a divided Sixth Circuit reversed the bankruptcy court's finding that cattle leases were disguised security interests. Over the course of three years, Debtor Lee Purdy entered into several leases with Sunshine Heifers for a total of 435 dairy cows. When Purdy filed for bankruptcy protection in 2012, Sunshine moved to retake possession of its herd. Purdy's lender, Citizens First Bank, claimed that its perfected security interest in equipment, farm products, and livestock had priority. After refinancing his debt with Citizens and granting security interests in his livestock, Purdy contacted Sunshine to increase his herd. The agreements with Sunshine prohibited Purdy from terminating the leases and Purdy agreed to return the cows after 50 months. Purdy guaranteed that the residual value of each head would be between $290 and $300. In conjunction with the leases, Purdy executed