Legislature(1997 - 1998)
04/03/1998 01:23 PM House JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 195 - COMMON LAW LIENS Number 0220 CHAIRMAN GREEN said the committee would hear SB 195, "An Act relating to common law liens, to remedies, costs, and fees imposed for the registration, filing, or recording of certain nonconsensual common law liens, and to penalties for recording common law liens." DOUG WOOLIVER, Administrative Attorney, Alaska Court System, came before the committee to testify. He informed the committee the reason the Alaska Court System asked the legislature to introduce this legislation is to address the problem of the filing of common law liens against people's property. He stated the liens are "bogus," they have no legal merit whatsoever, and they never have had, but they can cloud title to your property. If you try to sell your house and a lien has been recorded against it, you still have to get the lien removed and, typically, that requires a lawsuit. Number 0350 MR. WOOLIVER explained that last year in Anchorage, in retaliation for a zoning enforcement action, a person recorded liens against the property of Mayor Mystrom, all the members of the Anchorage Municipal Assembly, all the zoning enforcement officers that were involved in the enforcement action, and the neighbor who called in the zoning violation. He indicated there was a subsequent case several months later of another person doing the same thing, only they just recorded against the zoning officers again. MR. WOOLIVER said SB 195 attacks this problem in four different ways. First, it makes it clear in statute that common law liens, as defined in the statute, are invalid so that title companies, banks, et cetera, isn't confused as to whether or not there is any merit to them. Number 0410 CHAIRMAN GREEN interjected and said if the legislation makes common law liens improper, some of the law that we have came from common law and asked, "Does that trace with that, for example, workmen's lien and those sorts of things? Are they--perhaps it's in other places in statute, so it doesn't negate then." MR. WOOLIVER replied that is correct. He said, "We have in our statute a statute ... I think it's entitled Improvement on Channels, (ph) ... which was what a common law lien used to be." He indicated Alaska does not have common law liens because we have an extensive statutory scheme that governs the recording of liens. He gave an example of what a common law lien used to be: if he did some work on your buggy and it's in his shop and you refused to pay him for it, he would have the right to keep your buggy until you paid for it. He said a common law lien used is a person's right to possess property that he or person has improved in some fashion, until payment is made. Mr. Wooliver informed the committee there is a lien statute that covers that. He said there are other types of liens such as mechanics' liens, materialmen's liens, and fishermen's liens, which are all covered by statute, none of which are affected by this bill. Number 0510 MR. WOOLIVER said in addition to making these liens clearly unlawful and meritless, there is also a provision to have either a court or an attorney file a paper to be recorded, to make it clear to others, that this previous lien is invalid under the Alaska Statutes. Hence, a loan officer or a title company doesn't have to make their own legal decisions as to whether or not this lien is a common law lien or not. He said the legislation also provides for costs and actual attorney's fees if a person goes to court to have a lien removed. In addition, it also makes it a Class A misdemeanor to record this type of lien. He noted that according to the Department of Law, some troopers have had liens recorded against them, and judges and magistrates have been threatened with liens as well. He indicated it is beginning to be a problem in Alaska and it is a very big problem in several states outside of Alaska. Number 0600 REPRESENTATIVE JEANETTE JAMES pointed out that liens can be filed on someone's property and they won't know that it's happened unless they are looking for it, or for some reason, have to check. She asked if someone took a lien in to be recorded, would the recorder's office take it. MR. WOOLIVER replied in the affirmative. He indicated the legislature changed the statute a few years ago regarding recorders' offices. He said the recorder's office will not be a gate; they are not going to review all of the various liens to check if they are valid or invalid. They don't have the training to do that. And the obvious response by people recording these liens is to make them look more legitimate or to make them more complicated. The recorder will accept liens. It's very easy to record on property and it has always intended to have been easy to do because a lot of these prejudgment-type of liens, such as mechanics liens, are filed by ordinary people and they are supposed to be simple. He said that fortunately, a lot of the people who record these liens like to call the person and tell them what they're doing, or send them a notice, but they don't have to. He referred to the case in Anchorage, stating that the only reason they discovered it was because Assemblyman Mark Begich was in the middle of a business transaction and the whole deal fell apart because he discovered this lien, and it stopped the whole project he was working on. Because of that incident, they found out all these other liens as well. Mr. Wooliver said it would be common a person wouldn't know about it until he or she went to borrow money against a piece of property or went to sell. Number 0720 REPRESENTATIVE JAMES asked how the bill would work, stating, "Someone files a lien against your property and you don't know it's there, and then all of a sudden you have this transaction going through and then here's this lien." She asked what the process is to get rid of the lien. MR. WOOLIVER replied that almost all of these liens are recorded against public officials, usually in retaliation for some official action they have taken. He explained that the first step in the process is whoever is reviewing your title should see that the lien is already invalid under statute, because this bill amends the statute to make it clear that this type of lien has no merit whatsoever. Step one is they should be able to completely ignore it and it won't have any affect on whatever transaction you're trying to do. He said if a person is a public official, an attorney would be able to file a statement to be recorded along with the lien indicating the lien is invalid under statute. If you're not a public official and this lien is on your property, again it's already invalid, which is stated in the statute, so it shouldn't cause a problem. But