Opinion ID: 2168958
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Heading: Iowa's Grain Dealer Licensing Statute.

Text: Iowa Code chapter 203 (1995) governs the licensing of grain dealers. Section 203.3, entitled License requiredfinancial responsibility, states in pertinent part: 1. A person shall not engage in the business of a grain dealer in this state without having obtained a license issued by the department. 2. The type of license required shall be determined as follows: a. A class 1 license is required if the grain dealer purchases any grain by credit-sale contract, or if the value of grain purchased by the grain dealer from producers during the grain dealer's previous fiscal year exceeds five hundred thousand dollars.... [1] .... 3. . . . The application [for a license] shall be accompanied by a complete financial statement of the applicant setting forth the assets, liabilities and the net worth of the applicant.... 4. In order to receive and retain a class 1 license the following conditions must be satisfied: a. The grain dealer shall have and maintain a net worth of at least seventy-five thousand dollars, or maintain a deficiency bond or an irrevocable letter of credit in the amount of two thousand dollars for each one thousand dollars ... of net worth deficiency. . . . b. ... [A]t any time the department [of agriculture and land stewardship] may require a financial statement that is accompanied by the report of a certified public accountant ... if the department has good cause. Iowa Code § 203.3 (emphasis added). The statute provides the following definition of good cause: 6. Good cause means that the department has cause to believe that the net worth or current asset to current liability ratio of a grain dealer presents a danger to sellers with whom the grain dealer does business, based on evidence of any of the following: a. The making of a payment by use of a financial instrument which is a check ... on a financial institution, and a financial institution refuses payment on the instrument because of insufficient funds in a grain dealer's account. Id. § 203.1(6). These provisions show that the purpose of the licensing requirement is to ensure that producers selling their crops have some protection from an insolvent grain dealer, a conclusion supported by legislative history. When the 1973 Iowa legislature first enacted the grain dealer licensing statute, which included a bond-posting requirement, the explanation accompanying the bill stated: The bill requires a bond for the protection of the grain seller and the grain buyer in grain transactions. There have been losses suffered by producers from both truckers and grain warehousemen of [sic] grain transactions. The present Iowa bonded warehouse law only provides bond coverage for stored grain. This bill will give the additional protection needed to producers throughout the state when selling their grain as well as purchasers of grain from truckers. See Explanation to H.F. 383, 1973 Iowa Acts ch. 276 (emphasis added) (codified at Iowa Code ch. 542 (1975) and subsequently transferred to Iowa Code ch. 203 (1993)). It is also clear that the legislature considers violations of the licensing requirement a serious matter. Chapter 203 provides for criminal penalties for specific violations of the licensing requirement. Section 203.11 states in pertinent part: 2. A person who engages in business as a grain dealer without obtaining a license ... commits a serious misdemeanor, except that a person who commits any of these offenses after having been found guilty of the same offense commits an aggravated misdemeanor. [2] 3. ... With respect to a continuing violation, each day that the violation continues is a separate offense. The county attorney in whose county the business is located is charged with prosecuting violations of the statute. See Iowa Code § 203.11(4). If the county attorney fails to take action within thirty days, however, the department can request the attorney general's office to prosecute. Id. An injunction may also be issued. Id. With this overview of the licensing statute, we now examine, in the context of this case, the governing legal principles with respect to the effect of a contracting party's failure to comply with licensing requirements.