SRC-MWN S.B. 779 77(R)   BILL ANALYSIS


Senate Research Center   S.B. 779
77R2483 JMG-FBy: Duncan
Natural Resources
4/18/2001
As Filed


DIGEST AND PURPOSE 

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

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a
state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 70, Property Code, by adding Subchapter E, as
follows: 

SUBCHAPTER E. AGRICULTURE LIENS

Sec. 70.401. DEFINITIONS. Defines "agricultural product," "agricultural
producer," "growing or harvesting," and "inventory." 

Sec. 70.402. LIEN CREATED. Provides that an agricultural producer who,
under an agreement, is to receive consideration for producing, growing, or
harvesting an agricultural product has a lien on certain property for the
amount owed under the agreement, or for the reasonable value of the product
on the date of transfer or delivery if there is no agreement. 

Sec. 70.403. WHEN LIEN ATTACHES. Provides that a lien created under this
subchapter attaches to the property described by Section 70.402 on the date
on which physical possession of the agricultural product is delivered or
transferred by the agricultural producer to the purchaser or the
purchaser's agent. Provides that if the agricultural producer delivers or
transfers agricultural products for cleaning or storage to a person other
than the purchaser, the lien attaches at the first time when the
agricultural product is both sold and physically delivered to the purchaser
or the purchaser's agent. 

Sec. 70.404. PERFECTING LIEN. Provides that an agricultural producer is not
required to file notice to perfect a lien created under this subchapter. 

Sec. 70.405. DURATION OF LIEN; NOTICE OF LIEN. Provides that a lien under
this subchapter, except as provided by this section, expires on the first
anniversary of the date of attachment. Provides that a lien created under
this subchapter is extended for a period of one year if an affidavit and a
written notice of lien, on a form prescribed by the secretary of state, are
filed with the secretary of state by the agricultural producer before the
date the lien is otherwise to expire. Requires the notice of lien to
include certain information. 

Sec. 70.406. PRIORITY OF LIEN. Provides that a lien under this subchapter
is superior to all other liens on the same property, regardless of when the
creditor's lien or security interest  attaches to property described by
Section 70.402. Provides that all liens created under this subchapter,
regardless of the date of attachment or date of notice of lien, are of
equal priority and payable pro rata in proportion to the size of the lien.
Provides that this section does not prohibit an unequal pro rata recovery
between agricultural producers if the inequality results from alien on
accounts receivable. 

Sec. 70.407. DISCHARGE OF LIEN. Provides that a lien created under this
subchapter is discharged when the lien holder receives full payment for the
agricultural product. Provides that if full payment is in the form of a
negotiable instrument, full payment is received when the negotiable
instrument clears all financial institutions. 

Sec. 70.408. FILING NOTICE OF DISCHARGE. Requires the lien holder, if a
notice of lien is filed under Section 70.405(b) for extension of a lien and
the lienholder subsequently receives full payment, to file with the
secretary of state a notice of discharge, signed by the lienholder, stating
that full payment has been received and the lien is discharged. Provides
that if the lienholder who has filed a notice of lien and subsequently
received full payment does not file a notice of discharge of the lien not
later than the 30th day after receiving s written request to discharge the
lien, the lienholder is liable to the purchaser of the agricultural product
for damages in the amount of $300. 

Sec. 70.409. FORM OF FILING WITH THE SECRETARY OF STATE; FEES. Requires the
secretary of state to prescribe the forms necessary for filing a notice of
lien and notice of discharge under this subchapter. Requires the lienholder
to submit to the secretary of state a $10 fee for filing a notice of lien
under Section 70.405. Prohibits the secretary of state from charging a fee
for filing a notice of discharge under Section 70.408. 

Sec. 70.410. JOINDER OF ACTIONS. Authorizes persons claiming a lien against
the same property under this chapter to join in the same action, and if
separate actions are commenced, the court is authorized to consolidate
them. 

Sec. 70.411. RECOVERY OF COSTS. Provides that an agricultural producer who
prevails in an action brought to enforce a lien created under this
subchapter is entitled to recover certain fees, costs, and interest.
Provides that the judgment interest rate is computed at a certain rate. 

Sec. 70.413. CONFLICT OF LAW. Provides that to the extent of any conflict
between this subchapter and Chapter 9 (Secured Transaction; Sales of
Accounts and Chattel Paper), Business & Commerce Code, Chapter 128
(Agricultural Chemical and Seed Liens), Agriculture Code, or any other law,
this subchapter prevails. 

SECTION 2. Effective date: September 1, 2001.
                      Makes application of this Act prospective.