Wagner

Orthodontist Roy Wagner and his wife, Carol, speculated in a cattle raising program offered by Mountain Shadows Ranch (MSR) in 1973. Their agreement authorized MSR to act as the Wagners’ agent in buying, maintaining and marketing their cattle.

To finance the operation the Wagners borrowed from Lloyds Bank (Bank), consistent with an understanding prenegotiated by MSR. The loan agreement not only furnished money for buying a breeding herd, but also established a maintenance fund with the Bank from which capital was disbursed as needed by MSR.

Under the Bank agreement, the Wagners were required to pay off any amount necessary to maintain a 75 percent margin; that is, if the Wagners’ loan obligation exceeded 75 percent of the value of the collateral (the cattle) as established by periodic appraisals, the Bank could request payment of the sum necessary to regain the proper margin (i.e., margin call).

It was one of those unfortunate times when beef prices declined and costs rose. In February 1974, the Wagners paid a margin call of $9,442 requested by the Bank to bolster the sagging value of the herd. After another appraisal in May 1974, the Bank demanded a second remittance…