Bremer Bank, National Association v. Border Bank

Background

Plaintiff Bremer Bank, National Association, holds promissory notes — written loan agreements — from non-parties Douglas and Jessica Clark, who borrowed money from Bremer Bank to support their farming operations. The Clarks pledged their farming assets (equipment, crops, machinery, vehicles, government payments, and livestock) as collateral — meaning Bremer Bank could claim those assets if the Clarks defaulted. Bremer Bank's security interest was perfected (legally established and recorded) through UCC-1 financing statements, which are public records establishing a creditor's priority claim over collateral.

Defendant Border Bank also held promissory notes from the Clarks and had a junior lien on the same collateral — meaning Border Bank's claim ranked below Bremer Bank's in priority. Bremer Bank alleges that since 2021, the Clarks paid proceeds from the sale of their 2022 and 2023 crops to Border Bank rather than to Bremer Bank, in order to reduce what the Clarks owed Border Bank. Bremer Bank further alleges that Border Bank retained those proceeds despite knowing of Bremer Bank's superior security interest, and that Bremer Bank had sent demand letters to Border Bank in March 2024 and February 2025 asserting its rights.

Bremer Bank filed suit in Minnesota state court in March 2025. Border Bank removed the case to federal court in April 2025. The Complaint asserts four counts: (1) declaratory judgment that Bremer Bank's lien is valid, perfected, and superior; (2) conversion; (3) civil theft under Minn. Stat. § 604.14; and (4) receipt of stolen property under Minn. Stat. § 609.53. Bremer Bank seeks damages for the value of the collateral, punitive damages, attorneys' fees, and costs.

Legal Standard

Border Bank moved to dismiss Counts 2, 3, and 4 under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint fails to state a claim upon which relief can be granted. Under the controlling standard from Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the complaint must plead sufficient factual matter to make the claim plausible on its face. The court accepts all factual allegations as true and draws all reasonable inferences in favor of the plaintiff, but does not credit legal conclusions dressed up as facts.

Count 2 — Conversion (Denied)

Conversion under Minnesota law requires: (1) a property interest in the plaintiff; and (2) deprivation of that interest by the defendant. Border Bank's argument focused on the first element — it contended that Bremer Bank failed to allege a tangible property interest.

The general rule in Minnesota is that money, as an intangible asset, cannot be the subject of a conversion claim. However, an exception applies when the money is "specific and capable of identification" or when a party can show "ownership or the right to possess specific, identifiable money." The court also noted that conversion can apply to documents in which intangible rights are merged, such as promissory notes and checks.

The court found that the crop sale proceeds were distinguishable from cases involving undefined overpayments or generic funds. Bremer Bank's property interest arose from documented security agreements covering the Clarks' crops specifically, and the proceeds of the crop sales are specific and identifiable. The court further observed that discovery might reveal that the proceeds existed in tangible form (e.g., checks), and might clarify what Border Bank did with the collateral. Citing Wangen v. Swanson Meats, Inc., 541 N.W.2d 1 (Minn. Ct. App. 1995) — which affirmed a creditor's conversion claim where a debtor used collateral proceeds to pay a secondary lender — the court found the conversion claim adequately pled.

Result: Defendant's motion to dismiss Count 2 is denied.

Count 3 — Civil Theft, Minn. Stat. § 604.14 (Dismissed with Prejudice)

Minnesota's civil theft statute, Minn. Stat. § 604.14, provides that a person who "steals" personal property is civilly liable for its value plus punitive damages. The critical requirement is an initial wrongful act of stealing. Minnesota courts define "steal" to mean wrongfully and surreptitiously taking another's property for the purpose of keeping or using it — incorporating a requirement that possession was obtained improperly at the outset.

The court found that Bremer Bank's allegations did not meet this standard. Border Bank did not surreptitiously seize the proceeds; rather, the Clarks voluntarily paid Border Bank pursuant to the Clarks' own promissory notes with Border Bank. The fact that Border Bank may have known about Bremer Bank's superior lien does not transform the transaction into stealing under Minnesota law. Courts have generally permitted civil theft claims to proceed only where there was an element of fraud or wrongful taking at the time property was initially obtained — circumstances not present here.

The court also found that amendment would be futile, citing Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010), because the undisputed facts — that Border Bank received the proceeds pursuant to its own promissory notes with the Clarks — cannot be amended away.

Result: Count 3 is dismissed with prejudice.

Count 4 — Receipt of Stolen Property, Minn. Stat. § 609.53 (Dismissed with Prejudice)

Minn. Stat. § 609.53 is a criminal statute that penalizes receiving, possessing, transferring, buying, or concealing stolen property. Subdivision 4 provides a civil remedy for anyone injured by a violation of subdivision 1. Border Bank argued that civil liability under this statute requires a prior criminal complaint, conviction, or guilty plea, relying on OnePoint Solutions, LLC v. Borchert, 486 F.3d 342 (8th Cir. 2007). Bremer Bank countered with Markle v. Metro Metals Corp., 2016 WL 4497278 (Minn. Ct. App. 2016), which held that no criminal conviction is required.

The court declined to resolve this conflict in authority because it was unnecessary. Regardless of whether a conviction is required, the complaint fails on a more fundamental ground: the facts do not plausibly describe "stolen" property or property obtained by "robbery." This dispute involves two creditors with competing security interests in the same collateral — a commercial lien-priority dispute, not a theft scenario. The court also noted that Markle was factually distinguishable (it involved a scrapyard that demolished vehicles purchased from thieves without any title verification), and that Border Bank had not stipulated, as the defendant in Markle had, that Bremer Bank owned the collateral.

Again, amendment would be futile because the factual deficiency cannot be cured.

Result: Count 4 is dismissed with prejudice.

Disposition

Border Bank's Motion for Partial Dismissal is granted in part and denied in part. Counts 3 and 4 are dismissed with prejudice. Count 2 (conversion) and Count 1 (declaratory judgment) survive. Border Bank has 14 days from the date of the order to answer or otherwise respond to the remaining counts.