author: MEIERHENRY, Justice (on reassignment). JOHNS, Circuit Judge

text:
    2004 SD 40
    AMERICAN BANK & TRUST, A South Dakota banking corporation, Plaintiffs and Appellees, and South Dakota Wheat Growers Association, Plaintiffs, v. Nathan SHAULL and Deborah Shaull, d/b/a Highmore Auction Sales, Defendants, and Fin-Ag, Inc., Defendant and Appellee, and AgStar Financial Services, PCA and Feldman Brothers, Defendants and Appellants.
    No. 22627.
    Supreme Court of South Dakota.
    Argued Aug. 27, 2003.
    Reassigned Feb. 4, 2004.
    Decided March 31, 2004.

      Brent A. Wilbur of May, Adam, Gerdes & Thompson, Pierre, SD, for plaintiffs and appellees American Bank & Trust.
    Robert M. Nash of Wilson, Olson & Nash, Rapid City, SD, for defendant and appellee Fin-Ag, Inc.
    Roger W. Damgaard and Susan M. Sabers of Woods, Fuller, Shultz & Smith, Sioux Falls, SD, Gary W. Koch and Dustan J. Cross of Gislason & Hunter, New Ulm, MN, for defendants and appellants.
   MEIERHENRY, Justice (on reassignment).

[¶ 1.] This is a claim and delivery action brought by American Bank and Trust (American) involving 910 cows which were being held by a receiver. American originally brought this action against Nathan and Deborah Shaull d/b/a Highmore Auction Sales and Fin-Ag. American’s complaint contained three counts: (1) an action on the indebtedness, (2) claim and delivery/injunctive relief, and (3) deceit. AgS-tar Financial Services, PCA, Feldman Brothers [Feldman] (party defendants) and the South Dakota Wheat Growers Association (party plaintiff) intervened.

[¶ 2.] The issues before this Court center on priority of the claims to the cows among American, Fin-Ag, Feldman, and AgStar. American claims it has a valid perfected first security interest. Fin-Ag claims it has a valid perfected security interest subject to the perfected first security interest of American. Feldman claims ownership of the collateral giving him priority over American and Fin-Ag. AgStar claims an interest through a security agreement with Feldman. The bifurcated claim and delivery cause of action was tried to the court. The trial court entered a judgment declaring that American has a valid perfected first security interest to the collateral, that Fin-Ag has a valid perfected security interest subject to American’s interest, that any ownership claim of Feld-man or security interest of AgStar are subordinate and inferior to the perfected security interest of American and Fin-Ag. Feldman and AgStar appeal. We affirm. The issues on appeal are as follows:

I. WHETHER SHAULL HAD SUFFICIENT RIGHTS IN THE COLLATERAL TO SUPPORT THE ATTACHMENT OF AMERICAN’S AND FIN-AG’S SECURITY INTERESTS TO ENTITLE AMERICAN TO IMMEDIATE CLAIM AND DELIVERY.
II. WHETHER AMERICAN AND FIN-AG OR FELDMAN BROTHERS ARE ESTOPPED FROM ASSERTING A SECURITY INTEREST IN THE COLLATERAL.
III.WHETHER THE COWS AND CALVES ARE INVENTORY OR FARM PRODUCTS.

Background and Facts

[¶ 3.] The core of this case centers on the demise of Nathan Shaull’s livestock operations in the spring of 2002. Shaull owned and operated the Livestock Auction in Highmore, South Dakota; he bought and sold cattle through the sale barn and additionally acted as a cattle broker, buying and selling cattle as H.S. Cattle. American had financed Shaull. The financing consisted of a promissory note for $750,000 revolving line of credit dated September 27, 1999 and a second note for $498,413.50 for “breeding livestock” and refinancing of debt on June 8, 2001. The amount due to American on the revolving line of credit was over $750,000 and the amount due on the livestock loan was $325,461. In conjunction with both loans, Shaull executed a security agreement granting to American a security interest in all livestock owned or later acquired and additionally on the second loan, a security interest in all inventory and farm products, owned or thereafter owned by Shaull. American filed financing statements in the office of the South Dakota Secretary of State (Secretary) which covered the livestock and specifically as to the second transaction covered “all cows and 2001 future offspring, all increase, issue offspring, products and products from the livestock” and included the proceeds from the collateral.

[¶ 4.] Prior to American’s financing, Shaull had financed his operation with Fin-Ag who had filed a financing statement with the Secretary in June of 1997 and July of 1998. When Shaull refinanced with American, Fin-Ag subordinated its security interest in the cows and calves by a Subordination Agreement and Assignment of Security Interest in June of 2001 which was formalized with the filing of UCC-3 with the Secretary. Fin-Ag claims that approximately 4,500 head of cattle which it financed were missing and that Shaull owes Fin-Ag over two million dollars. Fin-Ag last inventoried Shaull’s herd in May of 2001 approximately one month before American inspected Shaull’s cattle for refinancing.

[¶ 5.] The Feldman brothers operated a farming and cattle feeding business in Minnesota. Feldman entered into an agreement with Shaull on November 30, 2000 wherein Feldman placed cows with Shaull for feeding and care. Pursuant to the agreement, Feldman purchased 1,536 cows between November 28, 2000 and December 15, 2001 which were placed with Shaull, 915 of which should have been in Shaull’s possession at the time American did its refinancing inspection in June of 2001. AgStar had a Security Agreement with Feldman wherein it acquired a security interest in all the livestock owned or later acquired by Feldman. AgStar had not filed a financing statement in South Dakota.

American’s Inspection of the Collateral

[¶ 6.] On June 5, 2001, Shaull took two officers of American to inspect his cattle at three locations around Highmore and Miller, South Dakota. One location was owned by Shaull, the other two were rented. Because of the rough terrain, it was difficult to get an exact count of the herd; however, the group counted about 1,000 cows. Shaull ultimately set the number at 900 for purposes of collateral because he intended to cull some of the herd. Some of the cows were branded, some had ear tags, and some may not have had any identifying tag or brand. Shaull maintained that he owned these cattle. If so, they would have been the same cattle previously financed by Fin-Ag. In Shaull’s dealings with Fin-Ag, Fin-Ag had required Shaull to brand or ear tag his cattle with Fin-Ag’s identification. American’s inspection, although noting that some of the cattle were marked, did not specifically identify the brands or ear tags.

[¶ 7.] In addition to Shaull’s representation to the bank that he owned the cows, American reviewed Shaull’s financial statement and last tax return with the depreciation schedule for the cows. American further spoke with Fin-Ag who had financed the herd previously. No other verification of ownership was done by American prior to the loan approval. American knew that Shaull bought and sold cattle through his sale barn; however, it did not know of the agreement Shaull had with Feldman or that Shaull brokered cattle through H.S. Cattle.

Identifying the 910 Cows Remaining

[¶ 8.] Around the middle of April, 2002, when Shaull’s financial troubles became apparent, the South Dakota State Brand Board instigated an investigation of the remaining cows. All of the remaining cows were gathered in an effort to identify them. A total of 910 cows were counted. Of the total, 82 cows had Fin-Ag identifying ear tags; 571 can be traced to cows purchased by Feldman.

Basis of Feldman’s Claim to the Remaining Cows Held by the Receiver

[¶ 9.] Feldman claims that American and Fin-Ag’s security interests cannot attach to the cows that he purchased and placed with Shaull under the Bred Cow Agreement. Feldman and AgStar claim that the Agreement established a bailment not requiring them to file a UCC-1 to protect their interests. American argues that had Feldman and AgStar filed financing statements, the bank would have been put on notice of their interest in the collateral.

Whether the Trial Court Erred in its Findings of Facts or Conclusions of Law

[¶ 10.] This was a two-day trial to the court. At the end of the evidence, the trial court announced its decision in favor of American and directed counsel for American to propose Findings of Fact and Conclusions of Law for the court’s signature. The trial court’s Conclusions of Law 7 and 8 form the basis of the decision against Feldman and AgStar:

7. By their failure to file UCC-1 financing statements and by allowing Shaull to appear to be the actual owner of the cow herd, Feldman and AgStar are estopped from asserting that Shaull, as the apparent owner, did not have rights in the cow herd.
8. The cows and calves which are the subject of this action are farm products and not inventory.

Standard of Review

[¶ 11.] Our standard of review is well established:

We review the circuit court’s findings of fact under the clearly erroneous standard. Under this standard, we will only reverse when we “are left with a definite and firm conviction that a mistake has been made” after a thorough review of the evidence. We review conclusions of law under the de novo standard without deference to the circuit court.

In re Estate of Watson, 2003 SD 142, ¶ 9, 673 N.W.2d 60, 62 (internal citations omitted).

In applying the clearly erroneous standard, our function is not to decide factual issues de novo. The question is not whether this court would have made the same findings that the trial court did, but whether on the entire evidence we are left with a definite and firm conviction that a mistake has been committed. This court is not free to disturb the lower court’s findings unless it is satisfied that they are contrary to a clear preponderance of the evidence. Doubts about whether the evidence supports the court’s findings of fact are to be resolved in favor of the successful party’s “version of the evidence and of all inferences fairly deducible therefrom which are favorable to the courts action.”

Maryhouse, Inc. v. Hamilton, 473 N.W.2d 472, 474 (S.D.1991) (internal and further citations omitted).

[¶ 12.] Feldman claims that American and/or Fin-Ag cannot have a superior interest in the collateral because of Feldman’s ownership interest which is detailed in the Bred Cow Agreement between Feldman and Shaull. Feldman provided evidence that he had purchased 1,536 cattle from November 28, 2000 to December 15, 2001 to be cared for by Shaull as part of the agreement, 1,407 of which he purchased from Shaull (as H.S. Cattle). Fin-Ag claims that the cows held by the receivership were the same cows that Fin-Ag had previously owned and sold to Feldman and were the same cows Fin-Ag had identified and inventoried on May 22, 2001. Feldman claims that American’s own negligence caused its loss and that both American and Fin-Ag should be estopped from claiming a security interest in the collateral. Feldman points to American’s failure to ascertain the ownership of the cattle prior to extending credit to Shaull, its lack of any inspection subsequent to loaning Shaull money, and its failure to follow its own internal policy in monitoring the custodial account.

