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
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.”