Ag. Law Exam 3

If you default on your credit card (and remember, credit cards are defined as "unsecured" debt), what can the credit card company take for their payment?

 They can get a judgment and have the sheriff "execute" the judgment against any of your non-exempt property.

We said that it's important to "perfect" a security interest in collateral so that you can win the fight when someone gives the same collateral for two different debts. What does it mean to "perfect" a security interest?

We have completed all the requirements to make the security interest complete, which usually means having both a collateral agreement AND filing notice of our security interest in the appropriate office.

Tommy used money from four different banks to buy the same cattle. We have to figure out who actually gets the cattle when Tommy can't pay his debts and files bankruptcy.

Alpha Bank was the first to give Tommy a loan, and they did have a collateral agreement with Tommy, but they didn't file their security interest with the appropriate agency.
Bravo Bank had a collateral agreement and filed their security interest with the appropriate agency at 1:01pm March 1st of this year.
Charlie Bank also had a collateral agreement and filed their security interest with the appropriate agency at 1:02 pm March 1st of this year.
Delta Bank gave Tommy an unsecured line of credit that he used for part of the purchase price of the cattle.

PRIORITY FIGHT! Four banks enter, one bank leaves... with the moo-cows. Which bank is it?

 Bravo Bank

Which chapter of the Bankruptcy Code applies ONLY to farms?

Chapter 12

James has had a tough time of it lately and had to file for bankruptcy. Which of the following pieces of his property are NOT exempt from being taken by creditors in the bankruptcy settlement?

His Aston Marton DB5. To get the money to have it fitted with some extra accessories, he had to give a security interest in the car to MI6 Financial Corp.

Explain what a “secured” transaction is and how it can be formed.

a transaction where a creditor obtains an interest in the property of the debtor that allows the creditor to take the title to the property if the debtor defaults. It can be formed by a debtor offering property they already own as collateral for a loan that the creditor can provide funds for the purchase of the collateral itself, or the creditor takes a “floating” interest that’s attached to whatever collateral of a specific type is acquired. They can also be formed by statutory liens and often filed with the government.

What are the consequences of a secured transaction if the creditor defaults on the debt?

the creditor can reposses the collaterol, often without court involvement or sue for the debt

What is the order in which creditors get paid (i.e. secured vs. unsecured, secured vs. secured, etc)?

Creditors are paid in a strict legal order during bankruptcy or liquidation, prioritizing secured creditors over unsecured. Secured creditors (with collateral) are paid first, then domestic support obligations (child support, alimony), then administrative expenses, and then classified unsecured credtiors and allocating assets in proportion to the amount of debt

Which chapter of the Bankruptcy Code applies only to farmers?

chapter 12

What are the eligibility requirements for that chapter of the Bankruptcy Code?

• must be engaged in farming operation

• total debts of operation do not exceed $11,097,350, or at least 50% of total debts that are fixed in amount must be related to farming

• more than 50% of gross income for preceding tax year is from operation

• farmer has some form of “regular annual income”

What are the purposes of bankruptcy?

It is an efficient and fair payment of as many debts as practical without the debtor, and it provides the debtor with a fresh start by rearranging some debts and completely discharging others that are addressed

What property is “exempt” from collection in a judgment on debts or in bankruptcy?

clothing (up to $4,000), business equipment up to $10,000, guns up to $2,000 if for personal use, personal livestock (with limits to head numbers), and one year worth of provisions

When and where is the worst possible time and place for a transition family meeting?

 At Christmas in Mom and Dad's house around the kitchen table.

How much of your message comes from things OTHER than the actual words you are speaking (like tone of voice and body language)?

 

93%

When dealing with the challenges of handling on-farm heirs (farm kids) and off-farm heirs (city kids), what one core principle do you need to keep in mind?

 

Equal isn't equitable.

What are the challenges of a "sweat equity" transition plan?

 Lack of transparency, Lack of enforceability, and Masks profitability problems

Which item is missing from the list of critical estate planning items? Guardian nomination for minor children, beneficiary designations, powers of attorney, advanced directive, trust, life insurance?

Will

What are the three primary reasons farms and other family-owned businesses frequently fail after a generational transfer?

1. inadequate estate planning

2. insufficeient capitalization

3. failure to preapre next generation properly

What fraction of American farmers and ranchers have no estate planning tools in place?

64%

On average, how many businesses survive the transfer from the founding generation to the second generation?

