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Ag Choice and Zylstra established their business relationship in 2004

when Ag Choice began financing Zylstra’s operations. Zylstra owned and operated

a dairy farm on real property that consisted of 127 acres of land and improvements,

including barns housing a 1,250 stall dairy, a modern milking parlor, and manure

storage facilities. Zylstra also owned a herd of approximately 1,000 cows, various

vehicles, farm equipment, and milk inventory.

{¶3} On March 14, 2013, Ag Choice loaned Zylstra a principal amount of

$2,800,000, and on January 20, 2016, Ag Choice loaned Zylstra a principal amount

of $954,131.35. The loans were secured by an open-ended mortgage recorded on

March 14, 2013 in the Paulding County Recorder’s Office, and security agreements

dated January 21, 2014 and August 21, 2014. The security agreements gave Ag

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Choice a security interest in substantially all of Zylstra’s personal property,

including inventory, equipment, accounts, farm products (specifically including

livestock), and association equity. Ag Choice perfected its security interest by filing

a UCC-1 financing statement.

{¶4} The obligations of Zylstra to Ag Choice were further secured by

proceeds of milk and dairy products marketed by Dairy Farmers of America

(“DFA”) for Zylstra by an assignment of account effective in April 2016 that

required DFA to pay Ag Choice $44,940 a month from those proceeds (“Milk

Assignment”).1



Procedural History

{¶5} On November 21, 2016, Ag Choice filed a “Verified Complaint for

Breach of Promissory Notes, Enforcement of Security Agreements, for Foreclosure

of Mortgage, and for the Appointment of Receiver.” Ag Choice named Zylstra, the

United States, and several other interested parties, mostly creditors, as defendants.

Ag Choice alleged that Zylstra was insolvent and sought to foreclose on the

mortgage and to enforce the security agreements. Ag Choice requested the

appointment of a receiver in order to protect its collateral in the dairy operation. Ag



1

The record reflects that the Milk Assignment between Ag Choice and Zylstra was initially effective in

September 2009 and required DFA to pay Ag Choice a monthly amount of $63,759 of Zylstra’s milk

proceeds. In April 2016, Ag Choice reduced the monthly assignment amount because Zylstra needed more

income to maintain the herd.

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Choice further sought a judgment against Zylstra in the amount of $3,376,742.29,

plus interest, fees, and expenses. The trial court appointed a receiver the next day.

{¶6} The United States filed an answer to the complaint, asserting a crossclaim for funds to satisfy its tax liens against Zylstra arising from unpaid

employment taxes for the periods of December 31, 2013 through December 31,

2016.2

Specifically, the United States argued that it had perfected its liens upon

filing them on July 13, 2015, July 20, 2015, and June 6, 2016, and therefore claimed

to have priority with respect to any property owned by Zylstra that came into

existence 45 days after it filed notice of its liens. See 26 U.S.C. § 6323(d).

{¶7} In March and April of 2017, pursuant to a court-approved asset

purchase agreement, the receiver sold real property and personal property,

excluding the herd of cattle, belonging to Zylstra for $2.3 million. The net proceeds

from this sale totaled $2,276,084.18. The herd consisting of 778 cattle were sold at

$1,100 a head for a gross total of $855,800. The receiver also sold miscellaneous

equipment belonging to Zylstra at auction for $62,475, leaving a net total of

$50,903.79 after expenses. The amount of proceeds from the sale of all Zylstra’s

assets sold by the receiver totaled $3,182,787.97.

{¶8} On April 28, 2017, the trial court issued an order directing the parties

to file briefs asserting their priority positions regarding their claims to the proceeds



2

United States filed a “Proof of Claim for Internal Revenue Taxes,” establishing that Zylstra owed

$318,231.25 in unpaid taxes, penalties, and interest.

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of the sales held in the receivership account.3

In their respective briefs, Ag Choice

maintained that it had senior priority position as to all of the receivership assets

based upon its mortgages, security interests, and Milk Assignment. The United

States claimed that it had priority over Ag Choice with respect to the sale proceeds

from 17 cows, or $18,700.

{¶9} On October 25, 2017, the trial court issued a judgment entry finding

that Ag Choice was entitled to senior lien priority status over the United States with

respect to the 17 cows. Specifically, the trial court determined that Ag Choice’s

liens were superior to that of all the named creditors, including the United States.

The trial court further found that Ag Choice was entitled to all remaining proceeds

after the payment of the receiver’s administrative costs.

{¶10} On November 22, 2017, the United States filed a notice of appeal to

this Court, appealing the trial court’s October 25, 2017 lien priority determination.

