Agricultural Law NetLetter - Tuesday, October 7, 2014 - Issue 309

HIGHLIGHTS

A Justice of the Alberta Court of Queen's Bench has held that a farmer who received a loan on the security of a flock of sheep was in partnership with a divorcee who he was living with, and who later claimed that the sheep were hers, not the farmer's. The Court concluded that an objective review of the facts must be conducted to determine whether the parties had the intention of carrying on business in common as partners, and that the divorcee's denial of common intent was not determinative. The Court concluded that the loan application (which was witnessed by the divorcee) was made by the partnership even though it was only signed by the farmer, and that the loan documents and the security agreement signed by the farmer as the divorcee's agent. [Editor's Note: Undocumented partnerships are common in the rural landscape. Ownership issues with respect to livestock on family farms are complicated. Lenders can avoid risks like this by, among other things, requiring all farming participants to sign loan and security documents.]. (Agricultural Financial Services Corp. v. Felker, CALN/2014-032, [2014] A.J. No. 1084, Alberta Court of Queen's Bench)

NEW CASE LAW

Agricultural Financial Services Corp. v. Felker; CALN/2014-032, Full text: [2014] A.J. No. 1084; 2014 ABQB 587, Alberta Court of Queen's Bench, J.S. Little J., September 22, 2014.

Partnerships -- Subjective Evidence of Intention to Carry on Business in Common -- Agricultural Loans and the Ownerships of Livestock Collateral.

The Plaintiff, Agricultural Financial Services Corporation ("AFSC") applied for summary judgment against the Defendants, Berry Lee Felker ("Felker") and Kathleen Erikson ("Erikson") for the balance owing on a loan made by AFSC to Felker.

AFSC made the loan to Felker in 2007. Felker granted AFSC a security interest over a flock of sheep including replacements and progeny.

AFSC alleged that Felker and Erikson were partners when the loan was granted and that Felker therefore acted as agent for Erikson.

The loan went into default and Felker and Erikson moved their ranching operation to Saskatchewan. They registered a partnership in Saskatchewan in 2009. They later split up both on a business and a personal level.

Felker sold a portion of the flock of sheep at an auction sale in Alberta in 2011.

AFSC sought an Order for the proceeds from the auction sale. The proceeds from the sale of the auction were held in a solicitor's trust account and were subject to several...