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Public Service Commission v. Grand Forks Bean Co., Inc.

Supreme Court of North Dakota

August 9, 2017

Public Service Commission, Petitioner, Appellee, and Cross-Appellant
v.
Grand Forks Bean Company, Inc., Respondent and Auto-Owners Insurance Company, Respondent, Appellee, and Cross-Appellant and Bremer Bank, National Association, Interested Party, Appellant, and Cross-Appellee and Curt Amundson, Interested Party, Appellee, and Cross-Appellant and Brent Baldwin, Baldwin Farms, Inc., Duane Altendorf, Ronald Adams, Nicholas Adams, Chuck Nelson, and WJS Nelson, Interested Parties and Appellees

         Appeal from the District Court of Grand Forks County, Northeast Central Judicial District, the Honorable Jon J. Jensen, Judge.

          Mitchell D. Armstrong (argued), Illona A. Jeffcoat-Sacco (on brief), and Brian Schmidt (on brief), Special Assistant Attorneys General, Bismarck, N.D., for petitioner, appellee, and cross-appellant Public Service Commission.

          Michael J. Morley, Grand Forks, N.D., for respondent, appellee, and cross-appellant Auto-Owners Insurance Company.

          Tracy A. Kennedy (argued) and John D. Schroeder (on brief), Grand Forks, N.D., for interested party, appellant, and cross-appellee Bremer Bank, National Association.

          Jon R. Brakke, Fargo, N.D., for interested party, appellee, and cross-appellant Curt Amundson.

          Daniel L. Gaustad (argued) and Joseph E. Quinn (on brief), Grand Forks, N.D., for interested parties and appellees Brent Baldwin, Baldwin Farms, Inc., and Duane Altendorf.

          Russell J. Melland, Grand Forks, N.D., for interested parties and appellees Ronald Adams, Nicholas Adams, Chuck Nelson, and WJS Nelson.

          OPINION

          TUFTE, JUSTICE.

         [¶ 1] Bremer Bank, the Public Service Commission ("PSC"), Auto-Owners Insurance Company, and Curt Amundson appeal from a judgment in a grain warehouse insolvency proceeding involving Grand Forks Bean Company after the district court appointed the PSC as trustee for the sale of dry edible beans from Grand Forks Bean's warehouse, denied Bremer's motion to intervene in the insolvency proceeding, and ordered distribution of the proceeds of the sale of the beans to growers determined to be noncredit-sale receiptholders. We conclude the district court did not err in construing applicable statutory provisions for insolvency proceedings and in applying those provisions. We affirm.

         I

         [¶ 2] During the time period relevant to this proceeding, the PSC licensed Grand Forks Bean as a public grain warehouse under N.D.C.C. ch. 60-02, and Auto-Owners provided Grand Forks Bean with a $100, 000 surety bond under N.D.C.C. § 60-02-09. Bremer loaned money to Grand Forks Bean, and Grand Forks Bean executed a security agreement granting Bremer a security interest in Grand Forks Bean's personal property, including its inventory.

         [¶ 3] In November and December 2014, the PSC received complaints from nine dry edible bean growers about difficulty in obtaining payment or marketing services for beans delivered to Grand Forks Bean's warehouse. The nine bean growers were Amundson, Beth Nelson as assignee of the estate of Brad Nelson, Duane Altendorf, Brent Baldwin, Baldwin Farms, Inc., Ronald Adams, Nicholas Adams, Chuck Nelson, and WSJ Nelson. After determining the complaints could not be resolved without an insolvency proceeding, the PSC issued a cease and desist order against Grand Forks Bean. The beans in Grand Forks Bean's warehouse were ultimately sold, and the proceeds were deposited in an interest-bearing trust fund account under N.D.C.C. § 60-04-08.

         [¶ 4] In February 2015, the PSC applied for appointment as the trustee of the trust fund assets from the sale of the beans, alleging Grand Forks Bean was insolvent under N.D.C.C. ch. 60-04 and seeking an order preserving trust assets. The district court appointed the PSC as trustee of the trust fund. According to Susan Richter, the licensing director at the PSC, as of February 29, 2016, the trust fund had a balance of $768, 053.24 from the sale of the beans.

