HB 594 -- Security Interests in Farm Products

Sponsor:  Loehner

This bill requires the Secretary of State to design, implement,
and operate a central filing system for effective financial
statements that is certified by the United States Department of
Agriculture as meeting the requirements of 7 U.S.C. Section 1631
of the Food Security Act of 1985 as amended.  The system is to
provide buyers of farm products a practical method for
discovering the existence of security interests in farm products.
In its main provisions, the bill:

(1)  Specifies that no buyer is allowed to take advantage of and
apply the right of offset to defeat a priority established by any
lien or security interest;

(2)  Requires the Secretary of State to maintain a list of all
registered buyers of farm products, commission merchants, and
selling agents.  Registration is annual, must be accompanied by a
$30 fee, and must include certain information to be remitted to
the Secretary of State.  Fees for certain informational lists and
informational list formats are specified in the bill.  All fees
collected regarding the central filing system must be deposited
into the Secretary of State's Technology Trust Fund Account;

(3)  Defines "effective financing statement" as an original or
reproduced copy or an electronically reproduced copy of the
statement containing the name and address of the secured party,
the name and address of the person indebted to the secured party,
the Social Security number or other approved unique identifier of
the debtor, a description of the farm products subject to the
security interest, the county where the farm product is produced
or located, and crop year;

(4)  Specifies that an effective financing statement must be
amended in writing within three months by the debtor to reflect
any material change, remains effective for five years from the
date of filing, is subject to extensions of five years by filing
a continuation statement within six months prior to the
expiration date of the effective period, and lapses on either the
expiration date of the effective period of the statement or the
filing of a notice signed by the secured party that the effective
financing statement is terminated;

(5)  Requires a fee of $10 for the filing, amending, or
continuation of an effective financing statement and $.50 per
page for attachments;

(6)  Specifies that there is no fee for a termination statement;

(7)  Requires the Secretary of State to remove lapsed or
terminated effective financial statements from the master list
prior to its distribution;

(8)  Requires the Secretary of State to compile information from
all effective financial statements or notices filed with his or
her office.  Certain indexing and informational requirements
regarding the master list are specified in the bill;

(9)  Requires the Secretary of State to furnish an oral
confirmation within 24 hours followed by a written confirmation
to an unregistered buyer, commission merchant, or selling agent
requesting information regarding any effective financing
statement;

(10)  Requires the Secretary of State to apply to the Secretary
of the United States Department of Agriculture for certification
of the central filing system and for the approval of the system
or method of selecting an approved unique identifier;

(11)  Requires a secured party, whenever there is no outstanding
secured obligation, to notify the debtor of his or her right to
have a notice of lapse of his or her effective financial
statement filed.  Certain notice requirements, if not honored by
the secured party, result in the secured party being liable for
any resulting loss incurred by the debtor;

(12)  Specifies that oral or written inquires regarding
information provided by the filing of an effective financing
statement may be made at the Office of the Secretary of State
during regular business hours and must be accompanied by a $4.50
fee for each debtor name being investigated;

(13)  Requires the Secretary of State to provide a system that
assigns an identifying number to each inquiry and to maintain a
record of who inquired, on whom the inquiry was made, and the
date of the inquiry;

(14)  Specifies that an individual's inspection of the records of
effective financing statements of 10 or fewer names in one day
will not be charged a fee; however, $1 will be charged for each
additional inspection;

(15)  Specifies that for the purposes of 7 U.S.C. Section 1631 of
the Food Security Act of 1985, as amended, receipt of notice
means the date the notice is received by a buyer, commission
agent, or selling agent or the first date the delivery is
attempted by a carrier.  In all cases, a buyer, commission
merchant, or selling agent is presumed to have received a receipt
of notice 10 days after it is mailed or sent electronically;

(16)  Specifies that a buyer, commission agent, or selling agent
who buys a farm product covered by the central filing system will
take subject to the security interest under the system, except
that a registrant or buyer, commission merchant, or selling agent
making an inquiry under Section 430.450, RSMo, will not take
subject to the security interest if the filing system does not
correctly identify the debtor;

(17)  Specifies that a buyer, commission merchant, or selling
agent, buying farm products covered by an effective financial
statement takes free of any security interest on the products if
the buyer secures a waiver or release of the security interest
specified in the effective financial statement from the secured
party;

(18)  Specifies that if a buyer, selling agent, or commission
merchant tenders the total purchase price by means of a check or
other instrument payable to the seller and each security interest
holder of the seller identified in the central filing system for
the products and if each security interest holder authorizes the
negotiation of the check or other instrument, the authorization
and payment thereof constitutes a waiver or release of the
security interest to the extent of the amount of the instrument.
However, the waiver of the security interest does not establish
or alter in any way security interest or lien priorities under
Missouri law;

(19)  Specifies that for verification of the existence or
nonexistence of a security interest a buyer, commission merchant,
or selling agent can request a seller to disclose his or her
Social Security number, unique identifier, or taxpayer
identification number;

(20)  Specifies that any payee, endorser, or endorsee of a check
or instrument issued to pay for property subject to a lien or any
farm products subject to a security interest, who wrongfully
refuses to endorse the check or instrument to any other payee,
endorser, or endorsee of the check or instrument who is a
superior lienholder, superior secured party, or person legally
entitled to the check or instrument is liable to any payee,
endorser, or endorsee entitled to the endorsement of the check or
instrument for damages; and

(21)  Specifies the court's responsibilities for the assessment
of attorney fees and costs regarding the wrongful refusal of a
payee, endorser, or endorsee to endorse a check or instrument in
payment for property subject to a lien or any farm products
subject to a security interest or if an attorney brought an
action that was found to be frivolous or interposed solely for a
delay or harassment.  If the court finds that an attorney
unnecessarily expanded the proceedings by improper conduct, the
court will assess attorney fees and costs.

The bill becomes effective January 1, 2012.

Missouri House of Representatives
95th General Assembly, 1st Regular Session
Last Updated November 17, 2009 at 9:25 am