Secured Interests in Louisiana Crops: The 2010 Legislative Revision

• Author: L. David Cromwell
• Position: Member, Louisiana Bar, and Reporter of the Security Devices Committee, and member of the Council and of the Uniform Commercial Code Committee, of the Louisiana State Law Institute.
• Pages: 1175-1219

Secured Interests in Louisiana Crops: The 2010

Legislative Revision

L. David Cromwell∗

INTRODUCTION

If the legislator had by design sought to obscure the law

governing secured interests in crops and other farm products by

scattering it throughout the law books, he would have been at great

pains to devise a more fitting statutory scheme than the one that

has developed in Louisiana over the last several decades.

Since 1990, Chapter 9 of the Uniform Commercial Code1 has

to an increasing extent governed consensual security interests in

crops and other farm products. As revised in 2001, Chapter 9 now

also applies to agricultural privileges that arise by operation of

law,2 though the Uniform Commercial Code does not itself create

any of these privileges. Rather, agricultural privileges arise under

various articles of the Louisiana Civil Code as well as numerous

sections of Title 9 of the Louisiana Revised Statutes of 1950.

Neither Chapter 9 of the Uniform Commercial Code, the Civil

Code, nor Title 9 of the Louisiana Revised Statutes prescribes the

means of making security interests and privileges upon agricultural

products effective against third persons. Those rules are found in

Title 3 of the Louisiana Revised Statutes and, in the case of out-of-

state debtors, in the laws of other states. However, until the 2010

legislation that is the focus of this Article, none of these codes or

statutes provided the basic rule for ranking competing security

interests and privileges in crops. For that rule, it was necessary to

consult yet another section of Title 9 of the Louisiana Revised

Copyright 2011, by L. DAVID CROMWELL.

∗ Member, Louisiana Bar, and Reporter of the Security Devices Co mmittee,

and member of the Council and of the Uniform Commercial Code Committee, of

the Louisiana State Law Institute. Tula ne University of Louisiana, J.D. (1983).

1. Louisiana was the last state to adopt Article 9 of the Uniform

Commercial Code. See Act No. 528, 1988 La. Acts 1367, amended by Act No.

135, 1989 La. Acts 417 (adopting “Chapter 9 of the Louisiana Commercial

Laws,” effective January 1, 1990).

2. “A privilege is a right, which t he nature of a debt gives to a credito r, and

which entitles him to be preferred before other creditors, even those who have

mortgages.” LA. CIV. CODE ANN. art. 3186 (1994). Privilege can be claimed

only for those debts for which it is expressly granted by law. Id. art. 3185.

Chapter 9 of the Louisiana Uniform Commercial Code uses the uniform

terminology “agricultural lien” to refer to privileges that fall within the scope of

the definition of that term in Louisiana Revised Statutes section 10:9-102(a)(5).

Except where specific reference is made to a provision of Chapter 9, this Article

will use the civilian term “privilege” rather than “lien.” Where used in this

Article, the term “agricultural lien” should be understood to have the technical

meaning given to it in Chapter 9.

1176 LOUISIANA LAW REVIEW [Vol. 71

Statutes, section 9:4521.3 But, by its terms, the effect of that statute

was limited simply to the relative rankings of secured interests that

were perfected by a filing under Title 3 of the Louisiana Revised

Statutes. To determine the effectiveness of a secured interest that

was not so perfected, if indeed an unperfected secured interest

could have any effect against third persons at all, it was necessary

to return to rules in Title 3, the Uniform Commercial Code, or

perhaps even the Civil Code. Finally, none of these statutes, either

singly or in combination, gives a complete picture of the rights of

the holder of a secured interest in agricultural products against a

buyer. To find the answer to that question, it is necessary to consult

the federal Food Security Act of 1985, 7 U.S.C. § 1631.

Concerned about the “myriad of ownership, contract and

security interest issues that are difficult to sort out if there is not

enough money to satisfy the farmers, lenders and grain elevators”

following the insolvency of a grain elevator, the Louisiana

Legislature adopted Senate Concurrent Resolution No. 122 of

2008, urging the Louisiana State Law Institute (the “Law

Institute”) to study “security interest priorities and contract right

issues faced by farmers, lenders and grain elevators.”4 After an

exhaustive study, the Law Institute rendered a report to the

legislature,5 concluding that substantial inconsistencies, anomalies,

and voids existed in the law governing secured interests in crops.6

Accordingly, the Law Institute proposed, and the 2010 Louisiana

Legislature adopted, legislation designed to address and correct

these problems.7 After a review of the legislative evolution that

over the course of time produced Louisiana’s legal regime

governing secured interests in crops, this Article will discuss the

3. Louisiana Revised Statutes section 9:4521 was repealed by Act No. 378

of 2010.