30%

Who needs to have a transition plan?

everyone

What are the five steps in forming a farm transition plan (IMPORTANT: Know them in order)

1. Determine where you are now

2. communicate with stakeholdes

3. develop a business sucession plan

4. Develop a plan for your estate/gifts

5. deploy your pplans/evalulate/revise

Who are the “stakeholders” in a farm transition plan?

managers, financial investors, and emotional investors

How much of your total message consists of the words you use?

up to 7%

When, where, and how should you conduct a family meeting as part of the transition planning process?

not on a holiday, in a comfortable/distraction-free place (not a home), and be in a civil manner

What are the economic perspectives of “farm kids” and “city kids?”

“farm kids” have assets in business to invest and gros, while “city kid” has assets in investment so they want to generate returns and sell

What are the seven critical estate planning tools?

1. Guadrian nomination for minor children

2. beneficiary designations

3. powers of attorney (business/healthcare)

4. advanced directive for healthcare

5. will

6. trust

7. life insurance

What events should trigger a review of your farm transition plan?

birth, death, marriage, divorce, disability, major acquisition, major disposition, major legal change, but really regularly

"In not choosing, you have chosen." Remember that, kids - it applies to life as well as ag law. If someone hasn't properly executed a will when they die, and they haven't established any will substitutes, their property is distributed by what process?

 

Intestate succession

Mike has three children from a previous marriage: Greg, Peter, and Bobby. He married Carol, and Carol also had three children from a previous marriage: Marcia, Jan, and Cindy. Which of the following people could NOT be a potential heir of Mike under the intestate succession rules?

Marcia

Assume Mike and Carol were married on April 14, 1970. Using the definitions we discussed in class, which items are considered “joint property” under Oklahoma law? 

 

The Ferguson Place and the Family Truckster

Assume that Mike and Carol were married on April 14, 1970. Using the definitions we discussed in class, which items are considered “non-joint property” under Oklahoma law?All of the times on the inventory are non-joint property.

 

The Mustang and the Griswold place.

Eldon begat Shannon, and Shannon begat Ferrell 2.0. Eldon dies when he flips his 'Vette in an illegal street race, and didn't have a will. Assuming no other relatives are in the picture, who can inherit property from Eldon?

 Shannon alone, because he is the closest descendant of Eldon; Ferrell 2.0 is blocked.

There are five requirements to properly execute a will. Which one is missing from this list:
Has to be signed at the bottom by the testator or someone signing it for them at their direction.
The signing of the will must be made in the presence of two witnesses.
Testator has to acknowledge "this is my will" at the time of signing.
Witnesses must sign at the bottom of the will at testator's request and in their presence.

 

The will has to be in writing.

Before heading off to her skydiving lesson, Ann stops by the local bookstore and gets a fill-in-the-blank will form. Alone in her car, she fills in those blanks, signs the form at the bottom, and sticks it in her glovebox. Does Ann have a valid will?

 No, because the only way a will that is not witnessed by someone else can be valid is if it is completely in the handwriting of the testator.

Which of these events is MOST likely to invalidate the ENTIRE will in each situation? Assume that all of the will execution formalities have been followed. 

 McMurphy is in the hospital and is writing out a will when Nurse Ratched crimps his oxygen tube and says “I’ll happily let go if you give me everything in your will.” Since he is a big fan of oxygen, McMurphy complies.

What is missing from the list of things Ferrell said EVERYONE needed in their estate plan?

• Guardian nomination for minor children

• Beneficiary designations

• Durable powers of attorney for business and healthcare

• Will

• Trust (maybe)

• Life insurance (maybe)

 Advanced directive for healthcare

Fred is married to Ethel. Fred dies in 2025 and his estate is valued at $12 million. In 2026, the federal estate tax exemption is $15 million. Later, in 2026, Ethel dies, and her estate is valued at $18 million as a result of some of her investments blowing up. Using the estate tax exemptions we discussed in class, the information in this problem, and assuming that Fred's estate filed an estate tax return for his estate, how much of Ethel's estate will be subject to federal estate taxation?

$0

Who can inherit property under the intestate succession rules (and who can’t)?

Interstate succession laws determine who receives property when someone dies without a will, prioritizing spouses, children, and close blood relatives. unmarried partners, friends, or charities get nothing

How do you define “issue” of decedent?

the direct, lineal descnedants of the decedent

Can you inherit property under intestate succession rules if there is another party closer in the family tree than you (for example – a grandpa, a dad, and a kid)?

no

What are the definitions of “joint” and “non-joint” property?

