Thorp Credit, Inc. v. Wuchter

Eugene and Louise Wuchter (Wuchters) (defendants) were farmers, and their farm included a dairy operation. The Wuchters’ son, Eric, helped run the dairy operation in exchange for a monthly salary. Eric had some dairy cows that were part of the approximately 350-head dairy herd on the Wuchters’ farm. Eric once borrowed money from the Farm Service Corporation in return for a purchase-money security interest in his cows. Eric’s cows were registered with the Holstein-Friesian Association; the Wuchters had not registered their cows in several years. The Wuchters borrowed a total of about $270 million from Thorp Credit, Inc. (Thorp) (plaintiff). In return, the Wuchters executed a security agreement granting Thorp a security interest in their livestock. The Wuchters defaulted on the loan. Thorp brought a replevin action to obtain all cows on the farm. The Wuchters then declared bankruptcy, which stayed the replevin action. About two years later, Thorp sought to lift the stay and sought repossession of the cows. Eric then filed an intervention in the repossession action, seeking to exempt his cows from Thorp’s repossession. At the trial on the repossession action, the testimony established that Thorp loan officers knew about registering Holstein cows. The trial evidence also established that registered Holstein cows cost hundreds of dollars more than unregistered cows. Thorp presented evidence that Eugene was acting as Eric’s agent regarding the security interest and that Eugene and Eric had a partnership that bound Eric to a security agreement. The district court rejected Thorp’s arguments and concluded that Eric’s registered cows were not subject to Thorp’s security interest. Thorp appealed.