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12-0400-14628-2 |
STATE OF MINNESOTA
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF AGRICULTURE
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In the Matter of the Claims Against the Grain Buyers’ Bond and Grain Storage Bond of Imogene Elevator, Inc., Granada, MN,Bond # 0350-05-095645
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FINDINGS OF FACT, CONCLUSIONS AND RECOMMENDATION
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The above-entitled matter came on for hearing on February 3 and 4, 2003, in North Mankato, Minnesota. The hearing record closed on March 3, 2003, upon receipt of the final post-hearing brief.
Appearances:
Joan M. Eichhorst, Assistant Attorney General, 445 Minnesota Street, Suite 900, St. Paul, Minnesota 55101, appeared on behalf of the Department of Agriculture (the Department).
Ronald E. Martell, Moore, Costello & Hart, PLLP, 701 Fourth Avenue South, Suite 1350, Minneapolis, MN 55415, appeared on behalf of the surety on the bonds, Employers Insurance of Wausau (Wausau).
Jeff C. Braegelmann, Gislason & Hunter, LLP, 2700 South Broadway, PO Box 458, New Ulm, MN 56073, appeared on behalf of claimants Merwin E. Thompson Farms, Inc., Merwin E. Thompson individually, and Quiet Acres, Inc.
James H. Turk, Blethen, Gage & Krause, 127 South Second Street, PO Box 3049, Mankato, MN 56002, appeared on behalf of claimant Robert Leet.
Claimants Duane and Melody Sanders, 2733 80th St., Granada, MN 56039, appeared pro se.
Claimant Richard Maday, 1577 280th Ave., Granada, MN 56039, appeared pro se.
Louis Maday, owner of claimant Maday Farms, Inc., 240 245th Ave. Fairmont, MN 56031, appeared pro se.
Claimants Richard Malo, Ted Fisher, Kenneth Steuber, Gregory Murphy, and Kenneth Tenney had reached settlements with Wausau regarding their storage bond claims and did not appear at the hearing. Claimants Lenny Steuber and Gary E. Hanson did not appear at the hearing.
Imogene Elevator, Inc., (Imogene Elevator) is not a party to this matter. However, the three owners of Imogene Elevator were called as witnesses during the hearing and one of the owners, Robert Seidel, 601 Shoreacres Apt. 307, Fairmont, MN 56031, submitted a short letter after the hearing.
This Report is a recommendation, not a final decision. The Commissioner of Agriculture will make the final decision after a review of the record, and may adopt, reject or modify the Findings of Fact, Conclusions, and Recommendations contained in this recommended decision. Pursuant to Minn. Stat. § 14.61, the final decision of the Commissioner shall not be made until this report has been made available to the parties to the proceeding for at least ten days. An opportunity must be afforded to each party adversely affected by this Report to file exceptions and to present argument to the Commissioner. Persons should contact the Commissioner of Agriculture, 90 West Plato Boulevard, St. Paul, Minnesota 55107, to ascertain the procedure for filing exceptions or presenting argument.
If the Commissioner fails to issue a final decision within 90 days of the close of the record under Minn. Stat. § 14.61, this report becomes the final decision of the agency.
The fourteen claimants delivered loads of their corn or soybeans to Imogene Elevator, or to a grain terminal on behalf of Imogene Elevator, and have not been paid for that grain. The ultimate issue is whether the claimants are entitled to recover their losses from either the grain storage bond or the grain buyer’s bond that had been purchased by Imogene Elevator. That issue is generally determined by whether the claimants had delivered their grain to Imogene Elevator “for storage” or “for sale.” If it was delivered “for storage,” rights to that amount and quality of grain in the elevator continued to “belong” to the farmer and claims for loss fall under the storage bond. If it was delivered “for sale” to the elevator, that grain became the property of Imogene Elevator and the circumstances must be examined to determine whether it was a “cash sale,” where claims for loss fall under the buyer’s bond, or a “voluntary extension of credit contract” sale,” for which there is no bond coverage. Thus, it is necessary to so classify each transaction between each claimant and Imogene Elevator.
As to certain claims, what was the date of the breach of the “conditions of the bond,” from which the 180-day claim filing deadline of Minn. Stat. § 232.22, subd. 6, should be measured?
What is the impact on the timeliness of claims of the claims filing deadline established and published by the Department, and then later modified by the Department?
How does the August 1, 2000, change to Minn. Stat. § 232.23, subd. 3, regarding the effect of a grain warehouse operator not specifying delivery type on a scale ticket apply to grain delivered prior to that date?
How do the August 1, 2000, changes to Minn. Stat. §§ 223.16, subd. 5, and 223.175, regarding the effect of the buyer not complying with statutory cash sale and contract sale requirements apply to grain delivered prior to that date?
Under a contract to sell grain in storage at Imogene Elevator at a future date at a fixed price, is the failure of Imogene Elevator to pay the purchase price covered by the buyer’s bond or storage bond?
Can and should an amount and quality of grain equivalent to that loaded on trucks at the farm and taken directly to a grain terminal at the request of Imogene Elevator and on behalf of Imogene Elevator under a verbal “direct shipment agreement,” be considered as “in storage” at Imogene Elevator?
Should storage and check-off fees be deducted from bond awards?
Based upon all of the proceedings herein, the Administrative Law Judge makes the following:
1. In 1987, four people formed Imogene Elevator, Inc., and bought the country grain elevator in Imogene, Minnesota, formerly known as the Gary Elevator.[1] They were Robert Seidel, who was primarily an investor; Larry Miller, who had been an employee and the manager for the prior owner since 1970 and continued as manager; Irene Kleven, who became the office manager, secretary, and bookkeeper in 1987; and Thomas Gary, the former owner’s son, who later sold his stock back to the corporation.[2] Imogene Elevator accepted deliveries of grain from farmers from 1987 until it closed without prior announcement on September 25, 2000.
2. Imogene Elevator was licensed by the Department as a public grain warehouse operator authorized to buy grain and to store grain.[3]
3. Imogene Elevator provided scale tickets to the farmers for each load of grain delivered to the elevator. It used a standard form Minnesota Warehouse Scale Ticket for that purpose until it ran out of the forms, apparently some time in August, 2000. The standard form had the Imogene Elevator name and address printed on it, space for the scale to print the gross and tare weights and dates and times of measurement, and space to write in net weight and bushels. It contained a space to be filled in to state whether the grain was received for storage, on a contract, or sold and a space to be filled in with the price per bushel. It also contained various language from Minn. Stat. § 232.23, including a statement that all grain was considered sold unless arrangements were made to apply it on a contract or for storage.[4] The standard form scale tickets were sequentially numbered with five digits and ran from about No. 11000 in 1997 up to about No. 18000 in mid-August, 2000.[5]
4. When Imogene Elevator was out of the standard form scale tickets, it used a pad of standard sales slips instead. They where printed with Imogene Elevator’s name, address, and phone number and had spaces for miscellaneous sales information. Miller would write in the date, producer’s name, type of grain, gross weight, tare weight, net weight and number of bushels. The sales slips were sequentially numbered and during August and September, 2000, slips numbered from about No. 2003 to about No. 2124 were used.[6]
5. Imogene Elevator used numbered “assembling sheets” to compile the scale ticket information for each series of deliveries for each producer. For each load, Kleven filled in the scale ticket number, net weight, and bushels by hand, generally ignoring the printed column headings. Dockage was indicated if shown on the scale ticket. Kleven was generally unaware and never recorded whether the delivery had been a sale, on contract, or for storage. Apparently at Miller’s direction, an assembling sheet would be totaled and a full or partial payment made to the producer. Kleven hand-recorded the payments on the assembling sheets and also on her Purchase Report, which was an expanded check register. She or Miller would often, but not always deduct the number of bushels that had been purchased and show the remaining balance on the assembling sheet, sometimes labeling it “in store” or the like. The assembling sheets were the only record of grain receipts and elevator payments maintained by individual producer. Producers were only sometimes provided copies of their assembling sheets, usually when they were paid.[7] Imogene Elevator also maintained Daily Position Records on which it tracked the amount of grain in the elevator owed by Imogene Elevator and the amount in storage for depositors. Those records were reviewed by Department examiners but are not in evidence in this proceeding.
6. When it purchased corn, either at the time of delivery or later from grain in storage, Imogene Elevator was required to deduct a ½¢ per bushel corn check off fee from the payment. The soybean check off fee, known as SPARC, was ½% of the purchase price and also had to be deducted. Imogene Elevator normally made those deductions and recorded them on the Purchase Report. On several occasions, Imogene Elevator made payments to farmers without deducting those fees.
7. Imogene Elevator was also required to charge a fee for storing grain in accordance with its filed tariff. According to its tariff, its storage rate was 3¢ per bushel per month.[8] Imogene Elevator did not identify the storage charge on its Purchase Report. Occasionally there is a difference between the calculated price less the check off fee that might be explained as a storage fee. Often there is no difference, even when the grain has been in storage for some period.[9]
8. Miller would sometimes ask a farmer to haul his grain directly to one of the grain terminals or processors that Imogene Elevator had a delivery contract with, rather than to Imogene Elevator. Sometime Miller would send a truck for the grain and might charge a “pick-up” fee. At the terminal, the truck driver would receive a bill of lading and Imogene Elevator would receive credit or be sent payment for the delivered grain. Kleven would record the weight and bushels on the Assembling Sheet for the farmer just as for a scale ticket, except that the bill of lading number would be listed instead of a scale ticket number. She did not identify the deliveries as direct shipments elsewhere and treated them the same as deliveries to Imogene Elevator. It is usually possible to identify direct shipments on the Assembling Sheets because the bill of lading numbers are the only six digit numbers.[10]
9. Imogene Elevator purchased combined grain storage bond and grain buyer’s bond[11] # 0350-05-095645, from Employers Insurance of Wausau in 1987. At the time of the closure, the storage bond was in the amount of $500,000 and the buyer’s bond was in the amount of $40,000.[12] Both were in the amounts required by statute and rule.
10. Wausau’s bond stated the following conditions:
1. APPLICABLE TO STORAGE OF GRAIN BY PRINCIPAL
If said Principal [Imogene Elevator], being duly licensed as provided herein, shall indemnify the owners of grain stored against loss during the period of this bond, shall fully and faithfully perform the duties imposed upon said license(s) and the conditions of this bond, and shall observe the laws of the State of Minnesota and the rules and regulations of the Minnesota Department of Agriculture adopted pursuant thereto, then this obligation shall be null and void, otherwise it shall remain in full force and effect.
2. APPLICABLE TO PURCHASE OF GRAIN BY PRINCIPAL
If said Principal, being duly licensed as provided herein, shall pay to the owner on demand the purchase price of grain sold to the Principal, shall fully and faithfully perform the duties imposed upon said license(s) and the conditions of this bond, and shall observe the laws of the State of Minnesota and the rules and regulations of the Minnesota Department of Agriculture relative thereto, then this obligation shall be null and void, otherwise it shall remain in full force and effect, provided this obligation shall not cover transactions wherein a voluntary extension of credit has been given on the purchase price of grain by the seller to said Principal.[13]
11. Imogene Elevator called the Department on Monday, September 25, 2000, to report its closing. It did not post a conspicuous notice of closing at each entrance as required by Minn. Stat. § 232.23, subd. 15. It surrendered its license to a Department Warehouse Examiner on September 28, 2000.
12. Imogene Elevator closed because it ran short of cash and grain to cover its obligations to the farmers who had delivered their corn and soybeans to the elevator for sale or storage. Miller had been aware of the shortfall since at least May, 2000, and Seidel had been informed of it shortly thereafter. Miller followed practices that did not comply fully with statutory requirements that may have contributed to the shortfall and that allowed Imogene Elevator to continue operating for an extended period without adequate assets. His practices led some farmers not to expect or demand prompt payment and to leave their grain stored for extended periods. These practices included making partial payments and receiving grain for storage, rather than sale, so that Imogene Elevator would not have to pay for it immediately. Miller also did so with grain that he had shipped directly from the farmer to a terminal or processor. In those cases, Imogene Elevator would be paid for the grain immediately by the terminal, but Imogene Elevator recorded a like amount and grade in storage on its books and it would not have to pay for the grain until the farmer ordered it sold. Some farmers did not order their grain sold, but left it in storage, thinking it was like money in a bank account, until they needed cash for some purpose.
