Request By:
Mr. Paul Wimpy, President
Kentucky Feed & Grain Association
P. O. Box 215
Midway, Kentucky 40347
Opinion
Opinion By: Steven L. Beshear, Attorney General; John Stephen Kirby, Assistant Attorney General
This letter is in response to your letter of inquiry dated August 9, 1982, concerning KRS 355.9-307(3) as amended by the 1982 General Assembly. That provision reads as follows:
"(3) If any grain or soybean crop subject to the lien of a security interest is sold to any entity which is a bona fide purchaser for value and which holds a current grain storage license issued by the Commonwealth of Kentucky or a current federal warehouse storage license, in the ordinary course of business, such entity shall take title to such crop free and clear of any such lien, and shall not be liable to the holder of such lien, unless written notice by certified mail, return receipt requested or by registered mail, of such lien, the name and address of the debtor and proper description of the property subject to the lien is given to the entity purchasing said crop prior to the payment of the proceeds of purchase to the owner or producer of such grain or soybean crop. "
The questions which you have raised are as follows:
1. Is the notification feature in Section 1 (3) applicable to liens that existed prior to July 15, 1982?
2. Would liens on grains as provided for in Section 1 (3) sold into the Commonwealth of Kentucky from another state be subject to the provisions of this law?
3. Would liens on grains as provided for in Section 1 (3) sold out of the Commonwealth of Kentucky into another state be subject to the provisions of this law?
The answer to your first question appears to be yes. No state law may have retroactive application, unless the statute specifically states that it will. In KRS 446.080(3) we read, "(3) No statute shall be construed to be retroactive, unless expressly so declared." The statute in question will not be retroactive in application, however, as it will apply only to sales of grain or soybeans which occur after July 15, 1982. It is the sale which the statute addresses, not the original lien attachment. Therefore, while a lien may have attached to a crop prior to July 15, 1982, as long as the sale does not occur until after that date the statute is applicable.
Your second question is answered by KRS 355.9-103(3), which reads as follows:
"(3) If personal property other than that governed by subsections (1) and (2) is already subject to a security interest when it is brought into this state, the validity of the security interest in this state is to be determined by the law (including the conflict of laws rules) of the jurisdiction where the property was when the security interest attached. However, if the parties to the transaction understood at the time that the security interest attached that the property would be kept in this state and it was brought into this state within 30 days after the security interest attached for purposes other than transportation through this state, then the validity of the security interest in this state is to be determined by the law of this state. If the security interest was already perfected under the law of the jurisdiction where the property was when the security interest attached and before being brought into this state, the security interest continues perfected in this state for four months and also thereafter if within the four month period it is perfected in this state. The security interest may also be perfected in this state after the expiration of the four month period; in such case perfection dates from the time of perfection in this state. If the security interest was not perfected under the law of the jurisdiction where the property was when the security interest attached and before being brought into this state, it may be perfected in this state; in such case perfection dates from the time of perfection in this state." [Emphasis added].
From the above it would generally appear that crops brought into the Commonwealth on which a security interest had attached would be governed by the law of the state in which the lien attached. This determination would have to be made on a case-by-case basis, however.
Most states have adopted provisions from the Uniform Commercial Code, from which the above statute is taken. In answer to your third question, provided that the state into which the crop is sold has a similar provision as that of Kentucky's cited above, then it is possible that the statute in question, KRS 355.9-307(3), may be applicable. Again, the exact determination would have to be made on a case-by-case basis considering the facts of the case and the law of the states involved.