DME H.B. 2762 75(R)BILL ANALYSIS AGRICULTURE & LIVESTOCK H.B. 2762 By: Walker 4-15-97 Committee Report (Substituted) BACKGROUND Cotton gins furnish a service to farmers by processing their seed cotton into a marketable packaged product. Many people conclude that a cotton ginner's lien is provided under Section 9.310, Business and Commerce Code, which is the priority of certain liens arising by operation of law. However, this conclusion is based upon a court decision involving a specific set of facts. In some instances, the issue of a ginner being able to claim a lien under Section 9.310 has been raised. The industry is moving towards the use of electronic warehouse receipts, and new farm legislation may change marketing practices used today. Both could impact future decisions on whether or not a ginner has a lien under Section 9.310. Determination may involve costly litigation. PURPOSE This legislation would establish a cotton ginner's lien under Section 70.003, Property Code, which would cover charges for processing and any charges incurred by the ginner for harvesting the crop. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends the heading of Section 70.003, Property Code, by adding "cotton ginner's" lien. SECTION 2. Amends Section 70.003, Property Code, by adding subsection (d) to establish a cotton ginner's lien on charges accrued for the processing and harvesting of cotton. Entitles the lienholder to retain possession of the cotton until charges are paid. Provides for notification of charges due to the cotton owner and to any other person having a lien on the cotton who has notified the ginner that such a lien exists. Establishes the lienholder's right to sell the cotton at a sale conducted under Section 9.504, Business and Commerce Code. Provides that any proceeds from the sale will be applied to the ginner's lien, with the remaining being applied to any other lien the ginner is aware of and then to the cotton owner. SECTION 3. Amends the heading of Section 70.005, Property Code, to delete "other than motor vehicle". SECTION 4. Amends Section 70.005(a), Property Code, by adding reference to Chapter 501, Transportation Code and to Section 70.003(d), Property Code. Deletes reference to the Certificate of Title Act as amended under Article 6687 1, Vernon's Texas Civil Statutes. SECTION 5. Specifies that any charges for processing and harvesting a cotton crop incurred before the effective date of this Act are not subject to this Act. SECTION 6. Effective date: September 1, 1997. SECTION 7. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE In addition to notifying the cotton owner in the introduced version, the substitute provides for notification to any other person having a lien on the cotton who has given notice of that lien to the cotton gin lienholder. Language in SECTION 2 of the original is changed from property to cotton and from public to commercially reasonable. The substitute establishes that a lienholder will utilize Section 9.504, Business and Commerce Code, when selling cotton to cover the lien debt.