Bremer Bank, National Association v. Border Bank
- Susan Nelson
- 0:25-cv-01249
- U.S. District Court · District of Minnesota
- 13
In Bremer Bank, National Association v. Border Bank, Judge Susan Richard Nelson granted in part and denied in part Border Bank's motion to partially dismiss, allowing the conversion claim to proceed while dismissing with prejudice the civil theft and receipt of stolen property claims because the facts showed Border Bank received farm proceeds through its own promissory notes with the Clarks rather than by stealing.
Banks and secured lenders involved in disputes over collateral proceeds where multiple lienholders exist; farmers or borrowers whose assets are pledged to multiple creditors; litigants in Minnesota considering civil theft or receipt of stolen property claims in commercial lien-priority disputes.
What happened
In Bremer Bank, National Association v. Border Bank (Case No. 25-cv-1249), Bremer Bank sued Border Bank after the Clarks — farming customers who had pledged their crops and equipment as collateral to Bremer Bank under promissory notes — paid the proceeds from their 2022 and 2023 crop sales to Border Bank instead of Bremer Bank, allegedly to reduce what they owed Border Bank. Bremer Bank claimed it held a superior (first-priority) lien on that collateral, while Border Bank held only a junior (lower-priority) lien. Bremer Bank brought four claims: a declaratory judgment confirming its superior lien, conversion, civil theft under Minnesota law, and receipt of stolen property under Minnesota law. Border Bank moved to dismiss the last three claims.
The court analyzed each disputed claim separately. On conversion — the wrongful taking of someone else's property — the court found that Bremer Bank adequately alleged a specific, identifiable property interest in the crop-sale proceeds arising from its promissory notes and security agreements, and that the money exception to the general rule requiring tangible property was met at this early stage. The court noted that discovery might also reveal the proceeds existed in tangible form such as checks. On civil theft under Minnesota Statute Section 604.14, the court found the claim failed because civil theft requires an initial wrongful or surreptitious taking, but the complaint itself acknowledged that Border Bank received the proceeds from the Clarks under Border Bank's own promissory notes with them — not by stealing. On receipt of stolen property under Minnesota Statute Section 609.53, the court similarly found the claim did not fit the facts because no property was alleged to have been stolen, and this dispute is fundamentally a lien-priority dispute between two banks, not a theft situation.
Judge Susan Richard Nelson denied Border Bank's motion to dismiss the conversion claim (Count 2), allowing it to proceed. She granted the motion as to the civil theft claim (Count 3) and the receipt of stolen property claim (Count 4), dismissing both with prejudice — meaning those claims cannot be refiled — because amending the complaint would not fix the fundamental problem that the facts do not support a theft theory. Border Bank has 14 days from the order to respond to the remaining claims.
The detailed version
Case
Bremer Bank, National Association v. Border Bank, Case No. 25-cv-1249 (SRN/DTS), United States District Court for the District of Minnesota.
Judge
Susan Richard Nelson, United States District Judge.
Procedural Posture
Bremer Bank originally filed this lawsuit in Minnesota state court in March 2025. Border Bank removed it to federal court in April 2025. Border Bank then filed a Motion for Partial Dismissal under Federal Rule of Civil Procedure 12(b)(6) — the rule that allows dismissal when a complaint fails to state a legally viable claim — targeting Counts 2 (conversion), 3 (civil theft), and 4 (receipt of stolen property).
Background Facts as Alleged
Non-parties Douglas and Jessica Clark (the Clarks) obtained promissory notes from Bremer Bank to finance their farming operations, pledging farming assets — including crops, equipment, machinery, vehicles, government payments, and livestock — as collateral under a security agreement. Bremer Bank's security interest was perfected (made legally effective against third parties) through UCC-1 financing statements, giving it a senior (first-priority) lien. Border Bank held a junior (subordinate) lien on the same collateral. Bremer Bank alleged that since 2021, the Clarks paid crop-sale proceeds from the 2022 and 2023 harvests to Border Bank rather than Bremer Bank, to reduce amounts the Clarks owed Border Bank under separate promissory notes. Bremer Bank sent demand letters to Border Bank in March 2024 and February 2025 asserting its superior interest and demanding the proceeds. Bremer Bank sought a declaratory judgment confirming its superior lien (Count 1, not at issue in this motion), plus damages including punitive damages and attorneys' fees on the tort claims.
