BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 592|
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UNFINISHED BUSINESS
Bill No: SB 592
Author: Harman (R)
Amended: 8/6/12
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 5/10/11
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SENATE FLOOR : 38-0, 1/26/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De Le�n, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman,
Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Strickland, Vargas, Walters, Wolk,
Wright, Yee
NO VOTE RECORDED: Runner, Wyland
ASSEMBLY FLOOR : 79-0, 8/16/12 (Consent) - See last page
for vote
SUBJECT : Dairy cattle supply liens
SOURCE : California Grain and Feed Association
DIGEST : This bill updates and modifies procedures in the
states 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.
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Assembly Amendments (1) delete provisions in existing law
requiring a lien claimant to provide written notice to
secured creditors at least 30 days prior to enforcing a
claim lien; (2) authorize a lien claimant to take specified
actions after payment default by the lien debtor; (3)
authorize a lien debtor to secure a release of a lien in
one of three ways; (4) require a lien claimant to send a
lien debtor a termination statement; (5) provide that the
provisions of the bill apply prospectively to all contracts
entered into on or after January 1, 2013; (6) make
technical changes.
Senate Floor Analyses of 1/23/12 strike lien attachment on
dairy cattle and offspring.
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
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 and
Agricultural (FAC) Code Sections 57402 and 57403.)
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.
(FAC Code Section 57405).
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
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SB 592
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security interest perfected by the filing of a financing
statement as of the date the notice of claim of lien was
filed. (FAC Code Section 57406.)
This bill:
1. Expands the lien authority to also include feed used to
raise the offspring of dairy cattle.
2. Increases, 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 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 : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 1/24/12)
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California Grain and Feed Association (source)
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
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.
ASSEMBLY FLOOR : 79-0, 8/16/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
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Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell,
Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza,
Miller, Mitchell, Monning, Morrell, Nestande, Nielsen,
Norby, Olsen, Pan, Perea, V. Manuel P�rez, Portantino,
Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Lara
RJG:d 8/17/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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