Legislature(1993 - 1994)
03/19/1993 01:40 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATOR TAYLOR introduced SB 86 (FUND TRANSFERS UNDER THE UNIFORM COMMERCIAL CODE) and SB 112 (UNIFORM COMMERCIAL CODE REVISIONS) both sponsored by SENATOR JAY KERTTULA, and announced they would be on teleconference. SENATOR KERTTULA referred the committee to his aide, BILL KELDER, to read a statement, and he promised a packet of information for the committee members. SENATOR KERTTULA explained he was asked to be a facilitator for the Supreme Court to attach the new amendments to the Uniform Commercial Code, have them drafted by Legislative Legal Counsel, and brought before the legislature. SENATOR KERTTULA reviewed the packet of information and invited MR. KELDER to read his statement. MR. KELDER explained SB 86 and SB 112 were companion pieces of legislation that would amend the Alaska Uniform Commercial Code. Number 072 MR. KELDER read from SENATOR KERTTULA'S statement: " The UCC is a comprehensive codification of commercial law; however, until the promulgation of Article 4A in 1989, it did not deal with funds transfers between commercial entities. As business practice has come to rely more heavily on the speed, efficiency, reliability, and comparatively low cost of electronic technology, it is apparent that Alaska's commercial laws need to be brought up to date. The new Article 4A embodied in SB 86 does this and has been adopted by 45 other states. In 1989, a record three trillion dollars were transferred on a single day - more money than the 1989 gross product of the United States - and the 1989 average was one trillion dollars a day. Presently, unless the parties to a transaction use the same bank, a funds transfer involves at least four entities ... numerous problems and questions can arise. This bill provides for a significant improvement in Alaska Law. It will help keep Alaska's Uniform Commercial Code up to date, thus tending to assure a favorable commercial climate here - one that is in line with the rest of the country." MR. KELDER presented a zero fiscal note from the Department of Law, and in addition, he said financial regulators are encouraging individual states to enact the provisions included in Sb 86. He expressed the concern that unless states adopt these regulations and provisions, the federal government will enact a national UCC - and do their own enforcement. MR. KELDER added the provisions in SB 86 have been endorsed by the National Conference of Commissioners on Uniform State Laws, which helped draft the legislation. To begin the discussion of SB 112, MR KELDER read: "Senate Bill 112 makes amendments to Alaska's Uniform Commercial Code ... these changes are designed to bring the code up to date with the rest of the country. The first change adds a new Article 2A to the existing law. While the existing law covers commercial property leases there is no language relating to personal property leasing. Article 2A deals with what is called "true" leases and "finance" leases. The article provides the statutory answers to a broad range of legal issues, covering such matters as offer and acceptance, warranties, mistakes, failure to perform, risk of loss and remedies. The current absence of these rules promotes litigation. Articles 3 of SB 112 reorganizes the existing material in the state code to make it more clear and to account for modern technologies. These revisions fix many of the problems that have arisen over the past 40 years with the Uniform Commercial code with negotiable instruments. Some of the changes in Article 3 and Article 1 of SB 112 are necessary to bring these articles into compliance with the new language in Article 4A as it appears in SB 86. One important change in Article 3 is that the revision recognizes there are two types of instruments - notes and drafts - which usually perform different functions; therefore, merit different treatment. Benefits from enacting Article 3 of SB 112 include, but are not limited to, the following: certainty of the law, speed and reliability, lower costs, reduced litigation, and stricter standards for fiduciaries. Number 163 Finally, SB 112 seeks to repeal Article 6 of the present Uniform Commercial Code ... deals with bulk sales. A bulk sale is one in which a business sells all or a large part of its inventory to a single buyer outside the ordinary course of business. In addition, under Article 9 of the existing code, protections