13. On November 22, 2000, Imogene Elevator, Inc. filed for Chapter 7 bankruptcy. On November 24, 2000, creditors were sent notice of the bankruptcy.[14] Several farmers remain unpaid for their grain and now seek recovery in this proceeding from Imogene Elevator’s storage bond or buyer’s bond.
Actions by the Department
14. After Imogene Elevator informed the Department it had closed, Warehouse Examiner Bruce Bettendorf went to the elevator on September 28, 2000. He took the license and started a special examination of Imogene Elevator that day, which he completed November 11, 2000. The purpose of the special examination was to find all obligations to producers and to oversee the “load-out” of the grain remaining. Most of the grain remaining was of out of condition, could not be used to cover obligations, and was sold to a salvage operation.[15]
15. Bettendorf chronicled Imogene Elevator’s outstanding obligations in an attachment to his examination report entitled “Obligations By Producer.” It listed outstanding obligations to 17 producers,[16] including all 14 claimants in this matter.
16. The Department did not notify any of those producers of the potential outstanding obligations to them because it had no legal obligation to do so. Instead, the Department waited for bond claims to be filed.[17] On November 28, 2000, the Department received the first claim. It was from Kenneth Tenney and dated November 20, 2000.[18] The next three claims were received on December 1, 2000, from Attorney Jeff Braegelmann on behalf of Merwin E. Thompson Farms, Inc., Merwin E. Thompson, and Quiet Acres, Inc., all dated November 30, 2000.[19]
17. James M. Johnson, the Warehouse Examiner Supervisor for the Department, whose duties include determining bond claims, reviewed the Kenneth Tenney claim and found it timely. In accordance with Minn. R. 1562.1700, subp. 5, and following normal procedure, he had a notice published in the official newspaper of Martin County. On December 4, 5, and 6, 2000, the Department published the following “Public Notice” in the Fairmont, Minnesota, Sentinel:
The Minnesota Department of Agriculture has received a claim against the grain buyer’s bond of Imogene Elevator, Inc., Granada, Minnesota.
A person having a claim against the 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, must file a claim with the Minnesota Department of Agriculture Marketing Services Division, Grain Licensing and Auditing, 90 West Plato Boulevard, St. Paul, Minnesota 55107 by March 26, 2001.[20]
18. The Department determined the March 26, 2001 claim-filing deadline by using September 25, 2000, the date Imogene Elevator closed its doors and adding two days for the 48-hour payment requirement on multiple shipment sales, reasoning that by that date Imogene Elevator was in breach of all unfinished sale and storage agreements. It then added 180 days for the claim filing period prescribed by Minn. Stat. § 232.22, subd. 6, and Minn. R. 1562.1700, subp. 1, to reach March 26, 2001. It was Johnson’s view that in the case of an elevator closure it would be most fair to give everyone 180 days from this common breach date to file a claim, regardless of whether potential claimants had actual knowledge of that date.[21]
19. The Department did not receive any more claims by March 26, 2001. It did receive ten claims after that date. They were:
April 2, 2001 Robert Leet
Richard Maday
Richard Malo
Maday Farms
Gregory Murphy
Kenneth Steuber
Len Steuber
April 3, 2001 Ted Fisher
April 13, 2001 Gary Hanson
April 20, 2001 Duane Sanders[22]
20. On May 14, 2001, the Department issued a determination evaluating the validity of the claims against both the storage and buyer’s bonds.[23] The Department did not evaluate the claims received after March 26, 2001, labeling them all untimely. The Department approved the claims of Merwin E. Thompson Farms, Inc.; Merwin E. Thompson, individually; Quiet Acres, Inc.; and Kenneth Tenney totaling $414,515.43. It awarded and prorated all those claims against the $40,000 buyer’s bond. No payments were awarded under the storage bond.
21. The Department received several appeals of its May 14, 2001, determination. Based on the appeals and advice of counsel, the Department issued a revised determination (the Reconsideration) on November 15, 2001. It changed two interpretations from what it applied in making its May 14, 2001, determination. The Department described its first change as follows:
First, this reconsideration takes into account an amendment to Minn. Stat. § 232.23 that became effective in August 2000. That amendment changed the status of grain represented on unmarked scale tickets delivered to an elevator from being considered sold to being considered stored. Since the amended law was in effect at the time that the claims arose, that is [the] law that was used here to determine the status of claims filed against the Buyers and Storage Bonds.[24]
22. Second, the Department revised the filing deadline date from the published date of March 26, 2001, to Monday, April 2, 2001. It did so because it decided that the last day Imogene Elevator could have legally conducted business was not September 25, 2000, the day it closed, but September 28, 2000, the day it surrendered its license.[25] When it added two days for the 48-hour payment period it got to Saturday, September 30. The Department considered the next business day to be Monday, October 2. Adding 180 days to that yielded Saturday, March 31, 2001. Again, the Department used the next business day, April 2, 2001.[26]
23. In the Reconsideration, the Department considered all the claims it had received April 2, 2001, as timely, as well as the Ted Fisher claim it had received on April 3, 2001. It did so because all the claims it had received on April 2, 2001, and the Ted Fisher claim had been mailed by attorney John Edman and contained a similar cover letter from Edman dated March 30, 2001. Presuming all the claims had been mailed together, the Department considered the Fisher claim as received April 2, 2001, as well.[27] The Department still considered the claims of Gary Hanson and Duane Sanders untimely because they had been received well after April 2, 2001.[28]
24. In the Reconsideration, the Department made awards under the buyer’s bond totaling $498,563.34 to Merwin E. Thompson Farms, Inc. Merwin E. Thompson, Quiet Acres, Inc., Robert Leet, Richard Maday, Ted Fisher, and Maday Farms. It prorated the claims to total $40,000. The Department made awards under the storage bond totaling $116,403.97 to Kenneth Tenney, Robert Leet, Richard Maday, Richard Malo, Ted Fisher, Maday Farms, Gregory Murphy, Kenneth Steuber, and Len Steuber. The Department did not deduct storage, service, or check off fees from any of the awards.
25. The Department received timely appeals from Wausau and seven of the claimants regarding the Reconsideration.[29] On December 17, 2001, the Department served a Notice and Order for Hearing, setting the hearing in this matter for April 1, 2002. The hearing date was ultimately changed to February 3, 2003, by agreement of the parties.
26. From June 28, 1999, to July 23, 1999, Merwin E. Thompson Farms, Inc. (Thompson Farms) delivered 67,840.01 bushels of corn, some of which, according to the scale ticket and bill of lading numbers, went to the elevator and some of which went directly to terminals or processors as requested by Imogene Elevator. The deliveries were accumulated on Assembling Sheets Nos. 41, 43, and 44. On July 23, 1999, Imogene Elevator issued Warehouse Receipt No. 747 to Thompson Farms for 67,840 bushels of corn in storage. Imogene Elevator treated all the corn as having been delivered to Imogene Elevator for storage. Miller explained the direct-shipped transactions as Imogene Elevator trading its own corn in the elevator to Thompson Farms for the corn being direct-shipped at Imogene Elevator’s request and for its convenience.[30] There is no evidence as to whether Thompson Farms itself or a trucking company hauled the corn or who hired any trucking company.
27. Thompson Farms used the warehouse receipt as collateral for USDA, Commodity Credit Corporation (CCC) Loan No. 4530. Thompson Farms repaid that loan on August 2, 1999, obtained the warehouse receipt back, signed and dated the redemption portion without filling in the blanks, and returned it to Imogene Elevator.[31] Thompson Farms did not take redelivery of the corn at that time. Instead, it left the corn in storage and entered into an agreement with Imogene Elevator on a form Miller used entitled “Contract for Future Delivery of Grain, No. 508.”[32] The contract was dated August 2, 1999, and called for Thompson Farms to sell and Imogene Elevator to buy 67,840.00 bushels of grade “24C” corn at a price of $2.02 per bushel, with a delivery date of June, 2000. It contained notes written in by Miller that stated, “delivered from Imogene Elevator,” “in store,” and “-18¢ storage,” and showed his calculation of the total sale price, storage charge, and net payment.
28. Under this and similar agreements, Miller considered the corn to still be in storage and to still belong to Thompson Farms until the sale was complete. He wanted the corn off the warehouse receipt so that he could charge, at least in his opinion or rationalization, the 18¢ per bushel storage charge, which was different from the 3¢ per bushel per month storage charge listed on Imogene Elevator’s tariff. When Miller agreed to a regular contract for future delivery on behalf of Imogene Elevator, he would also enter into a contract with a terminal or processor for future delivery from the elevator to cover his purchase. Presumably, the price Imogene Elevator gave the farmer was discounted from the price it obtained from the terminal or processor, notwithstanding Miller’s claim that the 18¢ storage charge was his only margin on the transactions with Thompson Farms.[33]
29. Thompson Farms and Imogene Elevator entered into two more very similar transactions over the next few weeks. From August 10, 1999, to September 3, 1999, Thompson Farms delivered 39,723.20 bushels of corn, two loads of which went to the elevator and 39 loads of which went directly to terminals or processors as requested by Imogene Elevator. The deliveries were accumulated on Assembling Sheets 47, 48, and 49. On September 7, 1999, Imogene Elevator issued Warehouse Receipt No. 748 to Thompson Farms for that amount of corn, which Thompson Farms used as collateral for a CCC loan. It repaid the loan September 30, 1999, and that day returned the warehouse receipt to Imogene Elevator and entered into Contract for Future Delivery of Grain, No. 509, with Imogene Elevator, which called for Thompson Farms to sell Imogene Elevator 39,723.00 bushels of corn at $1.90 per bushel with a delivery date of June, 2000, and which contained the same notes written in by Miller indicating that the corn was already in storage at the elevator and an 18¢ storage charge.[34]
30. From September 22 to September 28, 1999, Thompson Farms delivered 41,192.48 bushels of corn, all 42 loads of which went directly to terminals or processors as requested by Imogene Elevator. The deliveries were accumulated on Assembling Sheets 52 and 53. On September 30, 1999, the same day Contract No. 509 had been entered into, Thompson Farms also entered into Contract for Future Delivery of Grain, No. 511, with Imogene Elevator, which called for Thompson Farms to sell Imogene Elevator 48,000.00 bushels of corn at $1.90 per bushel with a delivery date of June, 2000, and which contained notes written in by Miller indicating that the corn was already in storage at the elevator, but which did not mention a storage charge or show a calculation of a storage charge.[35]
31. Thompson Farms had no additional corn available in storage at the elevator on September 30, 1999, to provide the additional 6,807.52 bushels needed to reach the 48,000.00 bushels called for by Contract No. 511. Thompson Farms originally claimed, based on statements by Miller, that certain corn that had been delivered on February 24, 1999, made up the difference. On, February 24, 1999, Thompson Farms had delivered 13,998.40 bushels of corn. Imogene Elevator issued Warehouse Receipt No. 735 for that corn, which Thompson Farms gave as collateral for CCC Loan No. 4028 on February 25, 1999. That corn was still in the elevator on September 30, 1999, but was pledged to the CCC. If Thompson Farms paid off the CCC loan before June, 2000, the corn could have remained in storage and been available to fulfill the contract. But that is not what happened and not what was intended. Instead, about the same time, Thompson Farms ordered that the corn be sold to pay off the CCC loan. On November 30, 1999, Imogene Elevator bought the 13,998.40 bushels of corn. It paid Thompson farms $1.90 per bushel, a total of $26,742.41. Check No. 9295 for $19,457.78 was made out to the CCC to pay off the loan, $69.99 was deducted for the ½¢ per bushel corn check off, and the remainder of $7,214.64 was paid in Check No. 9296 to Thompson Farms. No storage charge was deducted. The redemption portion of the warehouse receipt was signed by Thompson Farms at some point and “9296” was written in the “check #” blank by Miller to indicate the means of redemption.[36]
32. Imogene Elevator did not pay for the corn on the three contracts any time during June, 2000. Its only payment to Thompson Farms was a $10,000 payment on July 12, 2000.
