80-4-538. Warehouse shortage -- remedies. (1) For purposes of this section, whenever a warehouse operator stores agricultural commodities of different kinds, a receipt holder has a claim against all commodities in storage, regardless of their kind, under the warehouse operator's receipt.

(2) Whenever it appears, after an investigation, that a warehouse operator does not have in the warehouse operator's possession sufficient agricultural commodities to cover the outstanding warehouse receipts, scale weight tickets, or other evidence of storage liability issued or assumed by the warehouse operator or when a warehouse operator refuses to submit the warehouse operator's books, papers, or property to lawful inspection, the department may give notice to the warehouse operator to comply with the following requirements:

(a) to cover the shortage;

(b) to give an additional bond as requested by the department; or

(c) to submit to an inspection as the department considers necessary.

(3) If the warehouse operator fails to comply with the terms of the notice within 24 hours from the date of issuance of the notice or within a further time as the department may allow, the department may petition the district court of the first judicial district, Lewis and Clark County, or the district court in the county where the licensee's principal place of business is located, as shown by the license application, for an order:

(a) authorizing the department to seize and take possession of any or all agricultural commodities in the warehouse or warehouses owned, operated, or controlled by the warehouse operator and of all books, papers, and property of all kinds used in connection with the conduct or the operation of the warehouse business and any materials that pertain in any way to that business; and

(b) enjoining the warehouse operator from interfering with the department in the discharge of its duties as required by this part.

(4) Upon taking possession, the department shall give written notice of its action to the surety on the bond of the warehouse operator and may notify the holders of record, as shown by the warehouse operator's record, of all warehouse receipts or scale weight tickets issued for agricultural commodities to present their warehouse receipts or other evidence of deposits for inspection or to account for the receipts or evidence of deposits. The department may cause an audit to be made of the affairs of the warehouse, including but not limited to the agricultural commodities of which there is an apparent shortage, to determine the amount of shortage and, if possible, to compute the shortage as to each depositor as shown by the warehouse operator's records. The department shall notify the warehouse operator and the surety on the bond of the amount of the shortage and notify each affected depositor by sending notices to the depositor's last-known address as shown by the records of the warehouse operator.

(5) The department shall retain possession of the agricultural commodities in the warehouse or warehouses and the books, papers, and property of the warehouse operator until:

(a) the warehouse operator or the surety on the bond has satisfied the claims of all holders of warehouse receipts or other evidence of deposits;

(b) the surety on the bond has satisfied all claims pro rata, if the shortage exceeds the amount of the bond; or

(c) the department is ordered by the court to surrender possession.

(6) If during or after the audit provided for in this section or at any other time the department has evidence that the warehouse operator is insolvent or is unable to satisfy the claims of all holders of warehouse receipts or other evidence of deposits, the department may petition the first judicial district court for the appointment of the department to operate or liquidate the business of the warehouse.

(7) At any time within 10 days after the department takes possession of any agricultural commodities or the books, papers, or property of any warehouse, the warehouse operator may serve notice on the department to appear in the first judicial district court at a time to be fixed by the court, and show cause why the agricultural commodities, books, papers, and other property should not be restored to the warehouse operator's possession.

(8) All necessary expenses incurred by the department in carrying out the provisions of this section may be recovered at the discretion of the department from the assets of the licensee, from the agricultural commodities held by the licensee under warehouse receipt, or in a separate civil action brought by the department in the first judicial district court.

(9) As a part of the expenses incurred, the department is authorized to include the cost of adequate liability insurance necessary to protect the department, its officers, and others engaged in carrying out this part.

(10) The department shall set by rule the time limits for:

(a) notification of its action on the surety bond of a warehouse operator;

(b) the holders of warehouse receipts or scale weight tickets to provide to the department evidence of deposit; and

(c) satisfaction of the claims of all holders of warehouse receipts or other evidence of deposits.

History: En. Sec. 45, Ch. 539, L. 1983; amd. Sec. 5, Ch. 299, L. 1991; amd. Sec. 10, Ch. 452, L. 1993.