By: Duncan S.B. No. 779 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the creation of an agricultural lien. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Chapter 70, Property Code, is amended by adding 1-5 Subchapter E to read as follows: 1-6 SUBCHAPTER E. AGRICULTURAL LIENS 1-7 Sec. 70.401. DEFINITIONS. In this subchapter: 1-8 (1) "Agricultural crop" means a plant product that is 1-9 grown, produced, or harvested as a result of an agricultural 1-10 producer's farm operation. 1-11 (2) "Agricultural producer" means a person who is 1-12 engaged in the business of growing, producing, or harvesting an 1-13 agricultural crop. 1-14 (3) "Buyer in ordinary course of business" has the 1-15 meaning assigned by Section 1.201, Business & Commerce Code. 1-16 (4) "Contract purchaser" means a person who, before 1-17 the planting of an agricultural crop, has agreed under a written 1-18 contract to purchase the crop or otherwise pay the agricultural 1-19 producer for growing, producing, or harvesting the agricultural 1-20 crop. 1-21 Sec. 70.402. LIEN CREATED. (a) An agricultural producer 1-22 who, under a written contract with a contract purchaser, is to 1-23 receive consideration for selling an agricultural crop grown, 1-24 produced, or harvested by the producer has a lien for the amount 1-25 owed under the contract, or for the reasonable value of the crop on 2-1 the date of transfer or delivery if there is no provision 2-2 concerning the amount owed in the agreement. 2-3 (b) A lien created under this subchapter is on every 2-4 agricultural crop, either in raw or processed form, in the 2-5 possession of the contract purchaser and on the entire inventory of 2-6 the contract purchaser with which the agricultural crop may have 2-7 been commingled. 2-8 (c) For purposes of this subchapter, an agricultural crop or 2-9 processed form of an agricultural crop deposited by a contract 2-10 purchaser with a warehouse, whether or not a warehouse receipt is 2-11 given as security, is considered to be in the possession of the 2-12 contract purchaser and subject to the lien. 2-13 Sec. 70.403. WHEN LIEN ATTACHES. A lien created under this 2-14 subchapter attaches to the agricultural crop on the date on which 2-15 physical possession of the crop is delivered or transferred by the 2-16 agricultural producer to the contract purchaser or the purchaser's 2-17 agent, or if there is to be a series of deliveries to the contract 2-18 purchaser or purchaser's agent, on the date of the last delivery of 2-19 the agricultural crop to the contract purchaser or purchaser's 2-20 agent. 2-21 Sec. 70.404. APPLICABILITY OF OTHER LAW. Chapter 9, 2-22 Business & Commerce Code, including applicable filing and 2-23 perfection requirements, applies to a lien created under this 2-24 subchapter to the extent Chapter 9 is consistent with this 2-25 subchapter. 2-26 Sec. 70.405. DURATION OF LIEN. A lien created under this 3-1 subchapter expires on the first anniversary of the date of 3-2 attachment. 3-3 Sec. 70.406. EFFECT OF LIEN; RECOVERY. (a) A buyer in 3-4 ordinary course of business of an agricultural crop, including a 3-5 person who buys any portion of an agricultural crop from a contract 3-6 purchaser, whether or not the agricultural crop has been 3-7 commingled, takes the agricultural crop free of a lien created 3-8 under this subchapter, and the lien created by this subchapter does 3-9 not pass to any subsequent claimant of the agricultural crop. 3-10 (b) An unequal pro rata recovery between agricultural 3-11 producers is not prohibited under this subchapter if the inequality 3-12 results from a lien on accounts receivable. 3-13 Sec. 70.407. DISCHARGE OF LIEN. A lien created under this 3-14 subchapter is discharged when the lienholder receives full payment 3-15 for the agricultural crop. If payment is received in the form of a 3-16 negotiable instrument, full payment is received when the negotiable 3-17 instrument clears all financial institutions. 3-18 Sec. 70.408. JOINDER OF ACTIONS. Persons claiming a lien 3-19 against the same agricultural crop under this subchapter may join 3-20 in the same action, and if separate actions are commenced, the 3-21 court may consolidate them. 3-22 Sec. 70.409. RECOVERY OF COSTS. An agricultural producer 3-23 who prevails in an action brought to enforce a lien created under 3-24 this subchapter is entitled to recover: 3-25 (1) reasonable and necessary attorney's fees and court 3-26 costs; and 4-1 (2) interest on funds subject to the lien at the 4-2 judgment interest rate as provided by Chapter 304, Finance Code. 4-3 Sec. 70.410. WAIVER OF CERTAIN RIGHTS PROHIBITED. An 4-4 agricultural producer's agreement with a contract purchaser to 4-5 waive the producer's right to seek a remedy provided by this 4-6 subchapter is void. 4-7 SECTION 2. This Act takes effect September 1, 2001, and 4-8 applies only to a contract to purchase agricultural crops entered 4-9 into on or after the effective date of this Act. A contract to 4-10 purchase agricultural crops entered into before the effective date 4-11 of this Act is governed by the law in effect immediately before the 4-12 effective date of this Act, and that law is continued in effect for 4-13 that purpose.