## Facts

- Eugene and Louise Wuchter operated a dairy farm with a large herd; their adult son, Eric Wuchter, worked in the operation for a monthly salary.
- Eric separately owned certain dairy cows that were kept with the larger herd on the family farm.
- Eric financed his cow purchases through a separate lender and granted that lender a purchase-money security interest in his cows.
- Eric’s cows were registered Holsteins in his name with a breed association; Eugene and Louise had not registered their cows for several years, and registered cattle were materially more valuable.
- Eugene and Louise borrowed a substantial sum from Thorp Credit, Inc. and signed a security agreement granting Thorp a security interest in their livestock, including after-acquired livestock.
- After default, Thorp filed a replevin action seeking possession of all cows on the farm; the action was delayed by Eugene and Louise’s bankruptcy automatic stay.
- When Thorp renewed repossession efforts, Eric intervened, asserting ownership of his registered cows and seeking to exclude them from Thorp’s collateral.
- Thorp argued that Eugene had authority to encumber Eric’s cows based on agency and, alternatively, that Eugene and Eric operated as partners so the security agreement bound Eric’s cows.

## Issues

1. Whether a security interest granted by Eugene and Louise in “their livestock,” including after-acquired livestock, attached to cows owned by Eric but kept on the family farm.
2. Whether Eugene could bind Eric’s cows to Thorp’s security interest under theories of agency (actual or apparent authority) or partnership.

## Decision

- The Iowa Court of Appeals affirmed the district court.
- The court held Eric owned the disputed cows and they were not subject to Thorp’s security interest.
- The court held Thorp failed to prove Eugene had actual or apparent authority to encumber Eric’s cows.
- The court held the evidence did not establish a partnership between Eugene and Eric that would permit Eugene to encumber Eric’s property as partnership property.

## Legal Principles

- Under UCC Article 9, a security interest attaches only to collateral in which the debtor has rights; a debtor cannot grant a security interest in property owned by a third party.
- An after-acquired property clause reaches only after-acquired property of the debtor, not property acquired or owned by nondebtors.
- Agency to encumber another’s property requires proof of actual authority or apparent authority created by the principal’s conduct; possession or commingling of goods on a family farm is insufficient by itself.
- A partnership requires evidence such as intent to form a partnership, joint control, and sharing of profits and losses; family relationship and paid labor on a family enterprise do not alone establish partnership status.

## Conclusion

The court enforced the limits of Article 9 attachment by refusing to extend a lender’s security interest in the parents’ livestock to the son’s separately owned registered cows, and it rejected agency and partnership theories unsupported by evidence of authority or a true partnership relationship.


Thorp Credit, Inc. v. Wuchter, 412 N.W.2d 641 (Iowa Ct. App. 1987)