Session of 2000
HOUSE BILL No. 2973 By Committee on Agriculture 2-10

9 AN ACT concerning grain storage; relating to public warehouses;
10 amending K.S.A. 34-237 and 34-2,111 and K.S.A. 1999 Supp. 34-228,
11 34-229, 34-230, 34-236, 34-273 and 34-2,104 and repealing the existing
12 sections.
13
14 Be it enacted by the Legislature of the State of Kansas:
15 Section 1. K.S.A. 1999 Supp. 34-228 is hereby amended to read as
16 follows: 34-228. (a) Any person desiring to engage in business as a public
17 warehouseman in this state shall, before the transaction of any such busi-
18 ness, make written application to the secretary for a license for each sep-
19 arate warehouse or, if the applicant owns more than one warehouse at
20 one point, all of such warehouses may be incorporated in one application,
21 at which the person desires to engage in such business. The application
22 for a license shall be on a form designated by the secretary and shall
23 contain the individual name and address of each person interested as
24 principal in the business and, if the business is operated or to be operated
25 by a corporation, setting forth the names of the president and secretary,
26 and such further information as the secretary may require.
27 (b) (1) Every application for a public warehouse license shall be ac-
28 companied by a current financial statement. The statement shall include
29 such information as required by the secretary to administer and enforce
30 the public warehouse laws of this state, including, but not limited to a
31 current balance sheet, statement of income, including profit and loss,
32 statement of retained earnings and statement of changes in financial po-
33 sition. The applicant shall certify under oath that the statement as pre-
34 pared accurately reflects the financial condition of the applicant as of the
35 date specified and presents fairly the results of operations of the appli-
36 cant's public warehouse business for the period specified. The financial
37 statement shall be prepared in accordance with generally accepted ac-
38 counting principles and shall be accompanied by: (A) A report of audit
39 or review conducted by an independent certified public accountant or an
40 independent public accountant in accordance with standards established
41 by the American institute of certified public accountants and the account-
42 ant's certifications, assurances, opinions, comments and notes with re-
43 spect to the statement; or (B) a compilation report of the financial state-

2
1 ment, prepared by a grain commission firm or management firm which
2 is authorized pursuant to rules and regulations of the federal commodity
3 credit corporation to provide compilation reports of financial statements
4 of warehousemen.
5 (2) Except as otherwise provided, the secretary, upon request of an
6 applicant, may grant a waiver of the requirements of this subsection for
7 a period of not more than 30 days if the applicant furnishes evidence of
8 good and substantial reasons for the waiver. The secretary may extend
9 such waiver beyond 30 days for grain stored in an alternative location
10 other than a location identified in the public warehouse license, if the
11 secretary determines that the owner of the grain would suffer substantial
12 hardship to require the grain to be stored at a location identified in the
13 license. The secretary may determine what constitutes substantial hard-
14 ship and what length of time the grain may be stored at such alternative
15 location.
16 (c) (1) Every applicant for a license to operate one or more public
17 warehouses and every person licensed to operate one or more warehouses
18 shall at all times maintain total net worth liable for the payment of any
19 indebtedness arising from the conduct of the warehouse or warehouses
20 equal to at least $.25 per bushel of the storage capacity of the warehouse
21 or warehouses except: (A) No person shall be granted a license or shall
22 continue to be licensed unless the person has a net worth of at least
23 $25,000; and (B) any deficiency in net worth required above the $25,000
24 minimum may be supplied by an increase in the amount of the applicant's
25 or licensee's bond or letter of credit as provided by K.S.A. 34-229 and
26 amendments thereto.
27 (2) In determining total net worth: (A) Credit may be given for in-
28 surable property such as buildings, machinery, equipment and merchan-
29 dise inventory only to the extent that the property is protected by insur-
30 ance against loss or damage by fire; and (B) capital stock, as such, shall
31 not be considered a liability.
32 (d) No license shall be issued to a person or entity not previously
33 licensed in this state and making application for an original license who,
34 in this state or any other jurisdiction, within the 10 years immediately
35 prior to the date of the application of the person or entity for a license,
36 has been convicted of or has pleaded guilty or nolo contendere to any
37 crime which would constitute:
38 (1) Embezzlement;
39 (2) any felony defined in any statute contained in article 37 of chapter
40 21 of the Kansas Statutes Annotated and amendments thereto;
41 (3) unauthorized delivery of stored goods;
42 (4) any felony defined in any statute contained in chapter 34 of the
43 Kansas Statutes Annotated and amendments thereto; or