33. The Department received Thompson Farms’ claim on December 1, 2000. The claim included a notarized Proof of Claim, a memorandum outlining the claim, copies of the three contracts for future delivery, assembling sheets, three CCC loan repayment receipts, and three warehouse receipts. Thompson Farms sought payment for the 67,840.01 bushels on Assembling Sheets 41, 43, and 44 and Contract No. 508 at $1.84 per bushel; the 39,723.20 bushels on Assembling Sheets 47, 48, and 49 and Contract No. 509 at $1.72 per bushel; and the 13,998.40 bushels on Warehouse Receipt No. 735 and 41,192.48 bushels on Assembling Sheets 52 and 52, part of which were on Contract No. 511, at $1.90 per bushel. It did not deduct any payments that had been received. The total claim was for $298,011.83 under the storage bond.
34. The Department determined that the corn was in storage originally, but determined that as of the June, 2000, delivery date called for by the contracts, the corn became sold to Imogene Elevator in a cash sale and that, therefore, any claim for failure to pay the sale price fell under the buyer’s bond. Thus, the Department awarded the entire claimed amount of $298,011.83 against the buyer’s bond, subject to proration with other awards under the buyer’s bond limit of $40,000.[37]
35. Based upon additional information received during this proceeding, Thompson Farms withdrew its claim for the 13,998.40 bushels of corn on Warehouse Receipt No. 735 and agreed that it had received a payment for $10,000 that should be deducted. The parties stipulated that Thompson Farms’ claim was timely.[38]
36. From June 23 to August 1, 2000, Merwin E. Thompson (Thompson) had 79,962.71 bushels of corn picked up for delivery to Imogene Elevator or to terminals designated by Imogene Elevator’s pursuant to Contract for Future Delivery of Grain, No. 507, dated July 22, 1999, which called for delivery of 76,200 bushels of corn to Imogene Elevator in June 2000.[39] The deliveries were accumulated on Assembling Sheets 89, 90, 91, and 407.[40]
37. The unit price per bushel under Contract No. 507 was $2.01 minus a $0.03 pick-up charge, for a net price of $1.98.[41] The total sale was $158,326.17. From July 18 to August 28, 2000, Thompson received four checks from Imogene Elevator totaling $126,138.00.[42] The balance, $32,188.17, was never paid.
38. The Department received Thompson’s claim on December 1, 2000. It included a notarized Proof of Claim, a memorandum outlining the claim, the contract for future delivery, copies of four checks from Imogene Elevator to Merwin E. Thompson, and Assembling Sheets 89, 90, and 91.[43] Check No. 9635 in the amount of $10,000.00 was mistakenly listed in the claim as having been paid to Thompson and deducted from the amount due. Thus, the claim was for $22,188.17. The Department awarded that amount against the buyer’s bond.
39. The $10,000 check had actually been paid to Thompson Farms. At the hearing, the pertinent parties stipulated that the error should be corrected, that the $10,000 check should be considered as paid on the Thompson Farms claim, and that the claim by Thompson, individually, should be allowed against the buyer’s bond in the amount of $32,188.16, subject to proration.[44]
40. There are three parts to the claim of Quiet Acres, Inc., (Quiet Acres). Regarding Part I, on October 25, 1999, Quiet Acres had entered into Contract for Future Delivery of Grain No. 510 with Imogene Elevator. It called for Quiet Acres to sell 116,000 bushels of type 24C corn to Imogene Elevator, to be “picked-up on farm,” for June-July 2000 delivery, at a price of $1.80, less 3¢ freight. From April to August 2000, Quiet Acres delivered 104,996.37 bushels of corn to Imogene Elevator pursuant to the contract, which was accumulated on Assembling Sheets Nos. 73, 408, 424, 428, and 429. Some loads went to the elevator and some went to terminals. At a net price of $1.77, Imogene Elevator should have paid Quiet Acres a total of $185,843.57 for the corn. It paid Quiet Acres $30,000.00 on June 30, 2000, and 67,518.00 on August 11, 2000. The balance of $88,325.57 remains unpaid.
41. Bettendorf’s Audit showed that Quiet Acres had sold 19,958.40 bushels of corn to Imogene Elevator at $1.94 per bushel that were direct-shipped from May 11 to May 28, 1999. It also showed that payments for 11,722.50 of those bushels were included in checks paid to Quiet Acres on June 7 and 8, 1999.[45] That left 8,235.90 bushels of corn at $1.94 per bushel, or $15,977.65, that had not been paid for at the time of the closure.[46]
42. Bettendorf also found that 24,563.52 bushels of soybeans had been direct-shipped from Quiet Acres to a grain terminal in October, 1999, because there was no space at the elevator. Imogene Elevator put the beans on Assembling Sheet No. 55 and issued Warehouse Receipt No. 756 for 23,882 of the bushels.[47] The Warehouse Receipt was used to secure an FSA loan and then forfeited in November, 1999. The remaining 681.52 bushels were never paid for.
43. The Department received Quiet Acres’ claim on December 1, 2000. It included a notarized Proof of Claim, a memorandum outlining the claim in three parts, a copy of Contract No. 510, a copy of the Quiet Acres summary from Bettendorf’s Audit, and Assembling Sheets Nos. 73, 408, 424, 428, and 429.[48] Part I was a claim under the buyer’s bond for the balance due on the corn delivered and sold to Imogene Elevator under Contract No. 510. The Department awarded the unpaid balance of the first claim under the buyer’s bond in the amount of $88,325.57, subject to proration. Wausau does not dispute the award, except to argue that the corn check off fee should be deducted. Part II was a claim under the buyer’s bond for the balance due on the corn delivered and sold to Imogene Elevator on Assembling Sheet No. 34. The Department made no award on Part II because the claim was not filed within 180 days of the May 11-28, 1999, delivery dates.[49] Quiet Acres no longer challenges that determination.[50] Part III was a claim under the storage bond for the balance due on the remaining 681.52 bushels of soybeans on Assembling Sheet No. 55 at $4.70 per bushel. The Department determined that these deliveries had to be classified as a sale because the beans were direct-shipped to a terminal and that the claim was not timely because it was not filed within 180 days of the October 21-28, 1999, delivery dates or, at the latest, the November, 1999, forfeiture.[51]
44. Robert Leet has been a grain farmer for 30 years and farms about 1,800 acres of corn and soybeans, some on rented land. He has delivered grain to what is now Imogene Elevator for 30 years. He has always delivered his grain for storage and received scale tickets so he knew how much he had delivered. He never requested or received warehouse receipts, except on occasions when he used his grain as collateral on CCC loans. He never received copies of his assembling sheets or any other accounting of how much grain he had in storage. He ordered his grain sold when he needed cash to pay rents, notes that became due, or to buy equipment. When he did so, he would tell Miller how much he needed and leave it to Miller to figure out the number of bushels to be sold at the current price, deduct any storage and check off fees, and give him a check. The fees would usually be shown on a slip received with the check.[52]
45. Leet owns one or more tandem grain trucks. He also owns a semi-tractor with a grain trailer. When the semi was not being used for his farm, he leased it to a local trucking company so he could keep the semi and driver busy. That company hauled grain for others, including Imogene Elevator.[53]
46. Leet engaged in a number of direct shipment transactions with Imogene Elevator under a verbal agreement with Miller. His understanding of their agreement was that when the elevator was full, Miller would have him take the grain directly to one of the terminals instead of taking it to the elevator, unloading it, reloading it, and then transporting it to the terminal for Imogene Elevator. He understood, as did Miller, that by doing so, he was exchanging his grain for grain in the elevator, which he then had in storage. He also understood that the deliveries to the terminals were to cover contracts Imogene Elevator had with those terminals and that Imogene Elevator received payment from those terminals for that grain. He, or his drivers, received copies of the bills of lading for the shipments stamped with the scale weights the same as scale tickets, so Leet knew how much grain he would be credited with. The agreement between Leet and Miller also provided that Imogene Elevator would not have to pay Leet a trucking charge for hauling the grain to the terminal, but would pay Leet the full terminal price for the grain when he ordered it sold, rather than the discounted price normally paid by Imogene Elevator.[54]
47. On October 10 and 11, 1998, Leet delivered six loads of soybeans to the elevator and received scale tickets with “storage” circled. The deliveries were accumulated on Assembling Sheet No. 1407 and totaled 2,913.00 bushels. The Assembling Sheet states that 1599.00 bushels were paid for by check no. 11558, leaving 1,314 bushels.[55]
48. The Purchase Report shows that check no. 11558 was issued to Leet on September 20, 1999, in the amount of $18,000. It shows that the check was for 4,830.00 bushels of beans, but, unlike most entries, does not show the unit price. It lists the full price as $20,913.90, on which the ½% SPARC of $104.57 was calculated.[56] In a normal transaction, the SPARC amount would have been deducted from the full price, along with a storage fee, and the difference paid to the farmer. Ignoring the storage fee because it is not shown on the Purchase Report and difficult to determine, Leet would have been paid $20,809.33 for 4,830.00 bushels. At a price of $4.33, less the SPARC, $18,000.00 would pay for 4,177.93 bushels, or a bit less if storage could be calculated.
49. There is no reliable evidence as to as to when the other 3,231 (4830 – 1599) bushels had been delivered. Leet estimated from his records that he should have had about 4,400 bushels of beans from 1998 and 1999 deliveries stored about that time, but he may have included beans delivered later in 1999 in that estimate.[57] The Purchase Report shows that Imogene Elevator made substantial payments to Leet or to the CCC on his behalf in August and September, 1998, and February, 1999.[58] Bettendorf’s audit did not list Assembling Sheet No. 1407 as having any outstanding obligation nor did it list any other previously existing obligation.[59]
50. On September 14, 1999, Leet delivered four loads of soybeans to the elevator totaling 1,878.66 bushels. The first ticket was marked “storage,” the rest were not marked. The tickets were accumulated on Assembling Sheet No. 1483. No payments were recorded on Assembling Sheet No. 1483.[60]
51. On October 6, 12, and 13, 1999, Leet delivered seven loads of soybeans to the elevator. Four of the tickets were marked “storage,” the rest were not marked. Three tickets totaling 963.38 bushels were accumulated on Assembling Sheet No. 1110, which was titled “Robert Leet (Lohse Farm)” and four tickets totaling 1,878.66 bushels were accumulated on Assembling Sheet No. 1123 which was titled “Robert Leet (Conn Farm)”. No payments were recorded on Assembling Sheet No. 1110, but on Assembling Sheet No. 1123, payments for 894.84 and 576.50 bushels were recorded as being paid on check nos. 9368 and 9594, respectively. Assembling Sheet No. 1123 also listed a deduction of 128.17 bushels for “out of store $33.54.” The balance left on the sheet was 1.83 bushels.[61]
52. Check No. 9368 was issued to Joann Conn on January 15, 2000, in the amount of $3,832.61 (894.84 bushels at $4.40, less ½% SPARC, plus $85.00 for some reason) and was probably a rent payment. Check No. 9594 was issued to Leet on June 20, 2000, in the amount of $25,000. The Purchase Report shows that it was for 576.50 bushels at $4.63 per bushel, resulting in a full price of $2,669.20 and a SPARC deduction of $13.35.[62] Thus, Leet was paid $2,655.85 for the 576.50 bushels and $22,344.15 for something else. At $4.63 per bushel, less the SPARC, $25,000 would pay for 5,426.70 bushels of soybeans.
53. From May 26 to May 30, 2000, Leet direct-shipped five truckloads of corn totaling 4,655.00 bushels to the Cargill and Cenex Harvest States terminals in Savage, MN, for Imogene Elevator. Imogene Elevator accumulated the bills of lading on Assembling Sheet 79, which was dated June 2000. No payment is indicated on the assembling sheet.[63]
54. From July 17 to 20, 2000, Leet direct-shipped four truckloads of beans to ADM in Mankato and two to Honeymead in Mankato for Imogene Elevator.[64] They were accumulated on Assembling Sheet No. 83 and totaled 5,206.46 bushels. The assembling sheet indicates that 5,000 bushels were paid for with Check No. 9638, leaving a balance of 206.46 bushels. That amount was later transferred to Assembling Sheet No. 84, leaving a balance of zero.[65]
55. Check No. 9638 was for $24,000.00 and was paid to Leet sometime between July 12 and 31, 2000. The Purchase Journal does not attribute it to any amount of grain or deduct any check off fees. At the $4.63 per bushel Imogene Elevator had paid Leet the previous month, $24,000 would pay for 5,209.63 bushels of beans with a deduction for the SPARC, but not for storage.
