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PRINTER'S NO. 726
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
632
Session of
2017
INTRODUCED BY SCHWANK, VOGEL, HUGHES, RAFFERTY, BLAKE, BOSCOLA,
STREET, FONTANA, FARNESE, TARTAGLIONE AND VULAKOVICH,
APRIL 20, 2017
REFERRED TO AGRICULTURE AND RURAL AFFAIRS, APRIL 20, 2017
AN ACT
Providing for grain dealer bonding; imposing penalties; and
providing remedies.
TABLE OF CONTENTS
Section 1. Short title.
Section 2. Definitions.
Section 3. Bonding requirement.
Section 4. Acquisition of additional facility.
Section 5. Posting of bond.
Section 6. Cancellation of bond.
Section 7. Compliance.
Section 8. Depositor lien.
Section 9. Issuance of receipts or tickets by dealer.
Section 10. Commingling of different lots.
Section 11. Return of grain to depositor.
Section 12. Replacement receipts or tickets.
Section 13. Dealer going out of business or suspending
operations.
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Section 14. Disclosure of interests.
Section 15. Disclosure of insolvency.
Section 16. Civil remedies for default or violation by dealer.
Section 17. Criminal penalties.
Section 18. Effective date.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Grain Dealer
Bonding Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Bailee." A person to whom grain is delivered in trust for
storage with title remaining in the name of the depositor.
"Bailor." A person who delivers grain to a bailee in trust
for storage grain with title remaining in the name of the
depositor.
"Bond." An agreement pledging surety for financial loss
which:
(1) Is caused by the act or default of a dealer.
(2) Meets all requirements of this act.
"Broker." A person that for commission or other compensation
markets grain or solicits or negotiates the marketing of grain
for or on behalf of a producer.
"Buyer-warehouse." A person that operates as both a
warehouse and grain handler.
"Dealer." Includes a person that is a broker, buyer-
warehouse, grain handler or warehouse. The term does not include
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the following:
(1) A person that buys or markets less than 5,000
bushels of grain annually.
(2) A person that buys grain for the sole purpose of
feeding livestock or poultry that the person owns or is
responsible to raise, keep or maintain, if the person:
(i) derives a major portion of the person's income
from selling or raising livestock or poultry or their
byproducts; and
(ii) does not offer storage, deferred pricing,
delayed payment or contracts or other instruments that
are linked to the commodity futures or commodity options
market.
(3) A person whose contracts for grain are exclusively
subject to the Perishable Agricultural Commodities Act, 1930
(46 Stat. 531, 7 U.S.C. § 499a et seq.).
"Default." Includes the following:
(1) Noncompliance by the dealer with the bonding
requirements of this act.
(2) Failure by the dealer to make timely payment of
money or timely delivery of grain due under obligations to
depositors.
(3) The filing of an action in bankruptcy by or against
the dealer.
(4) An action to appoint a trustee, receiver or other
person to manage the fiscal affairs of the dealer.
(5) A public declaration by the dealer of insolvency.
(6) In the absence of a good faith dispute, failure by
the dealer to pay debts in the ordinary course of business.
(7) An attempt by the dealer to dissolve business
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operations.
(8) An attempt by the dealer to make a transfer or incur
a debt that would be fraudulent to a producer under the
provisions of 12 Pa.C.S. Ch. 51 (relating to fraudulent
transfers).
"Deferred price agreement." A written contract between a
dealer and a depositor which covers the sale and transfer of
title of grain and states in written terms the service charges
and the method for pricing the grain at a later date.
"Deferred pricing." A purchase by a dealer in which title to
the grain passes to the dealer according to the terms of a
deferred price agreement and the price to be paid to the
depositor is not determined:
(1) at the time the grain is received by the dealer; or
(2) within 10 days of receipt.
"Depositor." Any of the following:
(1) A person that delivers grain to a dealer:
(i) for storage, conditioning, shipment or sale; or
(ii) under an agreement in which the dealer will
market the grain delivered.
(2) A person that owns or is the legal holder of a
ticket or receipt.
(3) A dealer that stores grain owned solely by the
dealer or owned, jointly or in common with others in a
facility owned or controlled by that dealer or another
dealer.
