LINCOLN, Neb. (DTN) -- A group of 19 Texas farmers argues Hansen-Mueller Co.'s financier, BMO Bank, converted collateral from grain sales that was rightfully theirs, as part of an ongoing Chapter 11 bankruptcy case, and asked a federal court in Nebraska to allow their more than $700,000 in grain claims to be submitted.

The Nebraska-based grain company filed for Chapter 11 in November 2025 after farmers in several states reported they had not been paid for grain deliveries.

The Texas producers filed a brief at the end of last week in the U.S. Bankruptcy Court of Nebraska, arguing that under Texas law, the farmers hold perfected statutory liens on their grain and the proceeds.

The liens were perfected, the farmers argue, for 90 days from the date they last delivered grain to Hansen-Mueller. That means the liens are superior to all competing liens, including BMO Bank's security interests in the case, they said in a court filing.

Hansen-Mueller has argued the Texas farmers' liens were not perfected because they didn't file the proper financing statements. The company contends that once the farmers' grain left Texas and became inventory in Nebraska, Nebraska law would govern lien perfection.

The company said because the purchase contracts signed by the farmers contained a "choice-of-law" clause, it required Nebraska law to govern all disputes, including triggering a mandatory arbitration clause that should bar the lien priority claims from being heard in court.

At the time Hansen-Mueller filed for bankruptcy, according to the Texas farmers' filing, the company was indebted to BMO Bank for more than $50 million.

Prior to the company filing for bankruptcy protection, the producers said Hansen-Mueller sold the grain owned by the Texas farmers and transferred the proceeds to BMO Bank.

"When Texas producers sold their grain to the debtor, claimants were unaware that BMO Bank had already taken affirmative steps to ensure repayment of the debtor's indebtedness from the proceeds of that grain," the producers said in their brief.

"In BMO Bank's own words, the debtor had been using over $11 million of collateral proceeds 'to fund debtor's operations and professional fees. BMO Bank's application of the proceeds to its own secured debt constitutes a conversion of Texas Producers' collateral because those proceeds were already subject to the producers' superior lien. Accordingly, BMO Bank is liable for conversion to the extent of the value of the proceeds subject to Texas Producers' lien, along with attorneys' fees and costs as provided by the Texas statute."

Leading up to the bankruptcy filing, according to the producers' brief, BMO Bank had placed Hansen-Mueller under forbearance agreements for at least a couple of months. Forbearance agreements are designed to help a debtor continue to do business with a financier under different terms.

"Under these agreements, the proceeds of the sales of grain were applied to BMO Bank's secured debt, with no intention or ability to pay the grain producers for their grain," the farmers argue.

DTN has reached out to Hansen-Mueller and BMO Bank for comment.

Read more on DTN:

"Hansen-Mueller Chapter 11 Extension," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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