3
1 (5) a violation of the United States warehouse act (7 U.S.C. 241 et
2 seq.).
3 (e) The secretary may investigate any applicant making application
4 for an original license for the purpose of determining if such person would
5 be qualified to receive such license under the provisions of this section.
6 (f) (1) Every application for a public warehouse license shall be ac-
7 companied by a license fee which shall be determined and fixed by the
8 secretary by rules and regulations. The license fee shall not be more than
9 the applicable amount shown in the following fee schedule plus not more
10 than $500 for each functional unit:

11 12	Capacity in Bushels	ANNUAL FEE Not more than
13	1 to 100,000	$500
14	100,001 to 150,000	525
15	150,001 to 250,000	550
16	250,001 to 300,000	600
17	300,001 to 350,000	625
18	350,001 to 400,000	650
19	400,001 to 450,000	700
20	450,001 to 500,000	725
21	500,001 to 600,000	775
22	600,001 to 700,000	800
23	700,001 to 800,000	850
24	800,001 to 900,000	875
25	900,001 to 1,000,000	900
26	1,000,001 to 1,750,000	1,225
27	1,750,001 to 2,500,000	1,400
28	2,500,001 to 5,000,000	1,750
29	5,000,001 to 7,500,000	2,100
30	7,500,001 to 10,000,000	2,375
31	10,000,001 to 12,500,000	2,600
32	12,500,001 to 15,000,000	2,800
33	15,000,001 to 17,500,000	3,000
34	17,500,001 to 20,000,000	3,225
35	For each 2,500,000 bushels or fraction over 20,000,000 bushels	350

36 (2) Whenever a licensed warehouseman purchases or acquires addi-
37 tional facilities, the warehouseman, if otherwise qualified, may acquire a
38 license for the remainder of an unexpired license period by paying to the
39 secretary a license fee computed as follows: If the unexpired license pe-
40 riod is nine months or more, the annual fee; if the unexpired license
41 period is more than six months and less than nine months, 75% of the
42 annual fee; if the unexpired license period is more than three months and

4
1 not more than six months, 50% of the annual fee; and if the unexpired
2 license period is three months or less than three months, 25% of the
3 annual fee.
4 (3) In addition to any other applicable fee, the secretary shall charge
5 and collect a fee each time a public warehouse license is amended in an
6 amount of not more than $300 which shall be determined and fixed by
7 the secretary by rules and regulations.
8 (4) Nothing in this subsection shall be construed to authorize a refund
9 for any unused portion of an issued license.
10 (g) The secretary shall examine each warehouse operated by a li-
11 censed public warehouseman at least once in each 12-month period. The
12 licensed public warehouseman may request additional examinations of
13 any warehouse operated by the warehouseman. The cost of additional
14 examinations when requested by the warehouseman shall be charged to
15 the warehouseman requesting the examination. The cost of each addi-
16 tional examination requested by a warehouseman shall be an amount
17 determined therefor in accordance with an hourly rate fixed by the sec-
18 retary of not more than $50 per hour, subject to a minimum charge of
19 four hours for the examination, plus amounts for subsistence expense at
20 the rate fixed under K.S.A. 75-3207a and amendments thereto and for
21 mileage expense in accordance with the schedule of charges established
22 under K.S.A. 75-4607 and amendments thereto. The secretary, at the
23 secretary's discretion, may make additional examinations of a warehouse
24 and if a discrepancy is found on that examination, or if one was found on
25 the last previous examination, the cost of the examination shall be paid
26 by the warehouseman.
27 (h) When the secretary authorizes a grain handling facility to be phys-
28 ically monitored, pursuant to subsection (a)(3) of K.S.A. 34-102, and
29 amendments thereto, the cost and expenses of the monitoring shall be
30 paid by the owner of the facility at the same rates fixed in subsection (g).
31 (i) As used in this section, "functional unit" means a public warehouse
32 which has the capacity to store, weigh in and weigh out grain. Any outlying
33 storage facility which is not a functional unit shall have its storage capacity
34 included as part of the combined capacity of the warehouseman's nearest
35 functional unit.
36 Sec. 2. K.S.A. 1999 Supp. 34-229 is hereby amended to read as fol-
37 lows: 34-229. (a) Every applicant for a public warehouse license ~~shall~~
38 ~~promptly,~~ upon notification by the secretary of the amount of bond or
39 letter of credit required, shall promptly file with the secretary a bond with
40 good corporate surety qualified under the laws of the state of Kansas or
41 letter of credit pursuant to subsection (d). The amount of the bond or
42 letter of credit to be furnished for each warehouse shall be $.20 per bushel
43 for the first 1,000,000 bushels of licensed capacity; $.15 per bushel for