See Ag Choice Farm Credit, ACA v. Zylstra Dairy Ltd., et al., 3d Dist. Paulding No.

11-17-09.

{¶11} On January 16, 2018, while the appeal was pending, the receiver filed

an interim report informing the trial court that it had disbursed $2,939,000 to Ag



3

As far as the other creditors asserting claims to the proceeds, an individual named Larry Baker claimed he

was entitled to $31,900 attributable to the sale proceeds of 29 cows, and the State of Ohio claimed to be

entitled to $73,208.38 for delinquent taxes and Worker’s Compensation premiums. However, since these

parties did not participate in this appeal, we will not further discuss their specific claims.

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Choice and further indicated that he was holding $190,477.27 in the receivership

account to pay final receivership bills.

{¶12} On January 18, 2018, the United States filed a “Motion for

Determination that the Federal Tax Liens are a Senior Lien Against the Remaining

Receivership Funds (Net of Remaining Administration Expenses) and to

Reconsider 10/25/17 Ruling As to 17 Cows.” For the first time during the trial court

proceedings, the United States argued that its tax liens were entitled to priority with

respect to the milk proceeds collected during the receivership, which it claimed

represented the majority of the $190,477.27 remaining in the receivership account.

The United States also requested the trial court reconsider its lien priority

determination with respect to the $18,700 in proceeds from the sale of 17 cows. At

the same time, the United States sought to dismiss its pending appeal without

prejudice, arguing to this Court that the trial court’s October 25, 2017 Judgment

Entry was not a final, appealable order.

{¶13} In response, Ag Choice sought to strike the United States’ motion,

asserting that the trial court had already “decided the seniority of Ag Choice’s

security interest as to all of the receivership assets. Those assets include the funds

still held by the receiver, which were held back to pay administrative expenses and

wind up the receivership. Once that is completed, the Receiver will distribute the

funds to Ag Choice according to the [October 25, 2017] order. There is nothing

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more of substance for this Court to do.” (Doc. No. 88 at 1-2). Ag Choice further

argued that the United States’ motion was an improper motion for reconsideration

of a final judgment.

{¶14} In February 2018, this Court denied the United States’ motion to

voluntarily dismiss its appeal without prejudice finding the United States’ argument

that the trial court’s October 25, 2017 Judgment Entry was not a final, appealable

order to be without merit. Specifically, this Court determined that the trial court’s

judgment entry determining the lien priority of the parties constituted a final,

appealable order. Ag Choice Farm Credit, ACA v. Zylstra Dairy Ltd., et al., 3d Dist.

Paulding No. 11-17-09. Subsequently, pursuant to the United States’ motion to

dismiss its appeal from the trial court’s October 25, 2017 Judgment Entry with

prejudice, this Court dismissed the appeal.

{¶15} On February 13, 2018, the United States filed an “Amended Motion

for Determination that the Federal Tax Liens are a Senior Lien Against the

Remaining Receivership Funds (Net of Remaining Administration Expenses).” In

this motion, the United States expressly “removed any request to reconsider” its lien

priority with respect to the proceeds from the sale of 17 cows, but reiterated its

position regarding the $190,477.27 held in the receivership account based upon its

claim to the milk proceeds. (Doc. No. 89 at 2).

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{¶16} On March 19, 2019, the trial court issued a judgment entry overruling

the United States’ motion. Specifically, the trial court determined that:

Reviewing the October 25, 2017 Judgment Entry, in said order,

the Court indicated that the liens of Ag Choice Farm Credit are

superior to that of all other parties, including the United States.

The Court finds that there has been no evidence presented, except

an assumption by the United States, that the money currently

being held by the receiver is new income not addressed by the

October 25, 2017 order. The Court therefore finds that the money

remaining in the receiver’s hands has already been accounted for

in the October 25, 2017 Judgment Entry to Ag Choice Farm

Credit.

(Doc. No. 103 at 3).

{¶17} The trial court also ordered the receiver to wind up the receivership,

file a final accounting, and terminated the receivership “upon completion of any and

all documentation required by law.” (Id.). The trial court further ordered that “[a]ny

and all additional funds remaining in the Receiver’s hands after the payment of

administrative expenses shall be paid to the Plaintiff Ag Choice Farm Credit as

indicated in the October 25, 2017 Judgment Entry.” (Id.).

{¶18} The United States appealed the trial court’s March 19, 2019 Judgment

Entry, however, this Court dismissed the appeal finding that the judgment was not

a final, appealable order because the language contained in the judgment entry left

the termination of the receivership conditioned upon a future event. Ag Choice

Farm Credit, ACA v. Zylstra Dairy Ltd., et al., 3d Dist. Paulding No. 11-19-03.