         [¶ 5] Bremer and the nine growers filed claims against the trust fund proceeds and Auto-Owners' surety bond. Bremer alleged it was a secured creditor of Grand Forks Bean and the proceeds from the sale of Grand Forks Bean's bean inventory were subject to Bremer's security agreement and superior lien in the principal amount of $641, 471.06, plus interest. Bremer alternatively alleged it was entitled to distribution from the trust fund assets after distribution to any valid noncredit-sale receiptholders and the PSC was not entitled to a distribution from trust fund assets for any incurred expenses. The nine bean growers ultimately filed amended claims alleging they were noncredit-sale receiptholders of Grand Forks Bean, Grand Forks Bean's date of insolvency was no later than October 15, 2013, and the price per hundredweight of beans on the date of insolvency was $38.

         [¶ 6] Bremer moved to intervene as a respondent in the insolvency proceeding under N.D.R.Civ.P. 24 and to file an answer, a counterclaim against the PSC, and a cross-claim against Grand Forks Bean. Bremer asserted its perfected security interest in Grand Forks Bean's beans had priority over the other claimants' interest in the beans and the disposition of the insolvency proceeding would impair or impede its ability to protect its interest. Bremer sought a declaratory judgment on the superiority of its lien and foreclosure of its interest in Grand Forks Bean's assets.

         [¶ 7] The district court denied without prejudice Bremer's motion to intervene, but allowed Bremer to participate in the insolvency proceeding "to the full extent provided to any other receiptholder/claimant." The court explained that resolution of the issue of whether Bremer's formal intervention was required was not necessary because the PSC, Auto-Owners, and all the other claimants agreed Bremer could participate in the proceeding as a claimant and assert objections to any proposed distribution. The court said intervention would be granted if there were any objection to Bremer's participation, but any intervention would be limited to claims within the scope of an insolvency proceeding under N.D.C.C. ch. 60-04.

         [¶ 8] The PSC initially issued a trustee's report concluding all nine bean growers were noncredit-sale receiptholders entitled to participate in the trust fund proceeds and recommending payment of $652, 747.92 to those receiptholders based on a December 2014 insolvency date and a market price of $23 per hundredweight on that date.

         [¶ 9] After an evidentiary hearing, the district court modified the PSC's report and ordered payment of $770, 190 in claims plus interest from the trust fund proceeds and payment of the PSC's costs and expenses. The court ruled eight of the bean growers were noncredit-sale receiptholders entitled to participate in the insolvency trust fund proceeds. The court concluded one grower, Amundson, had a credit-sale contract with Grand Forks Bean under N.D.C.C. § 60-04-01(2) and was not entitled to participate in the trust fund proceeds. The court also determined the date of Grand Forks Bean's insolvency under N.D.C.C. § 60-04-02 was October 15, 2013, and the market price for beans on that date was $38 per hundredweight. The court determined three growers were entitled to a different price per hundredweight for their beans because they had cash claims with Grand Forks Bean for an agreed price. The court further concluded the PSC was entitled to its costs and expenses under N.D.C.C. §§ 60-04-03.1, 60-04-09, and 60-04-10. The court ordered disbursement of the trust fund proceeds and thereafter issued an order denying Auto-Owner's motion for post-hearing relief. Bremer, the PSC, Auto-Owners, and Amundson appeal.

         II

         [¶ 10] The issues raised in this appeal primarily involve the interpretation and application of statutory provisions for grain and seed warehouses and insolvent grain warehousemen. Statutory interpretation is a question of law, fully reviewable on appeal. Pub. Serv. Comm'n v. Minnesota Grain, Inc., 2008 ND 184, ¶ 9, 756 N.W.2d 763. The primary objective in interpreting statutes is to determine legislative intent, as that intent is expressed in the language of the statute. Pub. Serv. Comm'n v. Wimbledon Grain Co., 2003 ND 104, ¶ 20, 663 N.W.2d 186. Statutory provisions and all proceedings under those provisions "are to be construed liberally, with a view to effecting its objects and to promoting justice." N.D.C.C. § 1-02-01. Statutory provisions are given their plain, ordinary, and commonly understood meaning, unless they are specifically defined or a contrary intention plainly appears. N.D.C.C. § 1-02-02. Words and phrases are construed according to the context in which they are used, and technical words defined by statute must be construed according to that definition. N.D.C.C. § 1-02-03. Statutes are construed as a whole and harmonized to give meaning to related provisions. N.D.C.C. § 1-02-07. Statutes are construed to give effect to all of their provisions so no part of a statute is rendered inoperative or superfluous. N.D.C.C. § 1-02-38(2) and (4). "When the wording of a statute is clear and free of all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." N.D.C.C. § 1-02-05.

