AN ACT Relating to security interests in farm crops; amending RCW 60.11.040; reenacting and amending RCW 60.13.040; adding new sections to chapter 62A.9 RCW; creating new sections; providing a contingent effective date; 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.

NEW SECTION. Sec. 2. All of the provisions of Parts 1, 2, 3, and 5 of chapter 62A.9 RCW apply to security interests in farm products except RCW 62A.9-307. A farm products statement constitutes a financing statement for the purposes of the provisions of Parts 1, 2, 3, and 5 of chapter 62A.9 RCW. Part 4 of chapter 62A.9 RCW does not apply to security interests in farm products.

NEW SECTION. Sec. 3. Unless the context clearly requires otherwise, the definitions in this section apply throughout this part.

(1) "Buyer of farm products" means any person, who buys farm products in the ordinary course of business from a person engaged in farming operations who is in the business of selling farm products.

(2) "Commission merchant" means any person engaged in the business of receiving any farm product for sale, on commission, or for or on behalf of another person.

(3) "Farm products" means crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states, such as ginned cotton, wool-clip, maple syrup, milk and eggs, which are in the possession of an obligor engaged in raising, fattening, grazing, or other farming operations.

(4) "Obligor" means a debtor as defined in RCW 62A.9-105(d), a seller of farm products pursuant to a purchase and sale contract, or a person subject to a statutory lien.

(5) "Purchase and sale agreement" means a written agreement by which a seller of farm products agrees to sell and a buyer agrees to purchase certain farm products. Such a purchase and sale agreement creates a contract interest in the described farm products between the obligor and the buyer of farm products, whether or not money is advanced to the seller by the buyer.

(6) "Security agreement" means an agreement which creates or provides for a security interest, which may be perfected by the filing of a farm products statement.

(7) "Secured party" means a lender, seller, or other person in whose favor there is a security interest in farm products.

(8) "Selling agent" means any person, other than a commission merchant, who is engaged in the business of negotiating the sale and purchase of any farm product on behalf of a person engaged in farming operations.

NEW SECTION. Sec. 4. (1) In order to perfect a security interest in farm products, a secured party or a statutory lien claimant under chapters 60.11 and 60.13 RCW, must file a farm products statement in the office of the department of licensing. In order to perfect a contract interest in farm products, a buyer of farm products must file a farm products statement in the office of the department of licensing. (2)(a) Except as provided in (b) of this subsection, a farm products statement is filed when the department of licensing has received the farm products statement, the appropriate filing fee has been tendered, and the farm products statement is entered into the central filing system.

(b) Any party who is registered with the department of licensing may give the department of licensing verbal notice of intent to file a farm products statement by telephone. The department shall log the notice of intent to file in the central filing system and provide the registrant telephoning a log-in number. If the person calling in files a farm products statement in the department containing the log-in number within three business days, excluding weekends and holidays, of the telephonic notice of intent to file, the filed farm products statement shall relate back to the date and time the notice of intent to file was logged in. If the person calling fails to file a farm products statement with the required information within the time period specified, any subsequent farm products statement shall be effective when filed but shall not relate back in time to the telephonic notice of intent to file.

(3) The farm products statement must include the following information:

(a) The name and address of the obligor;

(b) The obligor's signature;

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

(e) A description by category, as prescribed by rule under section 13 of this act, of the farm products subject to the security interest or contract interest including the amount of such products if applicable; and

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

If a statutory lien claim is being filed, the farm products statement shall include the additional information required by chapters 60.11 and 60.13 RCW.

(4) A farm products statement must be amended in writing within three months, and similarly signed and filed, to reflect any material changes, including assignment of the security interest or contract interest. In this Article, unless the context otherwise requires, the term "farm products statement" means the original farm products statement and any amendments.

(5) A farm products statement may be filed before a security agreement or purchase and sale agreement is made or a security interest or contract interest otherwise attaches. A copy of the security agreement or purchase and sale agreement is sufficient as a farm products statement if it contains the above information and is signed by the obligor. A carbon, photographic, or other reproduction of a security agreement, purchase and sale agreement, or a farm products statement is sufficient as a farm products statement if the security agreement or purchase and sale agreement so provides or if the original has been filed in this state.

(6) A farm products statement which otherwise complies with subsection (1) of this section is sufficient when it is signed by the secured party or buyer of farm products instead of the obligor, if it is filed to perfect a security interest or contract interest in:

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

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

(d) Collateral acquired after a change of name, identity, or corporate structure of the obligor.