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{¶19} On August 27, 2019, the trial court issued a judgment entry

terminating the receivership.

{¶20} It is from this judgment entry that the United States appeals, asserting

the following assignment of error.

THE COURT OF COMMON PLEAS ERRED WHEN IT

ORDERED DISTRIBUTION OF THE RECEIVERSHIP NET

INCOME TO AG CHOICE WITHOUT ADDRESSING THE

UNITED STATES’ CONTENTION REGARDING THE MILK

SALE PROCEEDS.

{¶21} In its sole assignment of error, the United States argues that the trial

court erred when it overruled its “Amended Motion for Determination that the

Federal Tax Liens are a Senior Lien Against the Remaining Receivership Funds

(Net of Remaining Administration Expenses).” Specifically, the United States

argues that the trial court erred in failing to determine the lien priority with respect

to the milk proceeds received as income under the receivership.

The Parties’ Positions on Appeal

{¶22} On appeal, the United States devotes a considerable amount of its brief

attempting to establish that its tax liens are entitled to priority over Ag Choice’s

security interests by virtue of 26 U.S.C. § 6323(d), which if applicable would deem

the federal tax liens senior with respect to any property acquired by Zylstra more

Case No. 11-19-08

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than 45 days after the first tax lien was recorded. 4 The United States argues that the

trial court’s October 25, 2017 Judgment Entry only determined the parties’ lien

priority with respect to the sale proceeds from Zylstra’s real estate, personal

property, equipment, and the herd. Therefore, United States contends that the trial

court has yet to adjudicate the parties’ lien priority with respect to the milk proceeds.

{¶23} On appeal, the United States further asserts that it is not only entitled

to priority over Ag Choice regarding the net proceeds from the $190,477.27

reserved by the receiver, but it also alleges wrongdoing on the part of receiver for

using the $1,153,357.11 in milk proceeds to operate the dairy while under

receivership. As such, the United States further seeks an order directing Ag Choice

to “disgorge” the distributions attributable to the milk proceeds, which it now

contends is the “government’s collateral.” (Appt. Br. at 23).

{¶24} In response to the United States’ position that its tax liens are senior

to its security interests, Ag Choice argues that the milk proceeds are “qualified

property” under 26 U.S.C. § 6323(c)(2), which provides an exception to the general

rule and gives priority for certain security interests arising within 45 days after tax

lien filing. More importantly, Ag Choice maintains that the United States had the

opportunity to argue its theory of senior lien priority regarding the milk proceeds



4

As previously indicated, the United States filed its tax liens on July 13, 2015, July 20, 2015, and June 6,

2016. The milk proceeds were collected during the receivership from November 25, 2016 through May 16,

2017.

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prior the trial court’s final determination on the matter in its October 25, 2017

Judgment Entry, and even in its original appeal of that judgment to this Court, but

failed to do so, and is now precluded from arguing its entitlement to any of the milk

proceeds under the law of the case doctrine.

{¶25} Specifically, Ag Choice contends that when the receiver sold the real

estate, personal property, equipment, and the herd for $3,182,787.97 pursuant to the

court-approved sale, this amount represented the total proceeds available from the

sale of all of Zylstra’s assets under the receivership. Ag Choice maintains that

throughout the case the parties were aware that the receiver used the income from

the milk proceeds to continue the dairy’s operation under receivership. Thus, the

milk proceeds were reinvested into the real estate, personal property, and the herd,

and did not constitute a separate asset at the time of the court-approved sale. Ag

Choice argues that when the trial court determined the issue of lien priority based

on the parties’ claims, the milk proceeds were included in the assets, albeit in a

different form. Therefore, Ag Choice asserts that the parties’ lien priority regarding

all the receivership assets had already been determined by the trial court in its

October 25, 2017 Judgment Entry.

Discussion



{¶26} The record reflects that in its Verified Complaint initiating this case,

Ag Choice addressed the issue of milk proceeds by discussing the “Milk

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Assignment” executed in April of 2016 and the accompanying UCC-1 financing

statement perfecting its security interest in Zylstra’s milk proceeds. These

documents were attached as exhibits to the complaint and established an

“irrevocable” assignment to Ag Choice of the milk proceeds due to Zylstra from

Dairy Farmers of America, Inc. (“DFA”), the third party who marketed Zylstra’s

dairy products. (Doc. No. 1, Ex. G).