         [¶ 11] A district court's findings of fact in a warehouse insolvency proceeding are reviewed under the clearly erroneous standard of N.D.R.Civ.P. 52(a). See N.D. Pub. Serv. Comm'n v. Cent. States Grain, Inc., 371 N.W.2d 767, 777 (N.D. 1985); State ex rel. Pub. Serv. Comm'n v. R. F. Gunkelman & Sons, Inc., 219 N.W.2d 853, 858 - 59 (N.D. 1974). A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing the entire record, we are left with a definite and firm conviction a mistake has been made. Matter of Estate of Johnson, 2017 ND 162, ¶ 9. In reviewing findings of fact, we do not reweigh the evidence, and we "give due regard to the trial court's opportunity to judge the witnesses' credibility." N.D.R.Civ.P. 52(a)(6). Under N.D.R.Civ.P. 52(a), a choice between two permissible views of the evidence is not clearly erroneous, and simply because we may have viewed the evidence differently does not entitle us to reverse the district court's findings. Knudson v. Kyllo, 2012 ND 155, ¶ 9, 819 N.W.2d 511.

         III

         [¶ 12] Bremer argues it was entitled to intervene in the insolvency proceeding as a matter of right and as a matter of permissive intervention under N.D.R.Civ.P. 24. Bremer claims the district court's decision impeded its ability to litigate the priority of its security interest in Grand Forks Bean's inventory because the decision precluded consideration of statutes outside N.D.C.C. ch. 60-04 in determining the priority of Bremer's interest. The PSC responds that the district court did not err in denying Bremer's motion to intervene, and even if the court erred, any error was harmless because the court allowed Bremer to assert all arguments and participate fully in the insolvency proceeding to determine whether the growers were protected noncredit-sale receiptholders or had credit-sale contracts with Grand Forks Bean.

         [¶ 13] Rule 24, N.D.R.Civ.P., allows for intervention as a matter of right and for permissive intervention. White v. T.P. Motel, L.L.C., 2015 ND 118, ¶ 19, 863 N.W.2d 915; Skogen v. Hemen Twp. Bd. of Twp. Supervisors, 2010 ND 92, ¶ 7, 782 N.W.2d 638. We construe N.D.R.Civ.P. 24 liberally, and intervention historically has been liberally granted in North Dakota. White, at ¶ 22; Eichhorn v. Waldo Twp. Bd. of Supervisors, 2006 ND 214, ¶ 13, 723 N.W.2d 112; Skogen, at ¶ 7; Braatelien v. Burns, 74 N.D. 29, 32, 19 N.W.2d 827, 828 (1945).

         [¶ 14] In White, 2015 ND 118, ¶ 20, 863 N.W.2d 915, we said N.D.R.Civ.P. 24 is derived from and is substantially similar to Fed.R.Civ.P. 24, and when a state rule is derived from a corresponding federal rule, the federal courts' interpretation of the federal rule may be persuasive authority when interpreting our rule. We said that "[u]nder Fed.R.Civ.P. 24(a)(2), upon a timely motion, a person is entitled to intervene as of right if: (1) the person has a cognizable interest in the subject matter of the litigation; (2) the interest may be impaired as a result of the litigation; and (3) the interest is not adequately represented by an existing party to the litigation." White, at ¶ 21 (citing Chiglo v. City of Preston, 104 F.3d 185, 187 (8th Cir. 1997); Kansas Pub. Emp. Ret. Sys. v. Reimer & Koger Assoc., Inc., 60 F.3d 1304, 1307 (8th Cir. 1995)).

