By Duncan S.B. No. 779 77R2483 JMG-F 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 product" includes: 1-9 (A) an agricultural, horticultural, 1-10 viticultural, or vegetable product, either in its natural or 1-11 processed state, that has been produced or processed in this state, 1-12 including: 1-13 (i) mint oil; 1-14 (ii) a Christmas tree; 1-15 (iii) nuts; 1-16 (iv) dairy products; 1-17 (v) animals used for human consumption; 1-18 and 1-19 (vi) any grain or commodity for which 1-20 standards are established by the department; 1-21 (B) bees and honey; and 1-22 (C) hay or straw baled and prepared for market. 1-23 (2) "Agricultural producer" means a person who is 1-24 engaged in the business of growing, producing, or harvesting an 2-1 agricultural product for market or for delivery or transfer to 2-2 another person who owns the agricultural product. The term 2-3 includes: 2-4 (A) a landowner, grower, landlord, tenant, or 2-5 sharecropper or other person who receives a share of the product; 2-6 and 2-7 (B) a person who performs labor, supplies 2-8 materials, or provides services on farmland, or on a range, ranch, 2-9 or orchard, or in that person's place of business to aid the 2-10 growing or harvesting of a crop or the raising of animals. 2-11 (3) "Growing or harvesting" includes tilling, sowing, 2-12 planting, cultivating, irrigating, pruning, thinning, fertilizing, 2-13 spraying, dusting, cutting, harvesting, stripping, packing, 2-14 reaping, threshing, gathering, transporting, securing, or otherwise 2-15 performing or furnishing labor, service, or materials to aid the 2-16 production of an agricultural product. 2-17 (4) "Inventory" means all agricultural products 2-18 purchased or received from agricultural producers, regardless of 2-19 whether in bulk lots or in blended or packaged form. The term does 2-20 not include the equipment or supplies of the person holding or 2-21 owning the agricultural product. 2-22 Sec. 70.402. LIEN CREATED. An agricultural producer who, 2-23 under an agreement, is to receive consideration for producing, 2-24 growing, or harvesting an agricultural product has a lien for the 2-25 amount owed under the agreement, or for the reasonable value of the 2-26 product on the date of transfer or delivery if there is no 2-27 agreement, on: 3-1 (1) the agricultural product if the product is 3-2 delivered or transferred by an agricultural producer to a purchaser 3-3 of the product or the purchaser's representative; 3-4 (2) the inventory of a purchaser of the agricultural 3-5 product or the purchaser's representative; 3-6 (3) the proceeds received by a purchaser from selling 3-7 the product or inventory to a third party; 3-8 (4) all accounts receivable of the purchaser from the 3-9 sale of the products to a third party if the agricultural products 3-10 transferred or delivered are animals used for human consumption; 3-11 and 3-12 (5) money of the purchaser deposited in a bank. 3-13 Sec. 70.403. WHEN LIEN ATTACHES. A lien created under this 3-14 subchapter attaches to the property described by Section 70.402 on 3-15 the date on which physical possession of the agricultural product 3-16 is delivered or transferred by the agricultural producer to the 3-17 purchaser or the purchaser's agent. If the agricultural producer 3-18 delivers or transfers agricultural products for cleaning or storage 3-19 to a person other than the purchaser, the lien attaches at the 3-20 first time when the agricultural product is both sold and 3-21 physically delivered to the purchaser or the purchaser's agent. 3-22 Sec. 70.404. PERFECTING LIEN. An agricultural producer is 3-23 not required to file notice to perfect a lien created under this 3-24 subchapter. 3-25 Sec. 70.405. DURATION OF LIEN; NOTICE OF LIEN. (a) Except 3-26 as provided by Subsection (b), a lien created under this subchapter 3-27 expires on the first anniversary of the date of attachment. 4-1 (b) A lien created under this subchapter is extended for a 4-2 period of one year if an affidavit and a written notice of lien, on 4-3 a form prescribed by the secretary of state, are filed with the 4-4 secretary of state by the agricultural producer before the date the 4-5 lien is to expire under Subsection (a). The notice of lien must: 4-6 (1) specify the amount claimed by the agricultural 4-7 producer after deducting all credits and offsets; 4-8 (2) specify the name, address, and signature of the 4-9 agricultural producer claiming the lien; 4-10 (3) specify the name and address of the person who 4-11 purchased the agricultural product from an agricultural producer; 4-12 (4) describe the agricultural product delivered or 4-13 transferred by the producer sufficient to identify the basis for 4-14 the lien; 4-15 (5) specify the date on which payment to the producer 4-16 was due; and 4-17 (6) contain any other information as required by the 4-18 secretary of state. 