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

NEW SECTION. Sec. 5. A secured party with a previously filed financing statement or statutory lien claim covering farm products is required to file a farm products statement. The secured party may, at its option, reference the previously filed financing statement or statutory lien claim on the farm products statement and the signature of the debtor/obligor on the previously filed statement or lien claim shall constitute compliance with the obligor signature requirement under section 4(3)(b) of this act. The priority of the filing of the farm products statement shall relate back to the filing date of the previously filed financing statement or statutory lien claim, for the purposes of determining priority against other farm products statements filings made under this section. The secured party with a previously filed financing statement or statutory lien claim covering farm products may file its farm products statement anytime during a thirty-day time period preceding the implementation of the central filing system.

NEW SECTION. Sec. 6. (1) Except as provided in subsection (2) of this section, conflicting security interests and contract interests in farm products created by farm products statements rank according to priority in time of filing.

(2) The priorities set forth in chapter 60.11 RCW regarding crop liens and in chapter 60.13 RCW regarding processor and preparer liens shall govern the priorities regarding security interests and contract interests in farm products where applicable.

(3) A buyer of farm products, 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, prior to the purchase of farm products:

(a) The buyer, commission merchant, or selling agent has registered with the department of licensing under section 12 of this act, and:

(i) The secured party has not filed a farm products statement with the department of licensing under section 4 of this act; or

(ii) The department of licensing fails to disclose a filed farm products statement in its distribution of master lists or response to inquiry from such buyer, commission merchant, or selling agent; or

(iii) The buyer, commission merchant, or selling agent has filed a farm products statement before the secured party has filed a farm products statement; or

(b) The buyer of farm products, commission merchant, or selling agent has not received from the secured party or seller, within one year before the sale of the farm products or before the filing of a farm products statement by the buyer of farm products, commission merchant, or selling agent, written notice of the security interest containing:

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

(ii) The name and address of the obligor;

(iii) The social security number of the obligor or, in the case of an obligor doing business other than as an individual, the obligor'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 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; or

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

NEW SECTION. Sec. 7. (1) A filed farm products statement is effective for a period of five years from the date of filing unless a shorter time period is elected by the person filing the statement. A person electing a shorter time period shall indicate the time period of effectiveness on the farm products statement and the statement shall automatically terminate upon expiration of the time period elected. If the person filing the statement fails to make an election, the filing party is required to file a termination statement under section 8 of this act if they wish to terminate the statement prior to the expiration of the five-year period. The effectiveness of a filed farm products statement lapses on the expiration of the applicable time period, unless a continuation statement is filed prior to the lapse.

(2) A continuation statement may be filed by the secured party or buyer of farm products regarding a farm products statement within six months prior to the expiration of the five-year or other applicable time period specified in subsection (1) of this section. Any such continuation statement must be signed by the secured party or buyer of farm products, must identify the original statement by file number, and must state that the original statement is still effective.

(3) Upon timely filing of the continuation statement, the effectiveness of the original statement is continued for the same time period as the original statement, from the date it would have expired whereupon it lapses in the same manner as provided in subsection (1) of this section unless another continuation statement is filed prior to such lapse. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the original statement.

(4) If a filed farm products statement exists at the time insolvency proceedings are commenced by or against the obligor, the farm products statement remains in effect until termination of the insolvency proceedings and thereafter for a period of sixty days, or until expiration of the applicable time period, whichever occurs later.

(5) Upon lapse of the farm products statement, the security interest or contract interest in the farm products becomes unperfected and the farm products statement is void and of no further force and effect. If the security interest or contract interest becomes unperfected upon lapse, it is deemed to have been unperfected as against a person who became a purchaser or lien creditor before lapse.

NEW SECTION. Sec. 8. (1) A secured party or buyer of farm products is required to file a termination statement with the department of licensing whenever there is no outstanding secured obligation and no commitment to make advances, incur obligations, or otherwise give value. The termination statement must provide that the secured party or buyer of farm products no longer claims a security interest or contract interest under the farm products statement, which shall be identified by file number.

(2) If a secured party or a buyer of farm products who has filed a farm products statement fails to file a termination statement regarding that farm products statement as required under subsection (1) of this section, the obligor may demand in writing that the secured party or buyer of farm products file a termination statement. If a secured party or buyer of farm products fails to file the termination statement within ten days of demand by the obligor, then the secured party or buyer of farm products shall be liable to the obligor for the sum of one hundred dollars plus an additional one hundred dollars per day for each day of delay without reasonable excuse between the date the termination statement should have been filed and the date it is filed, plus compensation for any loss caused to the obligor by the failure.

