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American Bank & Trust v. Shaull

678 N.W.2d 779 (2004)

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American Bank & Trust v. Shaull

South Dakota Supreme Court

678 N.W.2d 779 (2004)

Facts

In 1997 Nathan Shaull (defendant), a cattle broker, received financing from Fin-Ag, Inc. (defendant) and granted Fin-Ag a security interest in his cattle. In 1999 Shaull received credit from American Bank & Trust (American) (plaintiff) in exchange for a security interest in all cattle that Shaull owned and that he would acquire later. In 2000 Feldman Brothers (defendant) purchased cows from Shaull. Shaull and Feldman Brothers entered into a bailment agreement under which Shaull agreed to care for Feldman Brothers’ cows. In 2001 Shaull sought to refinance his debt with American. American conducted an inspection of Shaull’s farm and observed approximately 900 cows. Though Shaull claimed that he owned the cows, many of the cows were actually owned by Feldman Brothers. After observing the cows, American agreed to refinance Shaull’s debt. Shaull granted American another security interest, in all of his inventory and farm products. Fin-Ag subordinated its security interest in the cattle to American’s interest. At some point before the 2001 refinancing, Feldman Brothers granted AgStar Financial Services, PCA (AgStar) (defendant) a security interest in their cows purchased from Shaull. Neither Feldman Brothers nor AgStar filed financing statements detailing their interests in the cattle. In 2002 Shaull’s cattle business failed. American claimed that it had the superior security interest in Shaull’s cattle, followed by Fin-Ag’s subordinated claim. Feldman Brothers claimed that certain cows were owned by them, not Shaull, and that their claims to the cows were greater than American’s and Fin-Ag’s claims. The trial court held that American and Fin-Ag had superior claims to the cows because American did not know that Feldman Brothers owned the cows or that AgStar had a security interest in the cows granted by Feldman Brothers. Because Feldman Brothers allowed Shaull to appear as the owner of the cows to American, Feldman Brothers was estopped from arguing that American did not have a valid security interest in the cows. Feldman Brothers and AgStar appealed.

Rule of Law

Issue

Holding and Reasoning (Meierhenry, J.)

Dissent (Johns, J.)

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