Ag Lending: Could Selling Crops Be a Crime?

Ag Lending: Could Selling Crops Be a Crime? In an agriculture heavy state such as Indiana, lenders necessarily will have a certain portion of its lending dedicated to agricultural and farming operations.   There are certain protections for lenders under both Indiana law and federal law, which, while easy to follow, may not often be employed by lenders. The Uniform Commercial Code (“UCC”) was written to provide guidance concerning commercial transactions, and has been adopted in some fashion throughout the United States, including Indiana.  States are free, however, to adopt certain other provisions or deviations from the UCC.  As a general rule under the UCC, someone who buys a product in the “ordinary course” of the seller’s business buys that product free from any security interest or lien that a lender may have attached to that product.  This is true even if the lien is perfected and the buyer knows about the lien. Historically, there was an exception to this rule for “farm products”, which includes crops.  Therefore, under the UCC, a wholesale buyer of a farmer’s crops bought those crops subject to any lender’s lien. Congress, however, passed a federal law in 1985 to override this UCC exception, and stated that a buyer who in the ordinary course of business buys a farm product from a seller engaged in farming operations buys that farm product free of any lender’s lien. As with every rule, there are exceptions, and this one is no different.  This same federal law provides that the buyer of farm products will take the farm products subject to the lender’s lien if the buyer has been...

Mediation? Arbitration? Same Thing, Right?

Mediation? Arbitration? Same Thing, Right? There is often some confusion on the part of business clients concerning the differences between mediation and arbitration.  Some people tend to use the terms interchangeably, but in actuality mediation and arbitration are quite different. In a mediation, typically the parties hire a third party “neutral” person who, while she may be a lawyer, does not need to be in order to help facilitate settlement discussions.  Sometimes the attorneys involved will suggest a mediation as a way to have their clients listen to a neutral third party describe the strengths of the opponent’s case and the weaknesses of their own client’s case so that the parties can try to reach a resolution before incurring significant costs.  As previously noted in this blog, you are not sacrificing anything legally by engaging in mediation or other forms of settlement negotiations.  That is because if the case does not settle at mediation, any judge or jury who ultimately tries the case in court will never hear what offers of compromise may have been made by the parties. It is important to remember that in a mediation, the mediator makes no decisions.  Rather, all of the ultimate decisions about whether to settle, and for how much, are left to the parties.  The mediator cannot force a settlement on anyone.  The mediator can make suggestions, and the parties can agree on different ways to mediate.  However, ultimately it is up to the parties to decide if the case will settle or not.  This is one of the big advantages of mediation, because the parties control their own destinies.  After...

Ten Years to Fight Over a Contract?

Ten Years to Fight Over a Contract?! We are constantly emphasizing to our clients the importance of reading and understanding all of their contracts before signing them.  We also continually counsel our clients about the incredibly slow pace of litigation and how resolving business disputes through the courts can take many years.  A recent decision by the 7th Circuit Court of Appeals (which would hear federal cases under Indiana law) serves as a good illustration of these points: In that, the 7th Circuit reversed a jury’s award of $1,500,000.00 in favor of a sales representative, and found that the plain language of that representative’s contract showed that he was only entitled to $54,000.00 in commissions.  The reason for the reversal was that his contract very clearly stated that in order for the sales person to receive commission credit under the employer’s previous compensation plan, any sale must close on or before December 25, 2005.  The sale at issue did not close until March, 2006.  During the original trial, the trial court allowed evidence to be introduced concerning what was intended by the parties, as opposed to simply enforcing the plain terms of the contract.  With the introduction of that extra evidence, the jury awarded $1,500,000.00.  The Court of Appeals reversed that ruling and directed that the employee was only entitled to $54,000.00. A few interesting points that came out of this recent decision include the fact that this dispute has been ongoing for ten years.  For some perspective, the sale at issue closed about 18 months before the introduction of the iPhone and the decision was entered on July...

Oral Contracts are Enforceable in Indiana…

Oral Contracts are Enforceable in Indiana… But Not if They Affect Real Estate We often are asked whether or not contracts that are not in writing are enforceable.    As a general rule, those types of contracts are enforceable, but there are certain types of agreements and contracts that are required by law to be in writing.   One of those types of contracts is any contract which seeks to convey an interest in land. This fairly well established principle of law was recently reaffirmed by the Indiana Court of Appeals in a case involving a land contract.   Under a typical land contract, the seller retains legal title until the total contract price is paid by the buyer.  Legal title does not vest in the buyer until the contract terms are satisfied, but so-called “equitable title” vests in the buyer when the contract is executed.  It should be noted that the Indiana Supreme Court has previously determined that a land sales contract is similar to a mortgage, particularly if the buyer has paid more than a minimal amount of the contract price.    This affects what the seller must due in order to remove the buyer from the property if the buyer does not fully satisfy the terms and conditions of the land contract. In this new case, the two parties had entered into a land contract whereby the buyer would be making monthly payments until the end of the contract on November 30, 2010, when the unpaid balance was to be due in full unless renegotiated.  As the end of 2010 approached, the two parties entered into an oral agreement to...

Indiana Courts Enforce the Intent of the Parties

  A bedrock principle of Indiana law is that the intent of the parties controls the contract. We are constantly advising our clients of this principle, and that is why it is so important that a contract clearly express the true intent of the parties, so that anyone who later reads that contract can understand without question what both parties meant when they agreed to the contract. The Indiana Court of Appeals has again reaffirmed this principle and repeated its long-standing policy of enforcing business contracts when the parties’ intent is clear. In the case, which involved lien priorities, subordination agreements, crop financing and bankruptcy issues, there were 3 different lenders who had loaned money to a farmer.  At one point the lender who had the senior lien (“Lender #1), and therefore was entitled to be paid first from the proceeds of the farmer’s assets, entered into a partial subordination agreement with the lender which was “third in line” in terms of its lien position (“Lender #3).   It was clear from the subordination agreement that the reason for Lender #1 and Lender #3 to enter into the agreement was to induce Lender #3 to loan additional money to the farmer to plant crops.   Lender #3 then loaned additional money to the farmer, who ultimately filed bankruptcy.  The question then was which Lender was entitled to proceeds from those crops. After analyzing case law concerning subordination agreements from other States, and parsing through a number of different arguments made by Lender #2 (who was trying to claim some portion of the crop proceeds even though it had not loaned any...

What Triggers the Beginning of a Non-Compete?

In a recent case decided by the Indiana Court of Appeals, the judges unanimously agreed that a 10 day break in employment with a prior employer started the running of the non-compete agreement between that employer and its employee, despite the fact that same employee was rehired by that same employer 10 days later.      At the time of the employee’s original hire, he was asked to sign a non-compete agreement, which he did.  He was subsequently fired.  Ten days later his employer offered to revoke the termination and allow him to return to his prior position.  The employee returned to his position but the employer did not ask the employee to sign a new non-compete agreement.  Approximately 2 ½ years later, the employee left that employment and immediately began working for his former’s employer’s competitor.      The employer filed a lawsuit seeking to enforce the non-compete agreement that the employee signed at the time of his original hire.  The employer argued that because the termination was “revoked”, and the employee rehired, the non-compete agreement signed when the employee was originally hired should still remain in full force and effect.      The Indiana Court of Appeals rejected the employer’s argument and ruled in favor of the employee.  The Court noted certain principles related to non-compete provisions, which we have previously discussed here.  Included among these are the fact that covenants not to compete are in restraint of trade and are not favored by the law; they are strictly construed against employers and are enforced only if reasonable; and those covenants must be reasonable with respect to legitimate protectable interest of the employer....
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