NEW SECTION. Sec. 9. A secured party or buyer of farm products of record may by his or her signed statement release all or a part of any collateral described in a filed farm products statement. The statement of release is sufficient if it contains a description of the collateral being released, the name and address of the obligor, the name and address of the secured party or buyer of farm products, and the file number of the farm products statement.

NEW SECTION. Sec. 10. (1) A farm products statement may disclose an assignment of a security interest or contract interest in the collateral described in the farm products statement by indication in the farm products statement of the name and address of the assignee or by an assignment itself or a copy thereof on the face or back of the statement.

(2) A secured party or buyer of farm products may assign all or a part of his or her rights under a farm products statement by the filing in the department of licensing of an amended farm products statement providing the name and address of the assignee as the secured party or buyer of farm products in addition to the other information required in a farm products statement.

(3) After the disclosure or filing of an amended farm products statement under this section, the assignee shall be the secured party or buyer of farm products of record.

NEW SECTION. Sec. 11. (1) The risk of loss caused by an error falls on the party committing the error. If a secured party or buyer of farm products fails to properly complete or file a farm products statement, the secured party or buyer of farm products bears the loss. If a buyer of farm products, commission merchant, or selling agent fails to provide the department of licensing with the correct information regarding the obligor or fails to observe farm products statements properly disclosed to them, the buyer of farm products, commission merchant, or selling agent bears the loss. If the department of licensing fails to properly file or disclose a farm products statement, the department is liable for any losses or damages incurred as a result of such action or inaction.

(2) If an obligor signs a farm products statement which contains an erroneous obligor name, social security number, tax identification number, or departmental number, the obligor will be liable for all losses or damages incurred as a result of the erroneous information; the obligor will be presumed to have committed fraud; and the obligor's liability shall be nondischargeable in bankruptcy.

NEW SECTION. Sec. 12. (1) The department of licensing shall develop and implement a central filing system containing the information filed with it pursuant to section 4(3) of this act. Under this system, the department shall record the date and time of filing and compile the information into a master list:

(a) That is capable of being reported according to categories of farm products, further subdivided in the following ways:

(i) In alphabetical order according to the last name of the individual obligors, or, in the case of obligors doing business other than as individuals, the first word not an article in the name of such obligors; and

(ii) In numerical order according to the social security number of the individual obligors or, in the case of obligors doing business other than as individuals, the internal revenue service taxpayer identification number of such obligors; and

(iii) Geographically by county; and

(iv) By crop year; and

(b) That is capable of being reported by a departmental numbering system which shall be cross-referenced with the social security number, the tax identification number, and the name of the obligor.

(2) 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 on a form indicating:

(a) The name and address of each buyer, commission merchant, and selling agent;

(b) The interest of each buyer, commission merchant, and selling agent in receiving the lists described in subsection (3) of this section; and

(3) The department of licensing shall distribute periodically to each registrant who subscribes to the service, a copy in written or printed form of those portions of the master lists that cover the farm products in which such buyer, commission merchant, or selling agent has registered an interest.

(4) The information described in subsection (1) of this section shall be made available to registrants through electronic data transmission.

(5) The information described in subsection (1) of this section shall be made available to registrants through a toll-free telephone line.

(6) Upon the request of any person, the department of licensing shall orally provide the information described in subsection (1) of this section, followed by a written confirmation to be mailed within twenty-four hours after the telephone call.

(7) Upon the request of any person, the department shall furnish copies of particular filed farm products statements if the requestor provides the department with the file numbers of the statement to be copied.

(8) The department shall mark each farm products statement, termination statement, and statement of release with a file number and with the date and hour of filing and shall hold the statement or a microfilm or other photographic copy of the statement for public inspection. The original statement may be destroyed at any time after a microfilm or other photographic copy is made of the original statement. This microfilm or other photographic copy shall thereafter be treated as if it were the original filing for all purposes. The original, microfilm, or photographic record of any lapsed farm product statement shall not be destroyed earlier than one year after the lapse of such statement.

NEW SECTION. Sec. 13. The department of licensing shall:

(1) Apply for certification of the farm products central filing system from the United States department of agriculture on or before September 30, 1991;

(2) Fully implement the farm products central filing system as provided in this part;

(3) Develop a proposed fee schedule for filing farm products statements, registration of interested parties with the department, and regular distribution, electronic transmission, or other transmission of the information described in section 12 of this act. The fees established must be set in a sufficient amount to recover the initial request appropriation within three years after the appropriation is made. The annual fee for registering with the department of licensing shall not exceed fifty dollars. There shall be no fee for filing a termination statement. The actual fee schedule must be adopted by the legislature during the 1992 legislative session;

(4) Have the authority under chapter 34.05 RCW to adopt rules necessary to implement this part, including:

(a) Designation of the categories of farm products to be used in compiling the master list;

(b) Distribution of the master lists to registrants; and

(5) Assist buyers, commission merchants, selling agents, and other persons by initially providing field training sessions or written instruction on the utilization of the central filing system created by this part; and

(6) Study the following issues:

(a) The feasibility of including all farm products liens, statutory or otherwise, in the farm products central filing system; and

(b) The impact of (a) of this subsection on proposed fees for central filing.

