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

Bert Johnson, owner of Johnson Farms, entered a cattle-sharing arrangement with Hal Anderson. Anderson was to maintain and breed the cattle, though the cattle was still “owned by Johnson Farms and any offspring [was] to be sold under Johnson Farms’ name.” Johnson was to get a “guaranteed” percentage of all calves. A few years later, the parties modified the agreement to increase the number of cows and have Johnson provide beet tailings for feed. Anderson also contended that the parties agreed to do away with Johnson’s “guarantee” and have Johnson provide all feed, but Johnson disputed this. Border State Bank (Border) (plaintiff) loaned Anderson $155,528, and Anderson gave Border a security interest in all “rights, title and interest” in “livestock” that he owned or later acquired. Johnson reclaimed the cattle, but Anderson kept the calves to sell. Bagley Livestock Exchange (Bagley) (defendant) sold the calves. Bagley paid Johnson, who paid Anderson a remainder, less money allegedly advanced for feed. Border sued Bagley for conversion of its perfected security interest in the calves. Johnson filed a third-party complain against Anderson seeking indemnity, and Anderson countersued for breach of contract. The district court directed a verdict in favor of Bagley on the ground that Anderson did not have an “ownership interest” in the calves and could not give Border a security interest. Border appealed to the Minnesota Court of Appeals.