5
1 the next 1,000,000 of licensed capacity; and $.10 per bushel for all li-
2 censed capacity over 2,000,000 bushels. Except as provided further, in
3 no event shall the bond or letter of credit be for an amount less than
4 $10,000 nor more than $500,000.
5 (b) If an applicant for a license or a licensee at any time does not
6 have the total net worth required by K.S.A. 34-228 and amendments
7 thereto, an amount equal to the deficiency shall be added to the amount
8 of the bond required by subsection (a) or letter of credit required by
9 subsection (d).
10 (c) The bond shall be in favor of the state of Kansas for the benefit
11 of all persons interested, their legal representatives, attorneys or assigns
12 and shall be conditioned on the faithful performance of all the licensee's
13 duties as a public warehouseman and such additional obligations as as-
14 sumed by the warehouseman under contracts with a federal agency re-
15 lating to storage of grain in each warehouse. Any person injured by the
16 breach of any obligation of the warehouseman may commence suit on
17 the bond or letter of credit in any court of competent jurisdiction to
18 recover damages that the person has sustained, but any suit commenced
19 shall either be a class action or shall join as parties plaintiff or parties
20 defendant or other persons who may be affected by such suit on the bond
21 or letter of credit. No bond shall be canceled by the surety on less than
22 60 days' notice by mail to the secretary and the principal except that no
23 such notice shall be required for cancellation of any bond by reason of
24 nonpayment of the premium thereon. The liability of the surety on the
25 bond may continue for each successive license period the bond covers.
26 The total liability of the surety shall be limited to the amount stated on
27 the current bond or on an appropriate rider or endorsement to the cur-
28 rent bond. It is the intent of this statute that the bonds be nonaccumu-
29 lative, that stacking of bonds not occur in excess of the face value of the
30 current bond.
31 (d) (1) In lieu of a bond, a warehouseman may file with the secre-
32 tary an irrevocable letter of credit in the amount equal to or greater than
33 the amount of bond required in subsection (a). Such irrevocable letter of
34 credit shall: (A) Be issued by a financial institution which is insured by
35 the federal deposit insurance corporation or issued by farm credit insti-
36 tutions chartered by the farm credit administration; (B) be issued for a
37 period at least six months longer than the expiration date of the underlying
38 license; (C) provide for payment to the state of Kansas for the security
39 liability of the warehouseman; and (D) be on a form approved by the
40 secretary.
41 (e) If a person applies for licenses for two or more separate public
42 warehouses in this state, the person may give a single bond or letter of
43 credit covering all the applications, and the amount of the bond or letter