{¶27} In its June 14, 2017 brief to the trial court asserting its priority position

to the asset sale proceeds, Ag Choice discussed the Milk Assignment in further

detail. Ag Choice explained that the Milk Assignment originated in 2009 and

required DFA to pay Ag Choice $63,759 a month from Zylstra’s milk and dairy

proceeds marketed by DFA. In April of 2016, Ag Choice amended the Milk

Assignment, reducing the monthly amount it received to $44,940, so that Zylstra

could use the funds to provide care and maintenance for the herd and to replace

livestock as needed. Ag Choice stated that it had not received any of the proceeds

from the Milk Assignment since August 2016 when Zylstra filed for bankruptcy

prior to being placed under receivership in the instant case.5



{¶28} In addition to reducing the amount collected under the Milk

Assignment, Ag Choice stated that it also advanced $228,979.06 to fund the diary

operations throughout Zylstra’s bankruptcy and the receivership proceedings. Ag



5

The record reflects that Zylstra filed for a petition for Chapter 7 Bankruptcy in August of 2016, which was

subsequently dismissed by the Bankruptcy Trustee prior to the initiation of this case by Ag Choice.

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Choice asserted in its brief that the “Receiver collected and used $1,153,357.11 of

Ag Choice’s assigned milk money from DFA.” (Doc. No. 56 at 3). Moreover, Ag

Choice even attached as an exhibit to its brief an accounting reflecting that DFA had

distributed $1,153,357.11 in milk proceeds to the receiver from November 25, 2016

through May 16, 2017, and the affidavit of Donald Herring, a Senior Credit Lender

for Ag Choice, who confirmed that $1,153,357.11 in milk proceeds subject to Ag

Choice’s Milk Assignment had been used by the receiver to fund the dairy

operations. (Doc. No. 56; Doc. No. 57, Ex. F).

{¶29} The United States was given an opportunity to reply to Ag Choice’s

brief asserting its claims to the milk proceeds pursuant to the Milk Assignment. In

its reply, the United States only argued its lien priority with respect to its claims for

proceeds from the sale of 17 cows from the herd, and even discussed Ag Choice’s

claims to the $1,153,357.11 representing the income from the milk proceeds under

the receivership. Notably, while a number of arguments were raised as to why Ag

Choice was not entitled to all of these proceeds, the United States did not assert any

specific claim to the milk proceeds in its reply.

{¶30} Moreover, the parties’ briefs all appear to accept the fact that the real

estate, personal property, equipment, and the herd were the only assets of the

receivership at the time of the court-approved sale. The record further indicates that

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the parties participated in a hearing held on the issue of lien priority on October 2,

2017, although no transcript of that proceeding was filed with the record on appeal.

{¶31} In sum, through a somewhat circuitous argument on appeal, the United

States appears to assert a lack of apprisal of the milk proceeds collected and used

by the receiver to fund the operations of the diary under the receivership. The

United States argues that the trial court’s April 28, 2017 briefing order only directed

the parties to state their lien priority claims regarding the real estate, personal

property, and the herd. The United States maintains that it only asserted its claim

to the proceeds from the 17 cows in the herd in compliance with the trial court’s

directives.

{¶32} At the outset, we find the United States’ purported lack of awareness

of the milk proceeds collected and used by the receiver is belied by the fact that this

is a lawsuit involving a receivership of a dairy. Thus, it is not surprising that the

milk proceeds were a primary source of income under the receivership and that the

order appointing the receiver permitted this income to be used to continue the dairy

operation and preserve the receivership assets. In addition, as noted earlier, this

order was in response to the specific allegations, documentation, and requests of Ag

Choice in its Verified Complaint for receivership and brief in support thereof. Thus,

the record indicates that Ag Choice sufficiently apprised all creditor-defendants in

the case, as to its claims to the milk proceeds under the “Milk Assignment,” both in

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its Verified Complaint, and again in its brief to the trial court in support of its priority

position.

{¶33} Furthermore, the United States has failed to direct us to any portion of

the record that establishes anything other than an understanding by the parties that

the sale of the real estate, personal property, equipment, and the herd represented

the liquidation of all the receivership assets. As a result, the record demonstrates

that the United States was given ample opportunity to advance its claims regarding

the milk proceeds prior to the trial court issuing its October 25, 2017 judgment on

the parties’ lien priority positions.

{¶34} In addition, we note that the United States made all of these arguments

in the trial court prior to filing its motion to dismiss its pending appeal of the October

25, 2017 judgment of the trial court in this Court. The record indicates that there

was nothing precluding the United States from raising these same arguments to this

Court in that appeal once it was determined by this Court that the October 25, 2017

judgment was a final, appealable order. Instead, the United States chose to seek

dismissal of the appeal with prejudice, thereby foreclosing any review of the

October 25, 2017 judgment on the trial court’s lien priority determination, or failure

to address the same, as now argued by the United States.