if it does cause a problem, you have an opportunity to go to court and can get an ex parte order issued stating the person has 20 days to show up and argue that this lien is in fact valid. And if they don't do that, then the court signs a statement indicating the lien is invalid and you're awarded costs and attorney's fees for having done that. Those would be the steps you would go through. Mr. Wooliver added that hopefully a person wouldn't have to go to court because the title company would see that the lien, on its face, is invalid. Number 0860 REPRESENTATIVE BRIAN PORTER referred to page 3, line 17 of SB 195, stating that he is not familiar with why the term "grantee" would be used, pointing out that the other person purportedly benefitted by the claim. He said if that's not the person that filed the lien, then they wouldn't have the authority to take it back. MR. WOOLIVER said that that language was added by the Legislative Legal and Research Division when the bill was drafted. He stated that if a lien is recorded by a person to benefit someone else, that other person could file an affidavit indicating the lien is not to benefit them. He said the lien itself is also invalid anyway under the other provisions of the Act. CHAIRMAN GREEN referred to Mr. Wooliver's example of a buggy and asked: If the person who made the bolts that held the wheel on the buggy, would that be one of these grantees other than the person that may have filed? MR. WOOLIVER said he does not believe so. REPRESENTATIVE PORTER said a person could receive punitive damages, and he asked if that would be as a result of filing a tort case against the person that filed the lien. MR. WOOLIVER replied in the affirmative. He said a person who wanted to get damages from someone would have to sue them as a tort case. He indicated that under this legislation, a person will get court costs and actual reasonable attorney's fees, if the person has to go to court at all to get an ex parte order, but any other damages will have to be obtained through a law suit. Number 0994 REPRESENTATIVE PORTER referred to page 3, starting at line 17, subsection (b), and asked what the function of that subsection is. REPRESENTATIVE CON BUNDE asked, "I'm wondering if this is casting a wider net so that I file a lien, not in my name, but in your name, to get around my responsibility, and then if Representative Green comes to you as you're the grantee ... and you refuse to release him from that lien, even though I filed what should have been an inaccurate lien, is that ..." MR. WOOLIVER said he is not very familiar with this particular provision, but there are lots of angles that the common law courts use. He stated, "It is my understanding that I can record a lien for the benefit of somebody else, I'm in 'cahoots' with the other person, that person didn't actually record the lien, but does benefit from it, and that person could be required to release the lien since they are the beneficiary of that lien." He told the committee he is not sure how often something like this happens, if at all, but that is the loophole that this provision is trying to close. Number 1080 REPRESENTATIVE ERIC CROFT asked if SB 195 is based on any model legislation from other states. MR. WOOLIVER replied there are several other states that have similar types of provisions, which they have looked at, but this isn't modeled directly after any particular one. REPRESENTATIVE CROFT referred to the mechanics' lien Mr. Wooliver described earlier, and he said those types of liens are statutorily defined, and they would continue and would not be affected by this legislation. MR. WOOLIVER replied that is correct. REPRESENTATIVE BUNDE stated they know what would happen if someone were to file a common law lien after this legislation passes, but he asked what would happen before it passes. He asked if someone filed a lien against him, what hoops would he have to jump through to get that lien released. MR. WOOLIVER replied that typically he would have to go to court and try to sue the person to have it released. He said it is a difficult process that takes time that, which is complicated by the fact that a lot of the people who are recording this type of lien don't accept the jurisdiction of the court, and they won't accept service of process because they don't accept anything with a zip code on it. He said then you end up in a horrendous problem just trying to go through a court proceeding against some of the inherence to this approach. Number 1223 REPRESENTATIVE BUNDE asked what that might cost. MR. WOOLIVER referred to the Municipality of Anchorage's case and said he had talked to the attorney who represented the city and he was told they spent several hours on the case, but he did not know how much something like this would cost. In addition to the cost of going through this, most people won't find out about it until they are in the middle of trying to do something else. And then there are the costs of not being able to sell their house or not being able to go forward with their business plans. Number 1330 TOM LAKOSH testified via teleconference from the Anchorage LIO. He informed the committee he is a professional carpenter and stated that he can see a circumstance where he would not have the opportunity to keep someone's cabinets, if they decided not to pay. He asked the committee to put in specific language that would address the issue that mechanics' liens are accepted from the nonconsensual clause because if someone tried to stiff him on his wages, costs, or materials for work he did on someone's home or job site, that they wouldn't consent to the lien after that. Number 1420 CHARLES MCKEE testified via teleconference from the Anchorage LIO. He said, "I see a similarity in this common law lien - especially when a legislative body got upset - with $5 million that Congress was supposed to give us during statehood, then they went ahead and dissolved the mental health land trust of a million acres, so that was essentially a common law lien against the congressional act." He indicated he had filed a constructive notice under Article 1, Section 8 with the Alaska Public Utilities Commission because they are issuing licenses to telecommunication companies without researching whether they have (indisc.) property rights to do so. Number 1554 REPRESENTATIVE CROFT referred to page 1, Section 1, stating that a lien means judicial or statutory so that the mechanics and materialmen would fall under that statutory and this wouldn't affect them at all. Number 1591 REPRESENTATIVE NORMAN ROKEBERG made a motion to move SB 195 out of committee with individual recommendations and attached zero fiscal note(s). There being no objection, SB 195 was moved from the House Judiciary Standing Committee.