North Dakota Grain Dealers Association

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North Dakota Grain Dealers Association

• Agricultural Suppliers Liens
• Agricultural Processors Liens
• Central Notice System
• Bismarck, ND May 6, 2009
• Finley, ND May 7, 2009

Christopher D. Friez Crowley Fleck, PLLP 400 East
Broadway, Suite 600 Bismarck, ND
58501 701-223-6585 cfriez_at_crowleyfleck.com
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Agricultural Suppliers Lien

• Who can file a lien?
• Person who furnishes supplies is entitled to a
  lien upon the crops and products produced by the
  use of the supplies

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Agricultural Suppliers Lien

• What are supplies
• Seed
• Petroleum products
• Fertilizer
• Farm chemicals
• Insecticide
• Feed
• Hay
• Pasturage
• Veterinary services
• Furnishing of services in delivering or applying
  supplies

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AGRICULTURAL SUPPLIERS LIENS

• When is the lien effective?
• From the date supplies are furnished or services
  performed
• Is there a prerequisite to filing a lien?
• Billing statement for supplies furnished must
  include notice to producer that if amount due to
  supplier is not satisfied a lien may be filed

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Agricultural Suppliers Lien

• Procedure to obtain lien
• File a verified statement in the County
  Recorders Office of any county or in the
  Secretary of States Office
• Must be filed within 120 days after supplies are
  furnished or services performed
• (150 days for furnished or delivered petroleum
  products)

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Agricultural Suppliers Lien

• Lien statement must contain
• Name and address of person to whom supplies were
  furnished
• Name and address of supplier
• Description of crops, ag products, or livestock
  and their amount or number, if known, subject to
  the lien, together with a reasonable description,
  including the county of location of crops, ag
  products, or livestock and the year the crop is
  to be or was harvested
• Description and value of supplies and date
  furnished
• Social security number, or IRS taxpayer ID
  number, of the person or business to whom
  supplies were furnished
• Signature of secured party must be notarized
• ND Secretary of State has form Agricultural
  Suppliers Lien/Notice ASL-2 on its website
• Secretary of State forms must be received ten
  business days before end of the month to be
  published on next months list

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Agricultural suppliers lien

• Lien must contain A description of the crops,
  agricultural products, or livestock and their
  amount or number, if known, subject to the lien
  together with a reasonable description, including
  the county as to the location of the crops,
  agricultural products, or livestock and the year
  the crop is to be harvested or was harvested.

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Agricultural suppliers lien

• What is a reasonable description
• ND Supreme Court
• A bank asserted that a suppliers lien was
  deficient in location, description, and quantity
  of crops because the filed statements contained
  a lien on all alfalfa, corn, barley, wheat,
  potatoes, and sugar beets on Township 151, Range
  104 Township 152, Range 104, located in
  McKenzie, County, ND.
• Court stated statute does not require a
  description of acreage or amount of crops
• Rather, statute requires description of the
  amount or number, if known
• Court concluded that the above liens
  substantially complied with the statutory
  requirements to provide a description of the
  amount or number of crops, if known, and a
  reasonable description of the location of the
  crops

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Agricultural suppliers lien

• What is a reasonable description
• ND Supreme Court has provided some guidance
• The more detail the better to avoid problems or
  court challenges

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Agricultural Suppliers Lien

• Filing Fee
• 15.00 to file with Secretary of State or County
  Recorder

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Agricultural Suppliers Lien

• Can Lien be amended?
• Amendment may be filed to correct
• Social security or tax ID number of debtor
• Spelling of debtors or lienholders name
• Address of debtor or lienholder
• Secretary of State has amendment form
• 10.00 fee to file an amendment or assignment of
  lien
• Amending lien does not affect liens priority

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Agricultural Suppliers Lien

• Penalty for failure to release lien
• If lienholder fails to file termination statement
  within 60 days after lien has been satisfied,
  lienholder is liable to debtor for 100.00

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Agricultural Suppliers Lien

• Priority
• A Suppliers Lien has priority, as to the crops
  or agricultural products covered thereby, over
  all other liens or encumbrances except any
  agricultural processors lien.
• Priority of an effective agricultural suppliers
  lien is NOT transferable from the original
  lienholder
• After sale, assignment, or transfer, the priority
  of an effective suppliers lien is to be
  determined as of the date the lien was filed

