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Key: (1) language to be deleted (2) new language


                         Laws of Minnesota 1990 

                        CHAPTER 517-S.F.No. 1779 
           An act relating to agriculture; providing for 
          mediation and arbitration of certain contract 
          disputes; providing for recapture of capital 
          investments required by certain agricultural 
          contracts; clarifying responsibility of parent 
          companies for affiliates; requiring good faith; 
          prohibiting unfair practices; creating an ombudsman; 
          appropriating money; amending Laws 1989, chapter 350, 
          article 20, section 25; proposing coding for new law 
          in Minnesota Statutes, chapters 17 and 514. 
     Section 1.  [17.90] [DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] The definitions in this 
section apply to sections 1 to 9.  
    Subd. 2.  [AGRICULTURAL COMMODITY.] "Agricultural commodity"
means a material produced for use in or as food, feed, seed, or 
fiber and includes crops for fiber, food, oilseeds, seeds, 
livestock, livestock products, poultry, poultry products, and 
other products or by-products of the farm produced for the same 
or similar use. 
    Subd. 3.  [CONTRACTOR.] "Contractor" means a person who in 
the ordinary course of business buys agricultural commodities 
grown or raised in this state or who contracts with a producer 
to grow or raise agricultural commodities in this state. 
    Subd. 4.  [PRODUCER.] "Producer" means a person who 
produces or causes to be produced an agricultural commodity in a 
quantity beyond the person's own family use and is able to 
transfer title to another or provides management, labor, 
machinery, facilities, or any other production input for the 
production of an agricultural commodity. 
    Sec. 2.  [17.91] [MEDIATION; ARBITRATION.] 
    A contract for an agricultural commodity between a 
contractor and a producer must contain language providing for 
resolution of contract disputes by either mediation or 
arbitration.  If there is a contract dispute, either party may 
make a written request to the commissioner for mediation or 
arbitration services as specified in the contract, to facilitate 
resolution of the dispute. 
    Subdivision 1.  [NOTICE AND DAMAGES TO BE PAID.] A 
contractor must not terminate or cancel a contract that requires 
a producer of agricultural commodities to make a capital 
investment in buildings or equipment that cost $100,000 or more 
and have a useful life of five or more years, until: 
    (1) the producer has been given written notice of the 
intention to terminate or cancel the contract at least 180 days 
before the effective date of the termination or cancellation or 
as provided in subdivision 3; and 
    (2) the producer has been reimbursed for damages incurred 
by an investment in buildings or equipment that was made for the 
purpose of meeting minimum requirements of the contract. 
as provided in subdivision 3, if a producer fails to comply with 
the provisions of a contract that requires a capital investment 
subject to subdivision 1, a contractor may not terminate or 
cancel that contract until:  
    (1) the contractor has given written notice with all the 
reasons for the termination or cancellation at least 90 days 
before termination or cancellation or as provided in subdivision 
3; and 
    (2) the recipient of the notice fails to correct the 
reasons stated for termination or cancellation in the notice 
within 60 days of receipt of the notice. 
    Subd. 3.  [IMMEDIATE EFFECT OF NOTICE.] The 180-day notice 
period under subdivision 1, clause (1), and the 90-day notice 
period and 60-day notice period under subdivision 2, clauses (1) 
and (2), are waived and the contract may be canceled or 
terminated immediately if the alleged grounds for termination or 
cancellation are:  
    (1) voluntary abandonment of the contract relationship by 
the producer; or 
    (2) conviction of the producer of an offense directly 
related to the business conducted under the contract. 
    Subdivision 1.  [LICENSING.] If a contractor is required to 
obtain a license to purchase agricultural commodities, the 
licensing authority may require the parent company of a licensee 
subsidiary to guarantee payment or contract performance as a 
condition of licensing. 
    Subd. 2.  [PARENT COMPANY LIABILITY.] If an agricultural 
contractor is the subsidiary of another corporation, 
partnership, or association, the parent corporation, 
partnership, or association is liable to a seller for the amount 
of any unpaid claim or contract performance claim if the 
contractor fails to pay or perform according to the terms of the 
    Sec. 5.  [17.94] [IMPLIED PROMISE OF GOOD FAITH.] 
    There is an implied promise of good faith as defined in 
section 336.1-201, subsection 19, by all parties in all 
agricultural contracts.  In an action to recover damages, if the 
court finds that there has been a violation of this provision, 
damages, court costs, and attorney fees may be recovered.  
    Sec. 6.  [17.945] [RULES.] 
    The commissioner may adopt rules to implement sections 1 to 
9 including the prohibition of specific trade practices. 
    A position is created in the department of agriculture to 
provide information, investigate complaints arising from this 
chapter, and provide or facilitate dispute resolutions. 
    If a producer makes a prepayment for agricultural 
production inputs that include but are not limited to seed, 
feed, fertilizer, pesticides, or fuel for future delivery, the 
producer may demand a letter of credit or bank guarantee from 
the provider of the inputs to ensure reimbursement if delivery 
does not occur. 
    Dairy marketing agreements between producers and purchasers 
of milk are not contracts for purposes of sections 1 to 9.  