[¶ 13.] The trial court found that American “had neither actual nor constructive knowledge of any claim of ownership by Feldman or any security interest claimed by AgStar”. FF 26. The court further determined that, “[p]rior to making the June, 2001 loan to Shaull, American took all steps reasonably necessary to determine that its perfected security interest would attach to the cow herd.” FF 28. When reviewing findings of the trial court, this Court should not substitute its judgment. As we have said, “[t]his court is not free to disturb the lower court’s findings unless it is satisfied that they are contrary to a clear preponderance of the evidence.” Maryhouse, 473 N.W.2d at 474. A thorough review of the evidence supports the court’s findings and conclusions. The bank inspected the cows Shaull claimed were his, reviewed his financial statement and tax return and did a record search for UCC filings. The evidence further indicates that neither American nor others who dealt with Shaull knew of Feldman’s ownership of the cows, except for one of Shaull’s employees who worked with the cattle. Shaull did not indicate to the landowners from whom he rented the pasture that the cows were owned by someone else and he certainly did not tell American that Feldman owned the cattle.

[¶ 14.] The trial court further found that 625 of the cows that were inspected by American in June of 2001 were part of a lease purchase agreement between Shaull and Ron Jennings, a farmer near Miller, South Dakota. The court found that the Jennings’ “cows were in Shaull’s possession, control and apparent ownership at the time American inspected the cow herd in June, 2001 and were represented by Shaull as being owned by him.” The Jennings’ cows were later sold to Feldman in December of 2001.

[¶ 15.] The trial court was not clearly erroneous in finding that all the cows inspected by American in June of 2001 were the same cows held by the receiver. In fact, Shaull’s employee testified that was the case. The trial court did not base its decision on the actual ownership of the cows and whether a bailment existed but on the apparent ownership of the cows under an estoppel theory.

[¶ 16.] We have previously stated that control rather than ownership of collateral determines a debtor’s rights to collateral. First Nat. Bank of Omaha v. Pleasant Hollow Farm, Inc., 532 N.W.2d 60, 63 (S.D.1995). We said in Pleasant View Farms, Inc. v. Ness, 455 N.W.2d 602 (S.D.1990):

If the owner of collateral allows another to appear as the owner or to dispose of the collateral, such that a third party is led into dealing with the apparent owner as though he were the actual owner, then the owner will be estopped from asserting that the apparent owner did not have rights in the collateral.

Id. at 604 (citing In re Pubs, Inc., 618 F.2d 432 (7thCir.l980)).

[¶ 17.] The trial court found that AgS-tar was aware that Feldman placed cows with Shaull and that a UCC-1 financing statement needed to be filed in South Dakota to protect its interest. As early as 1999, AgStar had requested Feldman to provide Shaull’s name, address and social security number, which Feldman did. However, neither AgStar nor Feldman filed a financing statement. The trial court determined that had they done so, American would have been put on notice of their claims prior to making the loan to Shaull in 2001. Although Feldman as the bailor could have filed a financing statement, he was not obligated to under the Uniform Commercial Code. SDCL 57A-9-505.

[¶ 18.] Finally, Feldman claims that the trial court erroneously determined that the cows were farm products and not inventory. Although Shaull invoked his right to remain silent under the Fifth Amendment rather than answer many of the questions put to him by the attorneys, he did admit that the cows he sold as H.S. Cattle were part of his farming operation, not the sale barn, thus making them farm products and not inventory. The trial court based this finding upon the testimony and evidence presented at trial. Although there may have been evidence to the contrary, “[djoubts about whether the evidence supports the court’s findings of fact are to be resolved in favor of the successful party’s ‘version of the evidence and of all inferences fairly deducible therefrom which are favorable to the court’s action.’ ” Maryhouse, 473 N.W.2d at 474.

[¶ 19.] The question presented to the trial court was to determine the priority of claims. The question presented to this Court was whether Feldman’s ownership of the cows gave Feldman and AgStar priority over American and Fin-Ag. The trial court determined based on the evidence, that Feldman and AgStar were es-topped from claiming that Shaull did not have sufficient rights in the cows for a security interest to attach. Based upon the record, we cannot say that the trial court was clearly erroneous. The trial court is affirmed on all issues.

[¶ 20.] GILBERTSON, Chief Justice, and KONENKAMP, Justice, and TRIMBLE, Circuit Court Judge, sitting by Order of the Court, concur.

[¶ 21.] JOHNS, Circuit Court Judge, dissents.

[¶ 22.] JOHNS, Circuit Court Judge, sitting for SABERS, Justice, disqualified.

[¶ 23.] TRIMBLE, Circuit Court Judge, sitting for ZINTER, Justice, disqualified.

JOHNS, Circuit Judge

(dissenting).

[¶ 24.] This is an appeal from a judgment entered by the circuit court for claim and delivery of a herd of cattle and for declaratory relief determining the rights of the parties to the herd. I would affirm in part, reverse in part, and remand.

[¶ 25.] At the outset, some further development of the facts is useful to our inquiry in this case. This action was brought by American Bank and Trust (American), a South Dakota state chartered bank, against Nathan and Deborah Shaull, d/b/a Highmore Auction Sales, and Fin-Ag, Inc. (Fin-Ag). The South Dakota Wheat Growers Association intervened as a party plaintiff and AgStar Financial Services, PCA (AgStar) and Feldman Brothers (Feldman) intervened as party defendants.

[¶ 26.] American is a South Dakota banking corporation with its principal place of business in Huron, South Dakota. Fin-Ag is a South Dakota Corporation and subsidiary of Cenex Harvest States, a Minnesota based cooperative. AgStar is a financial institution organized and doing business under the laws of the United States with its principal place of business in Minnesota. Feldman is a Minnesota partnership whose principals are William Feldman and Peter Feldman.

[¶27.] Shaull was the owner of High-more Auction Sales, a sale barn in High-more, South Dakota. In addition, he conducted a cattle order brokering business under the name of H.S. Cattle and also had a cattle operation in which he ran his own cattle as well as those of Feldman. The genesis of this action was Shaull’s refusal to account for several hundred head of cattle missing from the cattle operation and his repeated invocation of his right to remain silent about the cattle.

[¶ 28.] The trial court held that Nathan Shaull (Shaull) had an interest in the cattle at issue and that the security interests he gave to American and Fin-Ag attached to his interest. The trial court also held that since Feldman and AgStar failed to file UCC-1 financing statements on the cattle and allowed Shaull to appear as the actual owner and to borrow money against them from American, Feldman and AgStar were estopped from claiming any interest in the cattle against American and Fin-Ag.

[¶ 29.] Feldman and AgStar appeal. The South Dakota Cattlemen’s Association, Minnesota State Cattlemen’s Association, Iowa Cattlemen’s Association and the National Cattleman’s Beef Association have joined in filing an amicus curiae brief.

[¶ 30.] American, Fin-Ag and AgStar each claim a security interest in the 910 cattle that are the subject matter of this action. American and AgStar each claim a first priority interest. Feldman claims an interest subject only to AgStar’s security interest. Fin-Ag claims an interest subject only to American’s interest.

American’s Interest

[¶ 31.] Shaull obtained financing from American in the form of a revolving line of credit for $750,000 to cover any overdrafts in connection with the sale barn. Subsequently, he obtained an additional $498,413 to refinance a herd of brood cows previously financed by Fin-Ag. To date $750,000 remains due and owing on the line of credit and $325,461 on the refinanced herd.

[¶ 32.] In connection with the line of credit, Shaull executed a security agreement on September 27, 1999 granting American a security interest in all of his owned or after-acquired livestock. On October 19, 1999, American filed a financing statement in the office of the Secretary of State of South Dakota covering owned or after-acquired livestock.

[¶ 33.] In connection with the refinancing of the herd, Shaull executed a security agreement on June 8, 2001 granting American a security interest in all inventory and farm products owned or thereafter owned by Shaull. On June 13, 2001, American filed a financing statement in the office of the Secretary of State of South Dakota that covered all cows as well as all offspring, all products from the livestock and all proceeds.

Fin-Ag’s Interest

[¶ 34.] Shaull’s relationship with Fin-Ag began with his participation in Fin-Ag’s value added program. As part of the program, Fin-Ag placed a herd of cattle with Shaull for care and feeding. Fin-Ag later converted the value added program into two loans to Shaull. Fin-Ag took perfected security interests in the cattle in June 1997 and July 1998.

[¶ 35.] Sometime in 2001, Shaull approached Fin-Ag about expanding the cattle operation to include feeder cattle. Fin-Ag did not want to loan Shaull any additional money but did agree that, if he refinanced the brood cows with American, he could use the loan proceeds to buy the feeder cattle. Thus, in June 2001, Fin-Ag subordinated its perfected security interest in Shaull’s breeder cattle to American.

AgStar’s Interest

[¶ 36.] AgStar’s interest is contingent upon Feldman’s interest. AgStar is Feld-man’s lender and holds a security agreement in all livestock owned or later acquired by Feldman.

Feldman’s Interest

[¶ 37.] Feldman’s claim is grounded upon its ownership interest in the cattle it placed with Shaull for feeding and care pursuant to a bred cow agreement dated November 30, 2000.

[¶ 38.] Feldman placed cattle with Shaull on a number of occasions:

• November 28, 2000: 122 bred cows purchased by Feldman from H.S. Cattle.
• December 7, 2000: 290 bred cows purchased by Feldman from Haas Livestock and delivered to Shaull.
• December 6-7, 2000: 38 bred cows delivered to Shaull by Feldman from them feedlot in Prior Lake, Minnesota.
• December 6-7, 2000: 91 bred cows purchased by Feldman from Haas Livestock which were delivered to Shaull from St. Onge, South Dakota.
• March 15, 2001: 370 bred cows purchased by Feldman from H.S. Cattle which included approximately 150 head of bred cows Shaull had contemporaneously purchased from Sampson’s, approximately 190 cows Shaull had contemporaneously purchased from Ogle Brothers and approximately 36 head of bred cows Shaull contemporaneously purchased from Greg Clement.
• December 15, 2001: 625 bred cows Feldman purchased from H.S. Cattle which were the Jennings cattle.

