BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  SB 592
                                                                  Page  1

          Date of Hearing:   August 8, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    SB 592 (Harman) - As Amended:  August 6, 2012 

          Policy Committee:                              JudiciaryVote:9-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:               

           SUMMARY  

          This bill modifies procedures in the state's dairy cattle supply 
          lien law to provide more certainty to a dairy creditor on 
          obtaining a lien on the proceeds of a dairy's milk products, for 
          contracts entered into after January 1, 2013. Specifically, this 
          bill:

          1)Expands the lien authority to also include feed used to raise 
            the offspring of dairy cattle.

          2)Increase, from 45 days to 60 days, the maximum time for which 
            reasonable charges for feed can be secured by the lien.

          3)Requires a lien claimant to also provide written notice of the 
            claim to other lienholders or parties who may have a security 
            interest in the milk proceeds, within 10 days of filing the 
            claim with the Secretary of State.

          4)Clarifies that the priority of conflicting security interests, 
            agricultural liens, and the dairy supply lien shall be 
            consistent with provisions of the Uniform Commercial Code.

          5)Authorizes additional enforcement options for a lien claimant 
            upon default by a lien debtor.

          6)Allows a dairy obligated under a dairy supply lien, when 
            presented with a demand notice to make payment from a feed 
            creditor, to honor a prior assignment of milk proceeds without 
            liability for failure to comply with such notice.

          7)Allows a lien debtor to secure a release of a lien by paying 
            the amount secured by the lien, or depositing with the 








                                                                  SB 592
                                                                  Page  2

            Secretary of the Department of Food and Agriculture a surety 
            bond, as specified, for the purpose of guaranteeing payment of 
            the full amount secured by the lien within 35 days after entry 
            of final judgment.

           FISCAL EFFECT  

          Neglible fiscal impact to the Department of Food and 
          Agriculture.

           COMMENTS  

           Purpose  . Current law provides a right for animal feed providers 
          to dairy animals to obtain a lien upon the proceeds of a dairy's 
          milk payments. This statute, known as the dairy supply lien law, 
          has not been significantly updated or revised since its 
          enactment in 1987. According to the author, the current statute 
          contains a number of ambiguities and limitations that leave 
          creditors, dairy persons, courts, and bankruptcy trustees 
          without clear direction with respect to the foreclosure and lien 
          process when the borrowing dairy person becomes distressed. This 
          bill is sponsored by the California Grain and Feed Association 
          (CGFA), but represents the collaborative efforts of a working 
          group of dairymen, feed and grain producers, bankers, and other 
          stakeholders to revise and update the state's dairy supply lien 
          law.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081