Enmity between farmers and banks is almost as old as the Good Book and the Express Grain fiasco is no exception. A group of victimized farmers sued UMB bank in federal court in November. They accused the bank of keeping the bankrupt grain elevator afloat until it could seize the harvests after delivery. However, UMB fired back at the farmers last week with a motion to dismiss the lawsuit.
The lawsuit revolves around Express Grain Terminals, LLC even though the company is not a party in this case. Express Grain is a large grain elevator that serves farmers in the Mississippi Delta. Farmers deliver their harvest to Express Grain and then transfer title. The company usually pays for the harvest within a few days of delivery. Harvest season is late August and September for corn and grain while soybeans are harvested in October.
Unfortunately, Express Grain was underwater by more than a few feet as it owes $70 million to UMB Bank of Kansas City.
The unsuspecting farmers delivered their grain as usual. For example, Island Farms shipped 80,000 bushels of corn in mid – September. Express Grain paid for the delivery with a bogus check for $410,874. The same fate happened to other farmers who delivered their grain.
The plaintiffs claim UMB knew Express Grain was dead broke in early 2021 but kept the grain elevator afloat until the fall when it could seize the only sizeable asset Express Grain possessed: the fall harvest. The bank called everything due at the end of September and forced Express Grain into bankruptcy. The bank took all grain delivered by the farmers for the 2021 harvest season.
The farmers sued the bank in U.S. District Court on November 8. They accuse UMB Bank of one count each of aiding and abetting fraud, conversion, unjust enrichment, and constructive trust. They seek damages as well as attorneys fees.
UMB said nice try but we want to take the ball and go home as it asked US District Judge Henry Wingate to dismiss the lawsuit. The bank said the farmers sued the wrong party as it is Express Grain that owes money to the farmers, not UMB. The farmers' remedy is to file a claim against Express Grain in the bankruptcy case.
The motion states:
As of September 2021, the total balance of UMB’s loans was approximately $70 million. Express Grain pledged virtually all of its assets, including property acquired by Express Grain after signing the loan documents, as collateral for the loans from UMB. The collateral included grain delivered to Express Grain. After Plaintiffs delivered grain to Express Grain, UMB notified Express Grain that it was accelerating its loans to Express Grain and declaring all amounts immediately due and payable.
Plaintiffs do not allege that UMB took physical possession of the grain that they delivered to Express Grain. Instead, they ambiguously plead that UMB “effectively seized the grain.”
However, UMB argues there is no claim for "aiding and abetting fraud" because no such claim exist under Mississippi law. No Mississippi court is ever recognized such a claim.
The bank also argues there is no claim for conversion as well. The farmers transfer title of the grain to Express Grain, not UMB. The plaintiffs admit the bank has a security interest in the grain. Neither the grain elevator nor the bank did anything wrong in taking ownership of the grain. Seizing collateral is not conversion.
The claim for unjust enrichment also fails because the farmers had an expectation they would be paid by the grain elevator. It was not UMB Bank's responsibility to pay the plaintiffs.
The motion and complaint are posted below.
Synopsis
Express Grain Terminals opened in 2007 and is a major grain elevator in the Mississippi Delta. Dr. Michael Coleman and his son John Coleman own Express Grain Terminals although John's share is 1%. Express Processing open in 2015 and Express Biodiesel opened in 2018. Express Grain owns the two companies.
Express Grain ran into some financial
trouble a year ago. Several farmers complained to MDAC in December 2020
that checks for their harvest bounced. However, the company made good on
the checks. However, the company owed over $70 million to UMB Bank. The
company submitted phony financial statements to the state when it
renewed its license in the spring of 2021. Word circulated among Delta
farmers during the harvest season that the company was in trouble.
Express Grain President John Coleman assured farmers everything was okay in a September 28 letter:
UMB Bank sued the company for fraud on the same day in Leflore County Chancery Court. UMB had issued a $40 million revolving loan and a $35 million term loan to the defendants. The bank extended the loans several times. The bank allegedly caught the company submitting false financial statements. UMB declared Express Grain in default on loans of $71 million. The lawsuit sought repayment of the loans and asked the Chancellor to place the company into receivership. Earlier post.