Legal Standard
Under Rule 12(b)(6), a complaint must allege sufficient facts to make a claim for relief 'plausible on its face,' per Ashcroft v. Iqbal, 556 U.S. 662 (2009). The court accepts all factual allegations as true and draws reasonable inferences in the plaintiff's favor, but does not accept legal conclusions dressed up as facts.
Count 2 — Conversion (DENIED)
Under Minnesota law, conversion requires: (1) the plaintiff holds a property interest, and (2) the defendant deprives the plaintiff of that interest. The general rule is that only tangible personal property may be converted, and money — being intangible — ordinarily cannot be the basis of a conversion claim. However, an exception exists when money is 'specific and capable of identification' or when the claimant can show 'ownership or the right to possess specific, identifiable money.' The court found that the crop-sale proceeds here, linked to specific security agreements and promissory notes, were distinguishable from an undefined overpayment amount (as in RSS Fridley, LLC v. Nw. Orthopaedic Surgeons P'ship, LLP). The court also noted that Minnesota courts and federal courts applying Minnesota law have recognized conversion claims in the secured-transaction context — where a creditor with a senior security interest alleges that a junior creditor improperly received collateral proceeds. See Wangen v. Swanson Meats, Inc., 541 N.W.2d 1 (Minn. Ct. App. 1995). The court further noted that discovery might show the proceeds were transferred in tangible form (e.g., checks). Accordingly, the motion to dismiss Count 2 was denied.
Count 3 — Civil Theft, Minn. Stat. § 604.14 (GRANTED, dismissed with prejudice)
Minnesota's civil theft statute imposes liability on a person who 'steals' personal property from another. Courts look to the criminal theft statute (Minn. Stat. § 609.52) and common-law definitions of 'steal,' which require that a person wrongfully and surreptitiously take another's property with intent to keep or use it — meaning there must be an initial wrongful act in obtaining possession. The court found this element was missing. Bremer Bank's own complaint acknowledged that Border Bank received the crop proceeds from the Clarks pursuant to the Clarks' own promissory notes with Border Bank — a facially legitimate transaction from Border Bank's perspective. That Border Bank may have known of Bremer Bank's superior lien does not transform receipt of payment under existing notes into the kind of surreptitious wrongful taking required for civil theft. The court further found that repleading (amending the complaint) would be futile because the core factual problem — that Border Bank received funds through its own contractual relationship with the Clarks — cannot be cured by additional allegations. Count 3 was dismissed with prejudice.
Count 4 — Receipt of Stolen Property, Minn. Stat. § 609.53 (GRANTED, dismissed with prejudice)
Minnesota Statute Section 609.53 is a criminal statute that also provides a civil remedy to persons injured by someone who receives, possesses, transfers, buys, or conceals stolen property knowing it was stolen. Border Bank argued that civil liability requires a prior criminal complaint, conviction, or guilty plea, relying on OnePoint Solutions, LLC v. Borchert, 486 F.3d 342 (8th Cir. 2007). Bremer Bank cited a conflicting Minnesota Court of Appeals decision, Markle v. Metro Metals Corp., 2016 WL 4497278 (Minn. Ct. App. 2016), which held a criminal conviction is not required. The court declined to resolve that conflict, instead holding that Count 4 failed on a more fundamental ground: there is no plausible allegation of 'stolen' property or property obtained by 'robbery.' The dispute is between two lienholders; the Clarks paid Border Bank under contractual notes. The court also noted that Markle was factually distinguishable because it involved a scrapyard purchasing vehicles from actual thieves, whereas here no such theft occurred. Count 4 was dismissed with prejudice as amendment would be futile.
Orders
(1) Border Bank's Motion for Partial Dismissal is granted in part and denied in part. (2) Counts 3 and 4 are dismissed with prejudice. (3) Border Bank has 14 days from October 29, 2025, to answer or otherwise respond to the remaining counts (Counts 1 and 2).
Reviewer note from the AI+
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