Cargill and Warren Grain & Seed Co. were sued by 86 farmers for losses incurred due to Warren's default on grain sale contracts. Cargill approved financing for Warren and entered into a security agreement with them, which included provisions for working capital and drafts drawn on Cargill. Despite expressing concern about Warren's increased use of funds, Cargill executed new security agreements, increasing the credit line. After an audit, Warren was found to be $4 million in debt. Cargill refused Warren's request for additional financing after discovering that Warren's financial statements had been deliberately falsified. The court found that Cargill's control and influence over Warren made it a principal with responsibility for Warren's acts as its agent. Warren acted on Cargill's behalf by procuring grain for Cargill as part of its normal operations, which were fully financed by Cargill. Cargill had significant control over Warren, and the lower court was correct in recognizing Cargill's role as a principal.
A. Gay Jenson Farms Co. v. Cargill, Inc. (1981)
Minnesota Supreme Court
309 N.W.2d 285
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