6
1 of credit shall be the total amounts which would be required for the
2 applications if separate bonds or letters of credit were given. In computing
3 the amount of the single bond or letter of credit the warehouseman may
4 add together the capacity of all warehouses to be covered by the bond or
5 letter of credit and use the aggregate capacity for the purpose of com-
6 puting the bond or letter of credit. If a warehouseman elects to provide
7 a single bond or letter of credit for a number of warehouses, the total
8 assets of all the warehouses shall be subject to liabilities of each individual
9 warehouse.
10 ~~(e)~~ (f) Whenever the director determines that any bond or letter of
11 credit given by any warehouseman is inadequate and insufficient security
12 against any loss that might arise under the terms of the bond or letter of
13 credit, the secretary shall require any additional bond or letter of credit
14 that the secretary considers necessary to provide adequate security. If the
15 secretary considers the financial condition of the surety upon any ware-
16 houseman and the warehouseman's bond or letter of credit to be im-
17 paired, the secretary shall require any substituted or additional bond or
18 letter of credit that the secretary considers necessary.
19 ~~(f)~~ (g) In all actions hereafter commenced in which judgment is ren-
20 dered against any surety company on any surety bond furnished or any
21 financial institution on any letter of credit issued under the provisions of
22 this section, if it appears from the evidence that the surety company or
23 financial institution has refused without just cause to pay the loss upon
24 demand, the court shall allow the plaintiff a reasonable sum as attorney
25 fees to be recovered and collected as a part of the costs. When a tender
26 is made by the surety company or financial institution before the com-
27 mencement of the action in which judgment is rendered and the amount
28 recovered is not in excess of the tender, no such costs shall be allowed.
29 ~~(g)~~ (h) Each licensed public warehouseman shall obtain a certificate
30 setting forth the amount and terms of the bond or letter of credit filed
31 with the secretary pursuant to this section, the name of the corporate
32 surety or financial institution therefor and such other information as the
33 secretary may prescribe by rules and regulations. The certificate of bond
34 or letter of credit information shall be posted in a conspicuous place in
35 the office room of the licensed warehouse, adjacent to the license posted
36 as required by K.S.A. 34-230 and amendments thereto, at all times during
37 the operation of the warehouse.
38 ~~(h)~~ (i) Transaction of any public warehouse business at any public
39 warehouse without having the certificate of bond or letter of credit infor-
40 mation displayed in the office room of the public warehouse as required
41 by this section is a class C nonperson misdemeanor.
42 Sec. 3. K.S.A. 1999 Supp. 34-230 is hereby amended to read as fol-
43 lows: 34-230. (a) Upon receiving the application and financial statement

7
1 required by this act, the secretary shall make an investigation and in-
2 spection of the warehouse or warehouses covered by the application. The
3 secretary may issue a license to the applicant if:
4 (1) The applicant furnishes the bond or letter of credit required by
5 ~~this act~~ K.S.A. 34-229, and amendments thereto;
6 (2) the warehouse or warehouses are found suitable for the proper
7 storage of grain for which a license is applied for; and
8 (3) the applicant complies with all requirements for licensure pre-
9 scribed by this act and rules and regulations adopted under this act.
10 (b) Every license shall be dated and shall designate the name of the
11 licensee and the location of the licensed warehouse or warehouses.
12 (c) Each license shall expire one year from the date of its issuance
13 except that, for the purpose of equitably distributing application dates of
14 warehouse licenses throughout each calendar year, the secretary may is-
15 sue licenses for periods longer than one year but not longer than two
16 years. Licenses for periods longer than one year shall be charged the
17 annual license fee, plus a monthly fee in proportion to the annual license
18 fee for the number of months the license is issued beyond one year.
19 (d) Any licensee making application for renewal of a license shall
20 submit the application, together with the licensee's financial statement
21 and any additional information required, at least 30 days prior to the date
22 of expiration of the licensee's current license. For each day that the li-
23 censee is late in submitting the application and required information, the
24 licensee shall be penalized an additional fee of $5.
25 (e) The license shall be posted in a conspicuous place in the office
26 room of the licensed warehouse at all times during the operation of the
27 warehouse.
28 (f) If a licensee is convicted of any violation of the provisions of this
29 act or if the secretary determines that a licensee does not comply with
30 any requirement for licensure or has violated any provision of this act or
31 of the rules and regulations adopted under this act, the secretary may at
32 the secretary's discretion suspend or revoke the license of the licensee.
33 All proceedings for the suspension or revocation of licenses shall be con-
34 ducted in accordance with the provisions of the Kansas administrative
35 procedure act.
36 (g) The licensee, if dissatisfied with the order of the secretary, may
37 appeal in the manner provided by law.
38 Sec. 4. K.S.A. 1999 Supp. 34-236 is hereby amended to read as fol-
39 lows: 34-236. (a) Every public warehouseman shall at all times keep the
40 grain stored in such warehouseman's warehouse insured in some reliable
41 insurance company authorized to do business in the state of Kansas. Such
42 grain is to be insured for its full market value, less the deductible amount
43 provided herein, against loss by fire, internal explosion, lightning, and

