Legal Measures Protect Payment for Sales of Produce, Dairy Products, Livestock

(Originally published in the Farm & Dairy.)

Those who produce and sell agricultural products are often concerned about whether and when they will get paid for the products they sell to a merchant, broker, or processor.  Fortunately, state and federal law offer protection to such providers.

1. Agricultural Product Lien Under State Law

A person who produces agricultural products automatically has a two-year lien to secure payment for the product when he delivers it.  If the producer files an affidavit with the recorder of the county in which the product was delivered, within 60 days of delivery, that lien has priority over most other creditors. The exceptions are wage and salary claims of workers and claims of secured creditors who have perfected their security interests under the Uniform Commercial Code.

2. Statutory Federal Trusts

Under Federal Law, agricultural products delivered to another -- as well as the proceeds received by that merchant or broker from the sale of those products -- are impressed with a trust in favor of the producer.  Livestock and poultry are covered by the Packers and Stockyards Act, while fruits and fresh vegetables are covered by the Perishable Agricultural Commodities Act. 

In general, both acts require that the buyer must pay promptly for the product.  Until payment is made, the trust in favor of the producer remains.  The producer’s interest in the trust, however, must be properly perfected.  This is generally done by placing a legend onto the invoice to the purchaser stating that the products are impressed with a trust in favor of the producer under the applicable statute.

Federal agricultural trusts can be enforced by an action in federal court, which may also include the recovery of attorney fees required to enforce the trust. 

Frederick S. Coombs III can be reached at fcoombs@hhmlaw.com or at (330) 744-1111.