"Facility." A location which is used by a dealer for storage
of grain or grain assets or for transaction of business
operations. With respect to locations outside this Commonwealth,
the term only includes the proportionate share of the location's
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grain storage capacity which is holding or storing grain for
Pennsylvania depositors.
"Farm organization." A Statewide organization representing
and having as primary members persons engaged in agricultural
production.
"Grain." Includes corn, wheat, oats, barley, rye, sorghum,
sunflower, speltz, canola, millet, buckwheat, safflower,
rapeseed, triticale and flax. The term does not include canning
crops for processing or grain which is purchased for sale as
seed.
"Grain bank grain." Grain which is:
(1) owned by a depositor for use in the formulation of
feed; and
(2) stored by the warehouse to be returned to the
depositor on demand.
"Grain buyer." A person that is engaged in the business of
grain handling.
"Grain handling." Any of the following:
(1) Engaging in or participating in the business of
purchasing grain for sale, resale, processing or any other
use.
(2) Engaging in or participating in the business of
receiving grain or title or equity in grain for the purpose
of marketing or sale to another.
(3) Operating as a bailee for the receiving, storing,
shipping or conditioning of grain.
"Negotiable receipt." A receipt which states that the grain
received will be delivered to the bearer of the receipt.
"Nonnegotiable receipt." A receipt which does not state that
the grain received will be delivered to the bearer of the
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receipt.
"Obligation." Money due to be paid or grain due to be
delivered by the dealer to a depositor as a result of a sales,
marketing, bailment or other agreement under which grain has
been delivered by the depositor to the dealer.
"Official grain standards of the United States." The
standards of quality or condition for grain fixed and
established by the United States Secretary of Agriculture under
the United States Grain Standards Act (39 Stat. 482, 7 U.S.C. §
71 et seq.).
"Person." An individual, partnership, corporation,
association or other form of business enterprise.
"Premises." A definite portion of land with appurtenances,
including a structure erected on the land.
"Producer." A person that is involved in the agricultural
production of grain on land which the person owns or leases.
"Receipt." A document, whether negotiable or nonnegotiable,
issued by a dealer for grain received by the dealer for storage
under a bailment agreement.
"Storage." The deposit of grain into a facility either for
the account of the dealer operating the facility or for the
account of the depositor.
"Ticket." A document issued by a dealer which indicates the
amount of grain received by the dealer.
"Warehouse." A facility or group of facilities which are:
(1) used for receiving, storing, shipping or handling
grain; or
(2) used for grain storage.
Section 3. Bonding requirement.
(a) General.--A dealer must, as a condition of doing
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business in this Commonwealth, obtain a bond issued by a surety
company authorized to do business in this Commonwealth under
this section. No person may conduct business as a dealer or
perform another activity related to operation as a dealer unless
the person has obtained and has in effect a bond which meets the
requirements of this act.
(b) Conditions.--A bond obtained under this act must comply
with all of the following:
(1) Be conditioned upon the dealer's faithful
performance of all obligations to depositors arising from
grain handling.
(2) Apply to all obligations of the dealer arising from
the effective date of the bond, regardless of whether the
dealer's facility exist on the effective date of the bond or
are assumed prior to the date the bond is canceled.
(3) Continuously remain in effect against the dealer,
including times during which the dealer violates this act,
temporarily suspends business operations or is subject to a
cease and desist order.
(4) Not be subject to cancellation, except as under
section 6.
(c) Amount of the bond.--
(1) Except as set forth in paragraph (2), the amount of
the bond must be the greater of:
(i) the dealer's highest monthly average of
outstanding obligations to depositors incurred during the
previous calendar year; or
(ii) the amount calculated in subparagraph (i)
multiplied by the ratio of the maximum volume of grain
that the dealer is currently capable of holding or
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storing at all facilities operated by the dealer to the
maximum volume of grain which the dealer was capable of
holding or storing at all facilities operated by the
dealer on December 31 of the previous calendar year.
(2) In no event may the bond be less than $10,000 for
each facility currently being used by a dealer to hold or
store grain.
