The Food Security Act of 1995 is part of a
of statutes. In the center is the general rule of 9-320(a) of the
UCC, that a buyer in the ordinary course of business takes free of a security
interest created by its seller. The next doll is the Farm Products
Exception, which I wrote about here:
except, most notably, in California, the buyer in the ordinary course rule does
not apply to a buyer of farm products. The next doll is the Food Security Act
itself: if you fail to comply with its terms, then the Farm Products
Exception does not apply. Finally, if you do comply, then the Farm
Products Exception does apply.
If that's not entirely clear, don't blame the messenger.
An interesting case out of the U.S. Bankruptcy Court for
the Central District of Illinois asked this question: does the Food
Security Act apply to proceeds? Here are the basic facts of CNH
Capital America LLC v. Trainor Grain & Supply Co.: Both CNH and
Trainor had financed crops for farmers named Printz, who are now in
bankruptcy. CNH had the earlier filed financing statement. Trainor
was also the grain elevator which bought the crops. CNH did not comply
with the notice provisions of the Food Security Act. Trainor had
therefore, there was no dispute, purchased the crops free and clear of CNH's
lien. But what about the proceeds? Trainor simply offset them
against its debt and paid nothing to the Printzes. Would it be able to
walk away without paying, despite CNH's earlier filed financing statement?
Read the entire article at the Food Liability Law Blog
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