         [¶ 15] The ultimate question of whether a party may intervene as a matter of right under N.D.R.Civ.P. 24(a) is a question of law that is fully reviewable on appeal. White, 2015 ND 118, ¶ 23, 863 N.W.2d 915; Fisher v. Fisher, 546 N.W.2d 354, 355, 546 N.W.2d 354 (N.D. 1996); Skogen, 2010 ND 92, ¶ 7, 782 N.W.2d 638. In considering a party's motion to intervene under N.D.R.Civ.P. 24(a), we review any findings of fact made by the district court under the clearly erroneous standard of review in N.D.R.Civ.P. 52(a). White, at ¶ 23; Skogen, at ¶ 7.

         [¶ 16] A district court's decision on permissive intervention will not be reversed on appeal absent an abuse of discretion. White, 2015 ND 118, ¶ 23, 863 N.W.2d 915; Fisher, 546 N.W.2d at 356. A court abuses its discretion if it acts in an arbitrary, unreasonable, or unconscionable manner, its decision is not the product of a rational mental process leading to a reasoned determination, or it misinterprets or misapplies the law. City of Bismarck v. Mariner Constr., Inc., 2006 ND 108, ¶ 8, 714 N.W.2d 484.

         [¶ 17] The district court denied without prejudice Bremer's motion to intervene in this insolvency proceeding to litigate the priority of its security interest, but allowed Bremer to participate in the proceeding "to the full extent provided to any other receiptholder/claimant." The court explained:

[R]esolution of the issue of whether or not formal intervention is required is not necessary. The PSC, the surety and all of the other claimants agree that Bremer may proceed in this action as a claimant and assert objections to any of the proposed distributions. Under these circumstances intervention is unnecessary. In the event that an objection to Bremer's participation in these proceedings were to be asserted, intervention would be granted, but limited to proceedings within the scope of Chapter 60-04 (limited to objections to the commissioner's report and proposed distributions).

         [¶ 18] In N.D. Pub. Serv. Comm'n v. Valley Farmers Bean Ass'n, 365 N.W.2d 528, 537-40 (N.D. 1985), this Court considered a claim by three Banks as a secured creditor in the context of a grain warehouse insolvency proceeding under N.D.C.C. ch. 60-04. The Banks had a security interest in the warehouseman's inventory, and as the Banks disbursed loan funds to the warehouseman on a line of credit, the warehouseman prepared and delivered to the Banks documents identified as "warehouse receipts." Id. at 537. This Court said the purpose of a warehouse insolvency proceeding was to create a trust fund for the receiptholders of the warehouseman and held labeling the documents issued to the Banks as "warehouse receipts" did not change the Banks' status from a secured creditor to a "receiptholder." Id. at 537 - 38. This Court held the Banks were not entitled to participate in trust fund assets on the basis of the warehouse receipts. Id. In addressing the Banks' claim that they were entitled to participate in the trust fund assets on the basis of their security interest, this Court rejected the Banks' claim and concluded valid receiptholders had priority over the Banks' secured claim to the warehouseman's inventory under the applicable statutory insolvency provisions. Id. at 539 - 40.

         [¶ 19] The relevant statutory framework has not changed since Valley Farmers. Under N.D.C.C. § 60-02-25, the delivery of grain to a public warehouse for an unconverted scale ticket or warehouse receipt is a bailment, and the grain is not subject to seizure by court process in an action against the bailee. Under N.D.C.C. § 60-02-25.1, the grain in a warehouse is subject to a first priority lien in favor of outstanding receiptholders, and the lien shall be preferred to any lien or security interest in favor of any warehouseman creditor regardless of when the creditor's lien attached to the grain. Section 60-04-03.1, N.D.C.C., provides that upon the insolvency of any warehouseman, a trust fund is established for the benefit of noncredit-sale receiptholders and for costs incurred by the PSC in the administration of N.D.C.C. ch. 60-04. Under those provisions, a secured creditor's claim to a warehouseman's grain is not superior to claims by noncredit-sale receiptholders or by the PSC for costs and expenses for administration of trust fund proceeds. Nevertheless, a secured creditor's interest in a warehouseman's grain may be intertwined with a noncredit-sale receiptholder's claim to the same grain in an insolvency proceeding under N.D.C.C. ch. ...


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