(d) Facilities.--No dealer may operate a facility for which
bonding has not been secured in the amount prescribed in
subsection (c).
Section 4. Acquisition of additional facility.
Notwithstanding the provisions of section 7 to the contrary,
a dealer may not hold or store grain in an additional facility
or a facility which the dealer has not continuously used for
holding or storage of grain unless the dealer has increased the
amount of the bond in accordance with section 3(c).
Section 5. Posting of bond.
(a) Required postings and notices.--A dealer shall post a
copy of its bond at each facility operated by the dealer within
this Commonwealth. The copy shall be posted in a conspicuous
place, accessible for observation by persons depositing and
marketing grain. The dealer shall provide a copy of the bond,
upon request, to any depositor or prospective depositor.
(b) Content of posting.--The posting shall include a copy of
the bond and denote all of the following:
(1) The name and address of the main business office of
the dealer.
(2) The name and address of all facilities the dealer
operates.
(3) The amount of the bond secured by the dealer.
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(4) A statement that the dealer is in compliance with
this act.
(c) Prohibited postings and notices.--
(1) A dealer may not do any of the following:
(i) Display or provide or attempt to display or
provide a copy of a bond which is suspended, canceled,
revoked or otherwise no longer in effect.
(ii) Direct or attempt to direct a person to display
or provide a copy of a bond which is suspended, canceled,
revoked or otherwise no longer in effect.
(iii) Give out or post or direct a person to give
out or post false or misleading information concerning
the bond or the dealer's operations.
(2) Each violation of paragraph (1) shall be a separate
offense.
Section 6. Cancellation of bond.
A bond may only be canceled after the expiration of at least
30 days from the date the surety mailed a notice of intent to
cancel, by registered mail, to the dealer.
Section 7. Compliance.
By January 31 of each year, a dealer shall review and
determine whether the amount of bond secured by the dealer
complies with the amount required under section 3. Upon
determination that the amount of the bond is insufficient to
comply with section 3, the dealer shall secure the additional
bonding required under section 3 by April 30 of the year in
which the determination is made.
Section 8. Depositor lien.
(a) Liens against the bond.--A lien shall exist against a
bond secured by a dealer in favor of all depositors to whom the
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dealer has outstanding obligations. The lien shall arise at the
time of delivery of the grain by a depositor and shall terminate
when the outstanding obligation has been satisfied. No security
interest, lien or other encumbrance shall defeat the lien
established under this subsection. The priority of distribution
of bond assets among respective depositors may not relate to the
date the depositor's claim arises but may be determined by the
priority of distribution established under subsection (b).
(b) Distribution of bond assets.--To the extent that the
amount of bond assets are insufficient to satisfy all claims by
depositors arising from outstanding obligations by the dealer,
the following shall determine the order of distribution of bond
assets:
(1) First priority for distribution of bond assets shall
be:
(i) Depositors whose claims arise from an agreement
for sale of grain to the dealer or marketing of grain by
the dealer and who possess receipts or tickets covering
grain owned, held or stored by the dealer.
(ii) Depositors that possess receipts or tickets
indicating ownership of grain under a bailment agreement
or other storage obligation by the dealer.
(iii) Depositors that surrendered receipts to the
dealer as a part of a grain transaction and were not
fully paid for the grain.
(2) Second priority for distribution of bond assets
shall be to depositors that:
(i) possess written evidence of agreement for sale
of grain to the dealer or marketing of grain by the
dealer other than receipts or tickets, including delayed
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price agreements or similar grain delivery contracts; and
(ii) completed delivery and pricing within 30 days
immediately prior to the default of the dealer.
(3) To the extent not necessary to satisfy depositors
having first and second priority of distribution, depositors
that possess written evidence of agreement for sale of grain
to the dealer or marketing of grain by the dealer shall
participate in the pro rata distribution of the remainder of
the bond assets in an amount not to exceed the value of the
claims.
(c) Resolution of claims.--Adversary proceedings to recover
bond assets pursuant to a lien established under subsection (a)
may be filed by the depositor in a court of competent
jurisdiction.
Section 9. Issuance of receipts or tickets by dealer.
