Banks and bankers are good at building organizations, and lobbying state legislatures. As a result, over time they tend to get their way with laws affecting their businesses. This is true in Nebraska and elsewhere.
One law that favors bankers concerns liens on livestock. The law creates risks that a purchaser of animals may be forced to pay for them twice – once to the seller and another time to seller’s bank if financial distress develops.
It was this uneven legal playing field confronting Domina Law Group's cattle feeder and investor client in York County, Nebraska District Court recently. The cattleman purchased cattle through a business associate whose responsibility was to locate and assemble the livestock on behalf of our client, and bill him later.
The middleman went broke. He mismanaged his funds, borrowed from the bank, lost money on other ventures, and was unable to pay his loan. The bank, looking anywhere it could for loan repayment, sued DLGpc’s investor client.
The Bank claimed its customer had owned the cattle – even if only for a little while. Therefore, the Bank said it never released its lien on the livestock.
Before trial, Domina Law Group lawyers Nora Kane and David Domina convinced the court that substantially all of the proceeds derived from the sale of the fed cattle in feedyards belonged to their client. Relying upon the federal Food Security Act of 1985, 7 USC § 1631, and Nebraska’s companion legislation, Neb Rev Stat § 52-1301 et seq., Kane and Domina argued that by accepting and negotiating checks made dually payable to the bank and the lender / middleman, the bank released or waived its security interest, to the extent it ever existed.
The remaining issues concerning mother cows and their calves – animals that did not go into feedyards immediately – were addressed differently. Trial before a jury led to a week of remarkable evidence. During the testimony:
Domina Law Group's client explained his business relationship and demonstrated a detailed and lengthy history of a course of dealing to support his claim to ownership of the remaining herd;
The borrower / middleman, bankrupt by his financial problems, was forced to testify under subpoena. Although an agreement made in his bankruptcy with the Bank could have reduced his bankruptcy reorganization plan payments by nearly $1 million, the cattleman truthfully described his relationship to our client as that of a broker.
After carefully digging through mountainous bank documents and reconstructing complex loan activity, David Domina used diagrams, charts, and statements contained in the otherwise highly confidential sections of the Bank’s loan file to prove that bank annual renewals of the loan were made based on an understanding that the Bank’s customer was buying cattle for immediate resale, treating them as inventory, and not holding them as farm products.
Presentation of evidence ended, and counsel argued legal motions before a final conference with the trial judge to settle jury instructions. While the jury was out, Domina made a formal motion requesting that the court enter judgment for DLGpc’s investor client, and dismiss all of the bank’s claims without jury submission. Domina argued that the bank’s actions prevented it from asking the court for relief. He also contended the evidence was so strongly favorable to his investor client that no reasonable jury could find for the bank.
Late the evening before argument on the motion, attorneys David Domina and Claudia Stringfield completed a persuasive legal brief detailing the law of judicial estoppel and outlining the facts. The bank had no response, and its lawyers found themselves confronted with a legal doctrine new to them. The trial court agreed with us, and entered judgment as a matter of law without sending it to the jury.
“Our client should never have been subjected to the risk of paying for cattle twice,” Domina said of the trial court’s ruling in his favor. “Cattlemen have altogether too many odds against them – weather, animal health, disease, grain prices, and difficult markets. They should not have to worry about their seller’s banks too.”