Protecting your assets
Compare the paperwork required for a simple visit to the doctor’s office to the pen pushing involved in contracting a few pens of cattle for six months with a custom feeder. The doctor may cost little more than $100. The other bill could be bumping several thousand dollars. Which normally has more documentation among the parties involved?
In 2020, the ag industry still operates in many ways similar to the way it always has – on a good word, a handshake and a whole lot of trust.
Most of the time it works out. But sometimes it doesn’t, and hindsight is 2020.
News headlines showcase the creativity with which bad apples can operate: Ponzi schemes, wire fraud, out-of-state sales, inflated cattle numbers, and selling and reselling fraudulent cattle. In today’s fast-paced business world full of complex and often virtual transactions, ag producers are to be admired for operating on old fashioned values – but yet, are advised to move toward more protection from bad situations.
Ariel Overstreet-Adkins is an attorney with Moulton-Bellingham, PC, based in Billings, Montana. Her focus includes agricultural, real estate and property law, and she says she is far too familiar with deals gone bad in the ag industry.
“By the time an issue gets to my office, it’s bad – usually a dispute about who owes who money. If that’s not fairly spelled out in a contract, there’s a lot to fight over,” Overstreet-Adkins says.
Her number one piece of advice is simply “get it in writing.”
“A lot of the litigation cases I see having to do with cattle deals are based on an oral agreement where the parties have different ideas of what the agreement actually entailed,” she says. “Even if you are dealing with people you do and want to trust, get it in writing. Memories waver and understanding can differ.”
Overstreet-Adkins says one of the more common scenarios she has seen involves ranchers turning their cattle out on someone else, and they come back in bad health. In these scenarios the outcome depends on proving what agreement was made between the parties. What did the people who were supposed to take care of the cows agree to do? What feed was agreed on? What about salt and minerals? How often were they supposed to check water? What happens in the case of calving, or bad weather?
“I get it, ranchers are frugal, but what could have been prevented by paying an attorney $1,000 to draft a contract now has become $50,000-$60,000 in pursuing litigation – those are some of the costs I’ve been seeing lately for relatively simple matters,” she says.
In situations where agreements involving livestock have gone bad, one tool possibly available is an agisters lien. This is a legal statute in most states where a person who has possession of and fed and cared for livestock may hold the animals as security for payment. Overstreet-Adkins says the two aspects of filing an agister’s lien are first that there was some form of contract – either written or oral, and second, the person owed money must still have possession of the animals.
Clay Lammers is the county sheriff in Garfield County, Mont., which covers large, rural agricultural spans. He says he doesn’t like to work on agister’s liens, but is currently in the process of dealing with one. In this situation, an out-of-state cattle owner brought his cattle to Montana to graze and failed to pay the fees. The process of enacting an agister’s lien involves getting a court order, having brand inspectors read Bangs’ and ear tags and brands, and posting a notice in the local paper. The process then becomes a sheriff’s sale of the cattle. Overstreet-Adkins says an agister’s lien “starts the clock, that someone owes you money. If they don’t pay you in a certain amount of time, there will be a sheriff’s sale to satisfy the bill.”
Lammers says he doesn’t see a lot of situations like this, but does know of a neighboring county with a similar situation and thinks the current ag economy might drive more. “I foresee more of this happening as feed bills become more expensive than what cattle are worth,” he says.
No matter the type of business agreement, Overstreet-Adkins says one key piece of advice is to always find out who you are doing business with.
“There are a lot of people advertising grazing or services on social media or online somehow. It’s really easy to be trusting, but find out what they are advertising, how much experience they have, and ask for references.
“You don’t want to take your most important services from people you don’t know their background.”
She says most state Extension services offer resources that provide information to help guide business transactions. But no matter how much homework you’ve done, involving a professional team is critical in protecting yourself from wishful hindsight and ugly headlines.