HBA-BSM S.B. 779 77(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 779
By: Duncan
Agriculture & Livestock
5/8/2001
Engrossed



BACKGROUND AND PURPOSE 

Currently, Texas law does not provide contracted growers with a secured
interest in the matter of bankruptcy cases.  Senate Bill 779 provides for
an agricultural lien on the proceeds of grown crops produced on contract
with a buyer. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

Senate Bill 779 amends the Property Code to provide that an agricultural
producer who, under a written contract with a contract purchaser, is to
receive consideration for selling an agricultural crop grown, produced, or
harvested by the producer has a lien for the amount owed under the
contract, or for the reasonable value of the crop on the date of transfer
or delivery if there is no provision concerning the amount owed in the
agreement.  Such a lien is on every agricultural crop in the possession of
the contract purchaser and on the entire inventory of the contract
purchaser with which the crop may have been commingled.  The bill provides
that a lien attaches to the agricultural crop on the date on which physical
possession of the crop is delivered or transferred by the agricultural
producer to the contract purchaser or the purchaser's agent, or if there is
to be a series of deliveries to the contract purchaser or purchaser's
agent, on the date of the last delivery of the agricultural crop to the
contract purchaser or purchaser's agent. A lien expires on the first
anniversary of the date of attachment.   

The bill also provides that a buyer in ordinary course of business of an
agricultural crop, including a person who buys any portion of an
agricultural crop from a contract purchaser, whether or not the
agricultural crop has been commingled, takes the agricultural crop free of
a lien, and the lien does not pass to any subsequent claimant of the
agricultural crop. An unequal pro rata recovery between agricultural
producers is not prohibited if the inequality results from a lien on
accounts receivable.  A lien is discharged when the lienholder receives
full payment for the agricultural crop.  The bill provides that  if payment
is received in the form of a negotiable instrument, full payment is
received when the negotiable instrument clears all financial institutions.
An agricultural producer who prevails in an action brought to enforce a
lien  is entitled to recover reasonable and necessary attorney's fees and
court costs and interest on funds subject to the lien at the judgment
interest rate. 

EFFECTIVE DATE

September 1, 2001.