TIMBER! Creditor’s Alleged Vendor’s Lien Falls

Like last week, this week’s post arises out of In Re: Cruse, 2013 Bankr. LEXIS 360 (S.D. Ind. 2013) (.pdf).  For factual background, please review last week’s entry.  Indiana lenders and businesses dealing with timber will gain insight from Cruse.

Vendor’s lien.  Today’s discussion surrounds the Creditor’s contention in Cruse that he held an enforceable vendor’s lien against timber that the Debtor cut down from the Creditor’s land.  For more on Indiana vendor’s liens, please click on my prior post:  What Is A Vendor’s Lien?

Real estate only.  The Court in Cruse rejected the Creditor’s argument for the simple reason that “under Indiana law, no vendor’s lien can arise on personal property.”  As mentioned last week, the Court held that the timber in Cruse was personal property and thus governed by the Uniform Commercial Code.  Indiana law appears to be settled that vendor’s liens only arise in “the context of the sale of real property,” including for instance a land contract.  The Cruse contract, however, only involved the trees (a/k/a timber; a/k/a goods).

Timber = personal property.  It may be counterintuitive for living trees to be viewed as personal property, as opposed to real property.  Yet the result in Cruse and the supporting legal authorities leave no doubt that the UCC and personal property law, not vendor’s liens or real estate law, govern transactions involving timber.  Had the heart of the transaction in Cruse been the Debtor’s purchase of the Creditor’s land (including the trees), then there might have been a different outcome – definitely a different legal analysis.