• joint: acquired during marriage through the joint industry of the spouses

• non-joint: acquired before marriage or during marriage by a seperate transfer to one spouse

Will a fill in the blank form work as a holographic will?

no

What are the general requirements for a holographic will?

written, signed, and dated in decedent’s own hadnwriting

Can you ever have an oral will?

no

What are all the requirements for the execution of a formal will?

• written

• signed at bottom

• signed in the presence of two witnesses (can not be anyone in will)

• testor has to acknowledge it as “this is my will”

• witneses must sign

What can invalidate a will?

lack of testatmentary capacity, fraud, mistake, undue influence, flaws in execution

What is the best way to revoke a will?

expressly in writing as part of a new will

What are the disadvantages of:

a. Intestate succession

b. Wills

c. Trusts

• intestate succession: no contorl over who gets your property (state decides), may exclude important people/causes, can create conflict, requires court-supervised probate, and no choise of gaudrian for minors

• wills: must go trhough probate (lengthy and costly), public record, can be contested, doesn’t help during incapacity, and may not cover all assets

• trusts: more expensive/complex to create, requires ongoing management, can fail if not updated, and may indue legal/trustee fees

What are the questions you need to answer before preparing a living trust?

• who are the trustees and beneficiaries

• duration of trust

• rights of the trustee

• uses of trust income and principal

• timing of distribution of beneficiaries

How much property can you give without paying estate tax in 2024?

$18,000

How much money or property can someone give to another person with NO gift tax in 2024? What if they are married and combine their limits?

$19,00, or $38,000 if married

There's a pretty good rule of thumb as to whether you should include something in an email or post it through social media. What is it?

 The "grandma" rule - would you want your grandma to see it?

What form is required to document the immigration/work -eligibility of ALL employees?

 

Form I-9

Because he is so fired up about personal finance, Ferrell works a side job delivering pizzas on the night shift at Dominoes to make some extra investin' money. Last week was a doozy, and he racked up 41 hours. What did Dominoes have to pay him for that 41st hour (note that since he got promoted last month, he no longer makes minimum wage)?

 One and half times his normal pay rate

Which of the following employees would be subject to the minimum wage and employment requirements of the Fair Labor Standards Act?

 Someone manning the grain unloading pit at a local grain elevator.

Which of the following traits is NOT protected by the Civil Rights Act of 1964?

 Intelligence

How old does someone have to be to perform any task deemed “HAZARDOUS” under OSHA?

must be 16 or older

How do you calculate overtime?

1.5 times normal wage for hours over 40 in a week

Who is exempt from minimum wage and overtime requirements?

executives, admin, and range production of livestock

What factors are “protected” under the Civil Rights Act of 1964?

applies if you hae 15+ employees and makes it illegal to discriminate based on race, gender, color, disability, etc

What questions cannot be asked in an employment interview?

maiden name, age of kids, where parents were born, your age, religion, etc

CWA applies to

water (Clean Water Act)

CAA applies to

air (Clean Air Act)

RCRA applies to

solid waste (Resource Conservation and Recovery Act)

CERCLA applies to

hazardous waste (Comprehensive Environmental Response, Compensation, and Liability Act)

FIFRA applies to

pesticides (Federal Insecticide, Fungicide, and Rodenticide Act)

If you had to sum up the farmer-relevant requirements of FIFRA in one sentence, what would it be?

 

Always read and follow label directions.

Which of the following would NOT be considered a “pollutant” under the Clean Water Act’s National Pollutant Discharge Elimination System?

 

Runoff carrying commercial fertilizer containing nitrogen, phosphorous, and potassium off of an agricultural field into a nearby lake.

Which of the following would require an operating permit under the Clean Air Act?

 A facility emitting 11.7 tons of a "hazardous air pollutant" per year.

What is RCRA’s agricultural exemption from classification of a material as a “hazardous waste?”

 Agricultural residues from crop production or animal production are exempt if they are used as fertilizers.

What is required to establish liability for the cleanup costs associated with a release of hazardous substances under CERCLA?

 All that is required is to show that a person owns property where a release occurred.

