1 Secured Transactions Assignment 37 Statutory Liens Agricultural Liens and Oil and Gas interests...
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Transcript of 1 Secured Transactions Assignment 37 Statutory Liens Agricultural Liens and Oil and Gas interests...
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Secured TransactionsAssignment 37
Statutory Liens Agricultural Liens and Oil and Gas interests Against
Secured Creditors
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Debtor
Tax lien
PMSI
Securedparty
Seller
BuyerStatutory
lien
Judgmentlien
BankruptcytrusteeExecution
lien
Personal Property Competitors
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Debtor
Tax lien
Purchasemoney
mortgage
Mortgage
Seller
BFP forvalue
Mechanic’slien
Judgmentlien
BankruptcytrusteeFixture
filings
Real Estate Competitors
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CollateralObligation Lien
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Security interests Statutory liens Judicial liens
Article 9 SI Agricultural Judgment
Mortgages Mechanic’s Execution
Other SI Tax Attachment
Landlord’s Garnishment
Charging Equitable
Retaining
Hospital
Warehouse
CollateralObligation Lien
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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)
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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
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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
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Filing requirements for statutory liensSome lien statutes impose filing requirements (most do not)
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Filing requirements for statutory liensSome lien statutes impose filing requirements (most do not)
Maine garage keeper’s lien
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Filing requirements for statutory liensSome lien statutes impose filing requirements (most do not)
Maine garage keeper’s lien
Mechanic’s liens
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Filing requirements for statutory liensSome 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).
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Agricultural LiensHypo: 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
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Agricultural LiensHypo: 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
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Agricultural LiensGeneral Choice of Law Rules 9-301 – Location of the debtor not
collateral.
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Agricultural LiensGeneral 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.
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Agricultural Liens
Bank LenderWith blanket lien
FarmerLocated in Texas
All Assets
Loan
Farm and Crops located in Oklahoma
Landlord Located in Texas
Agricultural Lien
Buyer of Crops located in Kansas
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Agricultural Liens
Bank LenderWith blanket lien
FarmerLocated in Texas
All Assets
Loan
and Crops located in OklahomaArticle 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.
Landlord Located in Texas
Agricultural Lien
Buyer of Crops located in Kansas
Food Security ActBIOCOB, 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
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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
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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 and do not replace them.
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Perishable Agricultural Commodities Act
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Perishable Agricultural Commodities Act
DealersSara
Inventory LenderSecurityInterestSpeakers
PMSI
Problem 32.6
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Perishable Agricultural Commodities Act“The seller of these commodities retains a trust claim over
these commodities,
DealersSara
Inventory LenderSecurityInterestSpeakers
PMSI
Problem 32.6
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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,
DealersSara
Inventory LenderSecurityInterestSpeakers
PMSI
Problem 32.6
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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
DealersSara
Inventory LenderSecurityInterestSpeakers
PMSI
Problem 32.6
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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.”
DealersSara
Inventory LenderSecurityInterestSpeakers
PMSI
Problem 32.6
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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.
DealersSara
Inventory LenderSecurityInterestSpeakers
PMSI
Problem 32.6
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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.
DealersFarmer
Inventory LenderSecurityInterest
Fruits &vegetables
PACA: Farmer has priority over inventory lender
Debt
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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.
DealersFarmer
Inventory LenderSecurityInterest
Fruits &vegetables
PACA: Farmer has priority over inventory lender
Dealer 2
Inventory Lender 2
SecurityInterest
Fruits &vegetables
CashDebt
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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.
DealersFarmer
Inventory LenderSecurityInterest
Fruits &vegetables
PACA: Farmer has priority over inventory lender
Dealer 2
Inventory Lender 2
SecurityInterest
Fruits &vegetables
CashDebt
Does Farmer have priority over Inventory Lender 2?
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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.
DealersFarmer
Inventory LenderSecurityInterest
Fruits &vegetables
PACA: Farmer has priority over inventory lender
Dealer 2
Inventory Lender 2
SecurityInterest
Fruits &vegetables
CashDebt
Does Farmer have priority over Inventory Lender 2?
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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.
DealersFarmer
Inventory LenderSecurityInterestCattle
Same result under the Packers and Stockyards Act (PSA)
Debt
Other Agricultural Finance Issues
• Are Crops proceeds of seeds?
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Other Agricultural Finance Issues
• Are Crops proceeds of seeds? Some say yes some say no.
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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.
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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.
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Problem 37.1.b, page 621
NormanFarms
TomatoesAmericanProduce
Bad check
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Problem 37.1.b, page 621
NormanFarms
TomatoesAmericanProduce
StarMarkets
Bad check
Tomatoes
Cash
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Problem 37.1.b, page 621
NormanFarms
TomatoesAmericanProduce
StarMarkets
Retailcustomers
Bad check
Tomatoes Tomatoes
CashCash
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Problem 37.1.b, page 621
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
Bad check
Tomatoes
Tomatoes
Tomatoes
CashCash
Cash
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Problem 37.1.b, page 621
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
PublixBad check
Tomatoes
TomatoesTomatoes
Tomatoes
Account
CashCash
Cash
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Problem 37.1.b, page 621
Norman did not retain a security interest in the tomatoes
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
PublixBad check
Tomatoes
TomatoesTomatoes
Tomatoes
Account
CashCash
Cash
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Problem 37.1.b, page 621
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commod-ities, 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.”
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
PublixBad check
Tomatoes
TomatoesTomatoes
Tomatoes
Account
CashCash
Cash
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Problem 37.1.b, page 621
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commod-ities, 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 . . .“)
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
PublixBad check
Tomatoes
TomatoesTomatoes
Tomatoes
Account
CashCash
Cash
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Problem 37.1.b, page 621
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commod-ities, 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?
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
PublixBad check
Tomatoes
TomatoesTomatoes
Tomatoes
Account
CashCash
Cash
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Problem 37.1.b, page 621
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commod-ities, 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 priority against Haunt’s accounts lender?
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
PublixBad check
Tomatoes
TomatoesTomatoes
Tomatoes
Account
CashCash
Cash
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Problem 37.1.b, page 621
Norman did not retain a security interest in the tomatoes
PACA: “The seller . . . retains a trust claim over these commod-ities, 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 priority against Haunt’s accounts lender? Norman is prior.
NormanFarms
TomatoesAmericanProduce
StarMarkets
Haunt’sCannery
Retailcustomers
PublixBad check
Tomatoes
TomatoesTomatoes
Tomatoes
Account
CashCash
Cash
Mineral Interests
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Before extraction Oklahoma treats mineral rights as a real property interest. Once oil and gas are extracted they are goods, personal property.
Mineral Interests
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Before extraction Oklahoma treats mineral rights as a real property interest. State law where property located governsOnce oil and gas are extracted they are goods, personal property. For article 9, state law where debtor located governs.
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Oil and Gas
Mineral Owner
OilFirst
Purchaser
SecondPurchaser
Account
Oil
Account
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Oil and Gas
MineralOwner
OilFirst
Purchaser
SecondPurchaser
SecuredLender
Account
Oil
All AssetsSI
AccountLoan
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.
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 before extraction.
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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.
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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.
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