8
1 tornado and failure to do so shall make the public warehouseman liable
2 for the same on such warehouseman's bond or letter of credit for the
3 benefit of the owner or owners and the owners of warehouse receipts and
4 storage receipts issued by any public warehouse shall have a first lien, to
5 the extent of the value of the grain at the time of destruction at the place
6 where stored, on all such insurance for any loss or injury sustained by
7 them on account of the destruction or injury of such grain by fire, internal
8 explosion, lightning or tornado or any other cause covered by such insur-
9 ance policy.
10 (b) Fraud or criminal act of the warehouseman to which the holder
11 of a warehouse receipt or other interested person is not a party shall not
12 deprive the holder of a warehouse receipt or storage receipt or other
13 interested person of such person's right of recovery under such policy of
14 insurance. Nothing in this act shall be construed to require the insurer
15 to pay any loss or damage in excess of the amount of insurance effective
16 under its policy or to pay for any loss or damage not insured against by
17 its policy. In case of a fire, lightning or tornado, which shall destroy all or
18 part of the grain stored in any public warehouse, the public warehouse-
19 man shall, upon demand by the owner of the grain, or holder of any
20 warehouse receipt, or receipts, for such grain, and upon being presented
21 with the warehouse receipt, or receipts, make settlement for the value of
22 the grain covered by the warehouse receipt, or receipts, after deducting
23 the warehouse charges, at the market value of same, basing said value at
24 the average price paid for grain of the same grade at the station where
25 the public warehouse is located on the date of the destruction. Without
26 in any way limiting the warehouseman's liability under this section, the
27 warehouseman may carry a standard form of insurance policy approved
28 for grain warehousemen with a total deductible provision on the contents
29 not to exceed $10,000, except that the secretary upon a finding that it is
30 necessary to protect the public may order that a warehouseman's total
31 deductible provision be an amount less than $10,000 as specified by the
32 secretary.
33 Sec. 5. K.S.A. 34-237 is hereby amended to read as follows: 34-237.
34 (a) Any public warehouseman ~~may~~ on the written request of the owner
35 of any grain stored in a private bin, upon the surrender of the receipt, or
36 receipts, therefor, may be permitted to dry, clean or otherwise change
37 the condition or value of any such lot of grain; but in such case it shall
38 only be delivered as such separate lot, without reference to the grade it
39 may be made by such process of drying or cleaning.
40 (b) Nothing in this section~~, however,~~ shall prevent any warehouseman
41 from removing grain within ~~his~~ such warehouseman's warehouse for its
42 preservation or safekeeping, but no warehouseman shall be held liable
43 for damage to grain stored in special bins by heating, unless such damage

9
1 be caused by the act of the warehouseman. In case any public warehouse-
2 man shall discover that any portion of the grain stored in a special bin in
3 ~~his~~ such warehouseman's warehouse is out of condition or becoming so,
4 and it is not in ~~his~~ such warehouseman's power to preserve the same, he
5 the warehouseman shall immediately give notice to the owner, if known,
6 and, if not known, by public notice by advertising in a newspaper of
7 general circulation in the city in which such warehouse is situated, and
8 by posting a notice on the warehouse bulletin board or other public place
9 of its actual condition, as near as he the warehouseman can ascertain. He
10 The warehouseman shall state in such notice the kind and grade of grain
11 and the bin in which it is stored, and shall also state in such notice the
12 receipts outstanding upon which such grain will be delivered, giving the
13 numbers, amount and date of each, and shall give the name of the party
14 for whom such grain was stored, the date it was received and the amount
15 of it, and the enumeration of receipts and identification of grain so de-
16 scribed shall embrace as near as possible the quantity of grain contained
17 in such bins, and such grain shall be delivered upon return and cancel-
18 lation of such receipts, and the unreceipted grain upon the request of the
19 owner or holder of the receipt or receipts.
20 (c) Nothing herein contained shall be held to relieve the ~~said~~ public
21 warehouseman from exercising proper care and vigilance in preserving
22 such grain after such publication of its condition, but such grain shall be
23 kept separate and apart from all direct contact with other grain, and shall
24 not be mixed with other grain while in store in such warehouse. Any
25 public warehouseman guilty of any act or neglect, the effect of which is
26 to depreciate property stored in the public warehouse under ~~his~~ the war-
27 ehouseman's control, shall be liable on ~~his~~ the warehouseman's bond or
28 letter of credit therefor to the person damaged thereby.
29 (d) Nothing in this section shall be construed so as to permit any
30 public warehouseman to deliver any grain stored in a special bin or by
31 itself, as provided in this act, to any but the owners of the lot, or holder
32 of the warehouse receipt, or receipts. In case the grain declared out of
33 condition as herein provided for shall not be removed from store by the
34 owner or holder of the warehouse receipt, or receipts, thereof within
35 ~~twenty (20)~~ 20 days from the date of the notice of its being out of con-
36 dition, it shall be lawful for the public warehouseman where the grain is
37 stored to sell the same at public auction for account of said owner, or
38 holder, of the warehouse receipt, or receipts, by giving ~~ten~~ 10 days' notice
39 by advertising in a newspaper (daily, if there is such) published in the city
40 or town where such public warehouse is located.
41 Sec. 6. K.S.A. 1999 Supp. 34-273 is hereby amended to read as fol-
42 lows: 34-273. (a) In case any public warehouseman discovers that any
43 grain stored in such warehouseman's warehouse, other than in special

