H-1870

AN ACT Relating to security interests in farm crops; amending RCW 62A.9-307, 62A.9-402, and 62A.9-407; adding new sections to chapter 62A.9 RCW; creating new sections; prescribing penalties; making an appropriation; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The availability of credit is vital for agriculture. For that reason, the legislature has traditionally promoted the availability of agricultural credit. The legislature finds that lenders lack a uniformly effective means of providing notice of a lender's security interest in farm products to purchasers of the products. The legislature further finds that purchasers lack any practical method for discovering the existence of security interests in farm products.

Accordingly, it is the intent of the legislature to promote the development of a central filing system as provided in 7 U.S.C. Sec. 1631 and to encourage private businesses to provide for expeditious discovery of liens and security interests in farm products.

Sec. 2. RCW 62A.9-307 and 1987 c 393 s 15 are each amended to read as follows:

(1) A buyer in ordinary course of business (subsection (9) of RCW 62A.1-201) other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence.

(2) A buyer who in the ordinary course of business buys farm products from a person engaged in farming operations buys and takes free of a security interest created by his or her seller, and a commission merchant or selling agent who in the ordinary course of business sells farm products for a person engaged in farming operations buys, takes, and sells free of a security interest created by his or her seller, even though the security interest is perfected and the buyer, commission merchant, or selling agent knows of the existence of such interest if:

(a) The buyer, commission merchant, or selling agent has registered with the department of licensing pursuant to RCW 62A.9-407(4); and

(i) The secured party has not filed an effective farm products notice statement with the department of licensing pursuant to RCW 62A.9-402(9); or

(ii) Such buyer, commission merchant, or selling agent does not receive from the department of licensing written notice that specifies the seller and farm product pursuant to RCW 62A.9-407(3), (5), (6), and (8); or

(b) The secured party has not filed an effective farm products notice statement pursuant to RCW 62A.9-402(9) and the buyer, commission merchant, or selling agent has not received within one year before the sale from the secured party or seller written notice of the security interest containing:

(i) The name and address of the secured party;

(ii) The name and address of the debtor;

(iii) The social security number of the debtor or, in the case of a debtor doing business other than as an individual, the debtor's federal internal revenue service taxpayer identification number;

(iv) A description by category of the farm products subject to the security interest, including the amount of such products, if applicable;

(v) The crop year;

(vi) The county or counties where the farm products are produced or located and, if less than all of such farm products in a county are claimed, a reasonable description of the real property; and

(vii) Any payment obligations imposed by the secured party as a condition for waiver or release of the security interest;

The notice described in this subsection (b) must be amended in writing within three months and similarly signed and transmitted, to reflect material changes; or

(c) The buyer, commission merchant, or selling agent has obtained a waiver from the secured party by performing any payment obligation or otherwise.

(3) In the case of consumer goods, a buyer takes free of a security interest even though perfected if he buys without knowledge of the security interest, for value and for his own personal, family or household purposes unless prior to the purchase the secured party has filed a financing statement covering such goods.

((~~(3)~~)) (4) A buyer other than a buyer in ordinary course of business (subsection (1) of this section) takes free of a security interest to the extent that it secures future advances made after the secured party acquires knowledge of the purchase, unless made pursuant to a commitment entered into without knowledge of the purchase.

Sec. 3. RCW 62A.9-402 and 1989 c 251 s 2 are each amended to read as follows:

(1) Except as provided in subsection (9) of this section, a financing statement is sufficient if it gives the names of the debtor and the secured party, is signed by the debtor, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor and contains a statement indicating the types, or describing the items, of collateral. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches. When the financing statement covers timber to be cut or covers minerals or the like (including oil and gas) or accounts subject to subsection (5) of RCW 62A.9-103, or when the financing statement is filed as a fixture filing (RCW 62A.9-313) and the collateral is goods which are or are to become fixtures, the statement must also comply with subsection (5). A copy of the security agreement is sufficient as a financing statement if it contains the above information and is signed by the debtor. A carbon, photographic or other reproduction of a security agreement or a financing statement is sufficient as a financing statement if the security agreement so provides or if the original has been filed in this state.

(2) A financing statement which otherwise complies with subsection (1) is sufficient when it is signed by the secured party instead of the debtor if it is filed to perfect a security interest in

(a) collateral already subject to a security interest in another jurisdiction when it is brought into this state or when the debtor's location is changed to this state. Such a financing statement must state that the collateral was brought into this state or that the debtor's location was changed to this state under such circumstances; or

(b) proceeds under RCW 62A.9-306 if the security interest in the original collateral was perfected. Such a financing statement must describe the original collateral; or

(d) collateral acquired after a change of name, identity or corporate structure of the debtor (subsection (7)).

