Opinion ID: 1640458
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Heading: Deferred payment contracts or other credit arrangements

Text: Section 60-02-09(7), N.D.C.C., provides:  60-02-09. Bond filed by track buyer or public warehouseman. Before any license is issued to any public warehouseman or track buyer under this chapter, the applicant for such license shall file a bond with the commission which shall:       7. Not accrue to the benefit of any person entering into deferred payments contracts or other credit arrangements with a track buyer or public warehouseman. Having concluded that neither the grower agreements nor the 10/10 contracts were automatically canceled or terminated, we must next determine whether or not the agreements constituted deferred payments contracts or other credit arrangements under § 60-02-09(7), N.D.C.C. The phrase deferred payments contracts or other credit arrangements contained in § 60-02-09(7), N.D.C.C., at the time of the insolvency, was not statutorily defined. Millers asserts that the phrase should be construed to include any transaction in which the sales price is to be paid after delivery of the grain, regardless of the length of the delay, be it hours or days. See Parnell v. Baham, 228 So.2d 53 (La.Ct.App.1969); 77 C.J.S. Sales § 235 (1952). Neither the legislative history of the 1971 amendment excluding such transactions ( see Minutes of the House Committee on Agriculture, January 28, 1971 [H.B. 1241] ), nor the purpose of the warehouseman statutes support Millers' position. The rules of statutory construction require that we construe statutes liberally, with a view to effecting their objects and to promoting justice. § 1-02-01, N.D.C.C. The overriding purpose of requiring warehouseman's bonds is to protect all persons who sell or deliver grain to a warehouseman. Larkin v. Wheat Growers Warehouse Co., 64 N.D. 491, 253 N.W. 757 (1934). In State v. Hoover Grain Co., 63 N.D. 344, 248 N.W. 275, 278 (1933), this court stated: It is clearly the intent of the Legislature, however, that this law shall be comprehensive enough to settle the legitimate demands of owners of grain delivered to an insolvent elevator company, against those who have liability because of such grainan insurance company in case grain is destroyed, a surety on a bond in case grain is not paid for, and those liable for the conversion of the grain. The law was intended for the benefit of the claimants, and must be construed with sufficient liberality to effectuate its purpose without doing injury to those who are liable. If Millers' argument that any delay in payment following delivery constitutes a deferred payment contract or other credit arrangement were carried to its logical extreme, no producers selling grain in a warehouse would be entitled to protection under a warehouseman's bond because there is always some delay between delivery and payment. We do not believe the Legislature intended a result which is so wholly inconsistent with the statutory scheme. We conclude that whether or not a transaction constitutes a deferred payment contract or other credit arrangement depends not only on a delay in payment following delivery, but also on the expectations and intentions of the parties to the agreement. Cf. In re Samuels & Co., Inc., 510 F.2d 139 (5th Cir.1975), reversed en banc on other grounds, 526 F.2d 1238 (5th Cir.), cert. denied sub nom., Stowers v. Mahon, 429 U.S. 834, 97 S.Ct. 98, 50 L.Ed.2d 99 (1976). We believe that this interpretation most reasonably harmonizes the amendment with the purpose of the warehouseman statutes. The payment provision in the grower agreements provides: 5. Settlements and payments shall be made on the contracted portion of beans only. Settlements and payment shall be made in 3 payments: One-third, (1st Payment), 30 days after completion of contract; One-third, (2nd Payment), on November 15th, 1981; One-third, (3rd Payment), on December 30th, 1981, unless deferred payment is requested by Grower.  [Emphasis added.] Although the contract provision specifies that three payments shall be made following delivery, the inclusion of the phrase unless deferred payment is requested by Grower clearly indicates that neither VFBA, the drafter of the agreement, nor the producers considered the grower agreements to be deferred payment contracts. Although § 60-02-09(7), N.D.C.C., also excludes other credit arrangements from bond coverage, we do not believe the grower agreements fall within the statutory provision. In Syllabus 1 of Savelkoul v. Board of County Com'rs, Ward County, 96 N.W.2d 394 (N.D.1959), this court stated: Under the principle of ejusdem generis, general words following particular and specific words are not given their natural and ordinary sense, standing alone, but are confined to persons and things of the same kind or genus as those enumerated. Thus, we do not consider the phrase or other credit arrangements to necessarily expand the meaning of deferred payments contracts. We conclude that the grower agreements are not deferred payments contracts or other credit arrangements within the meaning of § 60-02-09(7), N.D.C.C. With regard to the producers who entered into the 10/10 contracts, we note that although they originally received scale tickets upon delivery of the beans, VFBA did not convert the scale tickets into cash or storage tickets. Section 60-02-11, N.D.C.C., provides that [a]ll scale tickets shall be converted into cash or storage tickets within a period of twenty days after first load of grain is delivered to the elevator and no longer than five days after final load is delivered to the elevator. Pursuant to § 60-02-09(3) and (6), N.D.C.C., a warehouseman's bond shall [r]un to the state of North Dakota for the benefit of all persons storing or selling grain in such warehouse, and shall [b]e, at all times, in a