BILL ANALYSIS
C.S.H.B. 1463
By: Swinford
April 4, 1995
Committee Report (Substituted)
BACKGROUND
Agricultural input suppliers often sell agricultural chemicals,
seed and animal feed on credit. They expect to be paid when a
farmer's operating loan is secured or at latest when the farmer
receives the proceeds from a crop or livestock. Usually the
supplier is duly paid, but occasionally he is not and the supplier
is left in a position as an unsecured creditor. The supplier is
not able to file notice of a lien against the debtor because, as is
practice in this business, he does not have a financing statement,
a signed document from the debtor stating that the supplier has a
financial interest in the debtor's crop or livestock. To file a
notice of claim of lien at the Secretary of State's office, one
must have a signed financing statement. The supplier would be put
at a competitive disadvantage if he made buyers sign a financing
statement when they buy the inputs because his competitors do not
require one. Once a buyer has failed to pay off his debt or set
out terms of payment, he will likely be unwilling to sign a
statement. C.S.H.B. 1463 would encourage suppliers to continue
providing farmers with needed products by giving them the ability
to secure a lien without the debtor's signature if the need arose.
PURPOSE
C.S.H.B. 1463 establishes the procedures for a seller of
agricultural chemicals, agricultural seed or animal feed to perfect
a lien on proceeds received by the debtor.
RULEMAKING AUTHORITY
It is the committee's opinion that additional rulemaking authority
is expressly delegated to the commissioner of agriculture in
SECTION 1 [Section 128.012] and SECTION 2 [Section 188.012]. It is
the committee's opinion that additional rulemaking authority is
expressly delegated to the secretary of state in SECTION 1 [Section
128.046] and SECTION 2 [Section 188.046].
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Title 5, Agriculture Code, by adding Subtitle H
as follows:
SUBTITLE H. HORTICULTURAL LIENS
CHAPTER 128. AGRICULTURAL CHEMICAL AND SEED LIENS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 128.001. DEFINITIONS. Defines "agricultural chemical,"
"agricultural seed," "labor," and "reasonable or agreed
charges."
Sec. 128.002. PROCEEDS. (a) Provides that for purposes of
this chapter, proceeds are the amounts received by a lien
debtor (farmer) from the sale of a crop before a deduction for
taxes, fees or assessments or a deduction made under a court
order from the sale of the crop treated by the agricultural
chemical, the first crop produced after the application of the
chemical, or the crop produced from the seed supplied through
the lien claimant (agricultural input supplier). The sale of
the agricultural chemical and seed includes the cost of
application, delivery or preparation.
(b) Sets forth that proceeds do not include amounts owed to or
retained by a cooperative association.
SUBCHAPTER B. AGRICULTURAL CHEMICAL AND SEED LIEN
Sec. 128.006. NOTICE BEFORE PURCHASE; REQUIRED NOTICE BEFORE
CLAIMING LIEN. Requires a potential lien claimant to give
notice to a debtor that a lien may be filed for failure to pay
debts. A potential lien claimant may give notice on the
credit application or invoice or by a mailed statement.
Requires a person to notify a debtor by certified mail before
he claims the lien. The notice should state that the payment
is more than 30 days overdue, the amount overdue, and that the
debtor has the options of paying the charges, allowing the
lien to be filed, or entering into an agreement granting a
security interest in the proceeds. Allows the debtor 10 days
to notify the claimant of the option selected. Allows the
claimant to file the notice of claim of lien if the debtor
does not comply in 10 days.
Sec. 128.007. ATTACHMENT OF LIEN. Sets forth that the lien
filed by the claimant attaches to the crop proceeds.
Sec. 128.008. AMOUNT OF LIEN. Provides that the amount of
the lien is for the unpaid charges for the chemicals, seeds
and/or labor furnished and the filing fees.
Sec. 128.009. PERSON ENTITLED TO FILE; EXCEPTION. Allows an
agricultural input supplier to file a lien unless four liens
have already been filed against the same proceeds or if the
arbitration of a dispute between the claimant and the debtor
is pending.
Sec. 128.010. PERFECTION OF LIEN. Provides that a lien
created under this chapter is perfected on the filing of a
notice of claim of lien with the secretary of state.
