Public Service Commission v. Grand Forks Bean Company, Inc.
900 N.W.2d 255
| N.D. | 2017Background
- Grand Forks Bean Company (licensed public grain warehouse) sold beans and proceeds ($768,053.24) were held in a PSC-administered trust after complaints from growers and a cease-and-desist leading to an insolvency proceeding.
- Bremer Bank held a security interest in Grand Forks Bean’s inventory and claimed a secured creditor priority (~$641,471.06).
- Nine growers filed claims; most asserted they were noncredit-sale receiptholders entitled to trust distributions; one (Amundson) claimed a credit-sale contract.
- PSC sought appointment as trustee and preservation/distribution of trust assets; district court appointed PSC trustee and held a hearing on classification of claims, insolvency date, pricing, and PSC costs.
- District court: denied Bremer’s intervention (but allowed full participation), held eight growers were noncredit-sale receiptholders (eligible for trust), Amundson had a credit-sale contract (ineligible), set insolvency date as Oct. 15, 2013 (price $38/cwt), awarded PSC costs and distributed proceeds.
- Bremer, PSC, Auto-Owners (surety), and Amundson appealed; Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bremer should have been allowed to intervene formally under N.D.R.Civ.P. 24 | Bremer: intervention as of right or permissive because its secured lien could be impaired and priority adjudicated | PSC/court: intervention unnecessary because Bremer could fully participate as a claimant; scope limited to ch. 60-04 matters | Court: denial of formal intervention was an abuse of discretion but harmless because Bremer was allowed full participation and could protect its interests |
| Proper definition and proof of a "credit-sale contract" under ch. 60-04 and §60-02-19.1 | Bremer: growers had credit-sale contracts under §60-04-01(2) and thus could be excluded from trust | PSC: §60-04-01(2) incorporates only the notice requirement of §60-02-19.1(7); UCC statute of frauds/signature applies | Court: §60-04-01(2) requires a written contract containing only §60-02-19.1(7) notice; UCC writing/signature rules apply; court correctly found Amundson had a credit-sale contract, others did not |
| Proper date of insolvency for pricing (market price on insolvency date) — Oct. 2013 v. Dec. 2014 | Bremer/PSC/Auto-Owners: insolvency date December 2014 (market price $23) | Grower (Altendorf)/court: insolvency triggered Oct. 2013 by a proper demand for payment after purchase/marketing (market price $38) | Court: apply §60-04-02 to determine ‘‘when’’ insolvency occurs; two alternative clauses exist; earliest qualifying date (Oct. 15, 2013) was correct |
| Whether PSC’s administrative costs/expenses have priority over secured creditor distributions | Bremer: PSC has no lien under §60-02-25.1; Bremer’s secured claim should be paid before PSC costs | PSC: statutes ( §§60-04-03.1, 60-04-09, 60-04-10) authorize payment of PSC costs from trust | Court: PSC entitled to costs and expenses from the trust fund under the insolvency statutes; award affirmed |
Key Cases Cited
- Pub. Serv. Comm’n v. Minnesota Grain, 756 N.W.2d 763 (N.D. 2008) (describing purpose and interpretation of ch. 60-04 insolvency scheme)
- Pub. Serv. Comm’n v. Valley Farmers Bean Ass’n, 365 N.W.2d 528 (N.D. 1985) (holders labeled as "warehouse receipts" do not become receiptholders when they are secured creditors; receiptholders have priority)
- Cent. States Grain, Inc., 371 N.W.2d 767 (N.D. 1985) (PSC entitled to costs in administering insolvency trust; distinctions among claim types in §60-04-09)
- White v. T.P. Motel, L.L.C., 863 N.W.2d 915 (N.D. 2015) (framework for analyzing intervention under N.D.R.Civ.P. 24 and persuasive use of federal Rule 24 analysis)