§ 26-3-7-16.5 — Determination of shortages; payment of claims; hearings and procedures

Indiana § 26-3-7-16.5

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 3: WAREHOUSES
• Ch. 7: Indiana Grain Buyers and Warehouse Licensing and

Text

5. (a) Upon learning of the possibility that
a shortage exists, either as a result of an inspection or a report or
complaint from a depositor, the agency, based on an on-premises
inspection, shall make a preliminary determination as to whether a
shortage exists. If a shortage is not discovered, the agency shall treat
the audit as it would any other audit.
(b) If it is determined that a shortage may exist, the director or the
director's designated representative shall hold a hearing as soon as
possible to confirm the existence of a shortage as indicated by the
licensee's books and records and the grain on hand. Only the licensee,
the surety company named on the licensee's bond, the issuer of the
irrevocable letter of credit, and any grain depositor who has made a
claim or complaint to the agency in conjunction with the shortage shall
be considered as interested parties for the purposes of that hearing, and
each shall be given notice of the hearing. At the hearing, the director
or the director's designated representative shall determine whether
there appears to be a reasonable probability that a shortage exists. If it
is determined that a reasonable probability exists and that the bond or
letter of credit proceeds or the cash deposit should be distributed, a
preliminary determination shall be entered to the effect that the
licensee has failed to meet its obligations under this chapter or the rules
adopted under this chapter. At the hearing, the director or the director's
designated representative shall take possession of the bond or other
security required under this chapter and all proceeds from grain sales
are to be held in the form in which they are received and to be kept in
a separate account from all other funds. The order shall also provide for
informal conferences between agency representatives and persons who
have or who appear to have grain deposited with the licensee. The
surety company shall be permitted to participate in those conferences.
(c) In the event that the director determines that the bond or letter
of credit proceeds or cash deposit is to be distributed, the agency shall
hold a hearing on claims. Notice shall be given to the surety company
named on the licensee's bond, the issuer of the irrevocable letter of
credit, and to all persons shown by the licensee's books and records to
have interests in grain deposited with the licensee. If the agency has
actual knowledge of any other depositor or person claiming rights in
the grain deposited with the licensee, the bond, the irrevocable letter of
credit, or the cash deposit, notice shall also be provided to that person.
In addition, public notice shall be provided in newspapers of general
circulation that serve the counties in which licensed facilities are
located, and notices shall be posted on the licensed premises. At the
hearing on claims, the director or the director's designated
representative may accept as evidence of claims the report of agency
representatives who in informal conferences with depositors have
concluded that a claim is directly and precisely supported by the
licensee's books and records. When there is disagreement between the
claims of a depositor and the licensee's books and records, the director
or the director's designated representative shall hear oral claims and
receive written evidence of claims in order to determine the validity of
the claim.
(d) Any depositor who does not present a claim at the hearing may
bring the claim to the agency within fifteen (15) days after the
conclusion of the hearing. However, a depositor who has a claim that
was involved in the probate of an estate at the time of the claims
hearing has one (1) year from the conclusion of the claims hearing to
present the claim to the agency.
(e) Only grain that has been delivered to a first purchaser licensee
for sale or storage under a bailment not more than fifteen (15) months
before the date of revocation of the licensee's license may be
considered by the director or the director's designated representative in
determining the total proven storage and financial obligations due to
depositors and the loss sustained by each depositor who has proven a
claim.
(f) Following the hearing on claims, the director or the director's
designated representative shall make a determination as to the total
proven storage and financial obligations due to depositors and the loss
sustained by each depositor who has proven a claim. Depositors found
to have proven their claims for storage or financial loss shall be proven
claimants. In arriving at that loss, in accordance with section 19 of this
chapter, the director shall apply all grain on hand or its identifiable
proceeds to meet the licensee's obligations to grain depositors of grain
of that type. Initial determinations of loss shall be made on the amount
of grain on hand, or identifiable proceeds, and shall reduce the amount
to which a depositor may have a proven claim. With respect to the
remaining unfulfilled obligations, the director shall, for the sole
purpose of establishing each depositor's claim under this chapter,
establish a date upon which the loss is discovered, shall price the grain
as of that date, shall treat all outstanding grain storage obligations not
covered by grain on hand or identifiable proceeds as being sold as of
that date, and shall determine the extent of each depositor's loss as
being the actual loss sustained as of that date. Grain of a specific type
on the premises of a licensee must first be applied to meet the licensee's
storage obligations with respect to that type of grain. If there is
insufficient grain of a specific type on hand to meet all storage
obligations with respect to that type of grain, the grain that is present
shall be prorated in accordance with the procedures described in this
section and section 16.8 of this chapter. The agency shall refer the
licensee to the county prosecuting attorney if the licensee does not have
the amount of grain in storage, at the time of the revocation of the
license, that the records indicate should be in storage.
(g) Upon the failure of the agency to begin an audit, which would
serve as the basis for a preliminary administrative determination,
within forty-five (45) days of the agency's receipt of a written claim by
a depositor, a depositor shall have a right of action upon the bond,
letter of credit, or cash deposit. A depositor bringing a civil action need
not join other depositors. If the agency has undertaken an audit within
the forty-five (45) day period, the exclusive remedy for recovery
against the bond, letter of credit, or cash deposit shall be through the
recovery procedure prescribed by this section.
(h) When the proven claims exceed the amount of the bond, letter
of credit, or cash deposit, recoveries of proven claimants shall be
prorated in the same manner as priorities are prorated under section
16.8 of this chapter.
(i) The proceedings and hearings under this section may be
undertaken without regard to, in combination with, or in addition to
those undertaken in accordance with section 17.1 of this chapter.
(j) The findings of the director shall be final, conclusive, and
binding on all parties.
(k) A claim of a licensee for stored grain may not be honored until
the proven claims of all other claimants arising from the purchase,
storage, and handling of the grain have been paid in full.
(l) A claim is considered to be adjudicated if the claimant has:
(1) agreed with the director's determination on the claim and not
filed an appeal under IC 4-21.5-3; or
(2) exhausted the claimant's administrative appeal and judicial
review remedies.
(m) Subject to the requirements under this chapter, if one (1) or
more claimants are not paid in full for the claimants' proven claims, the
director shall forward to the Indiana grain indemnity fund board of
directors a list of the claimants who are owed money and the difference
between the amount that the claimant was paid and the amount that the
claimant claims to be due along with a copy of the final order.
As added by Acts 1979, P.L.249, SEC.11. Amended by
P.L.191-1991, SEC.8; P.L.125-1997, SEC.35; P.L.173-1999, SEC.8;
P.L.75-2010, SEC.13; P.L.85-2017, SEC.101; P.L.145-2017, SEC.6;
P.L.114-2025, SEC.25.