Sec. 128.011. DURATION OF NOTICE OF CLAIM OF LIEN. (a)
Provides that the notice of claim of lien is effective and a
new notice of claim of lien is not required to maintain the
lien as long as the person who provides the agricultural
chemical, agricultural seed, or labor remains unpaid by the
debtor for the amount of the lien or continues to provide the
chemical, seed or labor to the lien debtor on a regular basis.
(b) Specifies that it is not considered regular basis if a
period of more than 45 days elapses between applications,
deliveries, or preparations.
Sec. 128.012. PROCEDURES FOR SETTLEMENT OF DISPUTES. (a)
Provides for the commissioner of agriculture by rule to
establish a procedure for settling disputes. The procedures
must provide a time requirement for submitting the dispute to
the department, a time requirement for notice of the dispute
submitted to each party, and a process for evaluating the
dispute.
(b) Sets forth that each party in the dispute is equally
liable for the costs incurred by the department in carrying
out this section.
Sec. 128.013. CONTENTS OF NOTICE OF CLAIM OF LIEN. Sets
forth that the notice of claim of lien must include the name and
address of the claimant and debtor; the location of the
property where the seed, chemical or labor was provided; that the
payment is at least 30 days overdue; the amount overdue; a sworn
statement that the requirements under Section 128.006(a) and (b)
have been met; and that a lien has been established.
Sec. 128.014. SIGNATURE. Requires the notice of claim of
lien to be signed by the claimant or an authorized person.
Sec. 128.015. FORM. (a) Requires the notice of claim of lien
to be filed on a form that satisfies the requirements of a
financing statement under Section 9.402, Business & Commerce
Code, except the claimant may be identified either as a lien
claimant or as a secured party and that the form must be
signed by the claimant but not necessarily by the debtor, and
that certain information listed in Section 128.013 must be
included.
(b) Requires that a separately signed statement containing the
information specified in Section 128.013(6) shall be attached
to the form required under Subsection (a).
Sec. 128.016. FILING AND MARKING IN OFFICE OF SECRETARY OF
STATE; FEE. Requires that the notice of claim of lien shall
be filed and marked in the secretary of state's office as a
financing statement is filed and marked under Section 9.403,
Business & Commerce Code. Establishes that the secretary of
state's filing fee is the same as the fee assessed for a
financing statement.
Sec. 128.017. TIME OF WRITTEN NOTICE. Requires the claimant
to provide written notice of the claim of lien to the debtor
no later than the tenth day after the date the notice is filed
with the secretary of state.
Sec. 128.018. RECOGNITION OF NOTICE AS FINANCING STATEMENT.
Requires the secretary of state to recognize a notice of claim
of lien under this subchapter as a financing statement
under Section 9.402, Business & Commerce Code.
SUBCHAPTER C. PRIORITY OF LIEN
Sec. 128.026. TIME OF FILING. (a) Provides that a lien
created under this chapter has the same priority as a security
interest perfected by the filing of a financing statement on
the date the notice of claim of lien is filed.
(b) Provides that a lien created under this chapter does not
have priority over labor claims for wages and salaries.
SUBCHAPTER D. INFORMATION CONCERNING LIEN
Sec. 128.031. ISSUANCE OF CERTIFICATE TO MEMBER OF PUBLIC;
FEE. Allows a person to obtain a certificate identifying any
lien on file and any notice of claim of lien. Allows a fee
for the certificate to be set and collected by the secretary
of state.
Sec. 128.032. COPIES OF NOTICES OF CLAIM OF LIEN AND OTHER
NOTICES; FEE. Allows a person to obtain a copy of any notice
of claim of an agricultural chemical or seed lien filed.
Allows a fee for the copy to be set and collected by the
secretary of state.
SUBCHAPTER E. ENFORCEMENT OF LIEN
Sec. 128.036. WRITTEN NOTICE TO SECURED CREDITORS BY LIEN
CLAIMANT. (a) Requires the lien claimant to provide written
notice to any secured creditor at least 30 days before the
date the claimant enforces the lien.
(b) Specifies that "secured creditor" means any entity named
as a secured party in a financing statement that is filed
regarding the debtor and that covers a farm product, an
account, or crop subject to the lien, a crop growing or grown
on land which the agricultural chemical was applied, or the
next crop to be grown on that land if a crop is not planted.
