BILL ANALYSIS
AB 1549
Page 1
Date of Hearing: May 4, 2009
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Pedro Nava, Chair
AB 1549 (Banking & Finance) - As Amended: April 13, 2009
SUBJECT : Judgment liens: priority
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
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
financial 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.
AB 1549
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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
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).)
FISCAL EFFECT : None.
COMMENTS :
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
AB 1549
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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.
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 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
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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
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
Business Law Section of the California State Bar - Sponsor
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081