56. Between July 31 and September 14, 2000, Leet direct-shipped twelve truckloads of beans to ADM and nine to Honeymead for Imogene Elevator. They were accumulated on Assembling Sheet No. 84 and totaled 18,416.67 bushels. The 206.46 bushels from Assembling Sheet No. 83 were added. The assembling sheet indicates that 5,000 bushels were paid for with Check No. 9673[66] and 265.95 bushels with Check No. 9727, leaving a balance of for 13,357.18 bushels.[67]
57. On September 11 and 14, 2000, Leet direct-shipped another two truckloads of beans totaling 1,770.33 bushels to ADM for Imogene Elevator. They were accumulated on Assembling Sheet No. 92, which was prepared by Miller and referred only to “ADM” without any bill of lading numbers. Miller noted that all the bushels were paid for on September 22, 2000, with Check No. 9727. The price was $4.60 per bushel, resulting in a total price of $8,143.52, SPARC of $40.72, and payment of $8,102.80.[68]
58. Check No. 9673 was issued to Leet August 14, 2000, in the amount of $20,000. The Purchase Report does not list a price or SPARC.[69] At the $4.63 Imogene Elevator had paid him the previous month, $20,000 would have paid for 4,341.36 bushels of beans and the SPARC.
59. Check No. 9727 was issued to Leet September 22, 2000, in the amount of $10,000. Again, the Purchase Report does not list a price or SPARC.[70] Assembling Sheet No. 92 shows that $8,102.80 of the $10,000 was applied to the 1,770.33 bushels on that sheet at $4.60, leaving $1,897.20 available. Assembling Sheet 84 says that Check No. 9727 also covered 265.95 bushels from that sheet. At the $4.60 per bushel paid that day on the other assembling sheet, Leet should have been paid $1,217.25, after the SPARC deduction. So he was paid an extra $679.95. Stated otherwise, the $1,897.20 actually paid Leet for 414.07 bushels of beans and the SPARC.
60. To summarize the foregoing, from October, 1998, through September, 2000, Leet delivered or direct-shipped 32,749.79 bushels of beans to or for Imogene Elevator. From September, 1999, through September, 2000, Imogene Elevator made payments to Leet sufficient to pay for 22,215.89 bushels of beans at the prices being paid to Leet at the time payments were made. Imogene Elevator did not pay Leet for the 4,655.00 bushels of corn direct-shipped in May 2000.
61. The $10,000 check Leet received September 22, 2000, was good. Leet went by the elevator the following week, apparently September 28 or 29 when Bettendorf was there, saw the state car, and stopped. Miller came out and told Leet that the elevator was closing, but that Leet didn’t have to worry about the money because the bonding company would take care of it and there would be plenty of money for everyone. Leet took that to mean that he didn’t have to do anything, but after talking with other farmers about Imogene Elevator’s status, he went to see Attorney Edman in mid-October, 2000, and was told that he may have to file a claim against the bond.[71]
62. The Department received Leet’s claim on April 2, 2001. It included a notarized Proof of Claim, a cover letter from Edman dated March 30, 2001, and seven assembling sheets. It claimed compensation under the storage bond for 17721.40 bushels of soybeans at $4.40 per bushel and 4655.00 bushels of corn at $1.30 per bushel.[72] The Department ultimately determined that the claim was timely under the notice it had published. The Department did not allow the claim on Assembling Sheet No. 1407 due to insufficient verification. (The scale tickets produced at the hearing were not submitted with the claim.) The Department considered the direct shipments as cash sales and the deliveries to the elevator as storage. Thus, it awarded Leet $64,823.09 against the buyer’s bond, subject to proration, and $13,421.22 against the storage bond.[73] Leet argues that the claims involving direct shipments should not be labeled “cash sales” and should instead be awarded as timely filed storage claims.
63. In August, 2000, Richard Maday delivered 3,514.50 bushels of soybeans to the elevator. The scale tickets, which were not marked as to storage or sale, were accumulated on Assembling Sheet No. 1177.[74]
64. Also in August, 2000, Maday direct-shipped 3,513.99 bushels of soybeans from his farm to ADM and Honeymead for Imogene Elevator pursuant to an agreement similar to the one between Leet and Imogene Elevator. The beans were accumulated on Assembling Sheet No. 86.[75] Maday understood from Miller that grain direct-shipped would be treated the same as grain hauled to the elevator.[76]
65. Maday believed that his beans were in storage and, at the time of the closing, had not yet ordered his beans sold. He has not been paid for the beans.
66. The Department received Maday’s claim on April 2, 2001. It included a notarized Proof of Claim, a cover letter from Edman dated March 30, 2001, and the two assembling sheets. It claimed compensation under the storage bond for both the 3,513.99 and 3,514.50 bushels of soybeans at $4.40 for a total of $30,925.35.[77] The Department ultimately determined that the claim was timely under the notice it had published. The Department considered the direct shipments a cash sale and the deliveries to the elevator as storage. Thus, it awarded Maday $15,461.55 against the buyer’s bond and $15,463.80 against the storage bond.[78] Maday argues that the direct shipments should be awarded as timely filed storage claims.
67. From May 9 to August 25, 2000, Richard Malo made 55 fairly regular deliveries of corn to Imogene Elevator, at about 280 bushels per load, totaling 14,724.09 bushels.[79] He was given some scale tickets marked “store,” but most of them had no indication of sale, contract, or storage.[80] The 30 deliveries through June 28, 2000, totaling 8,013.91 bushels were accumulated on Assembling Sheet 1300, and the remaining deliveries totaling 6710.18 bushels were accumulated on Assembling Sheet 410. He was paid for 1,292.69 bushels at $1.51 on June 29, 2000, and for 3,000 bushels at $1.25 on September 11, 2000.[81] He has not been paid for the 3,721.22 bushels remaining on Assembling Sheet 1300, nor for the 6710.18 bushels on Assembling Sheet 410.
68. From August 29 to September 6, 2000, Malo made 12 deliveries of soybeans to Imogene Elevator totaling 2818.63 bushels of soybeans and received handwritten scale tickets with no indication of sale, contract, or storage. The tickets were accumulated on Assembling Sheet 1181. Malo was paid for 1,000 bushels of soybeans at $4.30 per bushel on September 11, 2000.[82] He has not been paid for the remaining 1,818.63 bushels.
69. The Department received Malo’s claim on April 2, 2001, and considered it timely. The proof included a notarized Proof of Claim, a cover letter from Malo’s counsel dated March 30, 2001, and Assembling Sheets 1300, 410, and 1181.[83] The Department characterized all the deliveries as storage claims and awarded Malo $21,562.79 against the storage bond.[84]
70. Wausau disputed the timeliness of this claim, but has reached a settlement with Malo. They agree that his claim should be allowed in the amount of $13,000 against the storage bond. Malo retained any rights he may have to any buyer’s bond claims, but asserted no such claim in this proceeding.
71. Ted Fisher delivered soybeans to Imogene Elevator during July, 1998, that were accumulated on Assembling Sheet 1351. The scale tickets had been marked “contract,” and a balance of 753.50 bushels remained at the time of Bettendorf’s audit.[85] On July 29, 1998, Fisher had been paid for 1,000 bushels at $6.08 per bushel.[86] On August 5, 1998, he was paid for another 1,000 bushels at $5.55 per bushel and given a sales slip showing the payment calculation and stating, “753.50 Bu. stored.”[87]
72. On August 31 and September 1, 2000, Fisher made six deliveries totaling 2243.17 bushels of soybeans to Imogene Elevator. He was given scale tickets handwritten on sales slips without any indication of sale, contract, or storage.[88] The slips were accumulated on Assembling Sheet 1183. On September 8, 2000, he was paid with check no. 9707 for 1,000 bushels of soybeans at $4.41 per bushel.[89] He was never paid for the remaining 1,243.17 bushels.[90]
73. On September 19 and 20, 2000, Fisher made 11 deliveries totaling 5,170.35 bushels of corn to Imogene Elevator and received scale tickets handwritten on sales slips without any indication of sale, contract, or storage.[91] They were accumulated on Assembling Sheet 431. Fisher has not been paid for the 5,170.35 bushels of corn.[92]
74. The Department received Fisher’s claim on April 3, 2001,[93] but treated it as received on April 2, 2001, and timely. Fisher made three claims totaling $15,506.80 under the storage bond. The Department characterized the 1998 soybean delivery as a sale because no valid VECC had been provided by Imogene Elevator, the August and September, 2000, soybean delivery as a sale because payments had been made even though one check was outstanding, and the September, 2000, corn delivery as storage because the scale tickets were unmarked. It awarded Fisher $6,721.45 against the storage bond and $8,785.45 against the buyer’s bond.[94]
75. Wausau disputed the timeliness of this claim, but has reached a settlement with Fisher. They agree that the claim should be allowed in the amount of $7,500 against the storage bond. Fisher retained any rights he may have to any buyer’s bond claims, but asserted no such claim in this proceeding.
76. From June 5 to 17, 2000, Maday Farms, Inc., (a corporation apparently owned by Louis and Daren Maday) delivered 3,574.99 bushels of soybeans to the elevator, which were accumulated on Assembling Sheet No. 1167. On June 13, 2000, Imogene Elevator paid Maday Farms for 2,500 of those bushels at $5.21 per bushel, less the SPARC. On June 21, 2000, Maday Farms delivered another load to the elevator containing 459.33 bushels of soybeans that was added to the assembling sheet. On June 23, 2000, Imogene Elevator paid Maday Farms for 562.99 bushels at $4.74 per bushel, less the SPARC. That left a balance of 971.83 bushels on Assembling Sheet No. 1167.[95]
77. On August 16 and 17, 2000, Maday Farms direct-shipped 2,635.93 bushels of soybeans to ADM and Honeymead for Imogene Elevator. The beans were accumulated on Assembling Sheet No. 87. Imogene Elevator paid Maday farms for 2,416.00 of the bushels on August 24, 2000, deducting ½% SPARC and 80¢ for something else. That left a balance of 219.93 bushels on Assembling Sheet No. 87.[96]
78. On August 17 and 18, 2000, Maday Farms delivered two loads of soybeans to the elevator totaling 763.50 bushels. They were accumulated on Assembling Sheet No. 1178, which was at first titled for “Maday Bros” then changed to “Maday Farms”.[97] On August 25 and 28, 2000, Maday Farms delivered two loads of soybeans to the elevator totaling 1029.17 bushels. Maday Farms received handwritten scale tickets no. 2043 and 2045. Those tickets do not appear on the Assembling Sheet No. 1178 in evidence, but the Bettendorf audit listed all four tickets totaling 1,792.67 bushels as appearing on that assembling sheet and that it was for Louis and Daren Maday.[98] Maday Farms was not paid for those beans.
79. In total, Maday Farms has not been paid for 2,984.43 bushels of soybeans.
80. The Department received Maday Farm’s claim on April 2, 2001. It included a notarized Proof of Claim signed by Louis Maday, a cover letter from Edman dated March 30, 2001, the two scale tickets, and the two assembling sheets. It claimed compensation under the storage bond for 2,984.43 bushels of soybeans at $4.40 for a total of $13,131.49.[99] The Department ultimately determined that the claim was timely under the notice it had published. The Department considered the direct shipments a cash sale and the deliveries to the elevator as storage. Thus, it awarded Maday Farms $967.69 against the buyer’s bond and $12,158.80 against the storage bond.[100] Maday agrees with the Department’s determination.[101] Wausau disputes the timeliness of the claim.
81. On August 31, 2000, Gregory Murphy delivered three loads of soybeans to Imogene Elevator totaling 777.33 bushels and received scale tickets handwritten on sales slips without any indication of sale, contract, or storage.[102]. The tickets were accumulated on Assembling Sheet 1182.[103] Murphy had not been paid.
82. The Department received Murphy’s claim on April 2, 2001, and considered it timely. The claim included a notarized Proof of Claim in the amount of $3,420.25, under the grain storage bond, a cover letter from Murphy’s counsel dated March 30, 2001, and the three sales tickets issued by Imogene Elevator.[104] The Department characterized the deliveries as for storage and awarded Murphy $3,420.25 against the storage bond.[105]
83. Wausau disputed the timeliness of this claim, but has reached settlement with Murphy under the storage bond in the amount of $2,750. Murphy retained any rights he may have to any buyer’s bond claims, but asserted no such claim in this proceeding.
