PIERRE, S.D. (KELO) — A lender can’t take possession of cattle that a rancher was feeding for another rancher, the South Dakota Supreme Court said in an opinion publicly released Thursday.
The state’s high court ruled against First Dakota National Bank and in favor of Arthur and Jerilyn Gregg.
The Greggs had placed 258 branded and tagged Simmental cattle with their son-in-law, Tyler McGregor, at a feedlot he ran in McCook County.
McGregor however represented the Simmental cattle as his when he went to refinance at the end of 2015.
First Dakota did a UCC search on the cattle McGregor represented he had and found no other party had filed a caretaking or other UCC notice against the cattle.
First Dakota then advanced $954,453 to Tyler and Rebecca McGregor on February 19, 2016.
On April 7, 2016, a First Dakota representative went to the McGregor feedlot and found fewer cattle than McGregor had claimed.
McGregor called the bank and admitted he didn’t own about 1,800 cattle as he had represented to the bank. McGregor owned only about 285.
The various sides agreed on May 4, 2016, the Greggs could take their Simmental cattle but First Dakota would have the right to sue the Greggs and their lender if any indebtedness remained after First Dakota sold off the McGregors’ assets.
First Dakota sued in December 2017 for the value of the Greggs’ cattle that had been at the McGregor feedlot.
According to the Supreme Court’s opinion, Circuit Judge Chris Giles determined that “the Greggs allowed the McGregors to appear as the owners of the cattle, because neither the Greggs nor their lender took any action to protect their interests in the cattle. The court further determined that the McGregors’ appearance as the owners of the Gregg cattle led First Dakota to advance $954,453 in new money in February 2016.”
However, the Supreme Court unanimously found that Judge Giles got the result right by ruling in favor of the Greggs. The judge had said, “First Dakota could have done a more thorough inspection of the McGregor feedlot, required McGregor to provide First Dakota with some kind of proof of purchase other than McGregor’s word, and been more diligent in looking at the brands and ear tags of the ‘Group 21 cattle’ which would have alerted First Dakota to numerous red flags about whether McGregor actually owned the cattle.”
In the Supreme Court opinion, Justice Patricia DeVaney wrote that the Greggs weren’t required to file a UCC caretaker statement for their Simmental cattle with the South Dakota Secretary of State. That was contrary to the judge’s finding.
“Although the McGregors had possession of the Gregg cattle and were responsible for feeding them to finish, there is no evidence that the McGregors were given any interest in the cattle other than mere
possession. The evidence establishes that the Greggs simply delivered their cattle to their son-in-law for the specific purpose of feeding them to finish because the Greggs were getting older and looking to slow down,” Justice DeVaney said.
The justice said First Dakota could have reasonably discovered the Greggs’ cattle didn’t belong to McGregor had someone checked the brands and noticed the orange ear tags.
“In short, nothing the Greggs did suggested that they were relinquishing control over their cattle. First Dakota’s perception that all the cattle in the McGregors’ pens were owned by the McGregors was fueled by Tyler’s fraudulent actions and misrepresentations, rather than by the conduct of the Greggs,” DeVaney wrote.