4. S. Con. Res. 122, 2008 Leg., Reg. Sess. (La. 2008), available at http://

www.legis.state.la.us/billdata/streamdocument.asp?did=502554.

5. See Report in Response to SCR No. 122 of 2008, Secured Interests in

Crops (Mar. 12, 2010), which was aut hored by the author of this Article with the

assistance of members of the Security Devices Committee of the Law Institute.

This Article draws upon, and to a large extent reproduces, the author’s work

embodied in the report. The assistance provided by members of the Committee

is gratefully acknowledged.

6. “Farm products,” as defined in the Uniform Commercial Code, includes

both harvested and unharvested crops, livestock, and products of crops or

livestock. U.C.C. § 9-102(a)(34) (2010). Title 3 of the Louisiana Revised

Statutes defines “farm products” also to include standing timber. See LA. REV.

STAT. ANN. § 3:3652(8) (Supp. 2011). Though the focus of the Law Institute’s

report, as well as the resulting legislation, was on crops, the 2010 legislation

nonetheless has some effect on secured interests in other types of farm products.

For instance, the changes made to Title 3 affect secured interests in all types of

farm products.

7. Act No. 378, 2010 (effective, with limited exceptions, Aug. 15, 2010).

2011] SECURED INTERESTS IN LOUISIANA CROPS 1177

changes made by the 2010 legislation as well as a number of other

conflicts not addressed by the legislation.

I. HISTORICA L DEVELOPMENT

To understand how Louisiana’s rules governing secured rights

in farm products became scattered about as they are in its statutes,

and more importantly to understand how those rights relate to one

another, it is necessary to have an appreciation of the historical

development of Louisiana agricultural privileges, crop pledges,

and security interests.8

A. Agricultural Privileges

In view of the longstanding dependence of the state’s economy

upon agriculture, it might seem surprising that at the time

Louisiana attained statehood in 1812, its law recognized only two

privileges on crops: (1) the privilege of the overseer on crops of the

current year to secure payment of amounts due him for the current

year and the immediately preceding year and (2) the privilege for

debts due for the rent of an immovable and the hire of slaves

employed in working it.9 Act 70 of 1843 added a privilege for

debts due for necessary supplies, making this privilege expressly

subordinate to that of the overseer.

Following the close of the Civil War, Act 195 of 1867

amended article 3184 of the Civil Code of 1825 by substituting a

privilege for the wages of farm laborers in place of the previously

existing privilege for the hire of slaves.10 The same act added a

8. For an early discussion of crop privileges and pledges in Louisiana, see

Jack A. Bornemann, Crop Liens and Privileges in Louisiana, 14 TUL. L. REV.

444 (1940).

9. DIGEST OF 1808, bk. III, tit. XIX, ch. IV, § I, art. 74. The same provision

was carried forward in article 3184 of the Civil Code of 1825, except that the

overseer’s privilege was expanded to cover also the preceding year’s crop.

10. The term “laborer” has been extensively interpreted under the

jurisprudence, most recently by the Louisiana Supreme Court in Bayou Pierre

Farms v. Bat Farms Partners, III, 693 So. 2d 1158 (La. 1997), in which the

court, analogizing to its prior ruling under the Louisiana Private Works Act in

Pringle-Associated Mortgage Corp. v. Eanes, 226 So. 2d 502 (La. 1969), held

that the agricultural laborer’s privilege protects only the individuals who

actually pick cotton rather than the partnership employing them. But see Tee It

Up Golf, Inc. v. Bayou State Construction, LLC, 30 So. 3d 1159 (La. Ct. App. 3d

2010), which, without citing either Pringle or Bat Farms, allowed a corporate

general contractor in a Private Works Act case to claim the laborer’s privileges

of its employees. Fortunately, this portion of the court’s opinion was only dicta,

as the court correctly found that the general contractor’s filed statement of

privilege was defective because it contained only a municipal address of the

property. Id. at 1162.