84. Between August 1997 and June 2000, Kenneth Steuber made grain deliveries to Imogene Elevator. The following deliveries are at issue: Assembling Sheet 1368, August 1997, for an unpaid balance of 5,290.34 bushels of corn, tickets marked store or unclear; Assembling Sheet 1403, October 1997, for an unpaid balance of 700 bushels of corn, tickets unmarked; Assembling Sheet 1390, September 1998, for an unpaid balance of 2,553.18 bushels of soybeans, tickets marked store, unmarked, or marked contract; Assembling Sheet 1227, August 1999, for an unpaid balance of 5,783.93 bushels of corn, tickets marked store or unmarked; Assembling Sheet 1105, October 1999, for 1,267.17 bushels of soybeans, tickets unmarked; Assembling Sheet 1264, October 1999, for 4,699.67 bushels of corn, tickets marked store or unmarked; Assembling Sheet 405, June 2000, for 2,136.96 bushels of corn, tickets unmarked.[106]
85. The Department received Kenneth Steuber’s claim on April 2, 2001. It included a notarized Proof of Claim in the amount of $59,248.21 under the grain storage bond, a cover letter from Steuber’s counsel dated March 30, 2001, seven assembling sheets, and a Bankruptcy Schedule F listing of creditors holding unsecured nonpriority claims showing Ken Steuber owed for a cash sale of 4,167 bushels of soybeans.[107] The Department made no award on the Schedule F claim due to lack of substantiation. It characterized all the deliveries on the assembling sheets as storage claims and awarded Kenneth Steuber $37,106.32 against the storage bond.
86. Wausau disputed the timeliness of this claim, but has reached settlement with Kenneth Steuber under the storage bond in the amount of $27,000. Kenneth Steuber retained any rights he may have to any buyer’s bond claims, but asserted no such claim in this proceeding.
87. On August 12, 1999, Lenny and Wilbur Steuber delivered 430.36 bushels of corn to Imogene Elevator. The ticket or tickets were marked “store” and listed on Assembling Sheet 1226.[108] The Steubers have not been paid for the corn.
88. The Department received Lenny Steuber’s claim on April 2, 2001. It included a notarized Proof of Claim in the amount of $559.47 under the grain storage bond, a cover letter from Steuber’s counsel dated March 30, 2001, and a Bankruptcy Schedule F listing of creditors holding unsecured nonpriority claims showing Lenny and Will Steuber owed for 430.36 bushels of soybeans.[109] Because the Assembling Sheet 1226 listed in Bettendorf’s audit verified the information of the Schedule F, the Department awarded Lenny Steuber $559.47 against the storage bond. If the corn check off is deducted, he should be awarded $557.32. Wausau disputes the timeliness of this claim.
89. On June 22 and 23, 2000, Duane Sanders delivered 2,302.50 bushels of corn to Imogene Elevator. The deliveries were listed on Assembling Sheet 406. Three of the four scale tickets he received had “Storage” circled. From August 4 through 24, 2000, Sanders made seven deliveries of corn totaling 3,801.43 bushels that were listed on Assembling Sheet 421. One ticket had “Storage” circled, the rest were unmarked. Sanders made two more deliveries of corn August 24, one August 25, and one September 14, 2000, all of which were listed on Assembling Sheet 426 and totaled 1,735.35 bushels.[110] Sanders never requested that Imogene Elevator redeliver or sell these 9345.39 bushels of stored corn and has not been paid for them.
90. On August 22, 2000, while Sanders was at the elevator delivering a load of corn for storage, Imogene Elevator was also loading a semi with corn to deliver to the Corn Plus ethanol plant, but ran out of corn. Miller told Sanders that he didn’t have enough “overhead”[111] and asked whether he could send the truck out and have it loaded at Sanders’ farm. Sanders agreed and on August 22, 2000, Imogene Elevator sent a semi truck from Granada Transport to pick up two loads of corn from Sanders and have them delivered to the Corn Plus ethanol plant. Sanders considered the corn to be going into storage, “exactly the same as the loads I was hauling in at the time and receiving storage tickets for.” The loads contained a total of 1807.50 bushels and were credited to Gary Hanson’s Corn Plus account, not Imogene Elevator’s. Sanders does not have a Corn Plus account. Imogene Elevator never provided Sanders with any scale tickets, assembling sheets, or other accounting, or payment, for this corn.[112]
91. From June 23 to June 29, 2000, Sanders delivered eight loads of soybeans to Imogene Elevator. On July 26, 2000, he delivered another load. Three of the nine scale tickets had “Storage” circled, the rest were unmarked. The tickets were accumulated on Assembling Sheet 1169 and totaled 4,063.00 bushels.[113] Imogene Elevator paid Sanders for 1,000 of the bushels at $4.32 per bushel on September 5, 2000, and for 1,000 bushels at $4.39 per bushel on September 11, 2000.[114] That left 2063.00 bushels.[115]
92. On September 20 or 21, 2000, Imogene Elevator wrote out Check No. 9730 to Sanders in the amount of $9,298.66, which was for 2063.00 bushels at $4.53 per bushel, less $46.73 for the SPARC. However it did not deliver the check to Sanders until sometime in late-November. Sanders deposited the check in a money market fund. It was returned for non-sufficient funds to Sanders by a letter from the fund dated November 29, 2000, a Wednesday. That was the first notice Sanders had that he would not be paid for his beans.[116] Although Sanders testified he received the letter somewhat earlier, the earliest he could have received it was November 30, and allowing three days for mail delivery as is normally required by court rules, he would have received it Saturday, December 2, 2000.
93. The Department received Sanders’ claim on April 20, 2001. It apparently had been mailed April 19, 2001. The claim included a notarized Proof of Claim, a memorandum outlining the claim, Imogene Elevator bankruptcy documents, assembling sheets, the returned check and accompanying letter, the Corn Plus bills-of-lading tickets, scale tickets issued by Imogene Elevator, and a trucking company worksheet. Sanders claimed the following items:
7839.28 bushels of corn at $1.75 per bushel $13,718.74
1808.571 bushels of corn at $1.75 per bushel 3,160.50
2063.01 bushels of beans at $4.53 per bushel 9,345.39
Total $26,224.63[117]
94. The Department found the Sanders claim untimely, but said that had it been timely, $13,718.74 would have been awarded under the storage bond and $735.99 under the buyer’s bond.[118] The buyer’s bond figure would be the result of awarding $9,345.39 and then prorating it with the other awards under the $40,000 buyer’s bond limit. The Department did not explain why it would have made no award for the corn that had been direct shipped to Corn Plus, but it was likely because of lack of acceptable documentation.
95. Sanders maintains that his claim was timely filed within 180 days of notice of the breach. Wausau disputed the timeliness of the claim, but has reached a settlement with Sanders under the storage bond in the amount of $6,500. Sanders retained any rights he may have to any buyer’s bond claims and asserts that he is entitled to an award for the soybean payment check that bounced.[119]
96. On July 7 and August 8, 2000, Gary Hanson delivered 4915.19 bushels of corn to Imogene Elevator as shown by Assembling Sheet 415. The scale tickets were unmarked. All but 2080 bushels were redelivered to Corn Plus.[120]
97. The Department received Hanson’s claim on April 13, 2001. It included a notarized Proof of Claim for 270 bushels at $1.70 totaling $459 under buyer’s bond and one Assembling Sheet 415.[121] The Department found this claim untimely, but said that had it been timely, $459 would have been awarded under the storage bond.[122]
98. Wausau disputed the timeliness of the claim, but has reached a settlement with Hanson under the storage bond in the amount of $250. Hanson retained any rights he may have to any buyer’s bond claims, but asserted no such claim in this proceeding.
99. On September 21, 2000, Kenneth Tenney delivered 12 loads of corn totaling 3915 bushels to Imogene Elevator and received scale tickets handwritten on sales slips without any indication of sale, contract, or storage. The corn was under loan to the F.S.A. and Tenney had received a 30-day marketing authorization. On September 25, 2000, Tenney was informed that Imogene Elevator was closed and delivered the balance of the corn to another elevator and received $1.53 per bushel. He was not paid for the corn he had delivered four days earlier.
100. On November 28, 2000, the Department received Tenney’s claim. It included a notarized Proof of Claim for the 3915 bushels at $1.53, totaling $5,989.87, a short letter from Tenney, and the twelve scale tickets issued by Imogene Elevator.[123] In the Bettendorf audit, these deliveries had been labeled as for storage because the tickets were unmarked.[124] In its May 14, 2001, determination, the Department awarded $5,989.87 under the buyer’s bond because Tenney’s letter indicated he intended that the grain be sold.[125] In the November 15, 2001, Reconsideration, the Department returned to classifying the transaction as storage and awarded Tenney $5,989.87 under the storage bond
101. Wausau reached a settlement with Kenneth Tenney to allow the claim under the storage bond in the amount of $4,000.00. Tenney retained any rights he may have to any buyer’s bond claims, but asserted no such claim in this proceeding.
Based upon the foregoing Findings of Fact, the Administrative Law Judge makes the following:
1. The Commissioner of Agriculture and the Administrative Law Judge have jurisdiction in this matter pursuant to Minn. Stat. §§ 14.50 and 223.17.
2. The Department of Agriculture has fulfilled all relevant substantive and procedural requirements of law or rule. In particular, the Department has given proper notice of the hearing in this matter.
3. The burden of proof is on the claimants to establish that they are entitled to bond awards by a preponderance of the evidence.[126]
4. Public grain warehouse operators such as Imogene Elevator buy and store grain and are subject to the Grain Buyers Act,[127] the Grain Storage Act,[128] and rules adopted by the Department to implement those acts.[129]
5. To be licensed, Minn. Stat. § 223.17, subd. 4, requires a grain buyer to obtain a bond in a statutorily prescribed amount. Similarly, Minn. Stat. § 232.22, subd. 4, requires a public grain warehouse operator to obtain a “condition one” bond (storage bond) and “condition two” bond (buyer’s bond) in amounts prescribed by the Department in rule. Minn. R. 1562.0700, subp. 2, restates the statutory amounts for grain buyer’s bonds and Minn. R. 1562.0700, subp. 4, sets the amounts for grain storage bonds.
6. A grain buyer’s bond must provide for payment of loss to producers caused by the grain buyer's failure to pay, upon the owner's demand, for grain purchased in a cash sale.[130] However, the buyer’s bond does not cover any transaction that constitutes a voluntary extension of credit (VECC).[131] A grain storage bond must provide for payment of loss caused by the failure of a person licensed to store grain 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.[132]
7. A VECC is:
a contract for the purchase of a specific amount of grain from a producer in which title to the grain passes to the grain buyer upon delivery but the price is to be determined or payment for the grain is to be made at a date later than the date of delivery of the grain to the grain buyer. Voluntary extension of credit contracts include deferred or delayed payment contracts, unpriced sales, no price established contracts, average pricing contracts, and all other contractual arrangements with the exception of cash sales and grain storage agreements evidenced by a grain warehouse receipt or scale ticket marked "storage."[133]
8. Surety bonds are to be liberally construed in order that they accomplish their statutory purpose of protecting persons who deal with a publicly licensed warehouseman in normal and usual transactions from sustaining loss because of the warehouseman’s default.[134]
9. Grain warehouse operators must immediately issue a scale ticket to every depositor for each load of grain received and the scale ticket must state whether the grain was sold to the operator for cash, sold to the operator on a contract, or received by the operator for storage, along with the particulars of the grain deposited.[135]
10. A single-shipment delivery of grain to a grain buyer is a “cash sale” if the seller receives payment by the next business day or, for multiple-shipment deliveries, within the later of the next business day or 48 hours after the last shipment.[136]
Any transaction which is not a cash sale in compliance with the provisions of this subdivision constitutes a voluntary extension of credit which is not afforded protection under the grain buyer's bond, and which must comply with sections 223.175 and 223.177.