Express Grain filed a petition for Chapter 11 bankruptcy the next day.
The company reports total liabilities of $106 million in assets of $101 million. However, the company owes another $9 million to farmers. The secured claims are $70 million while unsecured claims are $36 million. Total amount owed to farmers is $41 million. The top twenty unsecured creditors report claims of over $23 million.
The damage does not stop with farmers losing their crops. More than a few banks place liens on harvests when farmers borrowed against them. The bankruptcy means those banks could lose the collateral on those loans.
Some farmers have gone to court to get their harvests back. They accused the bank of keeping the broke borrower afloat just long enough to steal the harvests delivered to the grain elevator without paying for them Earlier post.
Express Grain Posts
Commish moves to block Express Grain loan.
Commissioner wants to revoke Express Grain license for fraud.
Senate Committee holds Express Grain hearing.
This week on the podcast: Express Grain
Shucking & jiving to bankruptcy.
Express Grain Prez threatened.
Express Grain collapse over $100 million.
Lawsuit: Express Grain shucked bank out of $71 million.
Were Delta farmers shucked and jived?
27 comments:
Judge Wingate has the case? No rulings should be expected in the next ten years.
Shut. Them. Down. Shut them down now. This company should be shut down now. Pull their license now.
If one of the bankers or banks atty's from UMB are reading this, you deserve to be found in the bottom of a catfish pond...and I hope like hell you do, along with the Colemans. You knew what you were doing, and trying to get this dismissed instead of owning up to it is cowardly.
Never seen a DIP that maintains the same management that ran the entity into bankruptcy. The Coleman's should be in jail.
Where's Bennie Thompson? Surely these farmers are due the same level of bailouts as the Democrats have bestowed to so many others? What good is a Congressman with a million chits if he can't pull a rabbit out of his hat and save some of the few remaining actual taxpayers in his district?
And in for the bank is none other than Bill Reed!
You remember Bill?
He had a client dying of cancer and to console him…Bill pounded the clients wife.
Now Bill is back better than ever screwing farmers and their wives too.
You can’t make this shit up
This here, hell 2 the naww
Too big to fail. The dems understand what that means, right Bennie?
Its easy to hate the bank, especially after the public relations war that the farmer's attorney (the notorious Don Barrett) has put on telling everybody that would listen his version of the facts. But so far, he has produced nothing to show that the bank actually did collude with the elevator for the bank's benefit.
Now, it appears that there is another side to the story, that the bank learned that the financial statements submitted to support their ongoing loan renewals were bogus just as were the statements submitted to The Hat - which should be plenty good reason for the bank to call the loan.
Besides Barrett's making up of laws that don't exist, has he made up the story of collusion just so that he could have someone with pockets, no matter how deep, to sue? Damn right, nothing that any good trial lawyer raised in the Dickie Scruggs/Dennis Sweet School of Sueability would do.
Hate it for the farmers, but they willfully participated in giving title to their product without receiving money, and did so evidently with knowledge that Express Grain was in financial trouble.
Dumb. Double down dumb. Sorry, but you don't even get to pass go and collect anything.
Michael Coleman’s brother was arrested for selling luxury boats he didn’t own so this is no surprise
Hey, least we forget most of this was federal money from the farm bill, either through loans or whatever else they bleed the federal government out of. You guys want Congressman Thompson to bailout them out again?
The farm bill is being negotiated right now, where is Cindy ? Bennie’s got bigger fish to fry.
11:51 AM Farmers receive much more in federal welfare payments than the amount of their taxes
I practice Law and represent clients in lender liability cases - although nothing quite of this size and scope. I do think that the plaintiffs are going to get eaten alive on the motion to dismiss. Which is a pretty regular occurrence when you take shots like this at well-lawueted defendants, like financial institutions.
