Transcript Assignment 37

Secured Transactions
Assignment 37
Statutory Liens Agricultural Liens
and Oil and Gas interests Against
Secured Creditors
1
Personal Property Competitors
Secured
party
PMSI
Execution
lien
Judgment
lien
Debtor
Tax lien
Bankruptcy
trustee
Seller
Buyer
Statutory
lien
2
Real Estate Competitors
Purchase
money
mortgage
Mortgage
Fixture
filings
Judgment
lien
Debtor
Tax lien
Bankruptcy
trustee
Seller
BFP for
value
Mechanic’s
lien
3
Obligation
Lien
Collateral
4
Obligation
Security interests
Article 9 SI
Mortgages
Other SI
Lien
Statutory liens
Agricultural
Mechanic’s
Tax
Landlord’s
Charging
Retaining
Hospital
Warehouse
Collateral
Judicial liens
Judgment
Execution
Attachment
Garnishment
Equitable
5
Statutory Lien Issues
1.
Does a lien exist? Read the statute.
2.
How must the lienor perfect?
Read the statute
Does §9-310(a) require a financing statement (Ag lien?)
3.
What is the lien’s priority?
Read the statute
Default rule for non-possessory lien: first in time
Default rule for possessory lien: ranks first, §9-333(b)
6
Possessory Statutory Liens
§9-333 (b) A possessory lien on goods has priority over a
security interest . . . unless . . created by a statute that
expressly provides otherwise
7
Possessory Statutory Liens
§9-333 (b) A possessory lien on goods has priority over a
security interest . . . unless . . created by a statute that
expressly provides otherwise
(a) “[P]ossessory lien” means an interest, other than a
security interest or an agricultural lien:
(1) which secures payment . . . for services or materials
furnished with respect to goods by a person in the
ordinary course of the person’s business;
(2) which is created by statute or rule of law in favor of the
person;
(3) whose effectiveness depends on . . . possession of the
goods
8
Filing requirements for statutory liens
Some lien statutes impose filing requirements (most do not)
9
Filing requirements for statutory liens
Some lien statutes impose filing requirements (most do not)
Maine garage keeper’s lien
10
Filing requirements for statutory liens
Some lien statutes impose filing requirements (most do not)
Maine garage keeper’s lien
Mechanic’s liens
11
Filing requirements for statutory liens
Some lien statutes impose filing requirements (most do not)
Maine garage keeper’s lien
Mechanic’s liens,
§9-310 imposes a filing requirement for “agricultural liens”
(new in 2001).
12
Agricultural Liens
Hypo: Owner rents farmland to tenant who grows corn. Does
landlord have a lien under Oregon statute, p. 609?
Probably yes. §9-102(a)(44). Corn is “chattels”
Is this landlord’s lien an agricultural lien?
§9-102(a)(5). Agricultural lien means an interest in farm
products . . .
(A) which secures payment . . . for . . . rent . . . on real
property leased to a debtor in connection with its farming
operation
(B) which is created by statute in favor of a person that . . .
leased real property to a debtor in connection with the
debtor’s farming operation; and
(C) whose effectiveness does not depend on . . .possession
13
Agricultural Liens
Hypo: Owner rents farmland to tenant who grows corn. Does
landlord have a lien under Oregon statute, p. 609?
Probably yes. §9-102(a)(44). Corn is “chattels”
Is this landlord’s lien an agricultural lien? Yes, landlord must file
§9-102(a)(5). Agricultural lien means an interest in farm
products . . .
(A) which secures payment . . . for . . . rent . . . on real
property leased to a debtor in connection with its farming
operation
(B) which is created by statute in favor of a person that . . .
leased real property to a debtor in connection with the
debtor’s farming operation; and
(C) whose effectiveness does not depend on . . .possession
14
Agricultural Liens
General Choice of Law Rules 9-301 – Location of the debtor not
collateral.
15
Agricultural Liens
General Choice of Law Rules 9-301 – Location of the debtor not
collateral.
Agricultural Liens – Location of the collateral.
“While farm products are located in a jurisdiction, the local
law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of an
agricultural lien on the farm products.” 9-302
This means filings against the same collateral could be in
two different states, one for the agricultural lien one for the
security interest.
16
Agricultural Liens
Farm and Crops located in Oklahoma
Buyer of Crops located in
Kansas
Landlord
Located in Texas
Agricultural
Lien
Farmer
Located in Texas
All Assets
Loan
Bank Lender
With blanket lien
17
Agricultural Liens
and Crops located in Oklahoma
Article 9 Security Interests governed by Texas law
but agricultural liens by Oklahoma law. Note
different states have different variations of
BIOCOB rules and Proceeds for farm products.