Sec. 128.037. FORECLOSURE IN ACTION TO RECOVER REASONABLE OR
AGREED CHARGES. Allows the lien claimant to foreclose on a
lien under this chapter only in an action to recover the
reasonable or agreed charges.
Sec. 128.038. TERMINATION STATEMENT. Requires a lien
claimant to file a termination statement with the secretary of
state no longer claiming a security interest if the lien
claimant receives payment for the total amount secured by a
lien and has not furnished additional chemical, seed or labor
during the 45-day period before the payment was received. The
termination statement must include the identifying information
of the lien. If the claimant does not file a termination
statement as required then the claimant is liable to the
debtor for actual damages suffered by this failure. If the
claimant acts in bad faith in not terminating the lien, he is
liable for an additional penalty of $100. The secretary of
state's office shall properly file the termination statement.
The secretary of state's filing fee for a termination
statement is the same as the fee assessed for a financing
statement termination.
Sec. 128.039. RIGHT OF ASSIGNMENT OR TRANSFER; FILING OF
STATEMENT. Allows the holder of the lien to sell the lien.
Requires the lienholder to notify the secretary of state's
office of this assignment.
SUBCHAPTER F. MISCELLANEOUS
Sec. 128.046. RULES. Allows the secretary of state to adopt
rules to carry out duties under this chapter.
Sec. 128.047. MAXIMUM NUMBER OF LIENS. Allows no more than
four liens to be enforced under this chapter against the same
proceeds of a lien debtor even if the liens are by different
lien claimants.
Sec. 128.048. APPLICABILITY OF OTHER LAW. Chapter 9,
Business & Commerce Code, applies to a lien created under this
chapter to the extent Chapter 9 is consistent with this
chapter.
SECTION 2. Amends Title 6, Agriculture Code, by adding Subtitle E
as follows:
SUBTITLE E. LIENS ON ANIMAL PRODUCTS
CHAPTER 188. LIENS FOR ANIMAL FEED
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 188.001. DEFINITIONS. Defines "animal feed," "labor,"
"livestock," and "reasonable or agreed charges".
Sec. 188.002. PROCEEDS. (a) Provides that for the purposes
of this chapter, proceeds are the amounts received by a lien
debtor (farmer) before a deduction for taxes, fees or
assessment or a deduction made under a court order from the
sale of livestock for which the animal feed was used; meat,
milk, skins, wool or other products derived from that
livestock or that livestock's offspring.
(b) Sets forth that proceeds do not include amounts owed to or
retained by a cooperative association.
SUBCHAPTER B. ANIMAL FEED LIEN
Sec. 188.006. NOTICE BEFORE PURCHASE; REQUIRED NOTICE BEFORE
CLAIMING LIEN. Requires a potential lien claimant to give
notice to a debtor that a lien may be filed for failure to pay
debts. A potential lien claimant may give notice on the
credit application or invoice or by a mailed statement.
Requires a person to notify a debtor by certified mail before
he claims the lien. The notice should state that the payment
is more than 30 days overdue, the amount overdue and that the
debtor has the options of paying the charges, allowing the
lien to be filed, or enter into an agreement granting a
security interest in the proceeds. Allows the debtor 10 days
to notify the claimant of the option selected. Allows the
claimant to file a lien if the debtor does not comply in 10
days.
Sec. 188.007. ATTACHMENT OF LIEN. Sets forth that the lien
filed by the claimant attaches to the crop proceeds.
Sec. 188.008. AMOUNT OF LIEN. Provides that the amount of
the lien is for the unpaid charges for the animal feed and the
filing fees.
Sec. 188.009. PERSON ENTITLED TO FILE; EXCEPTION. (a) Allows
an agricultural input supplier to file a lien unless four
liens have already been filed against the same proceeds or if
the arbitration of a dispute between the claimant and the
debtor is pending.
Sec. 188.010. PERFECTION OF LIEN. Provides that a lien
created under this chapter is perfected on the filing of a
notice of claim of lien with the secretary of state.
Sec. 188.011. DURATION OF NOTICE OF CLAIM OF LIEN. (a)
Provides that the notice of claim of lien is effective and a
new notice of claim of lien is not required to maintain the
lien as long as the person who provides the animal feed
including labor remains unpaid by the debtor for the amount of
the lien and continues to provide animal feed on a regular
basis.
