Opinion ID: 1745684
Heading Depth: 1
Heading Rank: 2

Heading: the bank's dealings

Text: When DGB determined to solicit the Holmes & Barrier business in 1981, Stan Pratt and Stan Herren, DGB loan officers, made several trips to Yazoo City to find out about Holmes & Barrier's business operations. There is no dispute that at these initial meetings Jerry Barrier and the Holmes & Barrier personnel told DGB about the joint venture with Barnwell & Hays and how it operated. Pratt summarized this information in a report included with the loan application filed with DGB: In addition, Barrier has a joint venture with Barnwell & Hays, a Memphis merchant, whereby Barrier buys the cotton and ships it, and Barnwell & Hays sells the cotton, hedges the position with futures, finances the purchase and collects the receivables. Barrier shares 50% of the profits. The joint venture presently has contracts to sell 14,800 bales, which are handled on a gin direct basis (gin to mill). Herren learned the same things in 1981 about the joint venture. He knew the amount of cotton the joint venture was buying in 1982 from the Sartartia Gin. He also knew that Barnwell and Hays in Memphis financed the purchase of this gin direct cotton, knew Barnwell and Hays provided funds to pay for the gin direct cotton, knew that from time to time Barnwell and Hays wire transferred funds from Memphis to the Barriers' account in Yazoo City, and he knew that the Barriers actually issued the checks to the gin direct farmers from its account in Yazoo City. Jerry Barrier testified as to what he told the bank during loan negotiations: Q. Did you tell Deposit Guaranty National Bank about Barnwell and Hays? A. Yes. The gin direct was described, that we did business with Barnwell and Hays, that we were a joint venture with them, that we did the buying of the cotton down here and they did the selling up there; we did the invoicing for the farmer here, we fixed the price for cotton when they wanted to call their price, and Barnwell and Hays [sic] responsibility was to provide the trucking and to collect for the cotton. Q. Collect what? A. Well, most important, to make the sales and then collect the proceeds for the cotton and to send that back down to us so that we could pay the farmer. That pretty much was the way the responsibilities of the gin direct was described. Ernest Thomas, the Barriers' office manager, testified that though he could not remember the conversation verbatim, the wire transfers almost certainly were discussed during the meeting with DGB, and the bank officers were informed that the farmers would be paid by the Barriers by check. In conventional buying when the Barriers bought cotton, ownership was evidenced by compress receipts on each bale of cotton in which DGB was given a security interest by a security agreement executed by the Barriers. Also, DGB was to be given physical possession of the receipts. The Barriers' loan was backed by these compress receipts. DGB extended the Barriers a $15 million line of credit, and on September 18, 1981, the barriers executed a $15 million master note to DGB and security agreements to secure this indebtedness to the bank. The security agreement specifically gave DGB the right to appropriate and apply to any indebtedness secured hereby, whether or not then due, any monies now or thereafter held by Bank on deposit or otherwise to the credit or belonging to the debtor. ... This same arrangement between DGB and the Barriers extended into 1982, except the line of credit was reduced from $15 million to $10 million.