[¶ 39.] The bred cow agreement was entered into by the parties on November 30, 2000 and was to cover a period of two years. According to the agreement, Feld-man was to place 500 to 1300 bred cows with Shaull. Shaull would be paid by Feldman for the cost of feedlot feed and the cost to rent pasturage which costs were preset in the agreement. Feldman would be paid eleven percent interest on the cost of the cattle and feed. After the first year of the contract, Shaull was to provide bulls to impregnate the herd. Calves were to be sold by November 1, 2001 and November 1, 2002.

[¶ 40.] The agreement also provided that:

On or before December 1, 2001 and December 1, 2002, cows will be pregnancy checked, opens will be sold. We have the option on the pregnant cows to either sell them or keep them or add to them until next year.

Finally, the agreement provided that the parties were to split the profits or losses equally on the date of final settlement which was to be on or before December 15, 2002.

[¶ 41.] With this factual background, ■the issues presented in this case can be stated as follows:

Whether the trial court erred when it concluded that Shaull had rights in the cow herd and all calves born from that herd sufficient to allow American and Fin-Ag’s security interests to attach to the animals.
Whether the trial court erred when it concluded that Feldman and AgStar were estopped from making any claim that their interests in the animals were first and superior to those of American and Fin-Ag.
Whether the trial court erred when it concluded the cattle were farm products rather than inventory.

STANDARDS OF REVIEW

[¶ 42.] A trial court’s findings of fact are reviewed under the clearly erroneous standard. A.P. & Sons Const. v. Johnson, 2003 SD 13, ¶ 9, 657 N.W.2d 292, 294. A finding is clearly erroneous if, after reviewing the entire evidence, we are left with a definite and firm conviction that a mistake has been made. Id. The conclusions of law of the trial court are reviewed under the de novo standard. Id. Under the de novo standard we do not give deference to the trial court’s conclusions. Id.

ANALYSIS

ISSUE ONE

[¶ 43.] Whether the trial court erred when it concluded that Shaull had rights in the cow herd and all calves born from that herd sufficient to allow American and Fin-Ag’s security interests to attach to the animals.

[¶ 44.] In Continental Grain Co. v. Brandenburg, 1998 SD 118, ¶ 16, 587 N.W.2d 196, 200, this Court determined that:

SDCL 57A-9-203(l) provides three requirements that must be met before a security interest will attach and be enforceable against a debtor or third party:
(a) The collateral is in the possession of the secured party pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral ...; and
(b) Value has been given; and
(c) The debtor has rights in the collateral.
(emphasis original).

At issue here is whether Shaull had rights in the collateral sufficient for American and Fin-Ag’s security interests to attach and also the extent of such interests.

[¶ 45.] Although the phrase “rights in the collateral” is not defined in the Uniform Commercial Code (SDCL ch. 57A),

[The] language merely states a truism, namely, that the debtor normally can only convey something once it has something, and that something may be less than the full bundle of rights that one may hold in such property. The “rights in the collateral” language is a gateway through which one looks to other law to determine the extent of the debtor’s rights, and thus the interest the debtor can grant to a third party by way of a security interest.

4 James J. White Robert S. Summers, Uniform Commercial Code 31-6 (4th ed. 1995).

[¶ 46.] In looking to other law, we have used both legal and equitable concepts to determine the extent of a debtor’s rights in collateral. Continental Grain, 1998 SD 118 at ¶ 21, 587 N.W.2d at 202; SDCL 57A-1-103. One such concept is the doctrine of estoppel.

Although it is not always determinative on the issues of attachment and priority, the doctrine of estoppel may defeat competing claims when owners fail to protect themselves and allow others to retain control over collateral. SDCL 57A-1-103 permits legal and equitable concepts to supplement the provisions of the UCC.

Continental Grain, 1998 SD 118 at ¶ 21, 587 N.W.2d at 202. See also Pleasant View Farms, Inc., 455 N.W.2d at 604.

[¶ 47.] Feldman, AgStar and Amicus argue that the bred cow agreement created a voluntary bailment relationship and, therefore, Shaull obtained no rights in the collateral to which the security interests of American and Fin-Ag could attach. They cite Rohweder v. Aberdeen Production Credit Ass’n, 765 F.2d 109, 113 (8th Cir. 1985) for the proposition that, if parties intend to create a bailment with the owner retaining complete ownership of the cows and relinquishing only possession, the feeder does not have sufficient rights for attachment of a creditor’s lien. On the other hand, American and Fin-Ag cite us to a line of cases holding that a debtor acquires rights in collateral sufficient to estop the owner from claiming ownership against an innocent third party when the owner imbues the debtor with evidence of ownership and control and does not file a UCC-1 financing statement. In Proceedings for Dep. In Court of Monies, 417 N.W.2d 187, 188 (S.D.1987), we quoted with approval the following language from Brovm, 622 F.Supp. at 1049-1050:

Even if the plaintiff had established ownership of the cattle, the court is unconvinced that a third party’s ownership interest in collateral bears any substantial weight in determining a debtor’s “rights in collateral” for the purposes of attachment of a security interest. The official comment to § 9-202 states unequivocally that “[t]he rights and duties of parties to a security transaction and of third parties are stated in this Article without reference to the location of ‘title’ to the collateral.” Even if a party retains ownership interest in a piece of collateral, a debtor who retains that collateral is still able to mislead potential creditors by exercising his “rights” of possession and control over the collateral. It is the outward appearance of a debtor’s rights of ownership and control in the collateral that determines whether attachment of a security interest is effective and not the rights of a party who may have title to the collateral, (emphasis in original).

See also First Nat. Bank in Pierre, S.D. v. Feeney, 393 N.W.2d 458, 460 (S.D.1986).

[¶ 48.] The trial court concluded that “Shaull had rights in the cow herd and all calves born from that herd sufficient to allow a security interest to attach to the animals.” This conclusion was premised, in part, on the express terms of the bred cow agreement.

[¶ 49.] I agree with the trial court that, as a matter of law, Shaull did have an interest in the herd under the terms of the bred cow agreement. Reading the document as a whole, as we must, it is clear that, although Feldman was to buy the cows, both parties had rights in and to the calves and their proceeds. Feldman was obligated to pay Shaull fifty percent of the net proceeds from the sale of calves or to share equally in any loss resulting from such sale. Net proceeds were arrived at by deducting the fixed costs of feed and pasture per cow paid to Shaull, the variable veterinary costs and the eleven percent interest Feldman was to receive based on what it spent on the cost of the cows and the feedlot and pasture costs. Although some portions of this agreement suggest a bailment, it was much broader in scope. It created a joint venture relationship between the parties because each was to share equally in the profits or losses and because Shaull was obligated to provide the bulls to breed the cows after the first year. This agreement is also distinguishable from a bailment because it provided that Feldman was to receive an eleven percent return on its investment. This gave the agreement the complexion of a creditor/debtor relationship between Feld-man and Shaull.

[¶ 50.] Recognizing that the bred cow agreement expressly gave Shaull an interest in the calves sufficient for attachment of a security interest, the next question is whether Shaull also had a tangential interest in the cows. Since Shaull had an interest in the calf crop, it follows that he also had an equitable interest in each of the pregnant cows, albeit not a legal or ownership interest. However, ownership is not the critical factor as “[o]ur cases demonstrate that control over the collateral, rather than record ownership, is the key factor in determining a debtor’s rights in collateral.” First Nat. Bank, 532 N.W.2d at 63 (emphasis added).

[¶ 51.] The trial court never did assess the extent of Shaull’s interest in the cattle under the agreement since it also held that Feldman and AgStar were estopped from making any claim that their interests in the animals were first and superior to those of American. In light of my proposed disposition on issues two and three, I would remand to the trial court the question of the extent of Shaull’s interest under the agreement.

ISSUE TWO

[¶ 52.] Whether the trial court erred when it concluded that Feldman and AgStar were estopped from making any claim that their interests in the animals were first and superior to those of American and Fin-Ag.

[¶ 58.] As already stated, a person can acquire rights in collateral by one of two ways; by express agreement of the parties or by actions of the owner cloaking a bail-ee or another with indicia of ownership such that the equitable principle of estop-pel by negligence estops the true owner from making a claim. Estoppel by negligence is “[a]n estoppel arising when a negligent person induces someone to believe certain facts, and then the other person reasonably and detrimentally relies on that belief.” Black’s Law Dictionary 571 (7th ed. 1999). Estoppel by negligence must be distinguished from equitable es-toppel which requires an element of deception or gross negligence amounting to constructive fraud. See Kahler, Inc. v. Weiss, 539 N.W.2d 86, 91 (S.D.1995). Other than in secured transaction cases, we have recognized the concept of estoppel by negligence in the law of agency concerning the authority of an agent to act for a principal.

American’s $498,413.50 loan to Shaull

[¶ 54.] The trial court found that, by the terms of the bred cow agreement and the actions of the parties, Shaull had actual physical control and possession of the cattle. The court also found that the “cows were in Shaull’s possession, control and apparent ownership at the time [American] inspected the cow herd in June 2001 and were represented by Shaull as being owned by him.” While Feldman and AgStar dispute the finding of apparent ownership I am satisfied from the record that Feldman cloaked Shaull with sufficient indicia of ownership to mislead an innocent third party into believing that Shaull was the actual owner and was capable of granting a security interest in the cattle. Clearly Shaull had physical possession of the cattle, was responsible for leasing their pasture, decided if and when the cattle were to be moved and decided whether veterinarian work was to be done. Moreover, Shaull’s employees cared for the cattle and took their orders from Shaull. Finally, although Feldman would consult periodically with Shaull’s hired man, no other person associated with the care or keeping of the cattle in South Dakota had any idea that Feldman had any interest in the cattle.

[¶ 55.] The trial court found that, on or about June 8, 2001, American made a $498,413.50 loan to Shaull and that Shaull gave American a security interest in the cattle. The court also found that, at the time American took its security interest, it “had neither actual nor constructive knowledge of any claim of ownership by Feld-man or any security interest claimed by AgStar” and that it “took all steps reasonably necessary to determine that its perfected security interest would attach to the cow herd.” Feldman and AgStar argue that these findings are clearly erroneous. They contend that American failed to take reasonable measures to ensure that Shaull had an interest in the cattle and that it also failed to act reasonably when it did extend credit to Shaull by paying his checking overdrafts.