(b) Specifies that it is not considered regular basis if a
period of more than 45 days elapses between deliveries and
preparations.
Sec. 188.012. PROCEDURES FOR SETTLEMENT OF DISPUTES. (a)
Provides for the commissioner of agriculture by rule to
establish a procedure for settling disputes.
The procedures must provide a time requirement for submitting
the dispute to the department, a time requirement for notice
of dispute to each party, and a process for evaluating the
dispute.
(b) Sets forth that each party in the dispute is equally
liable for the costs incurred by the department in carrying
out this section.
Sec. 188.013. CONTENTS OF NOTICE OF CLAIM OF LIEN. Sets
forth that the notice of claim of lien must include the name
and address of the claimant and debtor, the location of the
livestock for which the feed was provided, that the payment is
at least 30 days overdue, the amount overdue, a sworn
statement that the requirements under Section 188.006(a) and
(b) have been met, and that a lien has been established.
Sec. 188.014. SIGNATURE. Requires the notice of claim of
lien to be signed by the claimant or an authorized person.
Sec. 188.015. FORM. (a) Requires the notice of claim of lien
to be filed on a form that satisfies the requirements of a
financing statement under Section 9.402, Business & Commerce
Code, except the claimant may be identified either as a lien
claimant or as a secured party and that the form must be
signed by the claimant but not necessarily by the debtor, and
that certain information listed in Section 188.013 must be
included.
(b) Requires that a separately signed statement containing the
information specified in Section 188.013(6) shall be attached
to the form required under Subsection (a).
Sec. 188.016. FILING AND MARKING IN OFFICE OF SECRETARY OF
STATE; FEE. Requires that the notice of claim of lien shall
be filed and marked in the secretary of state's office as a
financing statement is filed and marked under Section 9.403,
Business & Commerce Code. Establishes that the secretary of
state's filing fee is the same as the fee assessed for a
financing statement.
Sec. 188.017. TIME OF WRITTEN NOTICE. Requires the claimant
to provide written notice of the claim of lien to the lien
debtor no later than the tenth day after the date the notice
is filed with the secretary of state.
Sec. 188.018. RECOGNITION OF NOTICE AS FINANCING STATEMENT.
Requires the secretary of state to recognize a notice of claim
of lien under this subchapter as a financing statement under
Section 9.402, Business & Commerce Code.
SUBCHAPTER C. PRIORITY OF LIEN
Sec. 188.026. TIME OF FILING. (a) Provides that a lien
created under this chapter has the same priority as a security
interest perfected by the filing of a financing statement on
the date the notice of claim of lien is filed.
(b) Provides that a lien created under this chapter does not
have priority over labor claims for wages and salaries or for
charges for the care of livestock subject to the lien.
SUBCHAPTER D. INFORMATION CONCERNING LIEN
Sec. 188.031. ISSUANCE OF CERTIFICATE TO MEMBER OF PUBLIC;
FEE. Allows a person to obtain a certificate identifying any
lien on file and any notice of claim of lien. Allows a fee
for the certificate to be set and collected by the secretary
of state.
Sec. 188.032. COPIES OF NOTICES OF CLAIM OF LIEN AND OTHER
NOTICES; FEE. Allows a person to obtain a copy of any notice
of claim of an animal feed lien filed. Allows a fee for the
copy to be set and collected by the secretary of state.
SUBCHAPTER E. ENFORCEMENT OF LIEN.
Sec. 188.036. WRITTEN NOTICE TO SECURED CREDITORS BY LIEN
CLAIMANT. (a) Requires the lien claimant to provide written
notice to any secured creditor at least 30 days before the
date the lien claimant enforces the lien.
(b) Specifies that "secured creditor" means any entity named
as a secured party in a financing statement that is filed
regarding the debtor and that covers an animal product, an
account, or livestock subject to the lien.
Sec. 188.037. FORECLOSURE IN ACTION TO RECOVER REASONABLE OR
AGREED CHARGES. Allows the lien claimant to foreclose on a
lien under this chapter only in an action to recover the
reasonable or agreed charges.