(3) A form substantially as follows is sufficient to comply with subsection (1):

Name of debtor (or assignor) ....................................

Address .........................................................

Name of secured party (or assignee) .............................

Address .........................................................

1. This financing statement covers the following types (or items) of property:

(Describe) ...............................................

2.(If applicable) The above goods are to become fixtures on* (Describe Real Estate) .................................... and this financing statement is to be filed for record in the real estate records. (If the debtor does not have an interest of record) The name of a record owner is .........

*Where appropriate substitute either "The above timber is standing on .........." or "The above minerals or the like (including oil and gas) or accounts will be financed at the wellhead or minehead of the well or mine located on ........"

3. (If products of collateral are claimed)

Products of the collateral are also covered ..............

(use ............................................

whichever Signature of Debtor (or Assignor)

is ............................................

applicable) Signature of Secured Party (or Assignee)

(4) A financing statement may be amended by filing a writing signed by both the debtor and the secured party: PROVIDED, That a secured party may amend a financing statement without the signature of the debtor when the amendment is to change the address or name of the secured party. An amendment does not extend the period of effectiveness of a financing statement. If any amendment adds collateral, it is effective as to the added collateral only from the filing date of the amendment. In this Article, unless the context otherwise requires, the term "financing statement" means the original financing statement and any amendments. The fee for filing an amendment shall be the same as the fee for filing a financing statement.

(5) A financing statement covering timber to be cut or covering minerals or the like (including oil and gas) or accounts subject to subsection (5) of RCW 62A.9-103, or a financing statement filed as a fixture filing (RCW 62A.9-313) where the debtor is not a transmitting utility, must show that it covers this type of collateral, must recite that it is to be filed for record in the real estate records, and the financing statement must contain a description of the real estate sufficient if it were contained in a mortgage of the real estate to give constructive notice of the mortgage under the law of this state. If the debtor does not have an interest of record in the real estate, the financing statement must show the name of a record owner.

(6) A mortgage is effective as a financing statement filed as a fixture filing from the date of its recording if (a) the goods are described in the mortgage by item or type, (b) the goods are or are to become fixtures related to the real estate described in the mortgage, (c) the mortgage complies with the requirements for a financing statement in this section other than a recital that it is to be filed in the real estate records, and (d) the mortgage is duly recorded. No fee with reference to the financing statement is required other than the regular recording and satisfaction fees with respect to the mortgage.

(7) A financing statement sufficiently shows the name of the debtor if it gives the individual, partnership or corporate name of the debtor, whether or not it adds other trade names or the names of partners. Where the debtor so changes his name or in the case of an organization its name, identity or corporate structure that a filed financing statement becomes seriously misleading, the filing is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the change, unless a new appropriate financing statement or an amendment is filed before the expiration of that time. A filed financing statement remains effective with respect to collateral transferred by the debtor even though the secured party knows of or consents to the transfer.

(8) A financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading.

(9) Written notice of a security interest in farm products is sufficient for purposes of being filed in the system described in RCW 62A.9-407 (3) through (8) and shall, for purposes of such sections, be called an "effective farm products notice statement" if it contains the following information:

(a) The name and address of the debtor;

(b) The debtor's signature;

(d) The social security number of the debtor or, in the case of a debtor doing business other than as an individual, the debtor's federal internal revenue service taxpayer identification number;

(e) A description by category (as prescribed by rule pursuant to RCW 62A.9-407(3)) of the farm products subject to the security interest including the amount of such products if applicable;

(f) A reasonable description of the real estate where the farm products are produced or located. This provision may be satisfied by a designation of the county or counties, and a legal description shall not be required.

(10) An effective farm products notice statement described in subsection (9) of this section must be amended in writing within three months, and similarly signed and filed, to reflect any material changes.

(11) If a secured party fails to file a termination statement within ten days after proper demand for the statement, the secured party is liable to the debtor for one hundred dollars and in addition for any loss caused to the debtor by the failure.

Sec. 4. RCW 62A.9-407 and 1987 c 189 s 5 are each amended to read as follows:

(1) If the person filing any financing statement, termination statement, statement of assignment, or statement of release, furnishes the filing officer a copy thereof, the filing officer shall upon request note upon the copy the file number and date and hour of the filing of the original and deliver or send the copy to such person.

(2) Upon request of any person following payment of the required fees, the department of licensing shall issue its certificate showing whether there is on file with the department of licensing on the date and hour stated therein, any presently effective financing statement naming a particular debtor and any statement of assignment thereof and if there is, giving the date and hour of filing of each such statement and the names and addresses of each secured party therein. Upon request and following payment of the required fees, the department of licensing shall issue its certificate and shall furnish a copy of any filed financing statements or statements of assignment.

