HBA-BSM C.S.S.B. 779 77(R)    BILL ANALYSIS


Office of House Bill AnalysisC.S.S.B. 779
By: Duncan
Agriculture & Livestock
5/9/2001
Committee Report (Substituted)



BACKGROUND 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

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

C.S.S.B. 779 amends the Property Code to provide 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.  If
the agricultural crop is commingled after the crop has been transferred or
delivered, a lien applies only to that portion of the contract purchaser's
inventory in an amount that is equal to the amount of the crop transferred
or delivered by the agricultural producer.  The bill provides that a lien
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.  A lien expires on the first anniversary of the date of
attachment.   

The bill also 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, and the lien does not pass to any subsequent claimant of the
agricultural crop. An unequal pro rata recovery between agricultural
producers is not prohibited if the inequality results from a lien on
accounts receivable.  A lien is discharged when the lienholder receives
full payment for the agricultural crop or payment is tendered by the
contract purchaser and the lienholder without coercion defers payment.  The
bill provides that  if payment is received in the form of a negotiable
instrument, full payment is received when the negotiable instrument clears
all financial institutions.  An agricultural producer who prevails in an
action brought to enforce a lien  is entitled to recover reasonable and
necessary attorney's fees and court costs and interest on funds subject to
the lien at the judgment interest rate. 

EFFECTIVE DATE

September 1, 2001.



 COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.S.B. 779 differs from the original bill by providing that "contract
purchaser" does not include a person who is licensed and bonded under
current warehouse regulations.  The substitute also   provides that if the
agricultural crop is commingled after the crop has been transferred or
delivered, a lien applies only to that portion of the contract purchaser's
inventory in an amount that is equal to the amount of the crop transferred
or delivered by the agricultural producer.  C.S.S.B. 779 adds that a lien
is discharged when payment is tendered by the contract purchaser and the
lienholder without coercion defers payment.