[¶ 56.] An element of estoppel by negligence is reasonable reliance on the part of the innocent party. In this case, that requires proof that American acted in a reasonable manner when it took its security interest and extended credit. A creditor “cannot prevail on an estoppel theory without showing facts demonstrating both reliance and lack of knowledge of the true facts or means to discover them.” Estate of Harris v. Harris, 218 F.3d 1140, 1152-53 (10th Cir.2000).

[¶ 57.] To verify Shaull’s representation in his loan application that he owned the cattle, American took the following steps: its bankers were accompanied by Shaull in conducting a physical inspection of the cattle in their pastures; it obtained Shaull’s'last income tax return to ensure that the cattle were on a depreciation schedule; it reviewed Shaull’s two most recent financial statements; it confirmed with Fin-Ag the existence of the cattle; and, it did a comprehensive lien search, obtaining releases or subordinations of all liens of record. Furthermore, the only evidence before the trial court on the issue of American’s efforts to verify Shaull’s ownership was from American’s witnesses who testified that American followed standard banking practices and procedures in making the loan.

[¶ 58.] I am satisfied that this record supports the trial court’s findings that American took reasonable measures to verify Shaull’s ownership claim. Although American could have taken some of the additional measures suggested by AgStar such as an inspection of every animal or requiring Shaull to produce some proof of purchase, it must be remembered that this was a refinancing of an existing herd, not a purchase money financing. American acted as a reasonable lender would have under the same or similar circumstances and, thus, I would affirm that part of the trial court’s judgment determining that Feld-man and AgStar should be estopped from claiming that their interests in the 910 head of cattle are first and superior to the interest resulting from American’s $498,413.50 loan to Shaull.

Fin-Ag’s loan

[¶ 59.] The trial court concluded that Fin-Ag had a perfected security interest in the cattle, subject only to American’s interest. I agree with this conclusion to the extent that it recognizes the interest acquired by Fin-Ag through the bred cow agreement and the after-acquired property clause of its 1999 security agreement. I disagree, however, with any conclusion that Feldman and AgStar should be es-topped from claiming their share since the bred cow agreement was not entered into by Feldman and Shaull until November 30, 2000. The trial court never entered any findings of fact on this issue and there is simply no evidence in the record that Fin-Ag ever detrimentally relied upon the conduct of Feldman and AgStar in extending credit to Shaull after November 30, 2000. Therefore, I would reverse that part of the trial court’s judgment holding that Feld-man and AgStar are estopped from claiming their interests are first and superior to that of Fin-Ag.

American’s $750,000 loan to Shaull

[¶ 60.] There remains the question of whether Feldman and AgStar should be estopped from claiming their share in the cattle because of the $750,000 debt due to American on the September 27, 1999 revolving line of credit account. This account was established specifically to cover overdraft checks drawn on Shaull’s sale barn account. Of the $750,000, approximately $635,782 was extended over a two day period on April 11 and 12, 2002. Feld-man and AgStar contend that it was unreasonable for American to extend this credit. I would not reach this issue since the trial court never addressed whether American detrimentally relied upon the appearance of ownership of the Feld-man/Shaull cattle when it extended the credit to the sale barn operation. Thus, I would reverse and remand that part of the trial court’s judgment determining that Feldman and AgStar should be estopped from claiming that their interests in the 910 head of cattle are first and superior to the interests resulting from American’s $750,000 loan to Shaull. With the remand I would instruct the trial court to consider whether American detrimentally relied upon the appearance of ownership and, if so, to then balance the equities between the parties considering that estoppel is an equitable remedy.

ISSUE THREE

[¶ 61.] Whether the trial court erred when it concluded the cattle were farm products rather than inventory.

[¶ 62.] The final issue concerns the trial court’s conclusion of law that “[a]ny sales of cattle from the cow herd from Shaull to Feldman were sales of farm products by a farmer and, as such, the perfected security interests of [American] and Fin-Ag attached to any cattle purchased by Feldman from Shaull.” (emphasis added). The result of this conclusion is that American and Fin-Ag would have a one hundred percent interest in any cattle Shaull sold to Feldman by reason of the after-acquired property clauses of the multiple security agreements. The trial court erred in reaching this conclusion.

[¶ 63.] Shaull wore a number of different hats. He owned and operated a sale barn, he ran a cattle brokerage business, he ran cattle of his own, and he also managed the bred cow operation for Feldman. These were very distinct and different roles.

[¶ 64.] The issue is whether the cattle Shaull sold to Feldman were inventory of the cattle brokerage business or farm products of Shaull’s personal cattle operation. If they were inventory, a buyer in the ordinary course of business would take them free of any security interest. If they were farm products, the buyer would take them subject to any security interest. SDCL 57A-9-320 (a).

Under the Uniform Commercial Code, goods are classified as consumer goods, equipment, farm products, or inventory. Livestock used or produced in farming operations and in the possession of a debtor engaged in raising, „ fattening, grazing, or other farming operations are farm products. If goods are farm products they are neither equipment nor inventory. § 9-109(3), UCC.
Goods which are held for sale or lease are classified as inventory. § 9-109(4), UCC. The Comment to section 9-109, UCC, states that the classifications are mutually exclusive and that the principal test to determine whether goods are inventory is whether they are held for immediate or ultimate sale. In borderline cases the principal use to which the property is put should be considered determinative.

First State Bank v. Producers Livestock Marketing, 200 Neb. 12, 261 N.W.2d 854, 858 (1978).

[¶ 65.] In Finding of Fact # 45 the trial court found:

The cows which are the subject of this action are brood cows and were intended to be held for an extended period of time for calf production. The calves were intended to be raised and ultimately sold. Both the cows and calves are farm products and not inventory.

This finding is a correct statement to the extent that it recognizes that the joint venture bred cow operation of Feldman and Shaull did hold the cattle for breeding purposes and, ergo, they were farm products of that business venture. It does not necessarily support a conclusion-that they were farm products of Shaull’s personal cattle breeding operation.

[¶ 66.] In Finding of Fact # 49 the trial court found:

Shaull maintained and cared for the cow herd as a farmer and' not as an order buyer. Any purchase of cattle by Feld-man from the cow herd maintained by Shaull was a purchase of farm products from a farmer and not from a sale barn operator or order buyer.

Again this finding is correct to the extent that it recognizes how the cattle were held by the Feldman/Shaull business venture. It is, however, clearly erroneous in respect to all of the cattle sold by Shaull to Feld-man and then cared for by Shaull in that on March 15, 2001, Feldman purchased from H.S. Cattle 370 head of bred cows which H.S. Cattle purchased on that same date from three sources. These cattle were never held by Shaull in his personal cattle operation for breeding purposes. Rather, these cattle were held by Shaull for resale and were clearly inventory.

[¶ 67.] There were two other sales of cattle from Shaull to Feldman during the life of the bred cow agreement. The first sale was November 28, 2000 when Feld-man purchased 122 bred cows from H.S. Cattle. Because the trial court did not trace the ownership history of the 910 head of cattle present at the time of the count, it is impossible to determine, with the exception of the 82 head bearing the Fin-Ag brand or ear tag, which of the 910 head were purchased by Feldman from Shaull and which of them were procured by Feldman from other sources.

[¶ 68.] As to the 82 Fin-Ag cows the trial court found in Finding of Fact # 16:

Fin-Ag loan officers inspected the cow herd on a regular basis, and noted that the cow numbers were intact on each occasion. The last such inspection was conducted in May 2001.

[¶ 69.] And in Finding of Fact # 51 it found:

At the time the South Dakota Brand Inspectors conducted a brand inspection in June 2002, approximately 82 cows carrying F/A brands or ear tags were present. Those cows were some of the same cows which had been previously inspected by Fin-Ag and AB&T.

Based on these findings, which are not clearly erroneous, it is apparent that the 82 were part of the cow herd placed with Shaull by Fin-Ag in the mid 1990s under the value added program and later purchased by him from Fin-Ag. These cattle were held by Shaull in his own name for the purposes of breeding and were clearly farm products if and when they were sold to Feldman.

[¶ 70.] The third sale was December 15, 2001 when Feldman purchased 625 bred cows, known as the Jennings cattle, from H.S. Cattle. Shaull held these cattle for approximately nine months under a lease with an option to purchase and he exercised the option immediately upon Feldman’s commitment to buy them. The lease and American and Fin-Ag’s security interests in the lease ended on the exercise of the purchase option as those interests would have merged into Shaull’s ownership interest. Since Shaull did not own the cattle at the time he conducted his farming operation with them and since these cattle were purchased for immediate resale, they were clearly inventory at the time of their sale to Feldman. Therefore, the trial court erred in concluding as a matter of law that the “Jennings” cattle were farm products of Shaull at the time of their sale to Feldman.

[¶ 71.] With the exception of the 82 Fin-Ag cows and possibly the balance of the 122 head from the November 28, 2000 sale, the trial, court’s conclusion of law is not supported by the findings of fact and the record and, thus, I would reverse and remand for further consideration of the 122 November 28, 2000 cattle.

DISPOSITION

[¶ 72.] I would affirm that part of the trial court’s judgment holding that American and Fin-Ag jointly hold a security interest in a portion of the herd because of the bred cow agreement. However, I would remand this issue for the trial court to determine the extent of those interests. I would affirm that part of the trial court’s judgment holding that Feldman and AgS-tar are estopped from claiming any interest in the herd with respect to American’s June 8, 2001 loan to Shaull. I would reverse that part of the trial court’s judgment determining that Feldman and AgS-tar should be estopped from claiming their respective ownership and security interests against Fin-Ag. I would reverse and remand that part of the trial court’s judgment determining that Feldman and AgS-tar should be estopped from claiming their respective ownership and security interests against American’s September 27, 1999 revolving line of credit account. Finally, I would reverse and remand that part of the trial court’s judgment determining that all of the cattle Shaull sold to Feldman were held by Shaull as farm products rather than inventory.