This provision was deleted by Minn. Sess. Laws 2000, ch. 477, § 61. At the same time,[137] Minn. Stat. § 223.175 was amended by Minn. Sess. Laws 2000, ch. 477, § 62, as follows:
A written confirmation required under section 223.177, subdivision 2,[138] and a written voluntary extension of credit contract must include those items prescribed by the commissioner by rule. A contract shall include a statement of the legal and financial responsibilities of grain buyers and sellers established in this chapter. A contract shall also include the following statement in not less than ten point, all capital type, framed in a box with space provided for the seller's signature: "THIS CONTRACT CONSTITUTES A VOLUNTARY EXTENSION OF CREDIT. THIS CONTRACT IS NOT COVERED BY ANY GRAIN BUYER’S BOND.” If a written contract is provided at the time the grain is delivered to the grain buyer, the seller shall sign the contract in the space provided beneath the statement. A transaction that does not meet the provisions of a voluntary extension of credit, including the issuance and signing of a voluntary extension of credit contract, is a cash sale.
12. The effect of the changes to the Grain Buyer’s Act in 2000 was to clarify that sales transactions in which the grain buyer did not comply with statutory requirements were to be considered cash sales covered by the buyer’s bond, rather than VECCs not covered by the buyer’s bond. This interpretation of the prior language had previously been adopted by two of three members of a Court of Appeals panel, with one member expressly disagreeing.[139] This statutory change confirmed the majority’s view.
13. With regard to grain received for storage,Minn. R. 1562.1500, requires the grain warehouse operator to issue a grain warehouse receipt to the depositor within five working days of the date of deposit.[140] Even if the grain warehouse operator fails to deliver the grain house receipt, under In the Matter of Claims Against the Kern Grain Company, 369 N.W.2d 565, 570 (Minn. App. 1985)(rev. denied 1985). the grain is considered to be in storage if that is what the depositor intended.
Subd. 14. [OPEN STORAGE.] "Open storage" means grain or agricultural products received by a warehouse operator from a depositor for which warehouse receipts have not been issued or a purchase made and the records documented accordingly.[141]
Minn. Stat.§ 232.23, subdivision 3, was amended as follows:
Subd.
3. [GRAIN DELIVERED CONSIDERED SOLD
STORED.] All grain delivered to a public grain warehouse operator shall
be considered sold stored at the time of delivery, unless
arrangements have been made with the public grain warehouse operator prior to
or at the time of delivery to apply the grain on contract, for shipment or
consignment or for storage cash sale. Grain may be held in open storage or placed on a warehouse
receipt. Warehouse receipts must be
issued for all grain held in open storage within six months of delivery to the
warehouse unless the depositor has signed a statement that the depositor does
not desire a warehouse receipt. The
warehouse operator's tariff applies for any grain that is retained in open
storage or under warehouse receipt.[142]
Finally, Minn. Stat.§ 232.23, subdivision 6, was amended as follows:
Subd.
6. [LIABILITY.] A public grain
warehouse operator issuing a grain warehouse receipt is liable to the
depositor for the delivery of the kind, grade, and net quantity of grain
called for by the grain warehouse receipt. or scale ticket marked
"store."[143]
15. Again, these changes appear to be clarifications consistent with Department rules and a court decision.[144] The change from a delivery being presumed to be a sale unless other arrangements are made to being presumed to be for storage unless other arrangements are made is significant, but of limited effect here. Under the prior statutory presumption in favor of a sale, Kern Grain held that if the depositor intended it to be storage, and the elevator operator did not issue required documents showing the contrary, the transaction was a storage deposit. That holding was not changed by this amendment of the statute. On the contrary, the amendment complements and to some extent implements the Kern Grain interpretation of the prior statute. The issue that arises in some of the pre-August, 2000, deliveries in this matter is whether there is evidence that the farmer intended his grain to go into storage, even if the scale tickets were unmarked.[145]
16. A person claiming to be damaged by the breach of an agreement to purchase grain according to the terms of a cash sale or by breach of an agreement to store grain must file a written claim with the Commissioner of Agriculture within 180 days of the breach.[146] A bond is not liable for claims filed after 180 days from the date of breach of the bond.[147]
17. The Grain Buyers Act and the Grain Storage Act authorize the Commissioner to determine the validity of bond claims.[148] Department rules establish the procedure for doing so. Upon receipt of a valid claim, the Department must publish notice of the claim in the official county newspaper where the business is located. The notice must appear for three consecutive days (if it’s a daily newspaper) and state that a claim has been filed against the bond of the licensee, the name and address of licensee, that additional claims should be filed with the Commissioner, where to file additional claims, and the bond disbursement date.[149] The bond disbursement date is to be 90 days from the publication of the notice and at that time the Department is to initiate payments on valid claims.[150]
18. In re Kern Grain Co., 369 N.W.2d 565 (Minn. App. 1985), rev. denied, held that where it was found that customers did not have actual knowledge of the elevator’s breach of its storage obligations until the elevator filed for bankruptcy, particularly where the elevator deliberately misled the customers into thinking they might eventually be paid, the claim filing period should be measured from the date of actual knowledge.[151]
19. Grain Buyer’s Bond No. 877706-08624237, 486 N.W.2d 466, 467 (Minn. Ct. App. 1992), distinguished Kern Grain as applying only to grain in storage. It held that, “[b]reach of a cash sale contract occurs when the seller does not receive contemporaneous payment according to the terms of Minn. Stat. § 223.16, subd. 2a (1990).” It was based upon the presumption in the 1990 version of the Grain Buyers Act that a cash sale for which payment is not tendered within 48 hours becomes a voluntary extension of credit. However, the changes to Minn. Stat. §§ 223.17, subd. 5, and 223.175, discussed in Conclusions No. 11 and 12 above, reversed that statutory presumption. Now, the failure of a grain buyer to pay the farmer no longer creates a voluntary extension of credit contract; it merely creates a violation of the law by the buyer. Since the basis for Grain Buyer’s Bond decision has changed, the result should now be different. Thus, if Imogene Elevator strung a grain seller along by partial payments and assurances of full payment, that seller may not have had actual notice of a breach until it had reason to believe it would not be paid.
20. As described in the Findings, the Department determined that the claim filing deadline should be April 2, 2001. In its Post-Hearing Memorandum, the Department added the further clarification that the because the statutes require claims to be filed, not received within 180 days, all the claims mailed on or before the deadline date are timely. In this matter then, it argues that all the claims mailed by April 2, 2001, were timely. In addition, the Department argues that what it did by its deadline was establish the earliest date that a breach might have occurred based upon the limited information it had. As to individual claimants, the Department argues that under Kern Grain, actual knowledge of a breach later than September 28, 1999, may trigger a later 180-day filing period. Thus, the Department concludes, receipt of notice of Imogene Elevator’s bankruptcy filing may be the appropriate starting date for certain claimants.
21. The Department’s arguments and conclusions are correct. In this case, Imogene Elevator’s actions prevented the farmers from learning of its insolvency for days or weeks after the September 28, 2000, surrender of its license. It did not post a notice of closure as required by law. Up to that point it led the farmers to believe they had grain in storage that could be sold upon request. After that point, Miller continued to assure people they would be paid. The first person told of the closure was Leet and that was on September 28, 2000, at the earliest, and perhaps a day or more later. The Department properly determined that the earliest breach would have occurred 48 hours later and that 180 days later, not counting weekend days at the start and end of the period, was April 2, 2000. Thus, all the claims mailed by April 2, 2000, were timely.
22. The Hanson and Sanders claims were the only ones mailed after April 2, 2000. Wausau has settled with Hanson. Sanders was partially a storage bond case that has been settled and a buyer’s bond claim that is disputed. That claim is discussed below.
23. It is generally appropriate to deduct the soybean and corn check off fees in determining the awards in this matter because those were obligations of the farmers to the associations collecting those fees and Imogene Elevator usually deducted those fees. Moreover, they are usually not difficult to calculate. They should not be deducted from the stipulated bond awards. Storage fees are required to be collected in accordance with the tariff, but Imogene Elevator had many different practices as to whether to charge storage fees and how much to charge. Therefore, storage fees will not be deducted unless the storage fee agreement is clear.
24. The 67,840.01 bushels of corn Thompson Farms delivered in June and July, 1999, must be considered as delivered for storage to Imogene Elevator, even though some of the corn was delivered directly to processors or terminals rather than the elevator. This is because Imogene Elevator took control of the corn as its own and directed such delivery for its own benefit to satisfy its obligations to those processors or terminals. Moreover, Imogene Elevator informed Thompson Farms that the corn would be treated as stored, issued warehouse receipts for the corn, and treated the corn as stored by recording that amount of corn on its books and binding itself to buy and pay for or deliver the same amount and quality of grain upon request by Thompson Farms. Imogene Elevator cannot now deny that the corn was effectively delivered for storage and neither can its surety Wausau. The same conclusion applies to the 39,723.20 bushels delivered in August and early September, 1999, and the 41,192.48 bushels delivered in late September, even though no warehouse receipt was issued for those 41,192.48 bushels, because Imogene Elevator’s actions and intent were identical in all three transactions.
Wausau argues the position that the Department argues in the other direct-shipped claims below, namely, that grain that was never actually in the elevator can never be considered “stored” there, as demonstrated by the provision of Minn. Stat. § 232.23, subd. 7, that a warehouse receipt may not be issued for grain not actually received into the grain warehouse.[152] But Imogene Elevator did issue warehouse receipts to Thompson Farms, apparently in violation of the statute. And the expression that a depositor’s grain is “in storage” is a handy shorthand fiction because grain is fungible and the operator’s liability is for a like amount and quality of grain, not the same grain, so actual receipt is not important. Moreover, Minn. Stat. § 232.23, subd. 3, set forth in Conclusion No. 14 above, speaks of grain delivered to the “public grain warehouse operator,” not “warehouse” as being considered stored unless other arrangements are made. The corn was delivered to Imogene Elevator, the legal entity that was the operator, when Imogene Elevator took control of the corn at the Thompson Farms premises and had it shipped to a terminal for itself.
In addition, while it is not entirely clear, Kern Grain[153] approved of treating direct-shipped grain as being delivered for storage. The Court describes the deliveries in question as grain shipped to terminals when the elevator was full. The Court held that while those deliveries should normally have been treated as price-later sales because that was the arrangement between the elevator and the terminal, they were properly treated as storage under the facts of the case because that is what depositor intended and because the elevator should have issued appropriate receipts to the farmers, but did not and was estopped from denying that it was storage. The result is even more compelling here, where Imogene Elevator actually issued warehouse receipts. For all these reasons, the corn was “delivered for storage.”
25. Contracts No. 508, 509, and 511 were orders by Thompson Farms to sell corn in storage and agreements by Imogene Elevator to buy that corn on the terms stated in the contracts. While Miller used forms entitled “Contract for Future Delivery of Grain,” that is not what they were because Miller modified them to state the actual agreement between Thompson Farms and Imogene Elevator.
26. Under its obligations as a public grain warehouse operator and the terms of the contracts, Imogene Elevator was obligated to pay Thompson Farms in June, 1999, for 67,840.00 bushels of corn in storage at $2.02 per bushel, 39,723.00 bushels of corn in storage at $1.90 per bushel, and 41,192.00 bushels of corn in storage at $1.90 per bushel, all less 18¢ per bushel storage and ½¢ per bushel corn check off.[154] That is a total of obligation of $263,255.63. Imogene Elevator paid Thompson Farms $10,000.00 in July, 1999, leaving an unpaid obligation of $253,255.63.
27. Imogene Elevator’s failure to pay for the corn during June, 1999, breached its obligations under the Grain Storage Act and the storage bond to Thompson Farms to pay for grain in storage when Thompson Farms ordered that the grain be sold in lieu of taking redelivery of grain. Therefore, under Minn. Stat. § 232.22, subd. 7(a), and Minn. R. 1562.1800, subp. 2, Thompson Farms is entitled to an award of $253,255.63 under the storage bond.
The Department’s position that the corn changed from being “in storage” to being “sold” in June is not well-supported. It is based in part upon the title of the contract form, “Contract for Future Delivery of Grain,” from which the Department deduced that a sale took place in June. But, as concluded above, the contracts were actually orders for the sale of grain from storage at an agreed date and price. Moreover, for the most part, the sales never took place because the agreed-upon payments were not made. The only sale that was completed was for the $10,000 paid in July. Thus, the great majority of the corn remained in storage. The Department argued that its interpretation would be different if timing of the sale or claim were different, but nothing requires that an order for sale from storage be an immediate sale and it has been stipulated that the Thompson Farms claim was timely.
