A gay jenson farms v cargill
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Facts
In A. Gay Jenson Farms Co. v. Cargill, Inc., 86 farmers sued Cargill, Inc. and Warren Grain Seed Co. to recover losses due to Warren's default on grain sale contracts after its financial drop. Warren, operated by Lloyd and Gary Hill, was emotionally attached in purchasing and selling grain and sought financing from Cargill in 1964. Cargill provided financing to Warren under several agreements, extending Warren's credit line from $175,000 to $1,250,000 over several years. Cargill also had significant manage over Warren's operations, including requiring agreement for certain transactions, having access to Warren's books, and making recommendations about its business practices. Despite Cargill's financial involvement, Warren eventually defaulted, leading to the lawsuit in which the farmers claimed Cargill was liable as Warren's principal. The district court sided with the plaintiffs, evidence Cargill liable as Warren's principal, and Cargill appealed the decision. The Minnesota Supreme Court affirmed the lower court's decision, holding that Cargill had exercised enough control over Warren to be considered a principal.
Issue
The main issue
Corporations Cases
- A. Gay Jenson Farms Co. v. Cargill, Inc., Supreme Court of Minnesota, 309 N.W.2d 285 (1981)
- Warren Grain & Seed Co. wanted to expand its business, so it sought financing from Cargill, Inc. Cargill wanted to obtain a source of market grain for its business, so it gave Warren an open line of credit with a maximum first at $175,000, then at $300,000, and so on up to $1,250,000. It became evident that Warren had financial problems, so Cargill conditioned credit on its permission for certain activities; sent a manager to help make business decisions at Warren; required periodic checks on the Warren business; and stated that Warren needed paternal guidance. When Warren ceased operations and defaulted on grain sale contracts, 86 farmers sued Warren and Cargill, claiming an agent/principal relationship. Held Cargill is liable for the grain contracts because Warren was an agent for Cargill as to purchase, storage, and sale of seed grain. Restatement (Second) of Agency § 14 O (1958) states that a security holder who "takes over [de facto] management of the debtor's business either in person or through an agent, and directs what contracts may or may not be mad
Reasoning and Analysis
The case turned on whether Cargill’s relationship with Warren constituted an agency relationship, portraying Cargill liable as a primary for Warren’s contractual obligations. The court scrutinized numerous factors indicating Cargill’s control over Warren, such as financing operations, influencing handling decisions, having a right of first refusal on grain sales, and requiring approval for significant business transactions.
The court also considered past dealings where Warren acted as an agent for Cargill in separate projects, bolstering the argument that Warren operated under Cargill’s direction. The court differentiated this relationship from a standard creditor-debtor scenario, emphasizing the depth of Cargill’s involvement in Warren’s daily operations and decision-making processes.
Ultimately, it was concluded that Cargill’s ‘paternalistic’ approach and significant financial support went beyond lending and into the realm of supervise and agency, thus establishing liability for Warren’s defaults.
Conclusion
The Supreme Court of Minnesota affirmed the jury’s findings that Cargill
A. Gay Jenson Farms Co. v. Cargill, Inc.
Business Associations, Pages 14–19
Supreme Court of Minnesota, 1981
Facts:
Defendant Warren, a company running a grain elevator, was in financial trouble and applied for financing from defendant Cargill. Cargill agreed to loan Warren up to $175,000 to pay its bills. In return, Warren agreed to give its sales proceeds to Cargill, Cargill was made its grain agent with the Commodity Credit Corporation, and Cargill was given a right of first refusal to purchase market grain sold by Warren.
A few years later, Warren's credit line was extended to $300,000 and Cargill began to keep the books for Warren. Warren also agreed not to spend over $5,000 on improvements nor to take on another's debt or sell stock without Cargill's permission. As time went on, Cargill would tell Warren to make improvements or to act as its forwarder for new types of plants.
Cargill increased Warren's limit to $1.25 million, while Cargill ended up sending 90% of its cash grain to Cargill. Warren continued to go further into debt, and Cargill asserted more rights to the use of the money. Finally, it was revealed that Warren was $4 million in debt and falsifying document