for creditors are more significant than in the past. Because of these factors, the National Conference of Commissioners on Uniform State Laws, and a group of 16 Alaska Business Law Attorneys, have recommended that Article 6 be repealed. This bill received a zero note from the Department of Law's Division of Legal Services." SENATOR TAYLOR asked for questions on either SB 86 or SB 112, and SENATOR LITTLE presented a problem, which she thought might be addressable under the two bills. SENATOR LITTLE quoted a constituent as not being notified when their note for the mortgage of their house was not transferred from buyer to seller. SENATOR TAYLOR called on ART PETERSON, in his capacity as a Uniform Law Commissioner, to answer questions. MR. PETERSON explained this bill did not include an answer to SENATOR LITTLE'S question, but he explained the primary benefit of the bill is its uniformity with the rest of the nation. He said if reasonable notice to borrowers is needed, it would presently be outside the Uniform Commercial Code. Number 223 SENATOR HALFORD asked for the difference in the original bill and the Labor & Commerce committee substitute for SB 112. MR. PETERSON began by expressing support for SB 86 and SB 112 as essential to keep Alaska from receding into the backwater in the commercial area. He indicated there were about 5 or 6 very minor changes, and SENATOR HALFORD asked to be informed. 1. page 4, lines 20 & 21 - the words the code were inserted on page 20 and AS 45.12.207 inserted on line 22. 2. page 48, line 16 - change (d) to (e). 3. page 86, lines 13 through 15 - A new sentence "These sections may not be construed to defeat the prime opposition of a municipal tax lien under AS 29.45.300(b)" had been added, and MR. PETERSON proposed it be deleted. SENATOR TAYLOR moved to delete on page 86 line 13, the sentence beginning with "These sections ..." SENATOR JACKO asked why the sentence didn't fit in the bill. SENATOR TAYLOR explained the sentence would place a super tax lien on assets, which would make it a superior lien, over and above those liens held by the banks, and which would be devastating as far as transactions sold outside the state. Number 290 MR. PETERSON described how, by leaving it in the bill, it would affect other liens in statute, and he gave examples. He explained the sentence in question is a cross reference that emphasizes one lien at the expense of all others, and he encouraged the committee to remove it. Upon hearing no further questions, SENATOR TAYLOR renewed his moved to delete the sentence on page 86, lines 13 through 18. Without objections, so ordered. 4. page 106, lines 28 & 29 - the sentence at the end of subsection (c) - "If the certificate of title statute is silent on the issue of transfer, this section controls." MR. PETERSON described the ambiguity in the first sentence in subsection (c), and he explained why this sentence was added, after some research, to the committee substitute. 5. page 112, line 16 - to adjust an ambiguity in the lettering of the subsections. MR. PETERSON described the first sentence in subsection (e) as combining a disjunctive element with a conjunctive elements and explained how the problem was corrected after consultation with PROFESSOR MILLER. 6. page 112, lines 25, 28, & 29 - line 25 & 28 had typos - line 29 - insert lessor or before "lessee." SENATOR TAYLOR, satisfied there were no more changes, invited JOHN BEARD to testify from Anchorage. MR. PETERSON identified MR. BEARD as a knowledgeable commercial law practitioner sitting in for JERRY KURTZ, another Uniform Law Commissioner for Alaska. MR. BEARD explained he had practiced commercial law for 22 years, which has been heavily impacted by the two bills. He indicated his support for SB 112 and SB 86 and vouched for all the reasons covered in SENATOR KERTTULA'S remarks. He explained how the bills would update the way in which money is transferred, trends in leasing, and bank collections. Number 405 SENATOR TAYLOR, MR. BEARD, and MR. PETERSON discussed some of the points as covered in the bills. SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 112(JUD) (UNIFORM COMMERCIAL CODE REVISIONS) from committee with individual recommendations. Without objections, so ordered. SENATOR JACKO moved to pass CS FOR SENATE BILL NO. 112(JUD) (FUND TRANSFERS UNDER THE UNIFORM COMMERCIAL CODE) from committee with individual recommendations. Without objections, so ordered.