      . South Dakota brand law does not mandate branding east of the Missouri River. SDCL ch. 40-20.

      . A chronological summary of Feldman's purchases placed with Shaull under the Bred Cow Agreement are as follows:
      a). 122 bred cows from H.S. Cattle on November 28, 2000;
      b). 290 bred cows from Haas Livestock, and
      c). 38 bred cows from Feldman feedlot in Prior Lake, Minnesota December 7, 2000;
      d). 91 bred cows from Haas Livestock December 6-7, 2000;
      e). 370 bred cows from H.S. Cattle (Shaull purchased 150 from Sampson's, 190 from Ogle Brother and 36 from Greg Clement) March 15, 2001;
      f). 625 bred cows from H.S. Cattle December 15, 2001.

      . Fin-Ag's cattle were marked with either its brand or its ear tags. 82 of the 910 head of cattle carried either Fin-Ag’s brand or ear tag at the final count.

      . In First Nat. Bank of Philip v. Temple, 2002 SD 36, ¶ 23, 642 N.W.2d 197, 204, we expounded on the concept of "rights in the collateral.''
      The common conceptualization of property rights as consisting of a bundle of sticks is helpful in understanding when a debtor has sufficient rights in an asset to grant an enforceable Article 9 security interest. Full ownership of an asset includes, inter alia, the rights to possess and use the asset. All or some of the owner's rights can be transferred by way of sale, lease, or license. A person with transferable rights can grant an enforceable security interest in those rights. In the full ownership situations, the security interest attaches to the full panoply of rights, ... debtor with only limited rights in an asset can convey no more than the extent of its own interest. The limitations on the debtor's rights also constitute limitations on the interest taken by the secured party and on the interest that can be conveyed to a foreclosure-sale buyer.... A secured party's rights expand as additional parties with rights in the collateral consent to have their rights encumbered.... Even a person who has not actually consented to a security interest may be estopped to deny its effectiveness.... Estoppel can result from either a common-law rule or a statute and is inevitably based on the estopped person’s actions in clothing the debtor with indicia of ownership.

        Id. (quoting William H. Lawrence et al., Understanding Secured Transactions 88-90 (2000)).

      . Brown v. United States, 622 F.Supp. 1047, 1049 (D.S.D.1985) provides a good definition of a voluntaiy bailment.
      [A] bailment constitutes the delivery of personal properly to another in trust for a specific purpose with an express or implied contract that the trust be faithfully executed and the property returned or accounted for when that purpose is accomplished or kept until reclaimed by the bailor.

        Id. (citing Johnson v. Hanna, 78 S.D. 324, 101 N.W.2d 830, 835 (1960)). See also SDCL ch. 43-39, Deposit of Personal Property.

      . The provisions of the bred cow agreement that are of particular importance are the final three:
      Calves will be sold by November 1, 2001 and November 1, 2002.
      On or before December 1, 2001, and December 1, 2002, cows will be pregnancy checked, opens will be sold. We have the option on the pregnant cow to either sell them or keep them or add to them until next year.
      This agreement will be settled by December 15, 2002 with profits or losses split equally between the parties, (emphasis added). Feldman did admit at trial that the "We”
      used in the second to the last paragraph meant both itself and Nathan Shaull.

      . As early as 1933, long before the adoption of our Uniform Commercial Code, we recognized that even though the financier for a car dealership reserved title to the vehicles in its own name, it could be estopped by its conduct from disputing the existence of title in an innocent third person.
      It is a general rule applicable to personal property that no one can transfer or confer a better title than he has unless some principle of estoppel operates to bar a claim under an otherwise better title. The mere possession of chattels, by whatever means acquired, if there is no other evidence of property rights therein or authority to sell given by or for the true owner, will not enable the possessor to give a good title.... "It is equally well settled that, if personal property is delivered, under a conditional sale contract, to a buyer who is engaged in the business of selling property of the same kind, and, with the knowledge of the seller, is placed on display for sale with such other property, the holder of the reserved title is estopped to assert it against a bona fide subvendee for value.... In such a case the rights of the innocent subvendee 'do not depend upon the actual title or authority of the party with whom he deals directly, but are derived from the act of the real owner, which precludes him from disputing, as against the innocent party, the existence of the title or power which, through negligence or mistaken confidence, he has caused or allowed to be vested in the party making the sale.' "

        Iowa Guarantee Mortgage Corp. v. General Motors Acceptance Corp., 62 S.D. 18, 21, 250 N.W. 669, 670 (1933) (quoting Pacific Finance Corp. v. Hendley, 103 Cal.App. 335, 284 P. 736, 737; 285 P. 1048).

      . As set forth in Federal Land Bank of Omaha v. Sullivan, 430 N.W.2d 700, 701 (S.D.1988):
      In the law of agency, a principal will be liable for contracts made in its behalf by an agent if the agent was authorized (emphasis original) to enter into the agreements. Mueller v. Union Pacific, 220 Neb. 742, 371 N.W.2d 732 (1985); 3 C.J.S. Agency § 408. This authority may be actual or ostensible. Actual authority is created by manifestations from the principal to the agent, SDCL 59-3-2, while ostensible authority is created when the principal allows a third person to believe the agent has authority to act on the principal’s behalf. SDCL 59-3-3. Strictly speaking, ostensible agency is no agency at all; it is in reality based entirely on an estoppel. Chleboun v. Varilek, 81 S.D. 421, 136 N.W.2d 348 (1965); Hartford Accident & I. [Imdemnity] Co. v. Bear Butte Valley Bank, 63 S.D. 262, 257 N.W. 642 (1934). “[WJhere it appears that the principal knew, or by a proper supervision of the affairs of the agency ought to have known, of the acts of the agent, or the general course and manner in which he was conducting the business of the agency, he is estopped as against innocent third persons from denying the power of the agent to act." Hartford Accident & I. [Imdemnity] Co., 63 S.D. at 267, 257 N.W. at 645. If the agent had ostensible authority, the principal is bound by the acts of his agent “to those persons only who have in good faith, and without negligence, incurred a liability or parted with value upon the faith thereof.” SDCL 59-6-3. (emphasis added).

      . Under the most favorable interpretation, Fin-Ag's interest would not be any more than one-half the herd.

      . Pursuant to the bred cow agreement, Feld-man placed 1,536 head of cattle with Shaull. Of this number, Feldman purchased 1,117 head from Shaull. The trial court never did determine which of the 910 head Feldman purchased from Shaull and which were at-ready owned by Feldman and delivered to Shaull.

      . However, this does not affect the results reached under the bred cow agreement and under the principles of estoppel.


source: Caselaw Access Project

author: GILBERTSON, Chief Justice.

license: Public Domain

text:
    2004 SD 43
    Ryan BALDWIN, Plaintiff and Appellant, v. CASTRO COUNTY FEEDERS I, LTD., Defendant and Appellee.
    No. 22912.
    Supreme Court of South Dakota.
    Argued Feb. 18, 2004.
    Decided March 31, 2004.

      Douglas R. Kettering of Kettering Law Offices, Yankton, South Dakota, Attorney for plaintiff and appellant.
    Timothy R. Whalen of Whalen Law Office, P.C., Lake Andes, South Dakota, Attorney for defendant and appellee.
   GILBERTSON, Chief Justice.

[¶ 1.] A South Dakota circuit court determined Castro County Feeders I, Ltd. (Castro County) had an enforceable security interest in the proceeds of a sale of seventy-eight cattle owned by Ryan Baldwin (Baldwin). Baldwin sold the cattle through Livestock Sales in Wagner, South Dakota. On appeal, Baldwin argues the circuit court erred in finding that Castro County had a security interest in the cattle, and he also disputes the circuit court’s conclusion that the proceeds of the sale were subject to arbitration. We affirm the judgment of the circuit court.

FACTS AND PROCEDURE

[¶ 2.] Both parties to this controversy reside in the State of Texas. Castro County runs a feedlot operation wherein it contracts to feed cattle placed in its lots as well as to provide the vitamins, minerals, and medicine necessary for the proper care of the cattle. Baldwin owns and operates a business specializing in the purchase and sale of cattle. As part of his business, Baldwin often placed his cattle with-Castro County. Castro County would feed the livestock for a period of time and then release the cattle to Baldwin for transport and sale in Kansas. Generally, the sale proceeds were made payable to Baldwin and Castro County in order to reimburse it for the feed and related services provided to Baldwin’s cattle.

[¶ 3.] Baldwin filed suit in circuit court seeking a Declaratory Judgment ordering Livestock Sales to release to him the proceeds of the sale. In response, Livestock Sales filed a motion to substitute parties and for removal of it as a defendant. Based upon stipulation of the parties, Livestock Sales was released from the action. Castro County was substituted as the only defendant in the action. Baldwin and Castro County stipulated to most of the facts in the case and agreed that only a question of law was before the court. After considering the facts, reviewing the relevant documents, and hearing argument of the parties, the circuit court found in favor of Castro County. The circuit court determined Castro County had a valid security interest in the cattle sold at Wagner. The circuit court also ruled the proceeds were subject to arbitration by the Texas Cattle Feeders Association as outlined by the Agreement executed by Baldwin and Castro County. Baldwin appeals the judgment of the circuit court and raises the following issues for our review:

1. Whether Castro County had a valid security interest in the proceeds of the sale of Baldwin’s cattle.
2. Whether the proceeds of the sale were subject to arbitration in Amarillo, Texas as provided by the Cattle Feeding Agreement.

Affirmed.

STANDARD OF REVIEW

[¶ 4.] We review the circuit court’s findings of fact under the clearly erroneous standard. City of Deadwood v. Summit, Inc., 2000 SD 29, ¶ 9, 607 N.W.2d 22, 25. The interpretation and application of South Dakota’s statutes governing secured transactions require de novo review by this Court. Farm Credit Services v. First State Bank, 1998 SD 13, ¶ 6, 575 N.W.2d 250, 251. Our construction of the state’s commercial code is also guided by SDCL 57A-1-102, which provides in pertinent part:

(1) This title shall be liberally construed and applied to promote its underlying purposes and policies.
(2) Underlying purposes and policies of this title are
(a) To simplify, clarify and modernize the law governing commercial transactions;
(b) To permit the continued expansion of commercial practices through custom, usage and agreement of the parties;
(c) To make uniform the law among the various jurisdictions^]

ANALYSIS AND DECISION

[¶ 5.] 1. Whether Castro County had a valid security interest in the proceeds of the sale of Baldwin’s cattle.