NEW SECTION. Sec. 14. 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 part shall be deposited into the fund. Expenditures from the fund may be used only for the purposes of sections 1 through 13 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. 15. Sections 1 through 14 of this act are each added to chapter 62A.9 RCW as Part 6 under the subchapter heading "farm products liens.

Sec. 16. RCW 60.11.040 and 1989 c 229 s 1 are each amended to read as follows:

(1) Except as provided in subsection (4) of this section with respect to the lien of a landlord, any lien holder must after the commencement of delivery of such supplies and/or of provision of such services, but before the completion of the harvest of the crops for which the lien is claimed, or in the case of a lien for furnishing work or labor within twenty days after the cessation of the work or labor for which the lien is claimed: (a) File a farm products statement evidencing the lien with the department of licensing; and (b) if the lien holder is to be allowed costs, disbursements, and attorneys' fees, mail a copy of such statement to the last known address of the debtor by certified mail, return receipt requested, within ten days.

(2) The statement shall be in writing, signed by the claimant, and shall contain in substance the following information:

(a) The name and address of the claimant;

(b) The name and address of the debtor;

(d) A description of the labor services, materials, or supplies furnished;

(e) A description of the crop and its location to be charged with the lien sufficient for identification; and

(f) The signature of the claimant.

(3) The department of licensing may by rule prescribe standard filing forms, fees, and uniform procedures for filing with, and obtaining information from, filing officers((~~, including provisions for filing crop liens together with financing statements filed pursuant to RCW 62A.9-401 so that one request will reveal all filed crop liens and security interests~~)).

(4) Any landlord claiming a lien under this chapter for rent shall file a statement evidencing the lien with the department of licensing. A lien for rent claimed by a landlord pursuant to this chapter shall be effective during the term of the lease for a period of up to five years. A landlord lien covering a lease term longer than five years may be refiled in accordance with RCW 60.11.050(4). A landlord who has a right to a share of the crop may place suppliers on notice by filing evidence of such interest in the same manner as provided for filing a landlord's lien.

Sec. 17. RCW 60.13.040 and 1987 c 189 s 7 and 1987 c 148 s 3 are each reenacted and amended to read as follows:

(1) A producer or commercial fisherman claiming a processor or preparer lien may file a farm products statement evidencing the lien with the department of licensing after payment from the processor, conditioner, or preparer to the producer or fisherman is due and remains unpaid. For purposes of this subsection and RCW 60.13.050, payment is due on the date specified in the contract, or if not specified, then within thirty days from time of delivery.

(2) The statement shall be in writing, verified by the producer or fisherman, and shall contain in substance the following information:

(a) A true statement of the amount demanded after deducting all credits and offsets;

(b) The name of the processor, conditioner, or preparer who received the agricultural product or fish to be charged with the lien;

(d) A statement that the amount claimed is a true and bona fide existing debt as of the date of the filing of the notice evidencing the lien;

(e) The date on which payment was due for the agricultural product or fish to be charged with the lien; and

(f) The department of licensing may by rule prescribe standard filing forms, fees, and uniform procedures for filing with, and obtaining information from, filing officers.

NEW SECTION. Sec. 18. The department of licensing shall report to the legislature in December 1991 and December 1992 as to the implementation, operation, and certification of the central filing system. The report shall be directed to the judiciary and agriculture committees of the house of representatives and the law and justice and agriculture committees of the senate.

NEW SECTION. Sec. 19. The effectiveness of sections 2 through 12 and 14 through 17 of this act is contingent on certification of the central filing system by the United States department of agriculture. Sections 2 through 12 and 14 through 17 of this act shall take effect July 1, 1992, if the central filing system has been certified by May 1, 1992. If certification is not received by May 1, 1992, but is received by May 1, 1993, sections 2 through 12 and 14 through 17 of this act shall take effect July 1, 1993.

NEW SECTION. Sec. 20. Sections 1, 13, and 18 of this act are 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. 21. This act may be cited as the Washington farm products central filing act.

NEW SECTION. Sec. 22. 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.