What are the “criteria pollutants” and “hazardous pollutants” under the CAA?

sulfur dioxide, nitrogen oxides, carbon monoxide, lead, particulate matter, and ozone “hazardous pollutants” and mercury

When is a CAA permit needed?

any source that emits more than 10 tons per year of 1 HAP (or 25 tons per year combo) or 100 tons per year of naother regulated pollutant`

What are the exclusions from the definition of “pollutant” under the NPDES?

agriculutral stormwater discharges, runoff

When is a stormwater discharge permit required under NPDES, and what are the agricultural exemptions?

stormwater from industrial facilities and construction activiites disturbing more than 1 acre of soil

What is the exemption for agricultural material from RCRA’s definition of hazardous waste?

agricultural residues from crop/animal production used as fertilizers

What does it take to establish a landowner’s liability for cleanup costs under CERCLA?

you can get stuck for the cost of cleanip just because you own the property on which a release occurred, even if it wasn’t you

What can you do to defend yourself against CERCLA liability?

1. an “innocent landowner,” “contiguous property owner,” or “bona fide purchaser.”

2. all appropriate inquiry where a professional insception of the enviromental conditon of the property is done

What is the one form of water that can actually be "owned" in Oklahoma?

 

Standing water & diffuse runoff

Which of the following would be considered a domestic use of either stream water or groundwater?

Irrigating a two-acre orchard on your property that you pick for your own fruit consumption

Which of the following has to be shown for an applicant to get an appropriation of stream water?

• Enough unappropriated stream water is available in the amount applied for in the application.

• The applicant will use the appropriated stream water for a “beneficial use.” The proposed use will not interfere with domestic or existing appropriative uses.

• The proposed use will not interfere with domestic or existing appropriative uses.

Which of the following has to be shown for an applicant to get a groundwater use permit?

• The applicant either owns the surface of the property where the groundwater well will be located, or has a valid legal agreement to take groundwater from the property.

• The proposed use of the groundwater will be a “beneficial use.”

• No waste by “depletion” or “pollution” will occur if the permit is granted.

When water is needed for oil and gas extraction, a very specific type of groundwater or streamwater appropriation tool is used in Oklahoma. What is it?

 

Provisional Temporary Permit (PTP)

What doctrine does Oklahoma use to allocate stream water?

california doctrine

What uses of water are considered “domestic?”

water for household purposes, watering farm animals up to normal grazing capacity of land, irrigation of land up to 3 acres, and “de minimis uses”

What factors must be proven to get a stream water appropriation?

• submit a document detailing where water will be diverted

• how much is needed

• proposed purpose

• justification for use

• supporting calculations

• file a “notice of the application”

• potentially attend a hearing

What factors must be proven to get a groundwater use permit?

• own the surface of the land where groundwater will be extracted or have a lease to take it from the property

• complete the OWRB grounwater use application

• all similar steps to stream water

Does an oil and gas operator have to get the permission of the surface owner to use the surface owner’s groundwater?

they must have appropriation with a permission of surface owner (water leae)

Which of the following events would trigger the Surface Damage Act?

 An oil and gas company sends you a letter saying they want to enter your property to drill a well for the production of oil and gas on your property

Under the Surface Damages Act, how are the "damages" calculated?

 The damages are the difference between the fair market value of the property before the oil and gas operations minus the fair market value of the property after the oil and gas operations.

True or false: damages caused by seismic exploration are covered under the Surface Damage Act.

false

What amount are surface landowners entitled to for damages caused by seismic exploration of their property?

 Only those damages that constitute "unreasonable" use of the surface, including damage caused by explosives.

Why should mineral owners care about getting a Pugh clause in their lease?

 Pugh clauses specify whether a lease can be "held" on a mineral acreage by production on land outside that acreage. Seperates land into pooled and non-pooled

When are you required to put your Social Security number on an oil and gas lease? Select ALL the correct answers.

never

What's the problem with Old Mother Hubbard?

The clause named after her can cause contiguous property to be included in an oil and gas lease, even if it was not the intention of the mineral owner to include that land in the lease. It is a “catch-all” provision

What is the most common royalty fraction for a mineral interest owner to receive in Oklahoma?

3/16

When is the Oklahoma Surface Damage Act triggered?

prior to an oil and gas operator entering a site with heavy equipment

What has to happen under the Surface Damage Act before the oil and gas company can drill on your property?

must notify landowner and enter damage negotiations

What are the essential provisions of the Seismic Exploration Regulation Act?

• surface owner must be notified >15 days prior to operations

• exploration company must have written agreement with surface owner

• implied payment