1-1 By: Duncan S.B. No. 779 1-2 (In the Senate - Filed February 19, 2001; February 20, 2001, 1-3 read first time and referred to Committee on Natural Resources; 1-4 April 23, 2001, reported adversely, with favorable Committee 1-5 Substitute by the following vote: Yeas 7, Nays 0; April 23, 2001, 1-6 sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 779 By: Duncan 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to the creation of an agricultural lien. 1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-12 SECTION 1. Chapter 70, Property Code, is amended by adding 1-13 Subchapter E to read as follows: 1-14 SUBCHAPTER E. AGRICULTURAL LIENS 1-15 Sec. 70.401. DEFINITIONS. In this subchapter: 1-16 (1) "Agricultural crop" means a plant product that is 1-17 grown, produced, or harvested as a result of an agricultural 1-18 producer's farm operation. 1-19 (2) "Agricultural producer" means a person who is 1-20 engaged in the business of growing, producing, or harvesting an 1-21 agricultural crop. 1-22 (3) "Buyer in ordinary course of business" has the 1-23 meaning assigned by Section 1.201, Business & Commerce Code. 1-24 (4) "Contract purchaser" means a person who, before 1-25 the planting of an agricultural crop, has agreed under a written 1-26 contract to purchase the crop or otherwise pay the agricultural 1-27 producer for growing, producing, or harvesting the agricultural 1-28 crop. 1-29 Sec. 70.402. LIEN CREATED. (a) An agricultural producer 1-30 who, under a written contract with a contract purchaser, is to 1-31 receive consideration for selling an agricultural crop grown, 1-32 produced, or harvested by the producer has a lien for the amount 1-33 owed under the contract, or for the reasonable value of the crop on 1-34 the date of transfer or delivery if there is no provision 1-35 concerning the amount owed in the agreement. 1-36 (b) A lien created under this subchapter is on every 1-37 agricultural crop, either in raw or processed form, in the 1-38 possession of the contract purchaser and on the entire inventory of 1-39 the contract purchaser with which the agricultural crop may have 1-40 been commingled. 1-41 (c) For purposes of this subchapter, an agricultural crop or 1-42 processed form of an agricultural crop deposited by a contract 1-43 purchaser with a warehouse, whether or not a warehouse receipt is 1-44 given as security, is considered to be in the possession of the 1-45 contract purchaser and subject to the lien. 1-46 Sec. 70.403. WHEN LIEN ATTACHES. A lien created under this 1-47 subchapter attaches to the agricultural crop on the date on which 1-48 physical possession of the crop is delivered or transferred by the 1-49 agricultural producer to the contract purchaser or the purchaser's 1-50 agent, or if there is to be a series of deliveries to the contract 1-51 purchaser or purchaser's agent, on the date of the last delivery of 1-52 the agricultural crop to the contract purchaser or purchaser's 1-53 agent. 1-54 Sec. 70.404. APPLICABILITY OF OTHER LAW. Chapter 9, 1-55 Business & Commerce Code, including applicable filing and 1-56 perfection requirements, applies to a lien created under this 1-57 subchapter to the extent Chapter 9 is consistent with this 1-58 subchapter. 1-59 Sec. 70.405. DURATION OF LIEN. A lien created under this 1-60 subchapter expires on the first anniversary of the date of 1-61 attachment. 1-62 Sec. 70.406. EFFECT OF LIEN; RECOVERY. (a) A buyer in 1-63 ordinary course of business of an agricultural crop, including a 1-64 person who buys any portion of an agricultural crop from a contract 2-1 purchaser, whether or not the agricultural crop has been 2-2 commingled, takes the agricultural crop free of a lien created 2-3 under this subchapter, and the lien created by this subchapter does 2-4 not pass to any subsequent claimant of the agricultural crop. 2-5 (b) An unequal pro rata recovery between agricultural 2-6 producers is not prohibited under this subchapter if the inequality 2-7 results from a lien on accounts receivable. 2-8 Sec. 70.407. DISCHARGE OF LIEN. A lien created under this 2-9 subchapter is discharged when the lienholder receives full payment 2-10 for the agricultural crop. If payment is received in the form of a 2-11 negotiable instrument, full payment is received when the negotiable 2-12 instrument clears all financial institutions. 2-13 Sec. 70.408. JOINDER OF ACTIONS. Persons claiming a lien 2-14 against the same agricultural crop under this subchapter may join 2-15 in the same action, and if separate actions are commenced, the 2-16 court may consolidate them. 2-17 Sec. 70.409. RECOVERY OF COSTS. An agricultural producer 2-18 who prevails in an action brought to enforce a lien created under 2-19 this subchapter is entitled to recover: 2-20 (1) reasonable and necessary attorney's fees and court 2-21 costs; and 2-22 (2) interest on funds subject to the lien at the 2-23 judgment interest rate as provided by Chapter 304, Finance Code. 2-24 Sec. 70.410. WAIVER OF CERTAIN RIGHTS PROHIBITED. An 2-25 agricultural producer's agreement with a contract purchaser to 2-26 waive the producer's right to seek a remedy provided by this 2-27 subchapter is void. 2-28 SECTION 2. This Act takes effect September 1, 2001, and 2-29 applies only to a contract to purchase agricultural crops entered 2-30 into on or after the effective date of this Act. A contract to 2-31 purchase agricultural crops entered into before the effective date 2-32 of this Act is governed by the law in effect immediately before the 2-33 effective date of this Act, and that law is continued in effect for 2-34 that purpose. 2-35 * * * * *