HBA-BSM C.S.S.B. 779 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 779 By: Duncan Agriculture & Livestock 5/9/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, Texas law does not provide contracted growers with a secured interest in the matter of bankruptcy cases. C.S.S.B. 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 C.S.S.B. 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. If the agricultural crop is commingled after the crop has been transferred or delivered, a lien applies only to that portion of the contract purchaser's inventory in an amount that is equal to the amount of the crop transferred or delivered by the agricultural producer. 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 or payment is tendered by the contract purchaser and the lienholder without coercion defers payment. 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. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 779 differs from the original bill by providing that "contract purchaser" does not include a person who is licensed and bonded under current warehouse regulations. The substitute also provides that if the agricultural crop is commingled after the crop has been transferred or delivered, a lien applies only to that portion of the contract purchaser's inventory in an amount that is equal to the amount of the crop transferred or delivered by the agricultural producer. C.S.S.B. 779 adds that a lien is discharged when payment is tendered by the contract purchaser and the lienholder without coercion defers payment.