10
1 bins, is out of condition or is becoming so and that it is not in such
2 warehouseman's power to preserve the grain, such warehouseman shall
3 immediately give such notice of that fact as is reasonable and possible
4 under the circumstances to the owner of such grain or to the person in
5 whose name the grain is stored and shall also give notice of that fact to
6 the secretary.
7 (b) The secretary, unless otherwise requested by the owner of such
8 grain or the person in whose name the grain is stored, shall cause an
9 inspection to be made of the grain. If it is found on such inspection that
10 the grain is out of condition, or is becoming so, and the owner of the
11 grain fails to promptly remove it, the warehouseman may sell the grain
12 upon giving the same public notice of sale as is required by this act for
13 the sale of grain to satisfy the lien of a warehouseman, except that the
14 grain may be sold at either public or private sale without advertising if,
15 in the opinion of the secretary, such grain should be sold without delay
16 and written authority to make sale without advertisement is given by the
17 secretary to the warehouseman. For the purpose of this section, the owner
18 of such grain shall be deemed to be the holder of warehouse receipts of
19 the oldest dates then in circulation or uncanceled and the grain repre-
20 sented by which has not previously been declared out of condition.
21 (c) Nothing herein contained shall be held to relieve any warehouse-
22 man from exercising due care and vigilance in preserving any such grain
23 after discovery that the same is out of condition, or is becoming so, but
24 such grain shall be kept separate and apart from all direct contact with
25 other grain and shall not be mixed with other grain while in store in such
26 warehouse. Any public warehouseman guilty of any act of neglect which
27 has the effect of depreciating property stored in a public warehouse under
28 the warehouseman's control, shall be liable on the warehouseman's bond
29 or letter of credit therefor to the person damaged thereby. After grain
30 has been sold as authorized by this section, the warehouseman shall not
31 be liable thereafter for the delivery of such grain even though the receipt
32 therefor is negotiable, but shall be liable as a trustee for the amount of
33 the proceeds of such sale in excess of the amount of any lawful charges
34 for which the warehouseman had a lien at the time of such sale.
35 Sec. 7. K.S.A. 1999 Supp. 34-2,104 is hereby amended to read as
36 follows: 34-2,104. (a) Whenever it appears to the satisfaction of the sec-
37 retary that a licensed warehouseman does not have possession of suffi-
38 cient commodities to cover the outstanding receipts and scale tickets is-
39 sued or assumed by the warehouseman or when a licensed warehouseman
40 refuses to submit records or property to a lawful examination, the sec-
41 retary may give notice to the warehouseman to comply with all or any of
42 the following requirements:
43 (1) Cover any existing shortage;