4-19 Sec. 70.406. PRIORITY OF LIEN. (a) A lien under this 4-20 subchapter is superior to all other liens on the same property, 4-21 regardless of when the creditor's lien or security interest 4-22 attaches to property described by Section 70.402. All liens 4-23 created under this subchapter, regardless of the date of attachment 4-24 or date of notice of lien, are of equal priority and payable pro 4-25 rata in proportion to the size of the lien. 4-26 (b) This section does not prohibit an unequal pro rata 4-27 recovery between agricultural producers if the inequality results 5-1 from a lien on accounts receivable. 5-2 Sec. 70.407. DISCHARGE OF LIEN. A lien created under this 5-3 subchapter is discharged when the lienholder receives full payment 5-4 for the agricultural product. If payment is received in the form of 5-5 a negotiable instrument, full payment is received when the 5-6 negotiable instrument clears all financial institutions. 5-7 Sec. 70.408. FILING NOTICE OF DISCHARGE. (a) If a notice of 5-8 lien is filed under Section 70.405(b) for extension of a lien and 5-9 the lienholder subsequently receives full payment, the lienholder 5-10 shall file with the secretary of state a notice of discharge, 5-11 signed by the lienholder, stating that full payment has been 5-12 received and that the lien is discharged. 5-13 (b) If a lienholder who has filed a notice of lien and 5-14 subsequently received full payment does not file a notice of 5-15 discharge of the lien not later than the 30th day after receiving a 5-16 written request to discharge the lien, the lienholder is liable to 5-17 the purchaser of the agricultural product for damages in the amount 5-18 of $300. 5-19 Sec. 70.409. FORM OF FILING WITH SECRETARY OF STATE; FEES. 5-20 (a) The secretary of state shall prescribe the forms necessary for 5-21 filing a notice of lien and notice of discharge under this 5-22 subchapter. 5-23 (b) The lienholder must submit to the secretary of state a 5-24 $10 fee for filing a notice of lien under Section 70.405. The 5-25 secretary of state may not charge a fee for filing a notice of 5-26 discharge under Section 70.408. 5-27 Sec. 70.410. JOINDER OF ACTIONS. Persons claiming a lien 6-1 against the same property under this chapter may join in the same 6-2 action, and if separate actions are commenced, the court may 6-3 consolidate them. 6-4 Sec. 70.411. RECOVERY OF COSTS. (a) An agricultural 6-5 producer who prevails in an action brought to enforce a lien 6-6 created under this subchapter is entitled to recover: 6-7 (1) reasonable and necessary attorney's fees and court 6-8 costs; and 6-9 (2) interest on funds subject to the lien at the 6-10 judgment interest rate set out by Subsection (b) for the period 6-11 beginning on the date the lien attaches and ending on the date of 6-12 payment. 6-13 (b) The judgment interest rate is: 6-14 (1) the auction rate quoted on a discount basis for 6-15 52-week treasury bills issued by the United States government as 6-16 most recently published by the Federal Reserve Board before the 6-17 date of computation; 6-18 (2) 10 percent a year if the auction rate described by 6-19 Subdivision (1) is less than 10 percent; or 6-20 (3) 20 percent a year if the auction rate described by 6-21 Subdivision (1) is more than 20 percent. 6-22 Sec. 70.412. WAIVER OF CERTAIN RIGHTS PROHIBITED. An 6-23 agreement by an agricultural producer to waive the producer's right 6-24 to file notice of a lien or to seek a remedy provided by this 6-25 subchapter is void. 6-26 Sec. 70.413. CONFLICT OF LAW. To the extent of any conflict 6-27 between this subchapter and Chapter 9, Business & Commerce Code, 7-1 Chapter 128, Agriculture Code, or any other law, this subchapter 7-2 prevails. 7-3 SECTION 2. This Act takes effect September 1, 2001, and 7-4 applies only to an agreement to grow, produce, or harvest 7-5 agricultural products entered into on or after the effective date 7-6 of this Act. An agreement to grow, produce, or harvest agricultural 7-7 products entered into before the effective date of this Act is 7-8 governed by the law in effect immediately before the effective date 7-9 of this Act, and that law is continued in effect for that purpose.