Border State Bank of Greenbush v. Bagley Livestock Exchange, Inc.

Bert Johnson, the owner of Johnson Farms, entered into a cattle-sharing agreement with Hal Anderson. Under the agreement, Anderson was to maintain and breed the cattle. Johnson still owned the cattle, any offspring were to be sold under Johnson’s name, and Johnson was to get a guaranteed percentage of the calves. Later, the parties modified the agreement to increase the number of cattle and to include Johnson’s beet tailings for feed. Anderson contended that the parties agreed to do away with Johnson’s guaranteed percentage and to have Johnson provide all feed, but Johnson disputed this.

Border State Bank (the plaintiff) loaned Anderson $155,528.00, and Anderson gave the plaintiff a security interest in all “rights, title and interest” in “livestock” that he owned or later acquired. Johnson later reclaimed the cattle, but Anderson kept the calves. Bagley Livestock Exchange sold the calves for Anderson, and paid him a remainder that was less than allegedly advanced for the feed. The plaintiff sued Bagley Livestock Exchange (the defendant), alleging conversion of its perfected security interest in the calves. Johnson filed a third-party complaint against Anderson, seeking indemnity, and Anderson countersued for breach of contract.

The district court directed a verdict in favor of the defendant because Anderson did not have an “ownership interest” in the calves. As a result, Anderson could not give the plaintiffs a security interest. The plaintiffs appealed to the Minnesota Court of Appeals.