HSB 500 (LSB 5179YC (3) 88)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON AGRICULTURE BILL BY CHAIRPERSON PAUSTIAN)

A BILL FOR

An Act relating to credit transactions involving grain by providing for a grain warehouse lien, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
GRAIN WAREHOUSE LIEN

    Section 1.  NEW SECTION.  571A.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Grain” means the same as defined in section 203.1.
   2.  “Grain depositor” means a person having a legal interest in grain who delivers that grain to a licensed grain warehouse.
   3.  “Grain warehouse lien” or “lien” means the lien created pursuant to section 571A.4.
   4.  “Licensed grain warehouse” means any of the following:
   a.  A licensed warehouse as defined in section 203C.1.
   b.  A warehouse operator licensed by the United States department of agriculture as provided by 7 U.S.C. §241 et seq.
    Sec. 2.  NEW SECTION.  571A.2  Applicable law.
   1.  Unless expressly superseded by a provision of this chapter, chapter 554, article 9, shall govern parties and transactions described in this chapter. For purposes of chapter 554, article 9, all of the following apply:
   a.  A grain warehouse lien is an agricultural lien.
   b.  Grain subject to a grain warehouse lien is a farm product. The grain is a fungible good.
   c.  A licensed grain warehouse is a secured party.
   d.  A licensed grain warehouse shall act in the ordinary course of business and in a commercially reasonable manner.
   e.  (1)  A grain depositor who incurs an obligation for obtaining a service furnished by a licensed grain warehouse pursuant to section 571A.3 is a debtor. Notwithstanding section 554.9102, a grain depositor is deemed a debtor even if the grain depositor’s legal interest is a security interest, agricultural lien, or other lien in grain.
   (2)  For purposes of section 554.9606, a default occurs when a grain depositor fails to satisfy the incurred obligation as described in section 571A.3.
   2.  This chapter does not create a possessory lien as provided in section 554.9333 and does not affect a lien held by a licensed grain warehouse under section 554.7209.
    Sec. 3.  NEW SECTION.  571A.3  Obligation incurred.
   1.  A grain depositor incurs an obligation when delivering grain to a licensed grain warehouse and the licensed grain warehouse furnishes a service with respect to storing, drying, conditioning, processing, or transporting grain for the benefit of the grain depositor. The service may include any act performed by the licensed grain warehouse that preserves the grain or its value as provided in section 554.9207.
   2.  The obligation may be incurred by written agreement or as required by law. Notwithstanding section 554.2201, the obligation may be incurred by oral agreement. Evidence of the obligation may include but is not limited to the licensed grain warehouse’s issuance of a warehouse receipt, scale ticket, or any other confirmatory memoranda or expression recognized under chapter 554, article 2.
    Sec. 4.  NEW SECTION.  571A.4  Lien created.
   1.  A grain warehouse lien is created. The lien secures the satisfaction of an obligation incurred by a grain depositor as provided in section 571A.3.
   2.  The lien is effective and attaches to the grain when the licensed grain warehouse takes possession of the grain.
   3.  The lien attaches to both the grain and any identifiable cash proceeds, as described in section 554.9315, subsection 2, from the sale of the grain.
   4.  The amount of the lien is the entire amount of the outstanding obligation owed by the grain depositor to the licensed grain warehouse pursuant to section 571A.3.
    Sec. 5.  NEW SECTION.  571A.5  Automatic perfection —— priority.
   1.  a.  A grain warehouse lien is automatically perfected at the time the lien becomes effective pursuant to section 571A.4.
   b.  The lien is no longer perfected under this section when the licensed grain warehouse relinquishes possession of the grain.
   2.  The perfected lien has priority over a conflicting security interest, agricultural lien, or other lien in the same grain, including a security interest or lien that was perfected prior to the effective date of the grain warehouse lien.
    Sec. 6.  NEW SECTION.  571A.6  Perfection by filing —— priority.
   1.  A grain warehouse lien that is effective may also be perfected by filing a financing statement in the office of the secretary of state as provided in section 554.9308.
   2.  a.  The financing statement must substantially meet the requirements of section 554.9502, subsection 1, and include all applicable information described in section 554.9516. In addition, the collateral description in the financing statement must at least include the type and number of bushels of grain subject to the lien and each crop year in which the licensed grain warehouse furnished a service in respect to the grain subject to the lien.
   b.  Filing a financing statement as provided in paragraph “a” satisfies all requirements for the perfection of an agricultural lien as provided in chapter 554, article 9.
   3.  a.  A financing statement may be filed during the period that the grain warehouse lien is automatically perfected under section 571A.5. The lien perfected by filing under this paragraph has priority over a conflicting security interest, agricultural lien, or other lien, including a security interest or lien that was perfected prior to the effective date of the grain warehouse lien.
   b.  A financing statement may be filed after the period that the grain warehouse lien is automatically perfected under section 571A.5. The lien perfected by filing under this paragraph has priority over a conflicting security interest, agricultural lien, or other lien in the grain as provided in section 554.9322 in the same manner as if the grain warehouse lien had never been automatically perfected.
   c.  If the licensed grain warehouse relinquishes possession of the grain and no financing statement is filed, the lien is unperfected until a financing statement is filed. An unperfected lien has priority over a conflicting security interest, agricultural lien, or other lien in the grain as provided in section 554.9322 in the same manner as if the grain warehouse lien had never been automatically perfected.
    Sec. 7.  NEW SECTION.  571A.7  Enforcement.
   1.  After a grain depositor’s default, the licensed grain warehouse may enforce a grain warehouse lien in the same manner provided for agricultural liens pursuant to chapter 554, article 9, part 6.
   2.  After the grain depositor’s default, and during the period that the grain is automatically perfected under section 571A.5, the licensed grain warehouse may dispose of the grain as if the licensed grain warehouse were taking possession and disposing of the grain pursuant to chapter 554, article 9, part 6.
DIVISION II
CONFORMING PROVISIONS

