15-0400-14628-2

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE DEPARTMENT OF AGRICULTURE

 

 

In the Matter of Imogene Elevator, Inc.

ORDER 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.

 

An Order Partially Denying Summary Disposition was filed on July 15, 2002.  The parties were directed to submit additional argument concerning the effect of Minn. R. 1562.1700 on the remaining issue of the timeliness of claims.  The last submissions were received on August 5, 2002.

 

          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.

(2)   A prehearing conference is scheduled on September 24, 2002 at 1:30 p.m. at the Office of Administrative Hearings.

Dated this _8th__ day  of August, 2002.

 

                                                                

/s/ Beverly Jones Heydinger

BEVERLY JONES HEYDINGER

Administrative Law Judge

MEMORANDUM

 

          The standards for summary disposition were set forth in the Order of July 15, 2002.  EIW requested summary disposition on three issues. Two were denied in the prior order.  The remaining issue is whether a claim against the Grain Storage Bond is barred if it was filed after March 29, 2001.

 

 

Background

 

          As stated in the Memorandum to the prior Order, 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.[1]  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.[2]  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.[3]

 

          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.[4] 

 

On April 2, 2001 the Department received several claims dated March 30, 2001.[5]  On April 13, 2001, the Department received a claim from Gary E. Hanson, dated April 11, 2001.[6]  On April 20, 2001, the Department received a claim from Duane Sanders dated April 19, 2001.[7]

 

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.[8]

 

          There is comparable language for filing claims against the grain buyer’s bond.[9]

 

           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.”[10]   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.”[11]   Neither EIW nor the Department have clearly stated when the breach occurred for any claimant.  Instead, they seem to imply that a breach may be presumed to have occurred on certain dates.

 

The Department took the position prior to the contested case proceeding that all claims had to be received by April 2, 2001 to be considered.[12]  It now acknowledges that claims filed later could be valid, depending on when the breach for the claimant occurred.  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.[13] 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 rule provides:  “At the end of this time period, the commissioner will initiate bond payments on all valid claims received by the department.”

 

The Department’s view is that the publication is intended to improve the likelihood that a potential claimant will be alerted to the process for filing a claim.  Publication, and the deadline in it, is not intended to cut off any claimant’s rights, so long as distribution has not been made.[14]  This does reconcile the language of the statute and rule, although it complicates the distribution of the bond proceeds and could foreclose recovery for a claimant.

 

If one accepts the position the Department is taking at this time, and the position of Kenneth Steuber, et al and Mr. Sanders, the Department could have distributed the bond proceeds after the deadline published in the newspaper notice, but that would not necessarily bar the filing of claims.  They contend that the Department’s rule allowing distribution must not be read to cut off the right of any claimant to file within 180 days of the breach, as to that claimant.  If all of the bond proceeds had been distributed, its possible that the later-filing claimant might not have received any funds, but the claim would still be considered valid.  This reading of the statutes and rules is the most logical and gives meaning to all portions.

 

Since the bond distribution has not occurred, one must conclude that each claimant is entitled to present evidence of the breach, and those who filed within 180 days of the breach will be awarded the appropriate share of the applicable bond.[15]

 

A prehearing conference will be held to schedule the hearing.

         

B.J.H.