My two cents: aiding fraud probably fails, along with the rest of the pleated causes of action in the complaint. I am incredibly sympathetic to the farmers, and I would love for tort liability against Banks to be expanded in these type of situations, but it is going to take Don Barrett making some new law. I just do not see what duty UMB Bank owed to the farmers let alone how they violated that duty.
I mean, the bank should be expected to try to recoup as much of its losses as possible. Wouldn't every bank wait until they have collateral to cease before dropping the hammer?
The real issue here is all of the farmers who gave unsecured credit to this grain elevator without, well, any security. They should have performed some diligence on bonding or some sort of financial backstop for the grain elevator. Expensive lesson.
2:30 p.m.: Speaking of making up law, what elements of which cause of action were you thinking of when you wrote the following:
"[H]e has produced nothing to show that the bank actually did collude with the elevator for the bank's benefit."
Macy: I don't have an opinion on the other causes of action, but here's a pretty good definition of negligence:
"Negligence is doing what a reasonable, prudent person would not do, or failing to do what a reasonable, prudent person would do, under substantially similar circumstances.”
I'll be interested to learn if the bank followed accepted banking practices (or its own policies) in the way it handled Express Grain throughout 2021.
" it appears that there is another side to the story, that the bank learned that the financial statements submitted to support their ongoing loan renewals were bogus just as were the statements submitted to The Hat - which should be plenty good reason for the bank to call the loan."
You're assuming that. You don't know what set of statements the bank got nor if the bank had access to the true financial statements when extending the loans several times.
Let us look at UMB. The State of Mississippi does business with this bank daily!
The "P card" AKA Visa or Master Card is used to purchase items for state agencies. DFA needs to look into doing business with another bank. The Governor should direct DFA to issue a RFP. We don't need to do business with this bank!
Former Banker here- Was always taught, You never want to be the person that makes someone their "last Loan". You move them out of the bank with tight loan agreements and have "some other bank" make them their last loan.
Is there any negligence on the bank for not verifying that "assets"(farmers grain) they seized were free and clear of a lien? Not sure how this works, but if I go bankrupt, and I have a mortgage on my house or loan on my cars, those people who hold title are paid off first from the sale of proceeds. The bank had a lien against the operating business, but not grain that was free and clear from lien.
@12:31 - your statement is the next big battle unless the judge halts the bankruptcy proceedings for the Fraud investigation. If she rules against these farmers lenders liens, it changes the face of banks loaning money to farmers all over the US. If you can’t use the grain as the collateral anymore, you can’t farm.
My understanding is that the farmers are unsecured creditors with claims against the failed grain elevator only. In the example above, the mortgagee and the lender on the automobile are secured lenders.
My understanding is also that the farmers sold their crops to the grain elevator and transfered "title" in exchange for a promise of payment, or a check that bounced. What lean did the farmers have on these crops? The issue to me seems simple: the best analogy would be when a bank has sold off its mortgage paper on your house.
Farmers sell their crop to grain elevator. Grain elevator now owns the crop. However, bank has a secured interest on all assets of the grain elevator, including the crops. Farmers claims of non-payment against grain elevator only go against grain elevator.
Macy Hanson, are you involved in this case? If not, have you reviewed all of the transaction paper work? Or are you just advertising your services? Collusion between the banks and the grain elevator operator does give the case a new twist.
The grain is collateral for the farmers lenders. Those lenders have 1st lien to the grain. Example, first south farm credit lends farmer a 2.4 million operating loan, secured, UCC filed, with the grain as collateral. Who has first rights to the grain sale… first south or umb? First south. If they don’t agree that first south has the first perfect lien, then loaning money in the ag world as you know it is drastically different, and if the ruling is adverse to the farmer, it will be appealed and end up with the high courts.
An attorney literally asked this question:
"What lean did the farmers have on these crops?"
@5:00 I noticed that also. Lean vs lien.
Spelling aside, Macy is correct about the lien priorities.
Let he or she not affected by auto correct cast the first stone. @5:00, what is your counter argument - literally?
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