    Sec. 8.  Section 554.7209, Code 2020, is amended by adding the following new subsection:
   NEW SUBSECTION.  6.  A warehouse that is a lienholder under this section may enforce a grain warehouse lien as provided in chapter 571A to the extent allowed in that chapter and in lieu of the lien created pursuant to this section.
    Sec. 9.  Section 570.1, subsection 2, unnumbered paragraph 1, Code 2020, is amended to read as follows:
   In order to perfect a lien in farm products as defined in section 554.9102, which is created under this section, a landlord must file a financing statement as required by section 554.9308, subsection 2. Except as provided in chapters 571, 571A, 572, 579A, 579B, and 581, a perfected lien in the farm products has priority over a conflicting security interest or lien, including a security interest or lien that was perfected prior to the creation of the lien under this section, if the lien created in this section is perfected on either of the following dates:
    Sec. 10.  Section 570A.5, subsection 2, Code 2020, is amended to read as follows:
   2.  Except as provided in section 570A.2, subsection 3, the lien shall have equal priority to a lien or security interest which is perfected prior to the time that the agricultural supply dealer lien is perfected. However, a all of the following exceptions apply:
   a.  A landlord’s lien that is perfected pursuant to section 570.1 shall have priority over a conflicting agricultural supply dealer lien as provided in section 570.1, and a that section.
   b.  A harvester’s lien that is perfected pursuant to section 571.3 shall have priority over a conflicting agricultural supply dealer lien as provided in section 571.3A.
   c.  (1)  A grain warehouse lien that is perfected pursuant to section 571A.5 shall have priority over a conflicting agricultural supply dealer lien.
   (2)  A grain warehouse lien that is perfected pursuant to section 571A.6 shall have priority over a conflicting agricultural supply dealer lien only as provided in that section.
    Sec. 11.  Section 571.3A, subsection 2, Code 2020, is amended to read as follows:
   2.  a.  A harvester’s lien that is perfected under section 571.3 shall have priority over a conflicting security interest in harvested crops regardless of when such security interest is perfected.
   b.  A perfected harvester’s lien shall have priority over a conflicting landlord’s lien as provided in chapter 570, regardless of when such landlord’s lien is perfected.
   c.  (1)  A grain warehouse lien that is perfected pursuant to section 571A.5 shall have priority over a conflicting perfected harvester’s lien.
   (2)  A grain warehouse lien that is perfected pursuant to section 571A.6 shall have priority over a conflicting perfected harvester’s lien only as provided in that section.
    Sec. 12.  Section 579B.4, subsection 4, paragraph a, subparagraph (2), Code 2020, is amended to read as follows:
   (2)  Notwithstanding subparagraph (1), a commodity production contract lien shall not be superior to a any of the following: 
   (a)  A court-ordered lien provided in section 717.4 or a.
   (b)  A veterinarian’s lien created under chapter 581, if such lien is perfected as an agricultural lien.
   (c)  (1)  A grain warehouse lien that is perfected pursuant to section 571A.5.
   (2)  A grain warehouse lien that is perfected pursuant to section 571A.6, but only as provided in that section.
DIVISION III
APPLICABILITY