    Sec. 10.  [514.945] [AGRICULTURAL PRODUCER'S LIEN.] 
    Subdivision 1.  [ATTACHMENT.] (a) A person who produces an 
agricultural commodity as defined in section 1, subdivision 2, 
except grain as defined in section 232.21, subdivision 7, and 
raw milk has a lien for the contract price or, if there is no 
contract the fair market value, of the agricultural commodity 
produced by the person and delivered to a buyer.  The lien 
attaches to the agricultural commodity and products and proceeds 
of the agricultural commodity. 
    (b) If the agricultural commodity is or becomes commingled 
with other agricultural commodities or goods, the lien continues 
in the proportionate share of the other agricultural commodities 
or goods. 
    (c) If an agricultural commodity to which the lien attaches 
becomes manufactured or processed to become part of another 
product the lien continues and attaches to the product 
manufactured or processed.  
    (d) An agricultural producer's lien does not attach to 
agricultural commodities:  
    (1) purchased by a marketing cooperative association; or 
    (2) purchased free of a security interest or lien as 
provided in United States Code, title 7, section 1631, and 
sections 223A.03 and 223A.04.  
    Subd. 2.  [PERFECTION.] An agricultural producer's lien is 
perfected from the time the agricultural commodity is delivered 
until 20 days after the agricultural commodity is delivered 
without filing.  An agricultural producer's lien may continue to 
be perfected if a lien statement under subdivision 3 is filed in 
the appropriate filing office under section 336.9-401 by 20 days 
after the agricultural commodity is delivered. 
    Subd. 3.  [LIEN STATEMENT.] (a) A lien statement must be in 
writing and verified by the producer and must contain: 
    (1) a statement of the amount due for the agricultural 
commodity after deducting applicable credits and offsets; 
    (2) the name of the purchaser to whom the agricultural 
commodity was delivered; 
    (3) a description sufficient to identify the agricultural 
commodity delivered and subject to the lien; 
    (4) the date and location to which the agricultural 
commodity was delivered; and 
    (5) the date when payment was due for the agricultural 
commodity subject to the lien. 
    (b) A lien statement is void and may be removed from the 
filing system six months after the date of filing.  The lien 
statement may be physically destroyed 30 months after the date 
of filing.  
    Subd. 4.  [PRIORITY.] (a) An agricultural producer's lien 
has priority over all other liens and encumbrances in: 
    (1) the agricultural commodity; 
    (2) proceeds from the agricultural commodity; 
    (3) the proportionate share of the agricultural commodities 
or goods with which the agricultural commodity has been 
commingled; and 
    (4) the products manufactured or processed with the 
agricultural commodity. 
    (b) An agricultural producer's lien that is continuously 
perfected from the time of delivery has priority over other 
liens and encumbrances whether they are filed before or after 
the agricultural producer's lien. 
    (c) An agricultural producer's lien that is filed after 20 
days after delivery of the agricultural commodity has priority 
in the order it is filed. 
    (d) Priority among perfected agricultural producers' liens 
is according to the first lien filed. 
    (e) An agricultural producer's lien that is not perfected 
has the priority of an unperfected security interest under 
section 336.9-312. 
    Subd. 5.  [LIEN TERMINATED.] An agricultural producer's 
lien is terminated on:  
    (1) full payment for the agricultural commodity delivered; 
    (2) recovery of the agricultural commodity in kind; or 
    (3) the date six months after the agricultural commodity is 
delivered if an action to enforce the lien has not been 
    Subd. 6.  [ENFORCEMENT.] The holder of an agricultural 
producer's lien may enforce the lien in the manner provided in 
sections 336.9-501 to 336.9-508, subject to section 550.17.  For 
enforcement of the lien, the lienholder is the secured party and 
the person receiving the agricultural commodity is the debtor, 
and each has the respective rights and duties of a secured party 
and a debtor under sections 336.9-501 to 336.9-508.  If a right 
or duty under sections 336.9-501 to 336.9-508 is contingent upon 
the existence of express language in a security agreement or may 
be waived by express language in a security agreement, the 
requisite language does not exist. 
    Subd. 7.  [SATISFACTION OF LIEN.] A lienholder must remove 
a lien statement from the filing system after the lien is 
satisfied.  If the lienholder does not remove the lien statement 
the commissioner shall remove the lien statement upon request of 
an affected party and providing proof is furnished that the lien 
has been terminated. 
    Subd. 8.  [ENFORCEMENT ACTION.] An agricultural producer's 
lien may be brought in district court in a county where the 
property to which the lien attaches is located or the county 
where the agricultural commodity was originally delivered.  The 
court shall allow costs including attorney fees to the 
prevailing party. 
    Sec. 11.  Laws 1989, chapter 350, article 20, section 25, 
is amended to read: 
    $50,000 is appropriated from the general fund to the 
University of Minnesota for a crop management specialist on seed 
production of forage and turf species in northern Minnesota, and 
for supplies, services, and expenses related to the specialist's 
work.  The specialist must be located at the Crookston campus of 
the university.  This appropriation is available for the fiscal 
year biennium ending June 30, 1990 1991. 
    Presented to the governor April 24, 1990 
    Signed by the governor April 26, 1990, 11:24 p.m.

Official Publication of the State of Minnesota
Revisor of Statutes