Elting v. Elting

Brothers Perry and Kerwin Elting (defendant) managed a farm partnership. The partnership agreement required majority approval for a managing partner to act on the partnership’s behalf if the partnership had more than two managing partners. When the brothers’ sons Knud and Carl joined as managing partners, all four signed a separation agreement anticipating that Perry and his son would eventually separate from Kerwin and his. The farm had hedge contracts to sell its corn crop for three years to Cargill, Inc., and another buyer. When Cargill began offering focal point contracts (FPCs) that adjusted the hedge price with market fluctuations, Kerwin signed them on behalf of the partnership. Kerwin claimed he discussed the FPCs with the other partners beforehand. The partnership profited on the first FPCs but lost over $2 million on the second and third. Meanwhile, Kerwin, Perry, and Carl renewed the farm’s credit line with the bank. All three signed balance sheets showing the gains from the first FPCs and the losses from the second. Three months later, Kerwin began dissolving the partnership, and the brothers began farming separately with their sons. Each pair needed separate credit from the bank and prepared their own balance sheets and cashflow projections to obtain it. Both showed projections based on hedge contracts with Cargill, but Kerwin’s showed FPC adjustments, while Perry’s showed the unadjusted hedge contract price. When the bank pointed out the discrepancy, Perry and Knud claimed it was the first time they knew about the FPCs. Perry and his family (plaintiffs) sued Kerwin for acting without authority and to recover their share of the losses, and they later amended the complaint to add additional FPCs identified in discovery and additional losses incurred as a result. The trial court awarded Perry and his family over $1 million. Kerwin appealed.