UCC Article 9-302 Analysis and Commentary: Law Governing Perfection and Priority of Agricultural Liens (Choice of Law)
1. Introduction
UCC Article 9-302 establishes choice-of-law rules for secured transactions in agricultural liens. In essence, this section (and related provisions) specifies which jurisdiction’s law governs whether a an agricultural lien is properly perfected and how competing claims are prioritized.
The following analysis closely follows UCC 9-302’s subsections, explaining how the governing law is determined based on the debtor’s location, the type of collateral, and the statutory exceptions.
2. General Rule: Law of the Debtor’s Location
By default, the local law of the debtor’s location governs the perfection and priority of a security interest (including the effect of perfection or nonperfection)—meaning that if a debtor is “located” in a particular state, that state’s Article 9 rules dictate how the interest is perfected (for example, by filing a financing statement) and how any priority conflicts are resolved.
2.1 Determining the Debtor’s Location
UCC 9-307 defines a debtor’s location. An individual debtor is located at their principal residence. An organization debtor is located at its sole place of business, or if it has multiple places of business, at its chief executive office.
If a debtor’s residence or business is in a jurisdiction with no public filing system for security interests (such as a foreign country), the debtor is deemed located in their principal residence.
Once the debtor’s location is determined, the law of that jurisdiction governs the relevant perfection and priority questions for the collateral.
2.2 Exception: Possessory Security Interests
If a security interest is perfected by possession of the collateral, then while that collateral is located in a particular state, the law of that state governs perfection and priority of the interest.
For example, if a lender holds a pledged asset in State X, the perfection and priority of that pledge are governed by State X’s law.
3. Tangible Collateral: Fixtures, Timber, and Other Goods
For certain tangible collateral (especially items tied to real property), the law of the collateral’s location governs perfection and priority instead of the debtor’s location. Specifically:
- Fixtures: Use the law of the state where the goods are located as fixtures (for fixture filings and related priority).
- Timber to be cut: Use the law of the state where the timber is located.
- Nonpossessory interests in goods: The effect of perfection (or nonperfection) and the priority of the security interest are governed by the law of the state where the collateral is located.
In addition, for as-extracted collateral (minerals like oil or gas to be extracted from land), the governing law is the law of the jurisdiction where the wellhead or minehead is located.
4. Agricultural Liens Under Local Law
UCC Article 9-302 covers agricultural liens (liens on farm products created by state law to secure obligations like unpaid farm suppliers or services).
The rule is that while the farm products are located in a given state, the local law of that state governs the perfection of the agricultural lien on those products, as well as the effect of perfection or nonperfection and the lien’s priority.
Basically, an agricultural lien is perfected and has priority according to the law of the state where the crops, livestock, or other farm products are situated.
5. Conclusion
UCC Article 9-302 provides a clear roadmap to determine which jurisdiction’s law governs the perfection and priority of an agricultural lien.
By following the statute, secured parties can ensure they perfect their interests under the proper state’s law and that any priority disputes will be resolved predictably.
Under Article 9, this clarity is particularly important when agricultural lien transactions span multiple states or countries.