11
1 (2) give additional bond or letter of credit as requested by the sec-
2 retary;
3 (3) submit to any examination that the secretary considers necessary.
4 If the warehouseman fails to comply with the terms of the notice within
5 24 hours from the date of its issuance or within such further time as the
6 secretary allows, the secretary may petition the district court of any county
7 in which is located one of the principal places of business of the licensed
8 warehouseman for an order authorizing the department to take posses-
9 sion of and maintain all or a portion of any and all commodities located
10 in the licensed warehouse or warehouses of the warehouseman and all
11 pertinent records and property.
12 Upon receipt of the secretary's verified petition setting forth the cir-
13 cumstances of the warehouseman's failure to comply and further stating
14 reasons why immediate possession and maintenance by the department
15 is necessary for the protection of depositors, warehouse receipt holders
16 or sureties, the court shall forthwith issue an order authorizing the de-
17 partment to take immediate possession of and maintain the commodities,
18 records and property for the purposes stated in this section. A copy of
19 the petition and order shall be sent to the warehouseman.
20 (b) At any time within 10 days after the department takes possession,
21 the warehouseman may file with the court a response to the petition of
22 the secretary stating reasons why the department should not be allowed
23 to retain possession. The court shall set the matter for hearing on a date
24 not less than five nor more than 15 days from the date of the filing of the
25 warehouseman's response. The order placing the department in posses-
26 sion shall not be stayed nor set aside until the court after hearing deter-
27 mines that possession should be restored to the warehouseman.
28 (c) Upon taking possession, the secretary shall give written notice of
29 its action to the surety on the bond or the financial institution which
30 issued the letter of credit of the warehouseman and may notify the holders
31 of record, as shown by the warehouseman's records, of all receipts and
32 scale tickets issued for commodities, to present their receipts or scale
33 tickets for inspection or to account for them. The secretary then may
34 cause an audit and other investigation to be made of the affairs of the
35 warehouse, especially with respect to the commodities in which there is
36 an apparent shortage, to determine the amount of the shortage and com-
37 pute the shortage as to each depositor as shown in the warehouseman's
38 records, if practicable. The secretary shall notify the warehouseman and
39 the surety on the warehouseman's bond or the financial institution which
40 issued the letter of credit of the approximate amount of the shortage and
41 notify each depositor affected by the shortage by sending notice to the
42 depositor's last known address as shown by the records of the warehouse.
43 The department shall retain possession and continue maintenance of

12
1 commodities, records and property under this section until the ware-
2 houseman or the surety on the warehouseman's bond or the financial
3 institution which issued the letter of credit has satisfied the claims of all
4 depositors or until the department is ordered by the court to surrender
5 possession.
6 (d) If during or after the audit or other investigation provided for in
7 this section, or at any other time, the secretary has evidence that the
8 warehouseman is insolvent or is unable to satisfy the claims of all depos-
9 itors, or the grain handling facility is operating without a valid federal or
10 state license, the secretary shall forthwith petition the district court for
11 an order appointing a receiver, under article 13 of chapter 60 of the
12 Kansas Statutes Annotated, and amendments thereto, to operate or liq-
13 uidate the business of the warehouseman or unlicensed facility in accord-
14 ance with the law. The petition may be accompanied by a verified appli-
15 cation requesting that the court appoint the secretary to act as temporary
16 receiver until a receiver is appointed. The court may appoint the secretary
17 as temporary receiver in an ex parte proceeding.
18 (e) While acting as temporary receiver, the secretary shall have all
19 the powers of a receiver and may appoint a special deputy director to
20 take charge of the affairs of the warehouse until a receiver is appointed.
21 The special deputy shall qualify, give bond and receive reasonable com-
22 pensation as determined by the secretary, subject to the approval of the
23 district court. The compensation shall be paid by the insolvent warehouse
24 or unlicensed facility or, upon appointment of a receiver, may be allowed
25 by the court as costs in the case.
26 (f) All necessary expenses incurred by the department or any receiver
27 appointed under this section in carrying out the provisions of this section
28 may be recovered from the warehouseman, owner or operator of the
29 unlicensed grain handling facility in a separate civil action brought by the
30 secretary in the district court or may be recovered at the same time and
31 as a part of the seizure or receivership action filed under this section. As
32 a part of the expenses so incurred, there is authorized to be included the
33 cost of adequate liability insurance necessary to protect the department,
34 the receiver, and others engaged in carrying out the provisions of this
35 section.
36 (g) A receiver shall have five months from the date of the receiver's
37 appointment for the settlement and completion of the receivership. For
38 cause shown, this period may be extended by the court, not exceeding
39 three months at a time.
40 Sec. 8. K.S.A. 34-2,111 is hereby amended to read as follows: 34-
41 2,111. (a) Whenever a public warehouseman offers to purchase grain
42 pursuant to a grain purchase contract which includes provision for de-
43 ferred payment or delayed pricing of the grain, the public warehouseman

