A. Gay Jenson Farms Co. v. Cargill, Inc.,

309 N.W.2d 285 (1981)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Ps were 86 individual farming entities. Ps sued Cargill (D) and Warren Seed (D1) to recover losses sustained when D1 defaulted on the contracts made by Ps for the sale of grain. P got the judgment and D appealed. D1 operated a grain elevator and was involved in the purchase of grain from local farmers. The grain would then be resold through a grain exchange or to terminal grain companies directly. D1 also stored grain, sold chemicals, fertilizer, and steel storage bins. D1 also operated a seed business. D1 decided to apply for financing from D. It was recommended by management that D finance D1. D and D1 established a line of credit for $175,000. In return for this line of credit, D1 appointed D its grain agent for transaction with the Commodity Credit Corporation. D1 was given the right of first refusal to purchase grain sold by D1 to the terminal market. A new contract was negotiated three years later for a $300,000 line of credit but also stated that D1 would provide D with annual financial statements, or an audit would be conducted, or D would keep the books for D1. D1 was also prohibited from making capital improvements in excess of $5,000 without the prior consent of D and D1 was also not allowed to become liable as a guarantor on another's debt or encumber its assets without permission of D. D1 also had to get consent from D to sell or purchase stock or to declare a dividend. In the next two years D1 acted as D's agent for a new type of wheat as well as for the growing of sunflower seeds for D. D was named as the contracting party and the farmers were paid directly by D for the seed and all contracts were performed in full for the first year as well as the second. D expressed doubt of the business acumen of D1 but a new security agreement was executed for $750,000, and a subsequent agreement raised that limit to $1,250,000 in 1976. D1's debt eventually continued to be in excess of its credit line. D began to assert its control over the business of D1 and even kept a daily debit position and interjected its regional manager on a day to day basis. Things began to unravel in 1977 and D1 was $4 million in debt. D assured various farmers that there would be no problems with payment. D was eventually informed that D1 has deliberately falsified his financial statements. In the final days of operation, D sent its employee to supervise the elevator including disbursement of funds and income generated by the elevator. D1 was in debt to D for $3.6 million. It was also determined that D1 was in debt to Ps for $2 million. Ps sued and alleged that D was a principal for the grain elevator.