Buyer of Crops located in
Kansas
Landlord
Located in Texas
Agricultural
Lien
Farmer
Located in Texas
All Assets
Loan
Bank Lender
With blanket lien
18
Food Security Act
BIOCOB, a commission merchant, and a selling
agent take farm products free of a security
interest created by the seller, unless:
(i) SP or the seller gives a complying notice of
the security interest within one year prior to the
sale; or
19
Food Security Act
(ii) SP has filed a financing statement in a central
filing system each state may create and either
the buyer, merchant or agent has received a list
of such filings, reflecting the secured party’s
filing (such list to be distributed periodically to
registered buyers, merchants and agents by the
central filing agency), or the buyer, merchant or
agent has failed to register with the central filing
agency to receive such lists; or
20
Food Security Act
(iii) SP has filed a financing statement in the
central filing system and the buyer, merchant or
agent (not being registered to receive the lists
described above) has been notified thereof in
writing by the central filing agency in response
to a specific inquiry made by the buyer,
merchant or agent.
Oklahoma adopted such a system in 9-307.1
through 9-307.8 and provides for filings in SOS
of EFS which differ from Financing Statements
21
and do not replace them.
Perishable Agricultural Commodities Act
22
Perishable Agricultural Commodities Act
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Problem 32.6
Sara
23
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities,
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Problem 32.6
Sara
24
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities,
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Problem 32.6
Sara
25
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Problem 32.6
Sara
26
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities until full payment is received.”
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Problem 32.6
Sara
27
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities until full payment is received.”
The “statutory trust” grants to sellers and suppliers a priority in
payment over even secured lenders.
Inventory
Lender
Security
Interest
Speakers
Dealers
PMSI
Problem 32.6
Sara
28
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities until full payment is received.”
The “statutory trust” grants to sellers and suppliers a priority in
payment over even secured lenders.
PACA: Farmer has
Inventory
priority over inventory
Lender
lender
Security
Fruits &
vegetables Interest
Farmer
Dealers
Debt
29
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities until full payment is received.”
The “statutory trust” grants to sellers and suppliers a priority in
payment over even secured lenders.
PACA: Farmer has
Inventory
Inventory
priority over inventory
Lender
Lender 2
lender
Security Fruits &
Security
Fruits &
vegetables Interest vegetables Interest
Farmer
Dealers
Dealer 2
Debt
Cash
30
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities until full payment is received.”
The “statutory trust” grants to sellers and suppliers a priority in
payment over even secured lenders.
PACA: Farmer has
Inventory
Inventory
priority over inventory
Lender
Lender 2
lender
Security Fruits &
Security
Fruits &
vegetables Interest vegetables Interest
Farmer
Dealers
Dealer 2
Debt
Cash
Does Farmer have priority over Inventory Lender 2?
31
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities until full payment is received.”
The “statutory trust” grants to sellers and suppliers a priority in
payment over even secured lenders.
PACA: Farmer has
Inventory
Inventory
priority over inventory
Lender
Lender 2
lender
Security Fruits &
Security
Fruits &
vegetables Interest vegetables Interest
Farmer
Dealers
Dealer 2
Debt
Cash
Does Farmer have priority over Inventory Lender 2?
32
Perishable Agricultural Commodities Act
“The seller of these commodities retains a trust claim over
these commodities, all inventories of food or other
products derived from these commodities, and any
receivables or proceeds from the sale of these
commodities until full payment is received.”
The “statutory trust” grants to sellers and suppliers a priority in
payment over even secured lenders.
Same result under the
Packers and
Stockyards Act (PSA)
Farmer
Cattle
Inventory
Lender
Security
Interest
Debt
Dealers
33
Other Agricultural Finance
Issues
• Are Crops proceeds of seeds?
34
Other Agricultural Finance
Issues
• Are Crops proceeds of seeds? Some say
yes some say no.
35
Other Agricultural Finance
Issues
• Are Crops proceeds of seeds? Some say
yes some say no.
• Agricultural lien statutes vary in the
treatment of proceeds, some include
proceeds of the farm products some do
not.
36
Other Agricultural Finance
Issues
• Are Crops proceeds of seeds? Some say
yes some say no.
• Agricultural lien statutes vary in the
treatment of proceeds, some include
proceeds of the farm products some do
not.
• Statutes also vary the treatment of
BIOCOBS allowing them to take free of
Agricultural liens or not.