13
1 shall inform the seller that such grain purchase contract is a voluntary
2 extension of credit and is not protected by the surety bond or letter of
3 credit, pursuant to K.S.A. 34-229, and amendments thereto, of the public
4 warehouseman.
5 (b) Each grain purchase contract which contains a provision for de-
6 ferred payment or delayed pricing, or both such provisions, shall be in
7 writing and shall include the following statement: "THIS CONTRACT
8 CONSTITUTES A VOLUNTARY EXTENSION OF CREDIT BY THE
9 SELLER TO THE PUBLIC WAREHOUSEMAN AND IS NOT PRO-
10 TECTED BY THE SURETY BOND OR LETTER OF CREDIT OF
11 THE PUBLIC WAREHOUSEMAN." The statement shall be promi-
12 nently displayed in capital letters which are at least as large as 10-point
13 type and shall be followed by a signature line which has the following
14 statement in parentheses under the line: "Must be signed by seller." Such
15 statements and signature line shall be framed in a box and placed on the
16 first page of the grain purchase contract as a part thereof so that it stands
17 out from the other provisions of the grain purchase contract.
18 (c) If a public warehouseman has entered into a written grain pur-
19 chase contract with a seller that produced the grain and if such grain
20 purchase contract provides for either deferred payment or delayed pric-
21 ing, or both, then, upon demand of the seller made after delivery of such
22 grain to the public warehouseman, the public warehouseman shall cause
23 a financial institution to issue to the seller a standby letter of credit in the
24 amount of the unpaid balance under the grain purchase contract at the
25 time such demand is made. Each public warehouseman who offers to
26 enter into such a grain purchase contract with any seller that produced
27 the grain shall post a sign providing public notice of the availability of
28 such standby letter of credit.
29 (d) As used in this section:
30 (1) "Deferred payment" means any payment to be made under the
31 terms of a grain purchase contract after delivery of the grain to the public
32 warehouseman;
33 (2) "delayed pricing" means any method of pricing grain under the
34 terms of a grain purchase contract after such grain has been delivered to
35 the public warehouseman;
36 (3) "financial institution" means any institution whose deposits,
37 shares or accounts are insured by a federal agency or banks for cooper-
38 atives created under title III of the farm credit act of 1971;
39 (4) "standby letter of credit" means a letter of credit within the mean-
40 ing of K.S.A. 84-5-103(1)(a), and amendments thereto, which, by its
41 terms:
42 (A) Is irrevocable;
43 (B) is nontransferable;

14
1 (C) names the seller that produced the grain as beneficiary;
2 (D) shall not expire earlier than 60 days after the final payment is
3 due under the terms of the underlying grain purchase contract; and
4 (E) cannot be drawn upon by the beneficiary in the absence of a
5 default in payment under the terms of the underlying grain purchase
6 contract;
7 (5) "unpaid balance" means that portion of the purchase price, to-
8 gether with interest thereon, if any, remaining unpaid to the seller under
9 the terms of a grain purchase contract at the time the seller makes de-
10 mand as provided in this section. Where the grain purchase contract pro-
11 vides for delayed pricing and the price has not been established at the
12 time demand is made by the seller, then, for the purposes of this section
13 only, the unpaid balance shall be determined as though the price had
14 been established at the time of the closing of the relevant futures market
15 on the last trading day before demand is made by the seller under this
16 section.
17 (e) As used in this section, the words and phrases defined in K.S.A.
18 34-223, and amendments thereto, shall have the meanings ascribed to
19 them in that statute.
20 (f) This section shall be construed as supplemental to the statutes
21 contained in article 2 of chapter 34 of the Kansas Statutes Annotated, and
22 amendments thereto.
23 Sec. 9. K.S.A. 34-237 and 34-2,111 and K.S.A. 1999 Supp. 34-228,
24 34-229, 34-230, 34-236, 34-273 and 34-2,104 are hereby repealed.
25 Sec. 10. This act shall take effect and be in force from and after its
26 publication in the statute book.