Pub. 8 2013-2014 Issue 2

July | August 2013 15 Extraordinary Service for Extraordinary Members. we’re Always CLOSE BY NetWorks is the Electronic Funds Transfer (EFT) service provider that Nebraskans have used and learned to trust like family for over 30 years. Since our offices are right here in Nebraska, you can count on us to provide quick and personalized service for all of your EFT needs. Give us a call and let’s talk about how we can simplify EFT for you. You will talk with a fellow Nebraskan and not some automated system. www.netseft.com Toll Free 800-735-6833 Local 402-434-8202 Problem One. The bank’s en- forcement of a note against a cattle owner was subject to any claim or de- fense that the cattle owner had against the feedlot arising from the same trans- action. So, if a feedlot employee left a gate open and 10 of the owner’s steers from this pen of cattle disappeared, the cattle owner’s damages arising from the feedlot’s negligence becomes a set-off against the bank’s enforcement of the note. Problem Two. Because neither the bank nor the feedlot ever provided the cattle owner with an authenticated notice of assignment of the note, a cattle owner can set off transactionally unrelated claims against the bank’s en- forcement of the note. If a cattle owner sold the feedlot a truckload of corn three years ago and the feedlot failed to pay the cattle owner for the value of the corn, those damages can be set off against the bank’s enforcement of the note. If the feedlot owner backed his F-350 into the cattle owner’s 16-year- old daughter’s BMW convertible, well, that becomes a set-off against the bank’s enforcement of the note as well. Obvi- ously, this can leave the bank subject to a myriad of potentially unknown risks in attempting to enforce the note. Problem Three. Prior to receipt of a notice of assignment of the note, a cattle owner can satisfy its obligation on the note by paying either the feedlot (the assignor) or the bank (the as- signee). That is exactly what happened in this case (along with tidbits of Prob- lems One and Two). The cattle owner successfully argued that the feedlot’s receipt of the packer checks coupled with the feedlot’s issuance of a closeout and profit check (whether calculated correctly or not) constituted payment of the note. Whether the feedlot then paid the bank was, in short, not the cattle owner’s problem. Of course, the bank “If you must take a note on assignment, immediately provide the debtor with an authenticated notice of assignment.” was still free to pursue the feedlot to recover the wrongfully withheld funds, but there is that whole “can’t get blood from a turnip” thing to deal with there. What to Do? Direct Lending. At family re- unions, in chemistry labs, and in banking, relationships matter. Who ultimately received the benefit from the cattle loans: the feedlot or the cattle owner? Since the cattle owner actually receives the funds (through repayment of cattle procurement costs or as funds advanced in payment of the owner’s feed bill), structure a direct lending re- lationship between the bank and cattle  Negotiability — continued on page 16