BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 592|
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THIRD READING
Bill No: SB 592
Author: Harman (R)
Amended: 5/17/11
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 5/10/11
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SUBJECT : Dairy cattle supply liens
SOURCE : California Grain and Feed Association
DIGEST : This bill updates the dairy cattle supply lien
laws to allow a lien also to be placed upon the dairy
cattle and offspring, provide feed or materials lien
claimants with a right to attach during a foreclosure
action, provide claim enforcement following the debtor's
payment default, and provide an award of reasonable
attorney's fees and costs to the prevailing party of a lien
enforcement action.
ANALYSIS : Existing law allows a person who provides feed
or materials to aid the raising or maintaining of dairy
cattle to place a lien upon the proceeds of the milk or
milk products produced from the dairy cattle for the
reasonable or agreed charges for the feed or materials
provided and for the costs of enforcing the lien. However,
the amount of charges secured by the lien cannot exceed an
amount equal to the reasonable or agreed charges for feed
or material provided within a 45-day period, and only two
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providers of feed or materials can have an enforceable lien
at any time, with lien priority in accordance with the time
the notice of claim of lien is filed. (Food & Agricultural
Code Sections 57402 and 57403.)
Existing law requires a lien claimant to provide written
notice at least 30 days prior to enforcing a lien claim to
secured creditors who have a perfected security interest in
dairy cattle, milk, milk products, or the proceeds thereof
as of the date the notice of claim of lien is filed with
the Secretary of State. (Food & Agricultural Code Section
57412.)
This bill would authorize a lien to be placed upon dairy
cattle and offspring therefrom and dairy products which are
raised or maintained through the use of feed or materials
provided by the lien claimant.
Existing law requires the lien claimant, in order to
perfect and give effect to the dairy cattle supply lien, to
file a notice of claim of lien, as specified. The notice
of claim of lien, among other things, must provide the name
and address of the lien debtor, must be signed by the lien
claimant or by a person authorized to sign such documents,
and the lien claimant must provide written notice of the
claim of lien to the lien debtor within 10 days of the date
of filing the notice of lien with the Secretary of State.
(Food & Agricultural Code Section 57405).
This bill clarifies that a lien shall be perfected by the
filing of a notice of claim of lien with the Secretary of
State.
This bill clarifies that the last known name and address of
the lien debtor must be provided on the notice of claim of
lien.
This bill deletes the redundant provision that the notice
of claim of lien shall be signed by the lien claimant or by
a person authorized to sign such documents on behalf of the
claimant.
This bill provides for specific claim of lien notice to
debtors which are entities and debtors which are
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individuals, as specified.
This bill provides that failure to provide written notice
of the claim of lien to the lien debtor shall not affect
the validity or priority of the lien.
Existing law provides that the dairy cattle supply lien
shall have priority in accordance with the time the notice
of claim of lien is filed and the same priority as a
security interest perfected by the filing of a financing
statement as of the date the notice of claim of lien was
filed. (Food & Agricultural Code Section 57406.)
This bill clarifies that the dairy cattle supply lien only
has the same priority as a security interest perfected by
the filing of a financing statement as of the date the
notice of claim of lien was filed.
Existing law provides that a lien claimant can foreclose on
a lien created by the dairy cattle supply lien law only in
an action to recover the reasonable or agreed charges for
feed and materials delivered. (Food & Agricultural Code
Section 57413.)
This bill authorizes an award of attorney's fees, as fixed
by the court, and costs to the prevailing party in a dairy
cattle supply lien enforcement action.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/18/11)
California Grain and Feed Association (source)
OPPOSITION : (Verified 5/18/11)
Western United Dairymen
ARGUMENTS IN SUPPORT : The author's office states, the
Dairy Feed Lien law has not been amended since it was
placed in statute 22 years ago and needs to be updated and
reviewed. While this is a superior lien to other unsecured
creditors, it has limitations and ambiguities in drafting
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that have left creditors, dairy persons, judges and
bankruptcy trustees without clear direction. Some of the
limits and ambiguities come from the priority of the lien
while other limitations are based in the requirements to
perfect the lien including the number who qualifies, time
periods and notification.
This bill clarifies ambiguities and removes some
impediments of the perfection process. The bill will be
attempting to address the issues of �n]otice, number of
lien positions available, suppliers length of the lien,
process to perfect the lien, and adding dairy livestock to
the lien.
California Grain & Feed Association (CGFA), the sponsor of
this bill, writes:
The California dairy industry has experienced extreme
price fluctuations, increasing input costs and
challenging economic times since the collapse of the
financial markets. While the dairy industry has
experienced significant volatility in the past, this
recent challenge has been more extreme and lasted
longer than past periods of economic challenge.
Following the recent stabilization, the dairy feed
and supply industry embarked on a project to identify
ways to improve this 22 year old law. We have been
meeting with other suppliers, bankers and dairy
operators exploring methods to improve this law and
update provisions to provide clear and transparent
guidance on how best �to] clarify certain sections of
the lien law. SB 592 is the culmination of those
efforts.
RJG:do 5/18/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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