15-0400-14628-2

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE DEPARTMENT OF AGRICULTURE

 

 

In the Matter of Imogene Elevator, Inc.

ORDER PARTIALLY DENYING SUMMARY DISPOSITION

         

A Motion for Dispositive Relief was filed by Employers Insurance of Wausau (EIW).  Ronald E. Martell, Moore, Costello & Hart, P.L.L.P., 701 4^th Avenue South, Suite 1350, Minneapolis, MN  55415-1823, appeared on behalf of EIW.  Opposition to the Motion was filed by Jeff C. Braegelman, and Gregory L. Sattizahn, Gislason & Hunter, L.L.P., 2700 South Broadway, P.O. Box 458, New Ulm, MN  56073-0458, on behalf of Mervin E. Thompson, Mervin E. Thompson Farms, Inc. and Quiet Acres, Inc.; James H. Turk, Blethen, Gage & Krause, 127 South Second St., P.O. Box 3049, Mankato, MN  56002-3049, on behalf of Kenneth Steuber, Richard Malo, Richard Maday, Robert Leet, Maday Farms, Ted Fisher, Gregory Murphy and Lenny Steuber; Duane Sanders, 2733 80^th Street, Granada, MN  56039, on his own behalf; and Joan M. Eichhorst, Assistant Attorney General, 445 Minnesota Street, Suite 900, St. Paul, MN  55101-2130, on behalf of the Department of Agriculture.

 

          Based upon the filings by the parties,

 

IT IS HEREBY ORDERED:

(1)   The Motion for Dispositive Relief filed by Employers Insurance of Wausau is DENIED, in part.

(2)   Additional argument concerning the effect of Minn. R. 1562.1700 shall be filed by July 30, 2002.

 

Dated this 15th day  of July, 2002.

 

 

                                                                

/s/ Beverly Jones Heydinger

BEVERLY JONES HEYDINGER

Administrative Law Judge

 

 

 

 

MEMORANDUM

 

          An administrative law judge may recommend summary disposition of a case or any part of a case when “there is no genuine issue as to any material fact….”[1]  The request for summary disposition is analogous to a motion for summary judgement under Rule 56.02 of the Minnesota Rules of Civil Procedure.  Summary disposition of a claim is appropriate when there is no genuine issue as to any material fact and one party is entitled to a favorable decision as a matter of law.[2]  A material fact is one that is substantial and will affect the result of outcome of the proceeding.[3]  The moving party must establish that there is no genuine issue of material fact and that it is entitle to judgment as a matter of law.[4]  In considering the Motion, a court must view the evidence in the light most favorable to the nonmoving party or parties.[5]

 

          EIW requests summary disposition on three issues. The issues are:

 

          1.       Is a claim against the Grain Storage Bond barred if it was filed after March 29, 2001?

 

2.       Must a claimant against the Grain Storage Bond possess a valid, original warehouse receipt for grain brought to the Imogene Elevator before August 1, 2000?

 

3.       Must a claimant against the Grain Storage Bond possess a valid, original warehouse receipt or scale ticket marked “store” for grain brought to the Imogene Elevator on or after August 1, 2000?

 

Background

 

          Certain facts are not disputed.  Imogene Elevator, Inc. operated and accepted grain from farmers for many years, until it closed on September 25, 2000.  It held a license to buy and store grain, effective July 1, 2000, with an expiration date of June 30, 2001.[6]  It voluntarily surrendered its public grain warehouse operator’s license to the Department of Agriculture on September 28, 2000.  EIW issued a Grain Storage Bond and Grain Buyer’s Bond, #0350-05-095645, to Imogene Elevator in 1987.  At the time in question here, Imogene Elevator had a Storage Bond with EIW in the amount of $500,000 and a Buyers’ Bond in the amount of $40,000. 

 

          On November 28, 2001, the Department received a claim against the Buyer’s Bond from Kenneth T. Tenney dated November 20, 2000.[7]  On December 1, 2000, the Department of Agriculture (MDA or Department) received claims from Merwin  Thompson on behalf of Merwin E. Thompson Farms, Inc., Merwin Thompson personally, and from Roger Thompson on behalf of Quiet Acres, Inc.  There were some claims against the Buyer’s Bond and some claims against the Storage Bond.[8]

 

          On December 4 and 6, 2000, the MDA placed a notice in the Fairmont, Minnesota Sentinel.  It directed any person with a claim against the grain buyer’s bond for breach of a cash sale, or a claim against the grain storage bond for breach of a storage agreement, for transactions on or before September 27, 2000, to file a claim with the MDA by March 26, 2001.[9] 

 

On April 2, 2001 the Department received several claims dated March 30, 2001.[10]  On April 13, 2001, the Department received a claim from Gary E. Hanson, dated April 11, 2001.[11]  On April 20, 2001, the Department received a claim from Duane Sanders dated April 19, 2001.[12]

 

Timeliness of Claims

 

          EIW contends that claims against the grain storage bond must not be allowed unless they were received by MDA by March 29, 2001.  It relies upon the following statutory language:

 

          A person claiming to be damaged by a breach of the conditions of a bond of a licensed public grain warehouse operator may file a written claim with the commissioner [of Agriculture] stating the facts constituting the claim.  The claim must be filed with the commissioner within 180 days of the breach of the conditions of the bond.[13]

 

          There is comparable language for filing claims against the grain buyer’s bond.[14]

 

           In order to determine when the time for filing ends, one must first determine when and if a breach of the grain buyers bond and grain storage bond occurred.  The parties dispute when the breach occurred.