[¶ 6.] The circuit court determined Castro County had a valid security interest in Baldwin’s cattle sold in Wagner. SDCL ch. 57A-9, South Dakota’s codified version of Article 9 of the Uniform Commercial Code, governs secured transactions. Generally, in order to be considered secured, a party must have a security agreement executed by a debtor granting that party a security interest in collateral. 57A-9-203; SDCL 57A-9-102(72) and (73) (defining “secured party” and “security agreement”); see generally SDCL 57A-9-101 through 57A-9-507; see also Continental Grain Company v. Brandenburg, 1998 SD 118, ¶ 15, 587 N.W.2d 196, 200. Specifically, SDCL 57A-9-203(b) lists three requirements that must be met before a security interest will be enforceable against a debtor:

Except as otherwise provided in subsections (c) through (i), a security interest is enforceable against the debtor and third parties with respect to the collateral only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and
(3) one of the following conditions is met:
(A) the debtor has authenticated a security agreement that provides a description of the collateral ...

(emphasis added). In this case, Castro County provided value in the form of feed and related services to the cattle in question. In fact, Castro County claims Baldwin owes it in excess of $94,000. Although Baldwin disagrees with this figure, he does not dispute that he owes Castro County some amount of money. Thus, the value-given requirement under subsection one is clearly met. In addition, since Baldwin stipulated he owned the cattle placed in Castro County’s feedlots and subsequently sold in South Dakota, the second requirement has been established.

[¶ 7.] The primary question Baldwin raises on appeal is whether the Agreement between himself and Castro County functions as a valid security agreement as required by SDCL 57A-9-203(b)(3)(Á), set out above. First, Baldwin questions whether the Agreement was properly “authenticated.” He points out the Agreement twice refers to a “Rick Baldwin” as opposed to “Ryan Baldwin.” A brief study of the document, however, shows “Ryan Baldwin” actually signed the document twice and scratched out the name “Rick” below the signature line. Furthermore, at trial Baldwin admitted he entered into the Agreement with Castro County and stipulated the document into evidence. Given these facts, we find Baldwin’s argument that the Agreement was not authenticated to be without merit.

[¶ 8.] Second, Baldwin questions whether the Agreement provides a sufficient description of the collateral. SDCL 57A-9-108 provides in relevant part:

(a)Except as otherwise provided in subsections (c), (d), and (e), a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.
(b) Except as otherwise provided in subsection (d), a description of collateral reasonably identifies the collateral if it identifies the collateral by:
(1) specific listing;
(2) category;
(3) except as otherwise provided in subsection (e), a type of collateral defined in the Uniform Commercial Code;
(4) quantity;
(5) computational or allocational formula or procedure; or
(6) except as otherwise provided in subsection (c), any other method, if the identity of the collateral is objectively determinable.
(c) A description of collateral as “all the debtor’s assets” or “all the debtor’s personal property” or using words of similar import does not reasonably identify the collateral.

In particular, Baldwin argues the Agreement insufficiently described the collateral because it gave Castro County a security interest in all cattle “being specifically located in Lot(s) #_at Castro County Feeders, I, Ltd., Hart, Castro County, Texas.” In other words, Baldwin believes the Agreement failed to sufficiently identify the cattle at issue in this case because it did not specify the feedlots in which his cattle were located. We disagree:

The parties often adopt Code definitions to describe collateral in their security agreement. In many cases, a creditor argues that its interest in “inventory,” “equipment,” “general intangibles,” “account,” “proceeds,” or such, includes the very property at issue and the debtor, bankruptcy trustee or other creditor(s) assert the contrary. Disputes of this nature should also be resolved by the Code’s two-stage analysis: could the description plausibly be read to include the property claimed, and if so, did the parties so intend ? In these cases, most courts resolve the problem solely as one of law.

4 White & Summers, Uniform Commercial Code § 31-3 (5th ed 2002).

[¶ 9.] To determine whether the description was sufficient, we must look to SDCL 57A-9-108. Pursuant to subsection (a), the “test” for sufficiency is whether the description (specific or not) “reasonably identifies what is described.” In the instant case, the description was “livestock.” This is an example of an identification of collateral by category, which is specifically permitted under 57A-9-108(b)(2). (“Except as otherwise provided in subsection (d), a description of collateral reasonably identifies the collateral if it identifies the collateral by ... (2) category!)]”) Comment 2 to UCC § 9-108 states:

The purpose of requiring a description of collateral in a security agreement under Section 9-203 is evidentiary. The test of sufficiency of a description under this section, as under former Section 9-110, is that the description do the job assigned to it: make possible the identification of the collateral described. This section rejects any requirement that a description is insufficient unless it is exact and detailed (the so-called “serial number” test).

[¶ 10.] Moreover, “livestock” is included in the definition of “farm products.” Therefore, even if the agreement had only provided for an interest in Baldwin’s “farm products,” the description would have been sufficient to include “livestock.” Specifically, SDCL 57A-9-102(34) provides:

“Farm products” means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:
(A) crops grown, growing, or to be grown, including:
(i) crops produced on trees, vines, and bushes; and
(ii) aquatic goods produced in aqua-cultural operations;
(B) livestock, born or unborn, including aquatic goods produced in aquacultural operations;
(C) supplies used or produced in a farming operation; or
(D) products of crops or livestock in their unmanufactured states.

(emphasis added). In Mushitz v. First Bank of South Dakota, 457 N.W.2d 849, 853 (S.D.1990) we held the description of “all farm machinery ... and livestock owned by [debtor]” constituted a sufficient description of the collateral. We held that such descriptions reasonably identify what they describe. Id.

[¶ 11.] Here, the Agreement did not attempt to give Castro County a security interest in all of Baldwin’s property as prohibited by 57A-9-108(c). Although the parties did not specify a particular lot or lots, the Agreement restricted the security interest to the cattle Baldwin delivered to Castro County’s feedlot complex in the city of Hart, Texas. According to the Agreement, Baldwin also granted Castro County a security interest in the sale of these cattle. We believe this description was sufficient to make the collateral objectively determinable. A reasonable reading of the Agreement gave Castro County a security interest in only those cattle of Baldwin’s to which it advanced feed and related services. It was not necessary for the agreement to list each individual head of livestock to which Castro County’s security interest attached. Moreover, it was also reasonable for the Agreement to leave a specific lot number blank given the fact the cattle were not usually located in one of Castro County’s lots when sold.

[¶ 12.] We believe the Agreement between Baldwin and Castro County constituted an authenticated security agreement that sufficiently described the collateral as those cattle to which Castro County provided feed and related services. Baldwin stipulated he owned the cattle placed at Castro County. Castro County provided value by advancing Baldwin’s cattle feed and related services. Thus, the requirements for valid security interest as defined by SDCL 57A-9-203 were met.

[¶ 13.] In this case, Baldwin delivered approximately 686 head of cattle to Castro County where they received feed and related care. By the terms of the Agreement, Castro County obtained a security interest in these cattle. Both parties agreed it was customary for Castro County to release Baldwin’s cattle and then receive payment upon their sale in Kansas. When Castro County released the seventy-eight head of cattle at issue in this case, it retained a security interest in the proceeds of their sale. Here, the fact that Baldwin sold these cattle in South Dakota rather than Kansas did not change the nature of Castro County’s security interest. We therefore affirm the judgment of the trial court on this issue.

[¶ 14.] 2. Whether the proceeds of the sale were subject to arbitration in Amarillo, Texas as provided by the Cattle Feeding Agreement.

[¶ 15.] The Cattle Feeding Agreement entered into by Baldwin and Castro County provided:

ANY DISPUTE OR CONTROVERSY ARISING UNDER, OUT OF, OR IN CONNECTION WITH OR IN RELATION TO THIS CATTLE FEEDING AGREEMENT AND ANY AMENDMENT THEREOF, OR THE BREACH THEREOF, SHALL BE DETERMINED AND SETTLED BY ARBITRATION TO BE HELD IN AMARILLO, TEXAS IN ACCORDANCE WITH THE RULES THEN APPLICABLE UNDER THE ARBITRATION PROGRAM OF THE TEXAS CATTLE FEEDERS ASSOCIATION. ANY AWARD RENDERED THEREIN SHALL BE FINAL AND BINDING ON EACH OF THE PARTIES HERETO, AND JUDGMENT MAY BE ENTERED THEREON IN THE STATE COURT OF THE STATE OF TEXAS FOR THE COUNTY OF POTTER.

(bold and caps original). In accordance with this provision, the circuit court ordered the sale proceeds disbursed to Baldwin, Castro County, and the Texas Cattle Feeders Association for arbitration. Baldwin believes the sale proceeds should only be disbursed to him based solely upon his argument that Castro County had no security interest in the cattle. We have already determined, however, that Castro County had a valid security interest in the cattle. The arbitration clause is a clear and unambiguous part of the contract between Baldwin and Castro County, and we affirm the judgment of the trial court that the proceeds at issue in this ease are subject to arbitration by the Texas Cattle Feeders Association in Amarillo, Texas. See Kimball Investment Land, Ltd. v. Chmela, 2000 SD 6, ¶ 14, 604 N.W.2d 289, 293 (recognizing the general rule that courts should enforce and give effect to the unambiguous language and terms of a contract).

[¶ 16.] SABERS, KONENKAMP, ZINTER, and MEIERHENRY, Justices, concur.

      . Subsections (c) through (i) do not apply to this controversy.

      . According to SDCL 57A-9-102(7) "authenticate” means:
      (A) to sign; or
      (B) to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record.

      . Subsections (d) and (e) do not apply in this case.