    Sec. 13.  APPLICABILITY.  This Act applies to grain first delivered by a grain depositor on or after the effective date of this Act.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   GENERAL. This bill creates new Code chapter 571A which provides for a special lien referred to as a “grain warehouse lien”. The lien is imposed pursuant to a financial obligation incurred by a debtor for certain services performed by a creditor who is delivered possession of grain. For purposes of the uniform commercial code (UCC), article 9, the lien is considered an agricultural lien. The lien also attaches to any identifiable cash proceeds resulting from the sale of the grain. The grain is considered a fungible good meaning that it may be comingled with other equivalent grain stored in bulk and the creditor is not required to provide for its special identification or segregation.
   PARTIES. Under the bill, the debtor is a grain depositor (e.g., farmer) who has a legal interest in the grain and relinquishes possession of the grain to a grain warehouse. The creditor is a grain warehouse licensed by either the department of agriculture and land stewardship under Code chapter 203C or by the United States department of agriculture under the United States Warehouse Act, codified in 7 U.S.C. ch. 10.
   OBLIGATION SUBJECT TO THE LIEN. The financial obligation incurred by the grain depositor is limited to those services related to storing, drying, conditioning, processing, or transporting the grain performed by the licensed grain warehouse. The services may also include any act performed by the licensed grain warehouse that preserves the grain or its value (see Code section 554.9207).
   PERFECTING THE LIEN —— PRIORITY. The warehouse lien is perfected in two ways. First, the lien is automatically perfected at the time the licensed grain warehouse takes possession of the grain. During the period of possession, the lien enjoys a super-priority status over any competing creditor’s interest. Thus, a licensed warehouse could enforce the lien before all other competing security interests and statutory liens, including agricultural liens, and common law liens regardless of when the competing security interest or lien was perfected. The automatic perfection terminates when the licensed grain dealer relinquishes possession of the grain. However, the licensed warehouse may retain its super-priority status by filing a financing statement (UCC-1) with the secretary of state during the period that the possessory lien is perfected. If the financing statement is filed after the period that the grain warehouse lien is automatically perfected, or the lien is never perfected after that period, the lien has priority over a conflicting security interest, agricultural lien, or other lien in the grain in the same manner as provided for other agricultural liens as if the lien had never been automatically perfected.
   BACKGROUND. Under Iowa’s version of the UCC, article 9, a security interest is created by a contract referred to as a security agreement executed by a creditor and debtor that creates a financial obligation (Code section 554.9201). The security interest attaches to the debtor’s collateral (Code section 554.9203) and based on that agreement the creditor may perfect the security interest by filing a financing statement with the secretary of state (Code section 554.9310). Possession is also a means to perfect a security interest, including general warehouse lien allowed under the UCC, article 7 (Code section 554.7209). In addition, various Code chapters existing outside the UCC create agricultural liens in commodities produced by a farming operation. An agricultural lien is a statutory lien that may secure the payment of a financial obligation associated with commodity production, and is not necessarily possessory, meaning that it may continue to cover the commodity after harvest and delivery (Code section 554.9102(1)(e)). However, an agricultural lien must be perfected by filing a financing statement with the secretary of state (Code section 554.9310). Once a lien is created, it receives a degree of priority over the covered collateral among competing creditors seeking to enforce a debt. Generally, under the UCC, article 9, the status of a creditor’s priority is based on the date of the security interest’s perfection. However, certain statutes outside the UCC, article 9, provide a special status to lienholders, including those holding agricultural liens.
   APPLICABILITY. The bill applies to grain first delivered by a grain depositor on or after the effective date of this Act.