Most importantly, Minn. R. 1562.1800, subp. 2, specifically states that a grain storage bond must cover losses caused by the failure of a person licensed to store grain 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. Thompson Farms, the depositor, ordered that the grain be sold and Imogene Elevator failed to pay. The rule, which interprets Minn. Stat. § 232.22, subd. 7(a), is binding and cannot be ignored. If the Department’s interpretation is applied, there would seldom be coverage under a storage bond. If all grain producers are like the ones in this case, virtually every depositor of grain eventually orders that the grain be sold in lieu of redelivery. Strictly applying the Department’s logic, once a sale is ordered, the grain transforms from being “in storage” to being “sold,” and coverage changes simultaneously from the storage bond to the buyer’s bond, so the change would apply even to orders for immediate sale. But the statutes and rules determine bond coverage by the intent of the farmer at the time of the original delivery, not by the status of the grain after the farmer has ordered it sold from storage. So even if the grain was thereafter considered “sold,” coverage for a breach would still be under the storage bond.
28. Thompson was underpaid by Imogene Elevator in the amount of $32,188.16 for cash sales of corn. As agreed by Thompson, Wausau, and the Department, his claim should be allowed against the buyer’s bond in that amount, subject to proration.
29. As with the Thompson Farms direct shipments, Imogene Elevator treated the beans as stored in the elevator. It recorded the beans on an assembling sheet, it issued a warehouse receipt for them, and it did not pay for them immediately. By requesting and using a warehouse receipt to secure a loan, Quiet Acres demonstrated its intent to store the beans. Thus, the beans must be considered to have been delivered for storage and Quiet Acres is entitled to an award for the remaining 681.52 bushels of soybeans under the storage bond.
30. As to Quiet Acres, no breach occurred until Quiet Acres had notice that it could no longer order redelivery or sale of its beans in storage. That would have been September 25, 2000, at the earliest. Its December 1, 2000, claim was timely.
31. Quiet Acres has reduced its claim and now argues that it is entitled to the $4.40 per bushel value for beans used by the Department, less the tariff storage rate of 3¢ per month for 13 months.[155] That calculation is appropriate. Quiet Acres should thus be awarded $2,732.89 under the storage bond.
32. The Robert Leet claim was timely because it was mailed on March 30, 2001, prior to the April 2, 2001, deadline established by the Department.
33. All the beans and corn at issue here, including the direct-shipped grain, was delivered by Leet to Imogene Elevator for storage. Leet believed he delivered it for storage, as did Miller. Imogene Elevator treated it as stored. The direct-shipped grain was delivered to Imogene Elevator when it was loaded on Leet’s trucks to be delivered to grain terminals for Imogene Elevator. The agreements between Leet and Imogene Elevator were mutually beneficial and reasonable.
34. Imogene Elevator underpaid Leet for the grain in storage. It paid him for 22,215.89 bushels of the 32,749.79 bushels of beans he delivered from October, 1998, through September, 2000, leaving the difference of 10,533.90 bushels unpaid. No credit for beans delivered earlier than that can be given because no reliable evidence of such has been provided. On Friday, September 25, 2000, Imogene Elevator had paid Leet $4.60 per bushel for beans, which was the full terminal price given in lieu of Imogene Elevator having to pay Leet trucking fees for delivering its beans. That price should be used to determine the award. With the SPARC deduction, Leet should be awarded $48,213.66 for the beans. He should also be awarded $6,028.23 for the 4,655.00 bushels of corn at $1.30 per bushel, less the ½¢ per bushel corn check off. His total award should be $54,241.89 under the storage bond.
35. The Maday claim was timely because it was mailed on March 30, 2001, prior to the April 2, 2001, deadline established by the Department.
36. All of Maday’s beans, including the direct-shipped beans, were delivered by Maday to Imogene Elevator for storage. Maday understood that he had delivered them for storage, as did Miller. Imogene Elevator treated them as stored. The direct-shipped beans were delivered to Imogene Elevator when they was loaded on trucks to be delivered to grain terminals for Imogene Elevator.
37. Imogene Elevator failed to redeliver or pay Maday for his 7,028.49 bushels of soybeans in storage. He should be paid at the $4.40 per bushel price of beans at the time of closing. With the SPARC deduction, Maday should be awarded $30,770.73 under the storage bond.
38. Richard Malo was not paid in full by Imogene Elevator for grain delivered for storage. As agreed by Malo and Wausau, his claim should be allowed in the amount of $13,000 against the storage bond.
39. Ted Fisher was not paid in full by Imogene Elevator for grain delivered for sale and for storage. The Department awarded $704.86 under the buyer’s bond, after proration, and $6,721.45 under the storage bond, a total of $7,426.31. As agreed by Fisher and Wausau, his claim should be allowed in the amount of $7,500 against the storage bond. Fisher did not assert any claim he may have had under the buyer’s bond, even though the Department determined that he did have such a claim. Because the agreed amount exceeds the Department’s total award, it appears that Fisher has waived any additional buyer’s bond payments. Therefore, no buyer’s bond payment should be allowed.
40. The Maday Farms claim was timely because it was mailed on March 30, 2001, prior to the April 2, 2001, deadline established by the Department.
41. The 219.93 bushels of beans direct-shipped to ADM and Honeymead could be considered stored for the same reasons as grain direct-shipped by the other claimants. But Maday Farms has agreed to the Department’s determination on that issue, so they should be considered as delivered for sale in this case. The other beans were properly considered as delivered for storage.
42. Imogene Elevator failed to redeliver or pay Maday Farms for 219.93 bushels of sold beans and 2,764.50 bushels of soybeans in storage. They should be paid at the $4.40 per bushel price of beans at the time of the closing. With the SPARC deduction, Maday Farms should be awarded $962.85 under the buyer’s bond and $12,102.98 under the storage bond.
43. Gregory Murphy was not paid by Imogene Elevator for grain delivered for storage. As agreed by Murphy and Wausau, his claim should be allowed in the amount of $2,750 against the storage bond.
44. Kenneth Steuber was not paid in full by Imogene Elevator for grain delivered for storage. As agreed by Kenneth Steuber and Wausau, his claim should be allowed in the amount of $27,000 against the storage bond.
45. Lenny Steuber’s claim was timely because it was mailed on March 30, 2001, prior to the April 2, 2001, deadline established by the Department.
46. Lenny Steuber was not paid by Imogene Elevator for 430.36 bushels of corn delivered for storage. At the $1.30 per bushel price at the time of the closing and deducting the corn check off fee, he is owed $557.32. He should be awarded that amount under the storage bond.
47. Duane Sanders was not paid by Imogene Elevator for the 1,735.35 bushels of corn Sanders delivered for storage. As agreed by Sanders and Wausau, this claim should be allowed in the amount of $6,500 against the storage bond.
48. The direct-shipped corn was intended by Sanders to be for storage, like all the other corn he was delivering to Imogene Elevator at the time. Imogene Elevator asked to have it picked it up by a trucker hired by Imogene Elevator rather than have Sanders deliver it to the elevator. Sanders agreed to the arrangement as an accommodation to Imogene Elevator. Delivery to Imogene Elevator was legally complete when Imogene Elevator’s driver picked up the corn at Sanders’ farm. Because the corn was for delivered to Imogene Elevator, the entity, for storage, it is covered by the agreed-to $6,500 award under the storage bond.
49. Sanders’ delivery of soybeans was a cash sale. The sale agreement was not breached until Imogene Elevator’s check for the final payment was returned. Sanders had notice of that December 2, 2000. Sanders had not demanded payment prior to that. His 180 days to file a claim expired May 31, 2001. Thus, his claim mailed April 19, 2001, was timely at least as to that transaction. Sanders should be awarded the amount of the check, $9,345.39, which already had the SPARC deducted, under the buyer’s bond, subject to proration.
50. Gary Hanson was not paid in full by Imogene Elevator for grain delivered for storage. As agreed by Hanson and Wausau, his claim should be allowed in the amount of $250 against the storage bond.
51. Kenneth Tenney was not paid by Imogene Elevator for grain delivered for storage. As agreed by Tenney and Wausau, his claim should be allowed in the amount of $4,000 against the storage bond.
52. Because the buyer’s bond awards exceed the amount of the bond, the $40,000 proceeds of the bond must be apportioned to the claimants on a pro rata basis.[156]
Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:
IT IS HEREBY RESPECTFULLY RECOMMENDED that the Commission of Agriculture order that payments be made under the buyer’s bond and storage bond as follows:
|
Buyer's Bond |
Storage |
|
||
|
Claimant |
Allowance |
Pro rata Payment |
Bond Payment |
Total |
|
Merwin E. Thompson Farms, Inc. |
|
|
253,255.63 |
253,255.63 |
|
Merwin E. Thompson |
32,188.16 |
9,841.82 |
|
9,841.82 |
|
Quiet Acres, Inc. |
|
|
|
|
|
Part I |
88,325.57 |
27,006.34 |
|
27,006.34 |
|
Part II |
|
|
|
0.00 |
|
Part III |
|
|
2,732.89 |
2,732.89 |
|
Robert Leet |
|
|
54,241.89 |
54,241.89 |
|
Richard Maday |
|
|
30,770.73 |
30,770.73 |
|
Richard Malo |
|
|
13,000.00 |
13,000.00 |
|
Ted Fisher |
|
|
7,500.00 |
7,500.00 |
|
Maday Farms |
962.85 |
294.40 |
12,102.98 |
12,397.38 |
|
Gregory Murphy |
|
|
2,750.00 |
2,750.00 |
|
Kenneth Steuber |
|
|
27,000.00 |
27,000.00 |
|
Lenny Steuber |
|
|
557.32 |
557.32 |
|
Duane Sanders |
9,345.39 |
2,857.44 |
6,500.00 |
9,357.44 |
|
Gary E. Hanson |
|
|
250.00 |
250.00 |
|
Kenneth T. Tenney |
|
|
4,000.00 |
4,000.00 |
|
|
|
|
|
|
|
Totals |
130,821.97 |
40,000.00 |
414,661.44 |
454,661.44 |
Dated this 3rd day of July, 2003.
s/Steve M. Mihalchick
STEVE M. MIHALCHICK
Administrative Law Judge
Pursuant to Minnesota Statute § 14.62, subdivision 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail.
[1] Imogene is a very small town in Martin County. It has a Granada, Minnesota, mailing address.
[2] Hearing Transcript (T.) 168, 190-192, 335-36.
[3] State Ex. 16 at 141. The Department’s exhibits are tabbed and numbered 1 through 27 and are continuously numbered as pages 1 through 288. State Exs. 2-15 each relate to a particular claimant. Wausau’s exhibits are tabbed and numbered 40 through 47 and individually paginated. Ones that relate to a particular claimant are also numbered with the number of that claimant’s tab in the Department’s exhibits.
[4] State Ex. 13 at 123-130.
[5] T. 169-70; and see, e.g., State Ex. 7 at 61 and State Ex. 11 at 92.
[6] State Exs. 8 at 65 and 9 at 81.
[7] T. 170-73; State Ex. 5 at 51, Wausau Ex. 44, Sanders Ex. 13-001.
[8] T. 81; Wausau Ex. 42-002.
[9] See, Wausau Ex. 44.
[10] T. 169-70; and, e.g., Leet Ex. 5-RL-06 and State Ex. 5 at 52.
[11] Even though it is now one bond, it is still referred to as two separate bonds.
[12]State Ex. 23 at 272-78.
[13] State Ex. 23 at 276.
[14] State Ex. 13 at 102.
[15] State Ex. 17 at 142. The salvage value was minimal, about $12,000 and apparently insufficient to create a “special fund” for distribution along with bond proceeds under Minn. Stat. § 232.22, subd. 7 (d) and (e). See, T. 127-28; Sanders Ex. 13-003-004.
[16] State Ex. 17 at 187-91.
[17] T. 46, 139, 149.
[18] State Ex. 15. No postmark dates for any of the claims were placed in evidence.
[19] State Exs. 1-4.
[20] Wausau Ex. 40. The notice did not state a bond disbursement date because Johnson considered it impractical to do set a disbursement date before the claims were filed. T. 114.
[21] T. 49-50, 86, 135-36.
[22] State Exs. 5-14.