sufficient sum to protect the holders of outstanding storage receipts and cash tickets or checks. Although VFBA failed to convert the scale tickets as required by law, that failure does not result in loss to the producers, but constitutes a violation of § 60-02-09(4), N.D.C.C., for which Millers is liable. See Farmers Elevator Mutual Insurance Company v. Jewett, 394 F.2d 896 (10th Cir.1968); cf. State v. Hoover Grain Co., 63 N.D. 344, 248 N.W. 275 (1933). These producers were clearly covered by the warehouseman's bonds prior to May 1982. About three months before VFBA became insolvent, the 10/10 letters were sent to producers. One of the options allowed the producers to have their beans returned to them for a price, and another allowed them to keep their beans on storage. The only sales option provided that a $10 per hundred weight payment would be made as soon as feasible, but in no event later than June 30, 1982, and an unsecured promissory note, bearing no interest, due and payable in 20 years ... would presumably be given at $10 per hundred weight as the other half of the sales price. The producers who entered into the 10/10 contracts did so in a good faith attempt to settle on payment terms which were advantageous to VFBA. It would be unconscionable to construe that good faith act on the part of the producers as resulting in a voluntary change of their status as receipt holders covered under the warehouseman's bonds to persons having entered into deferred payments contracts or other credit arrangements and no longer covered under the warehouseman's bonds. In addition, we believe that to apply § 60-02-09(7), N.D.C.C., in such a manner to the 10/10 contracts would be contrary to public policy and the fundamental purpose of the warehouseman statutes which are intended to protect all persons storing and selling grain in the warehouse. Consequently, we conclude that the producers who entered into 10/10 contracts do not fall within the category of persons who entered into deferred payments contracts or other credit arrangements under § 60-02-09(7), N.D.C.C. Even if we were to assume for discussion purposes only that the 10/10 contracts were deferred payment contracts, there is yet another reason for affirming the trial court. The statutory provision exempting deferred payments contracts or other credit arrangements from warehouseman's bond coverage was enacted in 1971. See 1971 N.D.Sess.Laws Ch. 583. The legislative hearing testimony indicates a concern that many of the elevators in the state would be unable to afford the larger bonds required to cover the liability under such contracts. One committee member stated that the provision would clarify bond coverage so that the farmer will know where he stands, and that by entering into such agreements, a farmer will be sticking his own neck out. See Minutes of the House Committee on Agriculture, January 28, 1971 [H.B. 1241]. One of the sponsors of the bill noted that the main purpose of the bill was to protect the farmer when he has his product in the elevators. See Minutes, supra. The rules of statutory construction require that we construe statutes liberally, with a view to effecting their objects and to promoting justice. § 1-02-01, N.D.C.C. The overriding purpose of requiring warehouseman's bonds is to protect all persons who sell or deliver grain to a warehouseman [ see Larkin v. Wheat Growers Warehouse Co., 64 N.D. 491, 253 N.W. 757 (1934)], and a surety's liability on a bond is conditioned on the faithful performance of a public warehouseman's duties under the law. § 60-02-09(4), N.D.C.C. See State v. Hoover Grain Co., supra . In light of the obvious purpose of the warehouseman statutes, and in order to give the 1971 amendment a meaning consistent with the overall statutory scheme, we believe that under § 60-02-09(7), N.D.C.C., a public warehouseman has a duty to disclose to producers entering into deferred payments contracts or other credit arrangements the risks of doing so. Without such a requirement, the warehouseman statutes would be reduced to a trap for unwary producers, a result we do not believe was contemplated by the Legislature in amending the statute, and which is wholly inconsistent with the statutory scheme. In the present case, the 10/10 contracts do not inform the producers that by the acceptance of its provisions, the producers would be surrendering their rights of coverage under the warehouseman's bonds. We conclude that by its failure to so inform the producers in the terms of the agreement, VFBA breached its duties under § 60-02-09(4), N.D.C.C. Because the warehouseman statutes were designed to protect the producers, the violation of subsection (4) takes precedence over the subsection (7) exemption provision of the statute, and Millers is liable as surety to those producers who entered into the 10/10 contracts without written notice that they would be giving up their rights to bond coverage. The decision we have reached today is in harmony with the latest amendments to Chapter 60-02, N.D.C.C. See 1983 N.D. Sess.Laws Ch. 672, § 13. Section 60-02-19.1, N.D.C.C., currently provides that in order to be effective, a credit sale contract must be in writing and shall state in a clear and prominent manner that the sale is not protected by the bond coverage provided for in section 60-02-09; ... We have held that [t]he principles of statutory construction do not prevent a court from looking to subsequent enactments and amendments as an aid in arriving at the correct meaning of a prior statute. State v. Novak, 338 N.W.2d 637, 640 (N.D.1983). See also Slawson v. North Dakota Indus. Com'n, 339 N.W.2d 772, 775 n. 2 (N.D.1983). Thus, we hold that the claims filed by producers who entered into grower agreements and of those who entered into 10/10 contracts are valid against the trust fund and the warehouseman's bonds.