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Agricultural suppliers lien

• PRIORITY EXAMPLE
• March 1 Bank files UCC Lien on crops
• June 1 Fertilizer Supplier files Ag Suppliers
  lien
• Fertilizer Supplier jumps ahead of bank in lien
  priority
• Fertilizer Supplier takes 1st priority, Bank
  takes 2nd Priority

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Agricultural Suppliers Lien

• Priority
• How priority is determined in case of multiple
  liens
• Priority is determined from the date the supplies
  were furnished or the services performed

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Agricultural suppliers lien

• MULTIPLE LIENS PRIORITY EXAMPLE
• March 1 Bank files UCC lien
• June 1 Fertilizer Supplier files Ag Suppliers
  Lien (furnished fertilizer on May 1)
• July 1 Seed Supplier files Ag Suppliers Lien
  (furnished seed on April 1)
• Priority
• Seed Supplier 1st, Fertilizer Supplier 2nd, Bank
  3rd

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Agricultural Suppliers Lien

• Duration
• Does not appear to be a statute of limitations on
  liens in the lien section or statute of
  limitations section of the code
• N.D.C.C. 35-01-22 provides that a lien is not
  extinguished by the lapse of time within which a
  court action can be brought upon the debt itself
• HOWEVER

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Agricultural suppliers lien

• N.D.C.C. 11-18-14
• County Recorder shall remove from the files in
  the recorder's office, and destroy, all
  agricultural processor's liens, agricultural
  supplier's liensand other liens together with
  any releases for the instrument upon which a
  claim for relief has accrued and which claim for
  relief is more than ten years old
• At the time of destroying the files the recorder
  shall note on the margin of the index opposite
  the record of each instrument so removed and
  destroyed the date when the instrument was
  destroyed.

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AGRICULTURAL PROCESSORS LIEN

• Used primarily by custom harvesters
• Processor includes persons threshing, combining,
  drying or harvesting any crop or agricultural
  product
• ASL-1 Processors Lien form is used
• Suppliers Lien most commonly used by grain
  elevators

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AGRICULTURAL PROCESSORS LIEN

• Process
• Similar to process for Suppliers Lien
• Difference
• Effective August 1, 2007, filing office must
  reject filing statement unless proof of mailing
  of notification of the lien to debtors
  last-known address by registered or certified
  mail with return receipt requested is filed with
  statement

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Agricultural processors lien

• Priority
• Lien is effective from the date the processing is
  completed

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Agricultural processors lien

• Priority
• Lien has priority, as to the crops or
  agricultural products covered thereby, over all
  other liens or encumbrances

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Agricultural processors lien

• PRIORITY EXAMPLE
• March 1 Bank files UCC lien on crops
• June 1 Fertilizer supplier files Ag Suppliers
  Lien
• October 1 Custom Combiner files Ag Processors
  Lien
• Custom Combiner takes 1st priority, Fertilizer
  Supplier takes 2nd priority, Bank takes 3rd
  priority

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AGRICULTURAL PROCESSORS LIEN

• Priority
• Priority of an effective agricultural processors
  lien is not transferable from the original
  lienholder
• After sale, assignment, or transfer, priority of
  an effective agricultural processors lien is to
  be determined as of the date the lien was filed

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Agricultural processors lien

• MULTIPLE LIENS PRIORITY EXAMPLE
• March 1 Bank files UCC lien
• June 1 Fertilizer Supplier files Ag Suppliers
  Lien (furnished fertilizer on May 1)
• July 1 Seed Supplier files Ag Suppliers Lien
  (furnished seed on April 1)
• October 1 Custom Combiner files Ag Processors
  Lien (services provided August 1)
• Slaughterhouse files Ag Processors Lien
  (services provided September 1)
• Custom Combiner 1st, Slaughterhouse 2nd, Seed
  Supplier 3rd, Fertilizer Supplier 4th, Bank 5th

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Agricultural processors lien

• Can Lien be amended?
• Amendment may be filed to correct
• Social security or tax ID number of debtor
• Spelling of debtors or lienholders name
• Address of debtor or lienholder
• Secretary of State has amendment form
• 10.00 fee to file an amendment or assignment of
  lien
• Amending lien does not affect liens priority