      . The complete Cattle Feeding Agreement definition of "collateral” included:
      [A]ll of Feeder's interest in farm products, limited to livestock, whether now owned or hereafter created, acquired or arising; all of Feeder's feed, vitamins, minerals, and medicine; all of Feeder's contracts for the future purchase or future sale or delivery of the livestock; all of Feeder’s contract rights and accounts receivable, checks, drafts, notes, general intangibles and all the sale of any of the foregoing Collateral; all right, title, and the interest of Feeder as partner, joint venturer, co-owner or otherwise with respect to any properties of the foregoing description; all of the foregoing, whether now owned or hereafter acquired; and all such Collateral being located on the real property described in Exhibit "A” and including without limitation all additions, accessions, substitutions and replacements of, for, or to all or any of the foregoing together with all proceeds and products of all or any of the foregoing, such livestock being specifically located in Lot(s) #_ at Castro County Feeders, I, Ltd., Hart, Castro County, Texas. It is expressly agreed that the Collateral is perishable in nature and is of a type requiring immediate sale to recognize the full value.
      As noted above, the Lot # space was left blank in the original Agreement.


author: MEIERHENRY, Justice.

text:
    2004 SD 45
    Harry SCHILLING, Plaintiff and Appellee, v. Bruce BACKER, Defendant and Appellant.
    No. 22882.
    Supreme Court of South Dakota.
    Considered on Briefs March 22, 2004.
    Decided April 7, 2004.
    Jeff Burns of Churchill, Manolis, Freeman, Kludt, Shelton & Burns, Huron, South Dakota, Attorneys for plaintiff and appellee.
    Drew C. Johnson, Aberdeen, South Dakota, Attorney for defendant and appellant.
   MEIERHENRY, Justice.

[¶ 1.] Harry Schilling filed suit to obtain a prescriptive easement against a private road owned by Bruce Backer. The trial court found in favor of Schilling. Backer appeals. We reverse.

FACTS

[¶ 2.] Schilling has used a private road to gain access to various lots since 1962. The South Dakota Department of Transportation (DOT) owned the road and the lot which it is on, from the 1950’s until 1982. DOT sold the lot and road November 17, 1982. Ownership transferred again in 1989. In 1991, Backer purchased the property. In 2001, Backer placed a no trespassing sign and a fence across the road, blocking Schilling’s use. On October 6, 2001, Schilling commenced an action to obtain a prescriptive easement to the road. The trial court issued a prescriptive easement to Schilling. Backer raises on appeal the following issue:

ISSUE
Whether Schilling can Obtain a Prescriptive Easement to a Road that was Owned by the South Dakota Department of Transportation.

STANDARD OF REVIEW

[¶ 3.] Findings of fact are reviewed for clear error. Lien v. Lien, 2004 SD 8, ¶ 14, 674 N.W.2d 816, 822 (further citations omitted). Conclusions of law are reviewed de novo. Id.

DECISION

[¶ 4.] Under South Dakota law, twenty years of adverse use is required in order to acquire a prescriptive easement on real property. SDCL 15-3-1; Travis v. Madden, 493 N.W.2d 717, 720 (S.D.1992); Steiner v. County of Marshall, 1997 SD 109, ¶ 18, 568 N.W.2d 627, 631-32. Schilling commenced this action on October 6, 2001. In order to. prevail, Schilling had to prove that he had adversely used the road for 20 or more years prior to commencement. The record shows that he used the road since 1962, almost 30 years. Backer claims, however, that because DOT owned the lot and the road until November 17, 1982, Schilling’s use could not be considered adverse until after DOT sold it. In Steiner v. Marshall County, we stated, “one cannot obtain a prescriptive easement against the government.” 1997 SD 109, ¶ 23, 568 N.W.2d 627, 632-33. Based on this Court’s holding in Steiner, Backer asserts that Schilling cannot include the 1962-1982 time-frame for his prescriptive easement time requirement. We agree.

[¶ 5.] SDCL 15-3-1 requires “twenty years before the commencement” of an adverse possession claim. Id. (emphasis added). The earliest that Schilling’s adverse possession could have commenced was after DOT sold it on November 17, 1982. Twenty years of continuous adverse use would not have transpired until November 18, 2002. In 2001, Backer blocked Schilling’s access and use of the road. Schilling brought his prescriptive easement claim on October 6, 2001. Consequently, Schilling cannot maintain a prescriptive easement claim under SDCL 15-3-1 because he cannot show that he adversely used the road for twenty years subsequent to the time the government owned it. We reverse the trial court’s issuance of a prescriptive easement. Because of our holding on Issue I, we need not reach the other issues raised on appeal.

[¶ 6.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and ZINTER, Justices, concur.

      . Schilling purchased the lots at different times.

      . Schilling "must prove open, visible, continuous and unmolested use of the property for twenty (20) years.” Kokesh v. Running, 2002 SD 126, ¶ 13, 652 N.W.2d 790, 794. Once Backer blocked Schilling's access to the road (installed a fence), Schilling was no longer using the property and therefore time towards the 20-year requirement ceased.


text:
    2004 SD 44
    SPISKA ENGINEERING, INC., Plaintiff and Appellant, v. SPM THERMO-SHIELD, INC., Defendant and Appellee.
    No. 22554.
    Supreme Court of South Dakota.
    Argued On Feb. 17, 2004.
    Decided April 7, 2004.
    Michael L. Loos of Johnson, Eiesland, Huffman & Clayborne, Rapid City, South Dakota, Jeffrey A. Maidenberg, Engle-wood, Colorado, for plaintiff and appellant.
    Gerald M. Baldwin, Custer, South Dakota for defendant and appellee.
   MEIERHENRY, Justice.

[¶ 1.] This is an appeal arising from a judgment of the circuit court affirming the decision of an arbitrator and denying a motion to vacate an arbitration award.

FACTS AND PROCEDURAL HISTORY

[¶ 2.] Spiska Engineering, Inc. (Spiska) and SPM Thermo-Shield, Inc. (Thermo-Shield) initially entered into a contract August 3, 1994. Subsequently, the parties added addendums and supplements to the original contract. The original contract granted Spiska exclusive rights in several European countries to distribute Thermo-Shield products. The subsequent adden-dums and supplements granted Spiska additional territories. Spiska was also given the right to mix raw Thermo-Shield material rather than buying the premixed product. Beginning in September 2000, Ther-mo-Shield attempted to amend the parties’ prior agreements to include a price increase of 30% and relinquishment of Spis-ka’s mixing rights. Spiska rejected the amendments. Soon thereafter, Thermo-Shield notified Spiska that its contracts and rights with Thermo-Shield were terminated. Spiska requested arbitration per the original contract, claiming wrongful termination of the contract. The arbitrator decided in favor of Thermo-Shield.

[¶ 3.] Spiska filed a Motion to Vacate the Arbitration Award in circuit court. The trial court reviewed the arbitration record and took testimony. Additionally, Spiska entered into evidence a contract that had not been produced at arbitration. The circuit court denied Spiska’s motion. Spiska filed a Motion to Reconsider which was also denied. Spiska then appealed to this Court. Subsequent to filing the appeal, Spiska moved for a new trial in circuit court based on newly discovered evidence. The trial court denied the motion because it lacked jurisdiction. Spiska filed a Motion to Supplement the Record with this Court. We remanded the matter to the trial court to determine if the record should be supplemented with the new documents. The trial court determined that the records were relevant and was satisfied that there was good reason they were not produced at trial. Accordingly, newly discovered documents were added to the record consisting of a business letter and two memorandums of understanding between Thermo-Shield and Spiska’s competitor. On remand, our Order did not provide the trial court with an opportunity to reconsider its opinion in relation to the new documents.

ISSUE

Whether the trial court erred by. affirming the arbitration award.

STANDARD OF REVIEW

[¶ 4.] Judicial review of arbitration awards is narrow as provided by SDCL 21-25A-24. In reviewing a trial court’s order “confirming the arbitrator’s award, we accept the court’s factual findings unless clearly erroneous, but decide questions of law de novo.” Schoch v. InfoUSA, Inc., 341 F.3d 785, 788 (8th Cir.2003) (citation omitted). The party asserting error has the burden of proof.

DECISION

[¶ 5.] Spiska claims that the arbitration award in favor of Thermo-Shield should be vacated because the award was procured by undue means, subsection (.1) of SDCL 21-25A-24. The statute provides in part: “Upon application of a party, the court shall vacate an award where: (1) The award was procured by corruption, fraud or other undue means.” Id. Spiska alleges that the newly discovered evidence supports its claim that Thermo-Shield’s grounds to terminate the parties’ agreements were a pretext to disguise its true desire to enter into a more lucrative deal with a different distributor. Spiska claims during arbitration it was limited in substantiating its claim because Thermo-Shield withheld documentation of its negotiations with the other distributor. The documents surfaced in lawsuits against the other distributor after the arbitration hearing and after the review hearing in circuit court. As a result of this newly discovered evidence, Spiska claims that the arbitration award to Thermo-Shield was procured by undue means. This Court has not previously had occasion to apply this subsection.

[¶ 6.] It is important first to determine what constitutes “undue means” under the statute. SDCL 21-25A-24(1) provides an award to be vacated if: “[t]he award was procured by corruption, fraud or other undue means.” Id. The term “undue means” is not defined by statute. Generally, courts have defined the term in conjunction with “corruption” and “fraud.” This method follows the doctrine of statutory construction noscitur a sociis, which defines a word in the “same general sense” as the words with which it is coupled. SUTHERLAND STATUTORY CONSTRUCTION § 47:16 Sixth Edition.

[T]he maxim [noscitur a sociis] means “it is known from its associates” and in practical application means that a word may be defined by an accompanying word, and ordinarily the coupling of words denotes an intention that they should be understood in the same general sense.

Id. See also Opperman v. Heritage Mut. Ins. Co., 1997 SD 85, ¶ 7, 566 N.W.2d 487.

