BILL ANALYSIS Ó
AB 502
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 502 (Wagner)
As Amended June 24, 2013
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |77-0 |(May 29, 2013) |SENATE: |38-0 |(September 9, |
| | | | | |2013) |
-----------------------------------------------------------------
Original Committee Reference: JUD.
SUMMARY : Adopts various amendments to Division 9 of the Uniform
Commercial Code, governing secured transactions in personal
property. Specifically, this bill , among other things:
1)Revises the requirements for a financing statement to
sufficiently provide the name of a debtor that is a registered
organization, or where the collateral is held in a trust or is
being administered by the personal representative of a
decedent's estate.
2)Specifies rules that apply to collateral to which a security
interest attaches within four months after the debtor changes
its location to another jurisdiction, or where there is a new
debtor that is a successor by merger. Specifically, provides
the filer with perfection for four months in collateral
acquired post-move, and provides for temporary perfection in
collateral owned by the successor before the merger or
collateral acquired by the successor within four months after
the merger.
3)Replaces references to "correction statement" with the term
"information statement," and authorizes the secured party of
record to also file an information statement if the secured
party believes that an amendment to its financing statement
was not authorized.
4)Specifies an additional requirement for determining whether a
secured party has control of electronic chattel paper.
5)Implements transitional rules for determining the perfection
of a security interest, and makes many other technical and
corresponding changes.
AB 502
Page 2
6)States that these provisions become operative on July 1, 2014.
The Senate amendments correct drafting errors needed to achieve
the purpose of the last set of Assembly amendments, related to
specifying the name of an individual debtor to appear on a
financing statement, and restoring inadvertently deleted
provisions specifying the information appearing in correction
statements.
FISCAL EFFECT : According to the Senate Appropriations
Committee, one-time appropriation of $240,000 (Special Fund)
from the Secretary of State Business Fees Fund for expenditures
associated with promulgating regulations, modifying automated
filing systems and programming, and updating filing forms.
COMMENTS : On behalf of the sponsor, the California Commission
on Uniform State Laws, the author introduced this bill to adopt
revisions to Article 9 of the Uniform Commercial Code (UCC) set
forth in 2010 by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws (hereafter,
"Uniform Law Commission" or ULC). Collectively, these revisions
are referred to as the "2010 Amendments."
The last major revision of Article 9 was in 1999 which was
adopted in all fifty states. It is the stated goal of the ULC
to enact the 2010 Amendments in all 50 states with an effective
date of July 1, 2013. This revision is current law in over 30
states, and has been introduced this year in the legislatures of
another sixteen states. This bill would enact many of the 2010
Amendments in this state, which uses the nomenclature "Division
9" rather than "Article 9" when referring to the California
Commercial Code.
According to the Uniform Law Commission, Article 9 of the UCC
governs secured transactions in personal property-that is, the
granting of credit secured by personal property. Hundreds of
millions of dollars of commercial and consumer credit are
granted every year in secured transactions under UCC Article 9.
Article 9 rules apply, for example, when a manufacturer finances
the acquisition of machinery, a retailer finances inventory, or
a consumer finances home furnishings. (Uniform Law Commission,
"UCC Article 9 Amendments Enacted in 26 States," May 22, 2012.)
Article 9 provides rules that govern any transaction, other than
AB 502
Page 3
a finance lease, that involves the granting of credit coupled
with a creditor's interest in a debtor's personal property. If
the debtor defaults, the creditor may possess and sell the
property to satisfy the debt. The creditor's interest is called
a security interest, and perfection of the creditor's security
interest establishes the creditor's priority over other
creditors. Article 9 specifies who has the first rights in the
collateral when two or more competing creditors have legally
enforceable interests in the collateral. (Id.)
Among other things, this bill seeks to enact several changes
with respect to perfection issues arising on after-acquired
property when a debtor moves to a new jurisdiction. Current law
provides that perfection by filing continues for four months
after the jurisdiction in which the debtor is located changes.
However, this temporary period of perfection applies only with
respect to collateral owned by the debtor at the time of the
change. Even if the security interest attaches to
after-acquired collateral, there is currently no perfection with
respect to such new collateral unless and until the secured
party perfects pursuant to the law of the new jurisdiction.
This bill seeks to change this by giving the filer perfection
for four months in collateral acquired post-move. A similar
change would be made with respect to a new debtor that is a
successor by merger. This bill would provide for temporary
perfection in collateral owned by the successor before the
merger or collateral acquired by the successor within four
months after the merger.
Under existing law, the debtor is permitted to file a correction
statement, which is a claim that a financing statement filed
against the debtor was in fact unauthorized. While this filing
has no legal effect on the underlying claim, it does put in the
public record the debtor's claim that the financing statement
was wrongfully filed. This bill would rename the "correction
statement" as an "information statement" and more importantly,
authorize the secured party of record to also file an
information statement if the secured party believes that an
amendment to its financing statement was not authorized. The
change addresses concerns of secured parties that an amendment
to a different financing statement may be inadvertently filed on
the secured party's financing statement because the amendment
contains an error when referring to the file number of the
financing statement to be amended.
AB 502
Page 4
The bill makes a number of additional technical changes to the
Commercial Code, including the following: 1) deleting some
extraneous information currently provided on financing
statements; 2) establishing a safe harbor for the transfer of
chattel paper in conformance with the Uniform Electronic
Transactions Act , as specified; 3) clarifying requirements for
certificates of title for title goods where the certificates of
title are, in whole or in part, in electronic form; and 4)
clarifying notice requirements applicable to electronic
dispositions of collateral when a security interest is enforced
by sale or other disposition of the collateral.
The bill includes an appropriation of $240,000 to the Secretary
of State for necessary regulatory updates and computer
application modifications, and establishes a delayed operative
date of July 1, 2014. In addition, the bill provides various
updated statutory UCC-related forms needed to reflect policy and
procedural changes made by this bill.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN:
0002252