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Published April 15, 2013, 10:07 AM

Judge rules in favor of SD farmer

A South Dakota district court judge in Aberdeen has agreed with a farmer from Orient, S.D., that his claim to a bond in the Anderson Seed case should be included in a $100,000 bond payout. The judge overturns a decision by the South Dakota Public Utilities Commission.

By: Mikkel Pates, Agweek

A South Dakota district court judge in Aberdeen has agreed with a farmer from Orient, S.D., that his claim to a bond in the Anderson Seed case should be included in a $100,000 bond payout. The judge overturns a decision by the South Dakota Public Utilities Commission.

On April 4, Fifth Circuit Judge Tony L. Portra issued the ruling that the South Dakota Public Utilities Commission had erred in denying a claim made by Ray Martinmaas of Martinmaas Dairy Inc.

The Martinmaas operation was one of the entities that delivered sunflower seed to the Anderson Seed processing plant at Redfield, S.D., in late 2011, but wasn’t paid. The judge agreed with Martinmaas that he’d made an oral contract for a delayed pricing contract on $47,000 in sunflowers. But Portra agreed with Martinmaas that the credit sale contract wasn’t in effect because Martinmaas never signed documentation to confirm the deal.

“I’ll get about $2,000, which is not why I went after this,” Martinmaas tells Agweek. Martinmaas hopes the victory will open up his request of his local county states attorney to continue criminal proceedings against Anderson Seed and its principals. “They stole my sunflowers,” Martinmaas asserts.

Anderson Seed, based in Mentor, Minn., officially went insolvent in February 2012. The company on Feb. 14, 2012, announced it had sold many of its assets and inventory to Legumex Walker, a Seattle-based company with a Winnipeg, Manitoba, base. Anderson Seed transferred ownership of its Redfield, S.D., processing plant to a company called Binco Holdings LLC. Farmers in North Dakota and South Dakota say Anderson Seed owes them more than $5 million.

Overturns PUC

Earlier, the SDPUC had ruled that Martinmaas had entered into a voluntary credit sale with Anderson Seed and therefore wasn’t entitled to a share of the South Dakota bond. Portra says Martinmaas may have intended to defer payment but didn’t sign the agreement, as required. In an earlier effort, Martinmaas had been denied inclusion in the $100,000 bond pay-out by the SDPUC.

A voluntary credit sale (also called deferred-payment or deferred-pricing) is a grain sale in which the sale price is “to be paid more than 30 days after the delivery or release of the grain for sale,” Portra writes.

Martinmaas intended to defer the payment until January 2012, but the voluntary credit sale was oral — and not in writing. Portra said the law allows for contracts to be “verbal with a follow up in writing within a reasonable time,” but Portra said elevators start out with verbal contracts but follow up with written agreements by the end of the business day.

“Martinmaas Dairy delivered to Anderson Seed on Nov. 4, 7, and 16 of 2011, but Anderson Seed did not even send the Deferred Payment Grain Purchase Agreement until December 19, 2011!” Portra writes. “Although there is no hard and fast rule as to what is considered reasonable, it is without question that waiting over a month is per se unreasonable … considering the very purpose for the rule is speed.”

SDPUC member Chris Nelson, who attended the mid-March court hearing, says the commission was relying on a statute, amended several years ago, that specifically allowed contracts to be made verbally, if the contract was sent out and not objected to within 48 hours.

“I understand where the judge was coming from,” Nelson says. “He gave more weight to one statute” that said the contracts have to be signed.

Choice of statutes

Asked whether the PUC would appeal the decision, Nelson couldn’t speak for the rest of the PUC, but said, “I would certainly not think so. Speaking for myself, I wouldn’t be inclined to appeal at all.”

Gary Hanson, who was elected to the commission in 2002 and 2008, is now the chairman, and originally had voted with Martinmaas. Nelson and Kristie Fiegen, both appointed in 2011 and both elected in 2012 voted against him. Martinmaas told the judge he had openly worked against both Fiegen and Nelson, the former PUC chairman, in their re-election bids.

Nelson says Martinmaas was the only delayed-price contract seed deliverer to appeal the PUC decision. He says the PUC now will have to go back to the court to seek approval for its new distribution of the bond, including Martinmaas, so the proposed payments to 29 others will be reduced.

Martinmaas is owed $2,255.45, Nelson says. The top three bond payees are Dakota Mill and Grain of the Rapid City area, $22,292.37; Midwest Cooperative of Pierre, $15,349.60; and farmer Robert Mizera of McLaughlin, S.D., $10,704.84.

Midwest Cooperative, an affiliate of CHS Inc., has filed a $1.4 million suit against Anderson Seed and Ron Anderson, president, and Stephanie Anderson, former general manager, asking that they be personally liable for seed purchase deals that CHS alleges were fraudulent because the officials knew the company wouldn’t pay them.

Nelson notes that the judge has “set a different standard” than what the SDPUC and the industry thought to be for verbal contracts. “We are going to have to analyze how that impacts our inspectors, as we inspect grain buyers,” Nelson says.

Nelson says Martinmaas in court had been frank that he intended the price-later contracts. “I don’t sign contracts,” Nelson recalls that Martinmaas told the judge. “That’s his mode of operation. In this case, that went to his benefit.”

In a separate case, Nelson says the SDPUC on March 29 suspended the grain broker license for the Gregory (S.D.) Farmers Elevator. It wasn’t because of recent financial reporting requirements promoted in the South Dakota Legislature by the SDPUC, but because of increased attention since last summer. “There was hope that they’d turn it around, but they weren’t making progress,” Nelson says. Gregory Farmers Cooperative owed a little over $300,000, all on deferred payment contracts. “The key difference is that this organization has equity — net worth. Upon liquidation, everybody’s going to get paid,” Nelson says.

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