{¶35} The law of the case doctrine provides that the “ ‘decision of a

reviewing court in a case remains the law of that case on the legal questions involved

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for all subsequent proceedings in the case at both the trial and reviewing levels.’ ”

Hubbard ex rel. Creed v. Sauline, 74 Ohio St.3d 402, 404 (1996), quoting Nolan v.

Nolan, 11 Ohio St.3d 1, 3 (1984). The doctrine “precludes a litigant from attempting

to rely on arguments at a retrial which were fully pursued, or available to be pursued,

in a first appeal. New arguments are subject to issue preclusion, and are barred.”

Sauline at 404-405. Accordingly, in this respect we do not find that the trial court

erred in treating the United States’ motion regarding the milk proceeds as an

improper motion for reconsideration of its October 25, 2017 judgment.

Waiver of Sovereign Immunity

{¶36} The United States next claims on appeal that the trial court’s October

25, 2017 judgment could not have adjudicated the issue of the parties’ priority to

the milk proceeds because the United States did not waive its sovereign immunity

to litigate its claim on that issue. Stated differently, the United States now asserts

that it only waived its sovereign immunity—i.e. consented to be a party to this

lawsuit—with respect to its priority claims involving the real estate, personal

property, and the herd, and that it did not waive its sovereign immunity with respect

to the milk proceeds until it filed its motion asserting its priority to the milk proceeds

in January of 2018. Thus, the United States maintains that the trial court did not

have jurisdiction to adjudicate the issue until it made its claim at that time.

Case No. 11-19-08

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{¶37} “The basic rule of federal sovereign immunity is that the United States

cannot be sued at all without the consent of Congress.” Block v. North Dakota ex

rel. Bd. of Univ. and School Lands, 461 U.S. 273, 287 (1983). “A waiver of the

Federal Government’s sovereign immunity must be unequivocally expressed in the

statutory text and will not be implied.” Lane v. Pena, 518 U.S. 187, 192 (1996).

{¶38} Here, 28 U.S.C. § 2410 allows for a waiver of the government’s

sovereign immunity in this instance and states that, “the United States may be

named as a party in any civil action or suit in any district court ... to foreclose a

mortgage or other lien upon … real or personal property on which the United States

has or claims a mortgage or other lien.” 28 U.S.C. § 2410(a)(1). This statute further

provides that “an action to foreclose a mortgage or other lien, naming the United

States as a party under this section, must seek judicial sale.” 28 U.S.C. § 2410(c).

{¶39} The United States contends that because the court-approved sale by

the receiver only included the real estate, personal property, and herd, the milk

proceeds were not subject to a “judicial sale” and the statutory waiver did not apply.

As we have already discussed, the record simply does not support the United States’

position in this regard. Rather, the record demonstrates that all of the assets under

the receivership were sold pursuant to the court-approved sale and that the milk

proceeds were not a separate asset subject to the sale because they had been

reinvested into the assets, which were ultimately judicially sold. The authority cited

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by the United States is premised upon cases involving a separate cross-claim

asserted by a party or property not subject to the underlying lawsuit. Neither

scenario is present here, therefore, we do not find those cases dispositive of the milk

proceeds issue at hand.

{¶40} In sum, by limiting the circumstances in which the United States

waives sovereign immunity, “Congress wished to prevent the discharge of federal

tax liens by operation of local law in circumstances where the government was not

given notice or an opportunity to protect its interest.” United States v. Capobianco,

836 F.2d 808, 817 (3d Cir. 1988). Accordingly, this waiver of immunity does not

extend to claims beyond the property in controversy. See Miller v. Tony and Susan

Alamo Found., 134 F.3d 910, 916 (8th Cir.1998).

In the case sub judice, the record demonstrates that the milk proceeds

were an integral part of the property in controversy. Moreover, the record

establishes that the United States was sufficiently apprised of this fact and Ag

Choice’s claim to and intended reinvestment of the milk proceeds into the subject

property from the inception of this case. Finally, the United States was given ample opportunity to make a specific claim to the milk proceeds prior the trial court’s lien priority determination. Sovereign Immunity is not intended to protect a party’s failure to litigate claims and defenses available to it at the time of adjudication, even Case No. 11-19-08 the United States. Accordingly, we conclude that the trial court did not err in overruling the United States’ untimely motion to determine lien priority with respect to the milk proceeds when it had already issued a final, appealable order adjudicating lien priority regarding all of the receivership assets.



For all these reasons, the assignment of error is overruled and the

judgment of the trial court is affirmed.