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Sears v. Buyers

Court of Appeals of Indiana

December 21, 2018

Dick Sears, Appellant-Petitioner,
v.
Indiana Grain Buyers and Warehouse Licensing Agency, Appellee-Respondent.

          Appeal from the Putnam Circuit Court The Honorable Matthew Headley, Judge Trial Court Cause No. 67C01-1706-MI-236

          ATTORNEY FOR APPELLANT Fred L. Cline Danville, Indiana

          ATTORNEYS FOR APPELLEE Curtis T. Hill, Jr. Attorney General of Indiana Andrea E. Rahman Deputy Attorney General Indianapolis, Indiana

          ALTICE, JUDGE.

         Case Summary

         [¶1] Between 2009 and 2016, Dick Sears (Sears), an Indiana farmer, deposited corn and soybeans with a grain elevator, Cline Grain, Inc. (Cline), which was licensed with the Indiana Grain Buyers and Warehouse Licensing Agency (the IGBWLA). On April 8, 2016, Cline financially failed, and the IGBWLA took possession of Cline for the purpose of determining payment owed to depositors, including Sears. The IGBWLA determined that pursuant to Ind. Code § 26-3-7-2(5), which defines "claimant" under the relevant grain warehousing licensing law, Sears was entitled to payment for grain delivered to Cline in the twelvemonth period prior to the elevator's failure, but he did not qualify as a "claimant" for grain delivered more than twelve months prior to the failure. The IGBWLA, thus, denied Sears's claim for grain delivered before April 8, 2015.

         [¶2] Sears administratively appealed, and an ALJ affirmed the IGBWLA's decision. Sears appealed again, and the Ultimate Authority designated by the IGBWLA adopted the findings and order of the ALJ, but with an adjustment based on a statute enacted after the ALJ's decision, I.C. § 26-3-7-37. Based on that statute, the Ultimate Authority found that Sears was entitled to payment for grain delivered after October 8, 2014, but not for grain delivered before that date. Sears filed a petition for judicial review, and the trial court denied relief. Sears filed the current appeal, raising the following restated issue:

Whether the trial court properly determined that the IGBWLA's interpretation of the term "claimant," defined in I.C. § 26-3-7-2(5), was not arbitrary or capricious.

         [¶3] We affirm.

         Facts & Procedural History[1]

         [¶4] Before we address the facts and history specific to Sears's case, we find that a brief overview of the grain warehousing licensing law is helpful to the analysis.

         Grain Warehouse Licensing Law

         [¶5] Many Indiana farmers deliver their harvested grain to a grain warehouse for either storage or sale. The Indiana Grain Buyers and Warehouse Licensing and Bonding Law, Indiana Code Chapter 26-3-7 (the Licensing Law) governs the licensing and regulation of Indiana grain buyers and warehouses. The Licensing Law contains numerous financial and reporting requirements for warehouse licensees in order to maintain a license with the State. The Licensing Law appoints the IGBWLA as the agency to administer the Licensing Law.

         [¶6] When an Indiana farmer, also referred to as a producer or depositor, delivers harvested grain to a licensed grain warehouse for storage, title to the grain remains with the producer until either he converts the grain to "grain for sale" or ships the grain to another location. While in storage it is the producer's grain, and the producer pays a storage fee. In contrast, in a grain for sale situation, the grain is sold, under several contract options, to the licensee. One arrangement is referred to as "deferred pricing," under which a producer delivers the grain, title transfers to the licensee, and the price for the grain is determined and paid at a later date.[2] The grain that is the subject of this appeal originated as a deferred pricing transaction between Sears and Cline.

         [¶7] In the circumstance where a licensed warehouse fails financially, the IGBWLA is charged with liquidating the failed licensee's assets and distributing the proceeds through a liquidation process set forth in I.C. § 26-3-7-16.5 (Section 16.5). During the liquidation process, producers are permitted to file claims at or after a hearing. I.C. § 26-3-7-16.5(c), (d). The director of the IGBWLA makes a determination as to the total proven storage obligation of each of the claimants and the loss sustained by each depositor who has proven a claim. I.C. § 26-3-7-16.5(e). The IGBWLA then makes distributions based upon certain statutory priorities and prorates the distributions to the extent there are insufficient funds to pay all claimants in full. I.C. § 26-3-7-16.5(g).