[¶ 7.] It follows then that undue means signifies “something akin to fraud and corruption.” Seither & Cherry Co. v. Illinois Bank Bldg. Corp., 95 Ill.App.3d 191, 50 Ill.Dec. 672, 419 N.E.2d 940, 945 (1981). The Eighth Circuit Court of Appeals defined the term as follows:

The term “undue means” must be read in conjunction with the words “fraud” and “corruption” that precede it in the statute. See Drayer v. Krasner, 572 F.2d 348, 352 (2dCir.), cert. denied, 436 U.S. 948, 98 S.Ct. 2855, 56 L.Ed.2d 791 (1978). Consistent with the plain meaning of fraud and corruption, and with the limited scope of judicial review of arbitration awards, other circuits have uniformly construed the term undue means as requiring proof of intentional misconduct. See American Postal Workers Union, AFL—CIO v. United States Postal Serv., 52 F.3d 359, 362 (D.C.Cir.1995) (undue means limited to conduct “equivalent in gravity to corruption or fraud, such as a physical threat to an arbitrator”); A.G. Edwards Sons, Inc. v. McCollough, 967 F.2d 1401, 1403 (9thCir.1992) (undue means “connotes behavior that is immoral if not illegal”), cert. denied, 506 U.S. 1050, 113 S.Ct. 970, 122 L.Ed.2d 126 (1993); Shearson Hayden Stone, Inc. v. Liang, 493 F.Supp. 104, 108 (N.D.Ill.1980) (“ ‘undue means’ requires some type of bad faith in the procurement of the award”), aff'd, 653 F.2d 310 (7thCir.1981).

PaineWebber Group, Inc. v. Zinsmeyer Trusts P’ship, 187 F.3d 988, 991 (8th Cir. 1999), reh’g and reh’g en banc denied, (Oct. 19, 1999) and cert. denied, 529 U.S. 1020, 120 S.Ct. 1421, 146 L.Ed.2d 313 (2000). Likewise, a court recently said “the ‘undue means’ language of the statute [has been interpreted] as requiring some type of bad faith behavior by the winning party.” Grosso v. Barney, No. 03-MC-115, 2003 WL 22657305, at *8 (E.D.Pa. Oct.24, 2003) (citation omitted). Therefore, the party asserting error has the burden of showing that the winning party procured the award through bad faith behavior “equivalent in gravity to corruption or fraud.” PaineWebber, 187 F.3d at 991.

[¶ 8.] This Court has defined bad faith behavior in different contexts. For example, we said “[a] municipality acts in bad faith when it condemns land for a private scheme or for an improper reason, though the superficially stated purpose purports to be valid.” City of Rapid City v. Finn, 2003 SD 97, 11, 668 N.W.2d 324, 327 (quoting City of Freeman v. Salis, 2001 SD 84, 12, 630 N.W.2d 699, 703). In the context of business transactions we have said “ ‘bad faith’ is the antithesis of good faith and has been defined ... to be when a thing is done dishonestly and not merely negligently. It is also defined as that which imports a dishonest purpose and implies wrongdoing or some motive of self-interest.” Smith v. Halverson, 273 N.W.2d 146, 151 (S.D.1978) (internal and further citations omitted). Further, this Court has defined fraud as “ ‘a representation made as a statement of fact, which was untrue and known to be untrue by the party making it, or else recklessly made; and made with intent to deceive and for the purpose of inducing the other party to act upon it.’ ” Cleveland v. BDL Enterprises, Inc., 2003 SD 54, 56, 663 N.W.2d 212, 219-20.

[¶ 9.] Because we have said that undue means requires proof that the award was procured by bad faith behavior equivalent to fraud or corruption on the part of the winning party, Spiska must prove that Thermo-Shield withheld the documents for an improper purpose. In other words, it must be shown that Thermo-Shield was dishonest or deceptive in its withholding of these documents implying some wrongdoing or selfish motive. The burden is by a preponderance of the evidence. Sejnoha v. City of Yankton, 2001 SD 22, ¶ 14, 622 N.W.2d 735, 739. Further, Spiska must show a nexus between bad faith withholding of the documents and the procurement of the award. PaineWebber, 187 F.3d at 993; Forsythe Int'l., S.A. v. Gibbs Oil Co. of Texas, 915 F.2d 1017, 1022 (5thCir.1990) (“requiring a nexus between the alleged fraud and the basis for the [arbitrator’s] decision”).

[¶ 10.] The issues brought before the arbitrator were:

(1) Whether either party had materially breached the contract.
(2) Whether Thermo-shield’s grounds to terminate its agreements with Spis-ka were a pretext for its actual purpose of termination.

The evidence Spiska presented at arbitration to show that it had not materially breached the contract included Spiska’s: (1) efforts and monetary investment to obtain results for certifications to sell Thermo-Shield products in its exclusive territories in Europe, (2) time, effort and expenses in maintaining an overseas office, free-zone warehouse, translation and printing of sales brochures, (3) attendance at trade shows, (4) building a sales and distribution network for Thermo-Shield products, and (5) minimum product orders per the parties’ contract.

[¶ 11.] Thermo-Shield countered Spis-ka’s evidence through testimony of its president and CEO Joseph Raver (Raver). Raver’s testimony deemphasized Spiska’s time, skills, and expenses related to obtaining governmental certification for the products to be distributed in Europe. He also downplayed the expansiveness and costs associated with the establishment of Spiska’s sales and distribution network. Raver pointed to Spiska’s reduced product orders in relation to Spiska’s overall performance in promoting Thermo-Shield products. Raver denied engaging in business dealings with Spiska’s competitors in violation of their agreements or engaging in dealings detrimental to Spiska’s exclusive sales territories. Raver also presented a document signed by Spiska, relinquishing Spiska’s exclusive territorial rights in Europe. Spiska denies voluntarily relinquishing any rights.

[¶ 12.] The evidence presented at arbitration for issue two, Thermo-Shield’s pretext for terminating the agreements, was limited. Spiska attempted to show Raver had associated with Spiska’s competitors and attempted to establish that Raver was motivated to deal with Spiska’s competitors because he could attain a more lucrative price. Spiska presented various documents during arbitration which indirectly and circumstantially indicated Thermo-Shield’s favorable dealings with Spiska’s competitors. There was no proof, however, that the dealings materialized into actual agreements; nor was there evidence of the time frame any dealings occurred.

[¶ 13.] At the trial court, Spiska presented a contract between Thermo-Shield and Thermo-Shield Germany (Competitor) dated December 1, 2000. Although Ther-mo-Shield had cancelled its contracts with Spiska by letter dated September 15, 2000, Spiska claims that Thermo-Shield entered into discussions with its competitor prior to cancellation. Since Spiska did not have evidence that the discussions materialized into agreements, he was left to theorize that they had. Spiska pointed to the December 1, 2000 contract’s reference to a September 1, 2000 Licensing Agreement between Thermo-Shield and Competitor. Spiska contends that Thermo-Shield had motive to withhold the contract because it would have created a trail for other discovery which would have proved Thermo-Shield breached the contract before terminating it.

[¶ 14.] The lack of other evidence to show that Thermo-Shield had an agreement with the Competitor prior to canceling Spiska’s contract influenced the trial court’s decision. The trial court found:

There is no evidence that any Contract of any kind was entered with the German Corporation prior to [Thermo-Shield’s cancellation notice]. [T]here was no intentional withholding of the German Contract. That the German Contract would have minimal influence on the arbitration, and that the failure to provide this Contract did not establish an arbitration that was procured by undue means.

[¶ 15.] Spiska claims that the record, supplemented by three newly-acquired documents not before the arbitrator or trial court, proves Thermo-Shield’s dealings and agreements with Competitor occurred before Thermo-Shield cancelled its agreements with Spiska. This evidence, attained by Spiska through litigation involving its European distributors and Competitor, is as follows:

(1) Letter from Thermo-Shield’s agent (dated January 27, 2003);
(2) Memorandum of Understanding (signed by Raver and principle of German competitor) — Sole Distributorship Agreement/Exelusive Licensing and Know-how Agreement (dated September 1, 2000);
(3) Memorandum of Understanding (signed by Raver and principle of German competitor) — Establishment of LLC under German Law (dated September 1,2000).

Spiska claims these documents were critical in its ability to prepare its case and cross-examine witnesses. Spiska points to Chevron Transp. Corp. v. Astro Vencedor Compania Naviera, 300 F.Supp. 179, 181 (1969). In Chevron, port logs were not made available to Chevron until after arbitration. It was, however, provided portions of the logs prior to the close of arbitration. The court concluded that in maritime proceedings, port logs were an important item of documentary evidence that all parties should have access to from the outset. Id. at 181. However, the court said that the record was unclear what portions of the log were undisclosed during arbitration. Without being able to determine if the undisclosed portions “contained information which would have been helpful to Chevron,” the court denied vacating the arbitration award. Id. at 182. The denial was “without prejudice, however, to Chevron’s right to move to reargue on the sole issue of whether or not its rights were prejudiced by the apparent failure of the panel to insure that all portions of the relevant [documents] were made available to Chevron prior to the close of evidence.” Id.

[¶ 16.] In this case, the trial court reviewed the arbitration record, heard testimony, and considered the one contract that Spiska had attained after arbitration. Our review is limited to whether the trial court erred in its factual findings and conclusions. We cannot say that the trial court erred based upon the evidence before it. However, the record has now been supplemented with documents that were not considered by the trial court. Under these circumstances, we remand for the trial court to reconsider its decision of whether the arbitration award was procured by undue means taking into consideration the newly discovered documents. The trial court should determine in light of the new documents whether Thermo-Shield acted in bad faith in withholding the evidence; and if so, whether there is a nexus between the bad faith behavior and the procurement of the arbitration award.

[¶ 17.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and ZINTER, Justices, concur.

      . This Court has only considered four cases under SDCL 21 25A 24: Azcon Const. Co., Inc. v. Golden Hills Resort, Inc., 498 N.W.2d 630 (S.D.1993); Aamot v. Eneboe, 352 N.W.2d 647 (S.D.1984); L.R. Foy Const. Co., Inc. v. Spearfish School Dist. No. 40-2, 341 N.W.2d 383 (S.D.1983); Peska Const. Co., Inc. v. Portz Inv., LLP, 2003 SD 136, 672 N.W.2d 483.

      . As noted previously, the statute provides by fraud, corruption, or other undue means. SDCL 21-25A-24(1). Therefore, to prove other undue means would require the same burden as proving fraud or corruption.

      . Spiska admits that his signature is on the document but denies having seen the document before it was presented at arbitration.

      . Spiska's agreements with Thermo-Shield included reduced pricing.