(a) General requirements for issuance.--A dealer shall issue
a receipt or ticket for each delivery of grain received by the
dealer which results in an obligation by the dealer to a
depositor. The receipt or ticket may be issued at the time the
grain is received by the dealer. The dealer shall inspect, grade
and determine the net weight or volume of grain being received
by the dealer prior to issuance of the receipt or ticket.
(b) Requirement for issuance of receipt.--A dealer issuing a
ticket for grain received for storage under a bailment agreement
shall, upon request of a depositor to whom a ticket was issued,
issue a receipt for the grain described in the ticket. The
dealer may not be required to issue a receipt for a ticket which
describes grain bank grain.
(c) Contents of receipts.--A receipt shall contain the
following:
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(1) The name of the dealer receiving the grain and the
location of the facility where the grain is received.
(2) The date of issuance of the receipt.
(3) The type, grade and net weight or volume of the
grain received by the dealer as established by the official
grain standards of the United States.
(4) The rate of storage charges or the basis for the
charges.
(5) A statement that the receipt is negotiable or
nonnegotiable, conspicuously printed or stamped on it.
(6) If the receipt is negotiable, language that the
grain is deliverable or payable to the bearer of the
document.
(7) The signature of the dealer or an authorized agent.
(8) The name of the depositor from whom the grain is
received and the signature of the depositor or an authorized
agent.
(9) The payment terms.
(10) The price or value of the grain received or, if the
price or value is not known or is uncertain at the time of
delivery, the formula for calculating the price or value at a
future date.
(11) The time that payment or transfer of grain by the
dealer is due.
(12) A statement that the dealer has the right to
terminate storage and collect outstanding charges against a
lot of grain with 60 days' notice to the depositor.
(13) A statement that the dealer is required to provide
a copy of a bond secured to protect the deposition of grain
for which the receipt is issued to the depositor, owner or
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receipt holder or ticket holder upon request.
(d) Contents of tickets.--A ticket shall contain the
following:
(1) The name of the dealer receiving the grain and the
location of the facility where the grain is received.
(2) The date of issuance of the receipt.
(3) The type, grade and net weight or volume of the
grain delivered as established by the official grain
standards of the United States.
(4) A statement conspicuously printed or stamped on the
ticket that the ticket is not a negotiable receipt or
negotiable instrument.
(5) The signature of the dealer or an authorized agent.
(6) The name of the depositor from whom the grain is
received and the signature of the depositor or an authorized
agent.
(7) A statement on the ticket which accurately describes
that the grain is being received by the dealer under a sales,
marketing, bailment or other agreement between the dealer and
depositor.
(8) The price or value of the grain received or if the
price or value is not known or is uncertain at the time of
delivery, the formula for calculating the price or value at a
future date.
(9) A statement that the dealer has the right to
terminate storage and collect outstanding charges against a
lot of grain with 60 days' notice to the depositor.
(10) A statement that the dealer is required to provide
a copy of a bond secured to protect the deposit of grain for
which the receipt is issued to the depositor, owner or
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receipt holder or ticket holder upon request.
Section 10. Commingling of different lots.
Different lots of the same type of grain delivered to a
dealer may be commingled by type of grain unless the receipt or
ticket states that the identity of the lot of grain is to be
preserved.
Section 11. Return of grain to depositor.
Upon demand and after payment of all applicable charges,
grain shall be returned to the depositor at the facility where
the grain was received unless otherwise agreed upon in writing.
Section 12. Replacement receipts or tickets.
(a) General.--Except as provided in subsection (b), a dealer
may not issue a receipt or ticket for grain for which a previous
receipt or ticket has been issued.
(b) Lost or stolen receipts or tickets.--
(1) If a receipt or ticket is lost, stolen or destroyed,
the dealer shall, upon request, issue to the depositor whose
interests are currently protected a replacement receipt or
ticket. The replacement receipt or ticket entitles the owner
to all rights appertaining to the original instrument being
replaced. The replacement receipt or ticket shall contain the
same information as was contained in the original instrument
and shall conspicuously state that the instrument is a
replacement for the original receipt or ticket.