Section 188.038. TERMINATION STATEMENT. Requires a lien
claimant to file a termination statement with the secretary of
state no longer claiming a security interest if the lien
claimant receives payment for the total amount secured by a
lien and has not furnished the additional feed during the 45-day period before the payment was received. The termination
statement must include the identifying information of the
lien. If the claimant does not file a termination statement
as required, then the claimant is liable to the debtor for
actual damages suffered by this failure. If the claimant acts
in bad faith in not terminating the lien, he is liable for an
additional penalty of $100. The secretary of state's office
shall properly file the termination statement. The secretary
of state's filing fee for a termination statement is the same
as the fee assessed for a financing statement termination.
Sec. 188.039. RIGHT OF ASSIGNMENT OR TRANSFER; FILING OF
STATEMENT. Allows the holder of the lien to sell the lien.
Requires the lienholder to notify the secretary of state's
office of this assignment.
SUBCHAPTER F. MISCELLANEOUS
Sec. 188.046. RULES. Allows the secretary of state to adopt
rules to carry out the duties under this chapter.
Sec. 188.047. MAXIMUM NUMBER OF LIENS. Allows no more than
four liens to be enforced under this chapter against the same
proceeds of a lien debtor even if the liens are by different
lien claimants.
Sec. 188.048. APPLICABILITY OF OTHER LAW. Chapter 9,
Business & Commerce Code, applies to a lien created under this
chapter to the extent Chapter 9 is consistent with this
chapter.
SECTION 3.
(a) Provides that Chapter 128, Agriculture Code, as added by
this Act, applies to agricultural chemical, agricultural seed
or labor supplied on or after the
effective date of this Act.
(b) Provides that Chapter 188, Agriculture Code, as added by
this Act, applies to animal feed and labor supplied on or
after the effective date of this Act.
SECTION 4. Effective date of September 1, 1995.
SECTION 5. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute requires notice to be given by a potential lien
claimant to customers that a lien may be filed for failure to pay
debts; adds that the amount of the lien includes the filing fees
but does not include the cost of enforcing the lien; makes
provision for the secretary of state's office to be paid a fee for
filing a lien and a termination notice; and expands the definition
of "livestock" to include beef and dairy cattle, poultry and
ratites. The original legislation defined "labor" as services
provided by the seller of the agricultural chemical or seed. The
substitute does not specify that the labor is provided by the
seller. In the substitute labor charges are included in a lien.
SUMMARY OF COMMITTEE ACTION
H.B. 1463 was considered by the committee in a public hearing on
March 7, 1995.
The following persons testified in favor of the bill:
Mr. George Mitchell, of Texas Ag Industries and Texas Agricultural
Aviation Industry, representing himself;
Mr. Kim Coker, of Texas Liquid Fertilizer and representing himself;
Mr. Harry Bauerschlag, of Custom Agri-Service, and representing
Texas Ag Industries Association and himself;
Mr. Tobias Hlavinka, of BHC Industries, Inc., Agriculture
Fertilizer and Chemical, and representing himself;
Mr. Patrick Miller, President of and representing Texas Ag
Industries Association and himself;
Mr. Robert H. Putz, Jr., of Putz Aero, Inc., representing himself
and the Texas Agricultural Aviation Association;
Mr. Jon Fisher, representing Texas Ag Industries Association;
Mr. Ben Boerner, representing Texas Grain and Feed Association;
Mr. Ronnie Felderhoff, representing himself, Muenster Milling
Company, Inc. and Texas Grain and Feed Association;
Mr. Tommy Engelke, representing the Texas Agricultural Cooperative
Council; and
Mr. Fred Bursey, Jr., representing himself, the Morrison Milling
Company and Texas Grain and Feed Association.
The bill was left pending.
H.B. 1463 was considered by the committee in a public hearing on
March 14, 1995.
The following person testified in favor of the bill:
Mr. Robert H. Putz, Jr. of Putz Aero, Inc., representing the Texas
Agricultural Aviation Association and himself.
The bill was left pending.
H.B. 1463 was considered by the committee in a public hearing on
March 21, 1995.
The committee considered a complete substitute for the bill.
The substitute was adopted without objection.
The bill was reported favorably, as substituted, with the
recommendation that it do pass and be printed, by a record vote of
9 ayes, 0 nays, 0 pnv, 0 absent.