HOUSE BILL REPORT

EHB 1047

As Amended by the Senate

BYRepresentatives R. Meyers, Schmidt, Inslee and P. King 

Modifying secured transaction requirements as they apply to crops.

House Committe on Judiciary

Majority Report:  Do pass.  (15)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Padden, Ranking Republican Member; Belcher, Brough, Dellwo, Hargrove, Inslee, P. King, Locke, R. Meyers, H. Myers, Patrick, Scott and Tate.

House Staff:Bill Perry (786-7123)

AS PASSED HOUSE MARCH 7, 1989

BACKGROUND:

The 1972 version of Article IX of the Uniform Commercial Code, adopted by the state of Washington in 1982, is the law which governs secured transactions in the state of Washington.  Generally, Article IX applies to any transaction which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper or accounts.

The UCC provides a formula for determining who has priority when two parties have conflicting security interests in crops. The formula gives a perfected security interest priority over an already existing security interest if new value is given within three months of when the crops become growing crops, and if the earlier interest secures obligations due more than six months before the crops become growing crops.

To amend a filed financing statement under the current code, one must file a writing signed by both the debtor and the secured party, regardless of the nature of the amendment.  In addition, where a debtor's name is changed so as to make a filed financing statement seriously misleading, the filing is not effective more than four months after the change unless a new financing statement is filed.  The signature of the debtor is required on any new financing statement.

SUMMARY:

Priority conflicts between security interests in crops are governed by Washington law on crop liens.  First, this gives the highest priority to liens in favor of any person who furnishes any work or labor upon the land. Second, priority is given to a later filed lien or security interest if the obligations secured by the earlier filed security interest or lien were not incurred to produce such crops.  Third, a landlord's lien has priority over an earlier filed security interest.  Aside from these three situations, the rule of priority is that the first party to file has priority.

A financing statement may be amended by filing a writing signed by only the secured party.  If collateral is added, then the signature of the debtor is also required on the amendment. Where there is a name change of the debtor which makes the financing statement seriously misleading, an amendment, rather than a new financing statement, is needed to record the name change.  An amendment may be obtained without the signature of the debtor.

EFFECT OF SENATE AMENDMENTS:  The House Bill requires a debtor to sign an amended financing statement only if collateral is added to the agreement.  The Senate amendment requires the debtor's signature for any change to the financing statement other than a change in a secured party's name or address

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Bob Wallace, Washington State Bar Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The bill removes unnecessary requirements that are traps for unwary parties to secured transactions.

House Committee - Testimony Against:      None Presented.

VOTE ON FINAL PASSAGE:

      Yeas 89; Absent 2; Excused 7

Absent:     Representatives Sommers, H. and Mr. Speaker

Excused:    Representatives Basich, Betrozoff, Brooks, Hargrove, Sayan, Schoon and Vekich.