(2) As a condition for replacement of a negotiable
receipt, the issuing dealer may require the person claiming
an interest in the original receipt to do the following:
(i) Provide a written affidavit which:
(A) confirms the person is lawfully entitled to
the original receipt and has not negotiated or
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endorsed the original receipt;
(B) describes the circumstances under which the
original receipt was lost or destroyed; and
(C) if the receipt was lost, states the actions
taken by the person to find the receipt.
(ii) Indemnify the dealer for all loss or liability
which the dealer may incur as a result of the issuance of
a replacement receipt.
(iii) Pay reasonable administrative expenses related
to the issuance of a replacement receipt.
(c) Warranty.--By issuance of a replacement receipt or
ticket, the dealer warrants all of the following:
(1) The replacement instrument accurately replicates the
instrument originally issued.
(2) The replacement instrument imposes no greater
obligation on the dealer than the obligation imposed under
the original instrument.
Section 13. Dealer going out of business or suspending
operations.
(a) Suspension or termination of operations.--A dealer that
intends to suspend or terminate operations shall, at least 30
days prior to the date of the suspension or termination, notify
all depositors and all known holders of receipts and tickets
issued by the dealer.
(b) Holder of receipt not known.--If all holders of receipts
are not known, the dealer shall publish notices of suspension or
termination on two consecutive weeks at least 14 days in advance
of suspension or termination in newspapers of general
circulation in locations where each facility operated by the
dealer in this Commonwealth is situated. If no newspaper is
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published in the facility's location, the dealer shall publish
the required notices in a newspaper of general circulation in
the county in which the dealer's facility is located.
Section 14. Disclosure of interests.
(a) Lien, mortgage or title.--A person may not knowingly
deposit grain to which the person does not have title or upon
which there is a lien or mortgage, either for sale or for
storage under a bailment agreement, without disclosing that the
person does not have title or that the grain is subject to lien
or mortgage.
(b) Dealer posting notice.--A dealer shall post in a
conspicuous place at each facility operated by the dealer within
this Commonwealth a notice of the prohibitions applicable to
depositors under this section. The notice shall be in large type
that is easily readable for depositors in the conduct of
business with the dealer.
Section 15. Disclosure of insolvency.
A dealer who is insolvent may accept deposits of grain,
except those deposits made to satisfy or to provide security for
an antecedent debt owed to the dealer.
Section 16. Civil remedies for default or violation by dealer.
(a) Action against the bond.--Upon default by the dealer, a
depositor may bring an action to enforce a lien provided to the
depositor under this act to satisfy a claim arising from an
obligation to the depositor incurred by the dealer.
(b) Injunctive relief.--A depositor may bring an action in
equity to compel a dealer to comply with the requirements of
this act or to enjoin a dealer from any further violation of
this act.
(c) Civil penalties.--A depositor who successfully brings an
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action in equity under subsection (b) shall be entitled to
recover from the dealer a civil penalty of not less than $50 nor
more than $500 for each day that the dealer is in violation.
(d) Recovery of reasonable attorney fees and related
expenses.--A plaintiff or petitioner that prevails in an action
brought under subsection (a) or (b) may recover against the
defendant reasonable attorney fees and other costs incurred as a
result of the action.
(e) Standing.--A farm organization shall have standing to
pursue a legal or equitable remedy authorized in this section on
behalf of depositor. The Attorney General or a district attorney
may pursue legal or equitable remedy authorized in this section
on behalf of a depositor.
(f) Remedies cumulative.--The remedies provided in this
section are in addition to other remedies provided in other laws
or in equity.
Section 17. Criminal penalties.
A person that violates any of the following provisions of
this act commits a misdemeanor of the third degree:
(1) Section 3(a) or (d).
(2) Section 4.
(3) Section 5(c).
(4) Section 12(a).
(5) Section 14(a).
(6) Section 15.
Section 18. Effective date.
This act shall take effect as follows:
(1) The following provisions shall take effect in 90
days:
(i) Section 3(a) and (d).
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(ii) Section 4.
(iii) Section 5.
(2) This section shall take effect immediately.
(3) The remainder of this act shall take effect in 60
days.
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