 

          The Department’s rule clarifies when the covered loss under each bond occurs.  The grain buyers bond provides for “payment of loss to producers caused by a licensed grain buyer’s failure to pay, upon the owner’s demand, for grain purchased in Minnesota according to the terms of a cash sale.”[15]   The grain storage bond provides for “payment of loss caused by the failure of a person licensed to store grain in Minnesota to deliver stored grain to the depositor’s order, or for nonpayment of grain when the depositor orders that the grain be sold in lieu of taking redelivery of the grain in storage.”[16]   Neither EIW nor the Department have clearly stated when the breach occurred for either of these bonds.  Instead, they seem to imply that a breach may be presumed to have occurred on certain dates.

 

According to its rules, once the Department determines that a valid claim has been made, it is required to publish notice of the claim, directing that any additional claims should be filed, and setting the date for the bond disbursement.[17] The apparent purpose of these procedures is to set a firm date when the bond proceeds may be distributed.  The date for the bond disbursement is 90 days from the date the commissioner publishes a public notice of a claim.  The rules provides:  “At the end of this time period, the commissioner will initiate bond payments on all valid claims received by the department.”

 

There is no apparent dispute that the first claims were filed with the Department in November and December, 2000, and that notice was published on December 4 and, 2000, as required by the Department’s rules.  Thus, one must assume that the Department had made a preliminary determination that one or more of the claims filed by that date was valid.  Rather than setting a date of 90 days for bond disbursement in the published notice, the Department allowed claims to be filed until March 26, 2000.

 

Inexplicably, none of the parties discuss the effect of the publication, and the March 26, 2001 cutoff included in the published notice.

 

EIW posits that the deadline for receiving claims would be March 29, 2001 if the breach occurred on September 25 (the day the Elevator closed), September 27 (two days after the Elevator closed), September 28 (the day the Elevator surrendered its license) or September 30 (two days after the Elevator surrendered its license).  None of these dates is clearly tied to the language governing what constitutes a breach as defined in the Department’s rules. The Department’s position is that the earliest that the breach occurred was two statutorily required business days after the Elevator surrendered its license.[18]  But it is not clear whose claim was triggered by this event and whether it applies to both the buyers bond and storage bond.  The breach could have occurred either before or after the date the elevator closed or the license was surrendered.  EIW and the Department are speculating about when a breach occurred.

 

The cases cited by EIW hold that claims against a grain buyer’s bond must be filed within 180 days of the breach of the condition of the bond.[19]  Because there is a factual dispute about when the breach occurred, those cases are not determinative. 

 

          Other parties take a different view of the deadline to file claims.  Kenneth Steuber, et al. assert that a farmer ordinarily must demand delivery, and the depositor has 48 hours to deliver.[20] If the storage contract expires, and there are no arrangements between the parties, the operator must notify the producer by registered letter of the intent to sell the grain and only then may sell the grain.  When a license is terminated, the operator must redeliver or purchase all grain belonging to others in the warehouse.[21]  Thus, it claims that breach of a storage contract is dependent on the triggering events of those provisions.

 

          Duane Sanders contends that he was sent a check for his grain in late November, 2000.  It was returned to him unpaid on November 29, 2000.  Thus, he claims that the breach of contract affecting him occurred on that date, and that he had 180 days to file thereafter.

 

          These arguments also fail to address the process for publication and disbursement once the first claim is received.

 

          Thus, the parties are directed to submit legal arguments concerning the effect of the Department’s published notice.  The question of timely filing of claims will be reconsidered. 

 

Documentation for the Claims.

 

EIW argues that certain documents, either a warehouse receipt or a scale ticket marked “store,” must be presented in support of a claim against the storage bond.  The difficulty with this argument is that the Elevator has the obligation to issue these documents and there is a factual dispute about whether the documents were issued.

 

          The warehouse operator must issue a scale ticket for each load of grain received, and must retain a duplicate copy.  The ticket must state specifically whether the grain is received on contract, for storage, for shipment or consignment or sold.[22]  Grain held for storage requires a warehouse receipt within six months of delivery, unless the depositor does not want a receipt.[23]  The warehouse operator must retain a record of each warehouse receipt.[24]

 

          There are factual disputes about the Elevator’s customary practices and the documentation of its transactions.  The purpose of the bond requirement is to benefit the producers who place their grain with the operator.  The Supreme Court has directed that surety bonds be liberally construed to protect the persons who deal with a publicly licensed warehouseman in normal and usual transactions from sustaining loss because of the warehouseman’s default.[25]  Thus, it is inappropriate to determine as a matter of law that the failure to produce the necessary documentation precludes any claim without examining the disputed facts.  In a similar dispute, the Court of Appeals addressed a similar argument and determined that the grain storage facility was estopped from arguing that the failure to issue warehouse receipts negated the farmers’ right to file claims, precisely because it had the duty to issue the warehouse receipts to the farmers.[26]  A hearing is necessary to determine whether scale tickets and/or warehouse receipts were issued, and whether either the Elevator or the producer has the records needed to determine the validity of timely claims.

 

B.J.H.