37
Problem 37.1.b, page 621
Tomatoes
Norman
American
Farms
Produce
Bad check
38
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Star
Norman
American
Cash Markets
Farms
Produce
Bad check
39
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Norman
American
Farms
Produce
Bad check
Star
Cash Markets
Tomatoes
Retail
Cash customers
40
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Star
Norman
American
Cash Markets
Farms
Produce
Cash
Bad check
Haunt’s
Tomatoes
Cannery
Tomatoes
Retail
Cash customers
41
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Tomatoes
Star
Retail
Norman
American
Cash Markets Cash customers
Farms
Produce
Cash
Bad check
Haunt’s Tomatoes
Publix
Tomatoes
Cannery Account
42
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Tomatoes
Star
Retail
Norman
American
Cash Markets Cash customers
Farms
Produce
Cash
Bad check
Haunt’s Tomatoes
Publix
Tomatoes
Cannery Account
Norman did not retain a security interest in the tomatoes
43
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Tomatoes
Star
Retail
Norman
American
Cash Markets Cash customers
Farms
Produce
Cash
Bad check
Haunt’s Tomatoes
Publix
Tomatoes
Cannery Account
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commodities, all inventories of food or other products derived from
these commodities, and any receivables or proceeds from the
sale of these commodities until full payment is received.”
44
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Tomatoes
Star
Retail
Norman
American
Cash Markets Cash customers
Farms
Produce
Cash
Bad check
Haunt’s Tomatoes
Publix
Tomatoes
Cannery Account
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commodities, all inventories of food or other products derived from
these commodities, and any receivables or proceeds from the
sale of these commodities until full payment is received.”
The trust reaches sales to “dealers” (“any person engaged in the
business of buying or selling in wholesale quantities . . .“)
45
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Tomatoes
Star
Retail
Norman
American
Cash Markets Cash customers
Farms
Produce
Cash
Bad check
Haunt’s Tomatoes
Publix
Tomatoes
Cannery Account
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commodities, all inventories of food or other products derived from
these commodities, and any receivables or proceeds from the
sale of these commodities until full payment is received.”
The trust reaches sales to “dealers” (“any person engaged in the
business of buying or selling in wholesale quantities . . .“)
Against what sources can Norman proceed?
46
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Tomatoes
Star
Retail
Norman
American
Cash Markets Cash customers
Farms
Produce
Cash
Bad check
Haunt’s Tomatoes
Publix
Tomatoes
Cannery Account
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commodities, all inventories of food or other products derived from
these commodities, and any receivables or proceeds from the
sale of these commodities until full payment is received.”
The trust reaches sales to “dealers” (“any person engaged in the
business of buying or selling in wholesale quantities . . .“)
Against what sources can Norman proceed? What is Norman’s
47
priority against Haunt’s accounts lender?
Problem 37.1.b, page 621
Tomatoes
Tomatoes
Tomatoes
Star
Retail
Norman
American
Cash Markets Cash customers
Farms
Produce
Cash
Bad check
Haunt’s Tomatoes
Publix
Tomatoes
Cannery Account
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commodities, all inventories of food or other products derived from
these commodities, and any receivables or proceeds from the
sale of these commodities until full payment is received.”
The trust reaches sales to “dealers” (“any person engaged in the
business of buying or selling in wholesale quantities . . .“)
Against what sources can Norman proceed? What is Norman’s
48
priority against Haunt’s accounts lender? Norman is prior.
Mineral Interests
Before extraction Oklahoma treats
mineral rights as a real property
interest.
Once oil and gas are extracted
they are goods, personal property.
49
Mineral Interests
Before extraction Oklahoma treats
mineral rights as a real property
interest. State law where property
located governs
Once oil and gas are extracted
they are goods, personal property.
For article 9, state law where
debtor located governs.
50
Oil and Gas
Oil
Mineral
First
Owner
Purchaser
Account
Oil
Second
Purchaser
Account
51
Oil and Gas
Oil
Oil
Mineral
Owner
First
Purchaser
Account
Second
Purchaser
Account
Loan
Secured
All Assets
Lender
SI
Real estate law governs mineral rights until
extracted. But once oil becomes personal
property unless mineral owner has an Article 9
security interest in the oil and its proceeds,
other Article 9 SPs have priority.
52
How does mineral owner get a
SI before extraction?
“As-extracted collateral” means:
(A) oil, gas, or other minerals that are subject to
a security interest that:
(i) is created by a debtor having an interest in
the minerals before extraction; and
(ii) attaches to the minerals as extracted; or
(B) accounts arising out of the sale at the
wellhead or minehead of oil, gas, or other
minerals in which the debtor had an interest 53
before extraction.
Where to file for as extracted
collateral
(4) The local law of the jurisdiction in which
the wellhead or minehead is located
governs perfection, the effect of perfection
or nonperfection, and the priority of a
security interest in as-extracted collateral.
9-301.
File in “(1) the office designated for the filing
or recording of a record of a mortgage on
the related real property” 9-501.
54
OK Oil and Gas Owners Lien
Act
• Adopted in response to SemGroup case
• Designed to protect mineral owners by
giving them a non-UCC lien over proceeds
of oil and gas sold to first purchasers.
• Claimed to be a real estate lien and not
subject to UCC debtor location rules.
• Variety of exceptions.
55