(1)
Whenever it appears probable after investigation that a licensed warehouse
operator does not possess sufficient commodities to cover the outstanding
negotiable warehouse receipts, scale tickets, or other evidence of storage liability
issued or assumed by the warehouse operator, the department may give notice to
the warehouse operator that the warehouse operator is required to do all or any of
the following:
(a) Cover the shortage;
(b) Give an additional bond or irrevocable letter of credit;
(c) Submit to such inspection as the department may deem necessary.
(2) If the warehouse operator fails to comply with the terms of the notice
within twenty-four hours after the date of its issuance or within such further time as
the department may allow, the department may do all or any of the following:
(a) Issue a cease-and-desist order pursuant to section 35-36-104;
(b) Take possession of all commodities in the public warehouse owned,
operated, or controlled by the warehouse operator and of all books, papers,
records, and property of all kinds used in connection with the conduct or operation
of the warehouse operator's public warehouse business, whether the books, papers,
records, and property pertain specifically, exclusively, directly, or indirectly to that
business or are related to the warehouse operator's handling, storage, or use of
commodities in any other business;
(c) Apply to any court of competent jurisdiction for an order to enjoin the
warehouse operator from interfering with the department in the discharge of its
duties as required by this section;
(d) Petition any court of competent jurisdiction for an order requiring the
warehouse operator or any person who has possession of any commodities, books,
papers, records, or property of any kind used in connection with the conduct or
operation of the public warehouse business who has refused to surrender
possession to the department to surrender possession of the same to the
department.
(3) Upon its taking possession of the commodities, the department may give
written notice of its action to the holders of all negotiable warehouse receipts or
other evidence of deposits issued for commodities to present their negotiable
warehouse receipts or other evidence of deposits for inspection or to account for
the same. Thereupon, the department shall cause an audit to be made of the affairs
of the public warehouse with respect to any commodity in which there is an
apparent shortage, determine the amount of the shortage, and compute the
shortage as to each owner of the commodity. The department shall attempt to
notify the warehouse operator of the amount of the shortage and attempt to notify
each owner affected by the shortage. If the owner cannot be notified after a
reasonable attempt by the department, the department is not liable for any losses
incurred by the owner.
(4) The department shall retain possession of the commodity in the public
warehouse and of the books, papers, records, and property of the warehouse
operator until such time as the warehouse operator or the warehouse operator's
bond or irrevocable letter of credit has satisfied the claims of all holders of
negotiable warehouse receipts or other evidence of deposits. In case the shortage
exceeds the amount of the bond or irrevocable letter of credit, the warehouse
operator's bond or irrevocable letter of credit satisfies the claims pro rata. Nothing
in this section prevents the department from complying with an order of a court of
competent jurisdiction to surrender possession.
(5) If, during or after the audit provided for in this section or at any other
time, the department is of the opinion that the warehouse operator is insolvent or in
danger of becoming insolvent or is unable to satisfy the claims of all holders of
negotiable warehouse receipts or other evidence of deposits, the department may
petition a court of competent jurisdiction in the county for the appointment of a
receiver to operate or liquidate the business of the warehouse operator in
accordance with applicable law.
(6) At any time within ten days after the department takes possession of any
commodities or the books, papers, records, and property of any public warehouse,
the warehouse operator may apply to a court of competent jurisdiction for an order
requiring the department to show cause why the commodities, books, papers,
records, and property should not be restored to the warehouse operator's
possession. Upon its being served notice, the department has up to ten days to
respond.
(7) (a) If a court of competent jurisdiction determines that all or any part of
the commodities, books, papers, records, and property should not be restored to the
possession of the warehouse operator, the court may:
(I) Appoint a receiver for all or any part of the commodities, books, papers,
records, and property; or
(II) Determine the disposition of the commodities, books, papers, records, and
property that were in the public warehouse and seized pursuant to this part 2.
(b) Pending determination of the ownership of the commodities, any money
received from the disposition of the commodities shall be placed in an interest-bearing escrow account.
(8) If the warehouse operator does not apply to a court of competent
jurisdiction for a show-cause order under subsection (6) of this section, the
department's action is presumed valid, and the commissioner may determine the
disposition of the commodities, books, papers, records, and property that were in
the public warehouse and seized pursuant to this part 2. Pending determination of
the ownership of the commodities, any money received from the disposition of the
commodities shall be placed in an interest-bearing escrow account.
(9) All expenses incurred by the department in carrying out this section are a
first charge and lien upon the assets of the warehouse operator; and the
department may bring a separate civil action through representation by the
attorney general in a court in the county in which the public warehouse is located to
recover the expenses, or they may be recovered at the same time and as a part of
an action filed under subsection (5) of this section.
(10) As a part of the expenses incurred by the department in carrying out this
section, the department or the receiver is authorized to include the cost of
adequate liability insurance necessary to protect the department, its officers, and
others engaged in carrying out this section.