BILL ANALYSIS
AB 1549
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1549 (Committee on Banking and Finance) - As Amended: April
13, 2009
PROPOSED CONSENT
SUBJECT : JUDGMENT LIENS: PRIORITY
KEY ISSUE : SHOULD JUDGMENT CREDITORS IN CALIFORNIA HAVE THE
ABILITY TO OBTAIN A JUDGMENT LIEN AGAINST THE ASSETS OF A
JUDGMENT DEBTOR ORGANIZATION THAT IS INCORPORATED OR REGISTERED
IN ANOTHER STATE BUT LOCATED OR HAS ASSETS IN CALIFORNIA?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This non-controversial bill, sponsored by the Insolvency
Committee of the Business Law Section of the State Bar of
California, seeks to reinstate the ability of judgment
creditors, held prior to July 2001, to obtain judgment liens
against the assets of a judgment debtor organization that is
incorporated or registered in another state but located or has
assets in California. Before July 1, 2001, judgment creditors
had that ability, but lost it on that date as a result of major
changes in Division 9 of the Commercial Code that affected the
rights of judgment creditors under the Code of Civil Procedure.
The bill allows judgment creditors to file notices of judgment
liens against the assets of registered organizations even if
they are companies registered or incorporated in another state,
and it accomplishes this by (1) removing the requirement that a
security interest in the property could be perfected at the time
the lien is created, and (2) requiring that, as a condition for
the creation of a lien against tangible personal property, the
property is located in California at that time. There is no
opposition to the bill.
SUMMARY : Seeks to reinstate the ability of judgment creditors,
held prior to July 2001, to obtain judgment liens against the
assets of a judgment debtor organization that is incorporated or
registered in another state but located or has assets in
AB 1549
Page 2
California. Specifically, this bill :
1)Removes the condition that a judgment lien on personal
property can only be obtained if a security interest in the
property could be perfected under the Commercial Code by
filing a financing statement with the Secretary of State at
the time when the lien is created.
2)Requires, as a new condition for the creation of a lien
against specified categories of tangible personal property,
that the personal property is at that time located within
California.
3)Requires, as a new condition for the creation of a lien
against tangible chattel paper, including accounts receivable,
that the property is at that time located within California
and the judgment debtor's residence, place of business, or
chief executive office is also located in California.
4)Excludes personal property that is as-extracted collateral, as
defined, and timber to be cut from the requirement that the
property must be located in this state.
5)Establishes a new priority rule, providing that a security
interest in personal property perfected by the filing of a
financing statement or other action under the law of a
jurisdiction other than this state has priority over a
California judgment lien in the same personal property.
6)Adds omitted references to agricultural liens, where
appropriate, to establish priority rules that should apply to
judgment liens and security interests with respect to
agricultural liens.
7)Provides that the officer levying an execution lien or
attachment lien upon a deposit account shall personally serve
the writ and notice of levy to a centralized location within
the state as designated by the financial institution that
maintains the deposit account.
EXISTING LAW :
1)Provides that a judgment lien on personal property is a lien
on all interests in specified personal property that are
subject to enforcement of a money judgment against the
AB 1549
Page 3
judgment debtor at the time the lien is created if a security
interest in the property could be perfected under the
Commercial Code by filing a financing statement with the
Secretary of State at that time, but without any condition on
the location of the personal property. (Code of Civil
Procedure Section 697.530(a).)
2)Provides that priority between a judgment lien on personal
property and a conflicting security interest in the same
personal property shall be determined according to priority in
time of filing or perfection, as provided. (Code of Civil
Procedure Section 697.590.)
3)Provides that the officer levying an execution lien or
attachment lien upon a deposit account shall personally serve
a copy of the writ and notice of levy either on a) the
financial institution that maintains the deposit account, or
b) a centralized location within the state as designated by
the financial institution. (Code of Civil Procedure Section
700.140(a).)
COMMENTS : This non-controversial bill is authored by the
Committee on Banking and Finance and sponsored by the Insolvency
Committee of the Business Law Section of the State Bar of
California.
According to the author, this bill is needed to reinstate the
ability of judgment creditors to obtain judgment liens against
the assets of so-called "foreign registered organizations."
This term refers to judgment debtors that are corporations,
limited liability companies, limited partnerships, or other
registered organizations and that are incorporated or registered
in other states, such as Delaware, but are located or have
assets in California. As to why judgment creditors do not
currently have this ability and the problems that result, the
author explains:
Before July 1, 2001, judgment creditors had that
ability, but lost it on that date as a result of major
changes in Division 9 of the Commercial Code that
affected the rights of judgment creditors under the
Code of Civil Procedure.
Prior to July 1, 2001, registered organizations
(including organizations registered in California, as
AB 1549
Page 4
well as foreign registered organizations) were deemed
located in the respective states where they had their
place of business or, if they had more than one, where
their chief executive offices were located. The
proper places to file financing statements to perfect
security interests in the assets of registered
organizations were where the tangible assets were
located (such as inventory, equipment, farm products
and tangible negotiable documents of title) or, where
the registered organization was deemed located for
intangible assets (such as accounts receivable). When
the current version of Division 9 became effective on
July 1, 2001, however, the deemed location of any
registered organization became its state of
incorporation or registration, and that state became
the proper place to file a financing statement for
both tangible and intangible assets.
These changes in the deemed location and
proper filing office for registered organizations are
problematic for judgment creditors because, under the
Code of Civil Procedure, they can only obtain judgment
liens against the assets of a judgment debtor by
filing a notice of lien with the California Secretary
of State "if a security interest [against those
assets] could be perfected under the Commercial Code
by filing a financing statement at that time with the
[California] Secretary of State." Civ. Proc. Code
697.530(a). If the judgment debtor is a foreign
registered organization, a judgment creditor can not
obtain a judgment lien because the proper place to
file a financing statement against the assets of the
foreign registered organization is the state where it
is registered (e.g., Delaware).
By removing the requirement that a security interest in the
property could be perfected at the time the lien is created,
this bill effectively allows judgment creditors to file notices
of judgment liens against the assets of registered organizations
even if they are companies registered or incorporated in another
state.
Agricultural Liens : The author explains that the omission of
references to agricultural liens in this section of the Code of
Civil Procedure is an apparent oversight arising from the broad
AB 1549
Page 5
July 2001 changes to Division 9 of the Commercial Code. Thus,
this bill corrects the problem by adding appropriate references
to agricultural liens to establish priority rules that should
apply to judgment liens and security interests with respect to
agricultural liens.
REGISTERED SUPPORT / OPPOSITION :
Support
Insolvency Committee, Business Law Section of the State Bar of
California (sponsor)
Opposition
None on file
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334