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


Senate Research CenterC.S.S.B. 779
77R12392 JMG-FBy: Duncan
Natural Resources
4/22/2001
Committee Report (Substituted)


DIGEST 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

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 crop," "agricultural
producer," "buyer in ordinary course of business," and "contract
purchaser." 

Sec. 70.402. LIEN CREATED. (a) Provides 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. 

(b) Provides that a lien created under this subchapter is on every
agricultural crop, either in raw or processed form, in the possession of
the contract purchaser and on the entire inventory of the contract
purchaser with which the agricultural crop may have been commingled. 

(c) Provides that an agricultural crop or processed form of an agricultural
crop deposited by a contract purchaser with a warehouse, whether or not a
warehouse receipt is given as security, is considered to be in the
possession of the contract purchaser and subject to the lien. 

Sec. 70.403. WHEN LIEN ATTACHES. Provides that a lien created under this
subchapter 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. 

Sec. 70.404. APPLICABILITY OF OTHER LAW. Provides that Chapter 9 (Secured
Transactions), Business & Commerce Code, including applicable filing and
perfection  requirements, applies to a lien created under this subchapter
to the extent Chapter 9 is consistent with this subchapter. 

Sec. 70.405. DURATION 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.  

Sec. 70.406. EFFECT OF LIEN; RECOVERY. (a) 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 created under this subchapter, and the lien created by
this subchapter does not pass to any subsequent claimant of the
agricultural crop. 

(b) Provides that an unequal pro rata recovery between agricultural
producers is not prohibited under this subchapter if the inequality results
from a lien 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 crop. 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. JOINDER OF ACTIONS. Authorizes persons claiming a lien against
the same agricultural crop under this subchapter to join in the same
action, and if separate actions are commenced, the court is authorized to
consolidate them. 

Sec. 70.409. 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 and interest. Provides that
the judgment interest rate is computed at a certain rate. 

Sec. 70.410. WAIVER OF CERTAIN RIGHTS PROHIBITED.  Provides that an
agricultural producer's agreement with a contract purchaser to waive the
producer's right to seek a remedy provided by this subchapter is void. 

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

SUMMARY OF COMMITTEE CHANGES

SECTION 1. Amends As Filed S.B. 779, by amending proposed Chapter 70E,
Property Code, regarding AGRICULTURE LIENS. 

Sec. 70.401.  Adds definitions for "agricultural crop," "buyer in ordinary
course of business," and "contract purchaser" and deletes definitions for
"agricultural product," "growing or harvesting," and "inventory." 

Deletes proposed Sections 70.404 (PERFECTING LIEN), 70.406 (PRIORITY OF
LIEN), 70.408 (FILING NOTICE OF DISCHARGE), 70.409 (FORM OF FILING WITH
SECRETARY OF STATE; FEES), AND 70.411 (RECOVERY OF COSTS). 

Makes further changes to clarify text of bill and make conforming changes.  

Adds Sections 70.402(b) and (c), 70.404, and 70.406.

SECTION 2. Makes conforming changes.