(3) The department of licensing shall develop and implement a central filing system containing the information filed with it pursuant to RCW 62A.9-402(9). Under this system, the department shall record the date and time of filing and compile the information into a master list organized according to categories of farm products. The list shall be organized within each farm product category in alphabetical order according to the last name of the debtor (or, in the case of debtors doing business other than as individuals, the first word in the name of such debtor). The list shall be further organized according to and contain information required by federal law and regulation. The department shall, by rule adopted pursuant to chapter 34.05 RCW, designate the categories of farm products to be used in compiling the master list. The department may establish and maintain, by rule, a separate system for filing farm products notice statements and search, retrieval, and dissemination of information relating to effective farm products notice statements, and may require separate search requests for such information pursuant to a fee schedule to be established by rule.

(4) The department of licensing shall maintain a list of all buyers of farm products, commission merchants, selling agents, and other persons who register with the department indicating an interest in receiving the lists described in subsection (5) of this section.

(5) The department of licensing shall distribute complete master lists for each farm product category at least quarterly to each buyer, commission merchant, selling agent, and other person registered under subsection (4) of this section and distribute either complete lists or cumulative supplements, which supplements shall be issued not less frequently than twice monthly, of effective farm products notice statements filed subsequent to the last date of filing for effective farm products notice statements on the last preceding quarterly master list, which the buyer, commission merchant, or selling agent has requested. The buyer, commission merchant, or selling agent shall be deemed to have received the lists and supplements no later than the third calendar day following the date of mailing by the department or in the event the mail is not delivered on that day, the first day thereafter on which mail is delivered.

(6) Upon the request of any person not registered pursuant to RCW 62A.9-407(4), the department of licensing shall provide, within twenty-four hours, an oral confirmation of the filing of the notice described in RCW 62A.9-402(9) followed by a written confirmation.

(7) Upon request of any person and payment of such fees as may be established by the department by rule, the department shall furnish copies of particular filed effective farm products notice statements or statements of assignment if the requestor provides the department with the file numbers of the statement to be copied.

(8) Information provided under subsections (3) through (7) of this section shall be made available to the public through electronic data transmission. In addition, information provided under subsections (3) through (7) of this section shall be made available by another means, such as by facsimile, microfiche, photographic copy, telephone call followed by written confirmation, or by any other means the department determines to be efficient and cost-effective.

(9) The department of licensing shall establish a toll-free telephone line that can be used by any interested person to obtain the information provided under subsections (3) through (7) of this section.

(10) The department of licensing shall establish a fee schedule by rule for registration and listing of buyers of farm products, commission merchants, and selling agents of farm products and for distribution of master lists and supplements of master lists and information and oral confirmation of filing as required by RCW 62A.9-407. The annual registration fee for buyers of farm products shall not exceed fifty dollars.

NEW SECTION. Sec. 5. All rules adopted under the provisions of this chapter are subject to the provisions of chapter 34.05 RCW concerning the adoption of rules. The department of licensing shall issue regulations requiring the master lists distributed to registrants to include a listing of statutory crop liens filed with the department.

NEW SECTION. Sec. 6. The central filing system program fund is created in the custody of the state treasurer. All receipts from the fees collected by the director under this chapter and RCW 62A.9-409(1) shall be deposited into the fund. Expenditures from the fund may be used only for the purposes of this act. Only the director of licensing or the director's designee may authorize expenditures from the fund. The fund is subject to allotment procedures under chapter 43.88 RCW, but no appropriation is required for expenditures.

NEW SECTION. Sec. 7. Sections 5 and 6 of this act are each added to chapter 62A.9 RCW.

NEW SECTION. Sec. 8. The sum of one hundred six thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1993, from the general fund to the department of licensing for the purposes of this act. The amount spent shall be repaid to the general fund before the end of the biennium ending June 30, 1995, from the fees imposed pursuant to section 4(9) of this act.

NEW SECTION. Sec. 9. The department of licensing shall assist buyers, commission merchants, selling agents, and other persons registered pursuant to RCW 62A.9-407(4) by initially providing field training sessions or written instruction on the utilization of the central filing system created by this act. The department of licensing shall report to the legislature in December of 1992 and December of 1994 as to the implementation and operation of the central filing system. The report shall be directed to the house of representatives and senate agriculture committees.

NEW SECTION. Sec. 10. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect July 1, 1991. The director of licensing may immediately take such steps as are necessary to ensure that this act is implemented on its effective date.

NEW SECTION. Sec. 11. This act may be cited as the Washington farm products central filing system act.

NEW SECTION. Sec. 12. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.