[23] State Ex. 19 at 208-17.
[24] T. 51-52; State Ex. 21 at 251 and 264.
[25] State Ex. 21 at 251.
[26] T. 52-53, 77-80.
[27] State Ex. 21 at 261.
[28] State Ex. 21 at 264.
[29] State Ex. 22.
[30]State Ex. 2 at 10-12, 22; Ex. 2-MTFARMS-006 at 89-91.
[31]State Ex. 2 at 13 and 22.
[32] State Ex. 2 at 8. The contract actually identifies Merwin Thompson as the seller rather than Thompson Farms, but the seller’s signature is, “Merwin Thompson Farms, Inc.”
[33]Exs. 2-MTFARMS-004 at 45-47, 56, 2-MTFARMS-005 at 27-28, 2-MTFARMS-006 at 96-104.
[34]State Ex. 2 at 9, 14-17, and 23.
[35] State Ex. 2 at 9 and 19-20.
[36] State Ex. 2 at 3-23, Wausau Ex. 44-016. The Purchase Report lists the check as paid to “M Thompson.”
[37] State Ex. 21 at 256-57.
[38] See, T. 14-15, clarifying October 15, 2002, Prehearing Order.
[39] State Ex. 3 at 27.
[40] State Ex. 3 at 32-34. Assembling Sheet 407 is now missing, but Examiner Bettendorf recorded its contents in his report at State Ex. 17 at 153-57.
[41] Bettendorf reported the sale price on Assembling Sheet 407 as $1.90, but the Department decided to allow the $1.98 price to apply to the 11,206.14 bushels on Assembling Sheet 407 as well.
[42] State Ex. 3 at 29-31. The fourth check, No. 9677 in the amount of $15,000, is shown on Wausau Ex. 44-002.
[43] State Ex. 3.
[44] T. 363-64.
[45] State. Ex. 17 at 190. The Purchase Report shows the two payments totaled $128,408.99, an amount sufficient to pay for over 65,000 bushels. Wausau Ex. 46 at 44-027.
[46] State Ex. 17 at 190.
[47] State Exs. 17 at 190 and 21 at 258-59.
[48] State Ex. 4 at 35-44; see State Ex. 17 at 190.
[49] Payment would have been due Monday, May 31, 1999, at the latest. 180 days from that is Monday, November 29, 1999.
[50] Post-Hearing Memorandum of Thompson Farms, Thompson, and Quiet Acres at 17; T. 14-15.
[51] State Ex. 21 at 258-259; T. 14-15.
[52] T. 293-96, 304-05; Leet Ex. 5-RL-07.
[53] T. 305-06, 327.
[54] T. 300-03, 305-06, 328.
[55] State Ex. 5 at 47; Leet Ex. 5-RL-01.
[56] Wausau Ex. 44-020. The full price would have been the result of a unit price of $4.33 per bushel, about what Imogene Elevator was paying for beans at the time.
[57] T. 321-22.
[58] Wausau Ex. 44-033, 042, 043; Leet Ex. 5-RL-07.
[59] State Ex. 17 at 187.
[60] State Exs. 5 at 50 and 17 at 187.
[61] State Exs. 5 at 50 and 17 at 187.
[62] Wausau Ex. 44-013 and 44-005.
[63] State Ex. 5 at 53.
[64] Honeymead issued scale tickets and Truck Shipment Advices. The tickets and advices for the two loads are not in evidence, but their numbers shown on Assembling Sheet No. 83 are in the series used by Honeymead. See Leet Ex. 5-RL-06.
[65] State Ex. 5 at 51.
[66] The parties agree that the assembling sheet mistakenly list Check No. 9683.
[67] State Ex. 5 at 51; Leet Ex. 5-RL-06.
[68] Leet Ex. 5-RL-10.
[69] Wausau Ex. 44-002; Leet Ex. 5-RL-08.
[70] Wausau Ex. 44-002; Leet Ex. 5-RL-08.
[71] T. 309, 316-17.
[72] State Ex. 5 at 45-53.
[73] State Ex. 21 at 259-60.
[74] State Ex. 6 at 57.
[75] State Ex. 6 at 55.
[76] Post-Hearing Letter of Richard L. Maday.
[77] State Ex. 6 at 54-57.
[78] State Ex. 21 at 260.
[79] State Ex. 7 at 60-61.
[80] State Ex. 17 at 187-88.
[81] State Ex. 7 at 60. Wausau Ex. 44-004 indicates that the June payment was for 2,500 bushels.
[82] State Exs. 7 at 62 and 17 at 188.
[83] State Ex. 7.
[84] State Ex. 21 at 260-61. The Reconsideration also lists the amount as $21,562.78 at State 254.
[85] State Ex. 17 at 187.
[86] Wausau Ex. 44-045.
[87] Wausau Ex. 44-044, State Ex. 8 at 65.
[88] State Ex. 8 at 73-76.
[89] State Ex. 8 at 66, Wausau Ex. 44-001.
[90] Imogene Elevator did mark Assembling Sheet 1183 that it paid Fisher for the balance and wrote a check to him on September 16, 2000. However, the check was being held at the time of Bettendorf’s audit and was later voided. State Ex. 17 at 187, Wausau Ex. 44-001.
[91] State Ex. 8 at 67-72.
[92] State Ex. 17 at 187.
[93] State Ex. 8.
[94] State Ex. 21 at 261.
[96] State Ex. 9 at 80; Wausau Ex. 44-002.
[97] State Ex. 9 at 81.
[98] State Exs. 9 at 79 and 17 at 174, 175, and 177.
[99] State Ex. 9 at 77-82.
[100] State Ex. 21 at 261-62.
[101] Post-Hearing Letter of Louis J. Maday, President, Maday Farms, Inc.
[102] State Ex. 10 at 85.
[103] State Ex. 17 at 188.
[104] State Ex. 10.
[105] State Ex. 21 at 262.
[106] State Ex. 21 at 262-63.
[107] State Ex. 11 at 86-95.
[108] State Ex. 17 at 189.
[109] State Ex. 12 at 96-98.
[110] State Ex. 13 at 105-07, 111-18.
[111] “Overhead” apparently refers to reserves of grain in the elevator, not to the lack of room for semi trucks as one brief argues.
[112] T. 34-35, 140-42, State Ex. 13 at 100-01, 119-22.
[113] State Ex. 13 at 110, 126-30.
[114] State Ex. 13 at 110, Wausau Ex. 44-001. The Purchase Report shows the payment was for 1,000 bushels. Assembling Sheet 1169 appears to have been changed from 1000.00 to 954.33 bushels, perhaps to adjust for an after-the-fact addition of ticket no. 17894, which had 45.67 bushels on it.
[115] Bettendorf’s audit listed 2,072.03 bushels remaining, a difference of 9.03 bushels. State Ex. 17 at 188.
[116] T. 271-73, 288-290; State Exs. 13 at 108-10, 17 at 188; Wausau Ex. 44-001.
[117] State Ex. 13 at 99-130. Sanders did not modify the Proof of Claim form to read “storage bond” instead of “buyer’s bond.’ The 3,160.50 figure was apparently an error; the calculation actually yields $3,165.00.
[118] State. Ex. 21 at 264.
[119] Sanders Post-hearing summary.
[120] State Ex. 17 at 187.
[121] State Ex. 14 at 131-32. Hanson did not modify the Proof of Claim form to read “storage bond” instead of “buyer’s bond.’
[122] State. Ex. 21 at 264.
[123] State Ex. 15 at 133-140.
[124] State Ex. 17 at 189.
[125] State. Ex. 19 at 212-13.
[126] Minn. R. 1400.7300, subp. 5; and 1562.1700, subp. 2.
[127] Minn. Stat. ch. 223. In 1982, various statutes that had existed for many years were reorganized and modified in the Grain Buyers’ Act. Minn. Sess. Laws 1982, ch. 635.
[128] Minn. Stat. ch. 232. Likewise, in 1982, existing statutes were reorganized and modified in the Grain Storage Act. Minn. Sess. Laws 1982, ch. 508.
[129] Minn. R. ch. 1562. The rules remain mostly unchanged since they were adopted in 1988. Notice of Adoption published at 12 State Register 2392 (May 2, 1988) adopting proposed rules published at 12 State Register 1597-1608 (February 1, 1988).
[130] Minn. Stat. §§ 223.17, subd. 8(a) and 232.22, subd. 7(b); Minn. R. 1562.1800, subp. 1.
[131] Minn. Stat. § 232.22, subd. 7(b).
[132] Minn. R. 1562.1800, subp. 2.
[133] Minn. R. 1562.0100, subp. 25, and Minn. Stat. § 223.16, subd. 16. The rule added the phrase, “or scale ticket marked ‘storage,’” to the statutory definition, acknowledging the existence of open storage without grain receipts.
[134] St. Paul Ins. Companies v. Fireman’s Fund Am. Ins. Co., 245 N.W.2d 209, 217 (Minn. 1976).
[135] Minn. Stat. § 232.23, subd. 2; Minn. R. 1562.1300. Minn. R. 1562.1300, provides, in part, as follows: The scale ticket must state specifically whether the grain was sold on contract or for cash and the price at which the grain was sold. If the grain was not sold, then the scale ticket must state whether the grain was received for storage. The term “contract” signifies any form of sale except a cash sale. The scale ticket must state specifically whether the grain was sold on contract or for cash and the price at which the grain was sold. If the grain was not sold, then the scale ticket must state whether the grain was received for storage. The term “contract” signifies any form of sale except a cash sale.
[136] Minn. Stat. § 223.16, subd. 2a, which provides:
(a) a sale for which payment is tendered to the seller not later than the close of business on the next business day after the sale, either in cash or by check, or by mailing or wiring funds to the seller’s account in the amount of at least 80 percent of the value of the grain at delivery; or
(b) a sale of a shipment of grain which is part of a multiple shipment sale, for which a scale ticket clearly marked “CASH” has been received by the seller before completion of the entire sale, and for which payment is tendered in cash or by check not later than ten days after the sale of that shipment, except that when the entire sale is completed, payment is tendered in cash or by check not later than the close of business on the next business day, or within 48 hours, whichever is later.
[137] All the amendments made by Minn. Sess. Laws 2000, ch. 477, relevant to this matter were effective August 1, 2000, because no effective date was specified.
[138] Minn. Stat. § 223.177, subd. 2, requires oral VECCs to be confirmed in writing by the buyer before the close of the next business day.
[139] In Re Grain Buyer’s Bond No. 877706-08624237, 486 N.W.2d 466, 469-70 (Minn. App. 1992).
[140]The Grain Storage Act states detailed requirements for grain warehouse receipts, but does not expressly require them to be issued. The requirement can be implied from the statutes.
[141] Minn. Sess. Laws 2000, ch. 477, § 63.
[142] Minn. Sess. Laws 2000, ch. 477, § 65.
[143] Minn. Sess. Laws 2000, ch. 477, § 66.
[144] Since Minn. Stat. § 232.23, subd. 3, now specifically allows open storage without a grain warehouse receipt, it supersedes the Minn. R. 1562.1500 requirement for grain receipts within five days.
[145] In making its claims determinations, the Department looks only to the claims documents and its audit records and does not attempt to determine intent beyond that. T. 160.
[146] Minn. R. 1562.1700, subp. 1; See, Minn. Stat. §§ 323.17, subd. 7, and 232.22, subd. 6.
[147] Minn. R. 1562.1700, subp. 4.
[148] Minn. Stat. §§ 323.17, subd. 8(b), and 232.22, subd. 7(c).
[149] Minn. R. 1562.1700, subp. 5.
[150] Minn. R. 1562.1700, subp. 6
[151] The Kern Court did not address the additional argument raised there by the Department that all the claims were timely because the Department had previously known of all the claims within the filing period by its own investigation.
[152].Wausau’s Post-Hearing Brief at 6.
[153] 369 N.W.2d 565.
[154] It is most likely that Imogene Elevator also intended to impose the storage fee on the third contract as well, even though Miller left off that that language and even though he didn’t charge it on the November 30, 1999, purchase.
[155] Post-Hearing Memorandum of Thompson Farms, Thompson, and Quiet Acres at 18.
[156] Minn. Stat. § 223.17, subd. 8(c); Minn. Stat. § 232.22, subd. 7(e)