         [¶8] For those claimants whose claim is not fully satisfied under the IGBWLA liquidation process, there is still a possibility of recovering some of their claim under the Indiana Grain Indemnity Program, set out in Ind. Code Chapter 26-4-1. It provides further protection for farmers who experience a loss as a result of the financial failure of a grain warehouse. If the farmer participated in the Grain Indemnity Program, he may be considered a claimant under the program if he possesses a claim resulting from a failure of a licensed grain buyer or warehouse and the claim has been adjudicated by the IGBWLA.[3] I.C. § 26-4-1-5.

         Sears's Claim

         [¶9] Sears is a farmer from New Salem, Indiana and, since at least 2009, he delivered harvested corn and soybeans to Cline, a grain elevator in Ladoga, Indiana. On April 8, 2016, Cline failed and surrendered its Indiana Buyer/Warehouse license to the IGBWLA. As a result, the IGBWLA, pursuant to Section 16.5 of the Licensing Law, took possession of Cline's business and initiated a claims procedure "for the purpose of settling outstanding accounts." Appellant's Appendix Vol. III at 17.

         [¶10] A claims hearing was held on May 8, 2016, and potential claimants had the opportunity to discuss their claims with IGBWLA auditors and were permitted to make oral presentations regarding their claims at the hearing. On June 1, 2016, Sears timely submitted his Proof of Loss claim form. On August 8, 2016, the IGBWLA issued its Findings of Fact and Final Order (IGBWLA Order). In determining which claims qualified for payment and which did not, the IGBWLA Order relied on I.C. § 26-3-7-2(5) (the Claimant Statute), which at that time defined "claimant" as follows:

(5) "Claimant" means a person that is unable to secure satisfaction within the twelve (12) months following delivery of the financial obligations due from a licensee under this chapter for grain that has been delivered to the licensee for sale or for storage under a bailment.

         Applying its interpretation of the Claimant Statute, the IGBWLA determined as follows with regard to claims:

Cline Grain failed, and therefore closed, on April 8, 2016 making that the operative date for a number of matters including the date of loss being discovered, the price of grain for deferred pricing . . . and the twelve month limit for claims is one year earlier, April 8, 2015.
Therefore, any grain deposited with Cline Grain before April 8, 2015 does not qualify for payment.

Id. at 18 (emphasis added). Applying the Claimant Statute, the IGBWLA bifurcated the many claims, including Sears's, into "Allowed Claims" for grain deposited on or after April 8, 2015, and "Denied Claims Over 12 Months" for grain deposited before April 8, 2015. Id. at 32, 76.

         [¶11] With respect to Sears's particular claim, the IGBWLA determined that Sears qualified for some payment[4] based on his claim of $97, 927.52, which represented 13, 295.982 bushels of corn and 6232 bushels of soybeans that he delivered to Cline within the twelve-month period from April 8, 2015, through April 8, 2016. The IGBWLA determined that Sears did not qualify as a claimant for grain delivered between 2009 and 2014, and it therefore denied his claim for payment for 83, 146.78 bushels of corn and 17, 293.41 bushels of soybeans delivered to Cline between 2009 and 2014.[5]

         [¶12] On August 26, 2016, Sears informed the IGBWLA that he wished to appeal the IGBWLA Order to challenge the determination that he was not entitled to payment for the grain delivered between 2009 and 2014. The narrow issue before the ALJ was "whether or not Dick Sears qualifies as a 'claimant' for grain that he delivered to Cline Grain before April 8, 2015." Appellant's Appendix Vol. IV at 2. After a December 16, 2016 hearing, the ALJ issued, on February 15, 2017, Recommended Findings of Fact, Conclusions of Law, Finding of Ultimate Fact and Order (ALJ Order), in which the ALJ concluded that "Sears is not a claimant as that term is defined in Ind. Code § 26-3-7-2(5), for grain he delivered to Cline Grain before April 8, 2015." Id. at 8.

         [¶13] In reaching this conclusion, the ALJ examined the legislative history of the Claimant Statute. It recognized that, prior to March 2010, "claimant" was defined in I.C. § 26-3-7-2(5) as follows:

"Claimant" means a person that is unable to secure satisfaction of the financial obligations due from a licensee under this chapter for grain that has been delivered to the licensee for sale or for storage under a bailment.

         In March 2010, the legislature amended the definition of "claimant" so that I.C. ...


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