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Agricultural processors lien

• Penalty for failure to release lien
• If lienholder fails to file termination statement
  within 60 days after lien has been satisfied,
  lienholder is liable to debtor for 100.00

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CENTRAL NOTICE SYSTEM

• ND Secretary of State shall maintain a central
  indexing system containing lien information filed
  in Secretary of States Office and County
  Recorders Offices
• The Central Indexing System is a computer system
  connecting the County Recorders Offices and
  Secretary of States Office
• Contains UCC, Central Notice (CNS), agricultural
  statutory liens and notices, miscellaneous
  statutory liens, and state and federal tax liens

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Central notice system

• Central Indexing System
• A computer printout of information from the
  central indexing system is prima facie evidence
  of the existence or nonexistence of the filing of
  a financing statement or lien

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Central notice system

• Central Indexing System
• Six separate databases in which filing
  information can be maintained and searched
• 1. Uniform Commercial Code (UCC) Index
• 2. Farm Products Central Notice (CNS) Index
• 3. Statutory Lien Index
• 4. Agricultural Statutory Lien Notice Index
• 5. Federal Lien Index
• 6. State Tax Lien Index

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CENTRAL NOTICE SYSTEM

• Purpose
• To provide a statewide, one stop system for the
  filing of agricultural suppliers liens and
  agricultural processors liens, and for Uniform
  Commercial Code financing statements
• Enables elevator manager to search the system to
  determine if a producers crop or livestock are
  subject to a lien or financing statement

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Central notice system

• Each month Secretary of State shall produce one
  list for crops and one list for livestock that
  each contain the information filed in the offices
  of Secretary of State and County Recorder
• Lists must be in alphabetical order according to
  the last name of, or in numerical order according
  to the social security number of, the person
  engaged in farming operations

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Central notice system

• Upon verbal request, Secretary of State, or
  recorder, shall verbally provide information
  contained on the list if the collateral is crops
  or livestock
• Requesting party may request a certificate from
  the Secretary of State or the County Recorder
  which confirms the information given

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Central notice system

• A computer printout of the information
  constitutes written confirmation of the Secretary
  of State
• A computer printout from the central indexing
  system constitutes the certificate of the
  Secretary of State or Recorder as to whether
  there is on file, on the date and hour stated on
  the printout, a financing statement

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Lists of LIEns

• Compact Disc
• Complete listing of all notice filings (lender
  notices and notices of statutory liens)
• Microfiche
• Subscribers receive one set of fiche containing
  notices for lender filings and one set containing
  notices of statutory liens
• Necessary to check both sets of fiche

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lists of liens

• Online search options from ND Secretary of State
• http//www.nd.gov/sos/businessserv/centralindex/di
  rect-access-searches.html
• Must document info you receive from Secretary of
  State or County Recorder
• CD and microfiche provide that information

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Delayed due date

• Before a lien can be filed, a billing statement
  for supplies furnished must include notice to the
  agricultural producer that if the amount due to
  the supplier is not satisfied, a lien may be filed

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Delayed due date

• How does this apply when a lien is used, but
  payment is not due for several months
• ND Supreme Court
• Bank challenged whether an ag suppliers lien was
  valid because the debt was on fall terms and
  not due until 5 months after lien was filed
• Bank also asserted claimant could not demand
  payment until it matured

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Delayed due date

• How does this apply when a lien is used, but
  payment is not due for several months
• ND Supreme Court
• Court rejected the Banks arguments, holding that
  reading NDCC 35-31-01 and 35-31-02 together
  require the lien to be filed within 120 days
  after the supplies are furnished and that the
  lien is effective from the date the supplies are
  furnished
• Court held the result would be the same with a
  credit sale

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Other items

• Payees on checks
• How should elevators prepare checks when paying a
  farmer for a crop when the elevator also has a
  lien on that crop
• North Dakota law is unclear
• Best practice
• Make check payable to Farmer and Grain Elevator
• Some banks say Farmer, Grain Elevator makes the
  endorsement of either sufficient to cash check,
  while insertion of word and between the names
  requires endorsement by both
• To remove any ambiguity, use the word and
  between the names of all payees