HB 251 - PRIORITY OF TOWING LIENS  2:36:37 PM CHAIR RAMRAS announced that the final order of business would be HOUSE BILL NO. 251, "An Act relating to liens on vehicles; and providing for an effective date." 2:36:44 PM CHAIR RAMRAS [moved to adopt the committee substitute (CS) for HB 251, Version 26-LS0786\E, Luckhaupt, 3/15/10, as a work draft.] There being no objection, Version E was before the committee. 2:37:24 PM DON HABEGER, Staff, Representative Jay Ramras, Alaska State Legislature, presented HB 251 on behalf of Representative Ramras, sponsor. He explained that there have been cases wherein towing companies have towed vehicles, often under the authority of a public safety officer, but have not been paid for their service. Mr. Habeger stated that a court has determined that towing liens are not a priority over perfected liens, and banks using the vehicle as a security have priority. He relayed that there are an increasing number of cases in which banks are saying they will not pay the towing company because of the court decision. MR. HABEGER directed attention to Section 1, in which new language is added to specify that possessory liens by towing companies have priority over other liens. He said this provision would be "directly connected to the vehicle." He then highlighted another feature of Version E, - a requirement for notification - that is found in language in Section 2, on page 2, lines 5-11, which read as follows: Unless a vehicle has already been reclaimed by the  owner, the person possessing the vehicle under this  section shall notify the registered owner or primary  lienholder, if any, of the towing, transporting, or  storage of the vehicle, by certified letter, return  receipt requested, mailed to the registered owner or  primary lienholder, if any, within five working days  after the initial towing, transporting, or storage of  the vehicle.  2:41:25 PM REPRESENTATIVE HERRON recounted that when he was a city manager, this problem was prevalent, and local towing companies were refusing orders from police officers because [they were not getting reimbursed]; therefore, he said he supports the bill, because he said he thinks it will benefit everyone. Notwithstanding that, he asked if, under HB 251, there may be a chance that towing companies would charge exorbitant rates for "this special service." 2:42:36 PM MR. HABEGER offered his understanding that the likelihood of that happening is lessened because of competition. For example, he said there are a number of towing companies in Fairbanks, Alaska, which compete well with one another and charge market rates. He said the odd situation wherein rates went up because of non-notification is addressed in Section 2. CHAIR RAMRAS said, "It's balanced." 2:43:28 PM MARGARET RABY, Alaska Towing Association (ATA);, Badger Towing, testified that ATA has no issue with Version E and considers it to be an excellent idea to give possessory liens priority. However, she stated that ATA has concerns about Section 2. She said the association understands the need for consumer protection, but does not think HB 251 is the appropriate venue in which to address the issue, which she said is more complicated than just notifying within five days or not. She said the vehicle owner may have been arrested or may be in the hospital following a motor vehicle accident, and "all notification does is get their lien holder excited to take their vehicle back," when there is no need for that to happen. She said Badger Towing just had this situation occur a week ago. Furthermore, she relayed, notification would drive up the cost for towing companies; the time and labor involved could result in an actual mailing cost of over $10 per vehicle. She noted that Section 2 limits a lien to towing and storage charges, and does not include compensation for the time and money invested in notification. 2:46:05 PM MS. RABY stated that towers are part of a service industry, and banks are the only part of the process not in partnership with towers. Moreover, she said banks seem to be in direct opposition with towing companies. She said it makes good press to say a towing company held onto a vehicle for a long time to drive up storage charges; however, she explained, the reality is that if a vehicle's residual value is less than 30 days worth of towing storage, it is unlikely that there is a lien against that vehicle in the first place, unless the vehicle has been destroyed and the lien holder is looking to dump it. MS. RABY said Alaska law has created a situation such that both private vehicle owners and lien holders have the ability to abandon vehicles - which is unlawful - and the towers "have no mechanism to take care of it." She continued as follows: So, if there are towing companies that may be extending the storage charges on towing a storage lien, I can tell you just from my own experience, they're very likely trying to cover charges from multiple vehicles that have been dumped on them. This is just one more way of cost-shifting, unfortunately. It's a practicality of trying to make ends meet when you're a small mom and pop company. It doesn't make it right, but that is what happens. MS. RABY concluded that there are a lot of changes that need to be made to Alaska towing laws; however, ATA believes suggesting that the entire bulk of monitoring and ensuring nothing goes wrong and nobody is harmed should be the responsibility of the towing companies is putting those companies in an untenable position. 2:48:29 PM SHAWN ROSS, President, Alaska Towing Association (ATA); Owner, Badger Towing, concurred with Ms. Raby that there are a lot of other costs involved with notification. He questioned whether "five working days" refers to the towing companies' schedules, which are 24 hours a day, seven days a week, or the bank's schedule, which is usually Monday through Friday. He related a situation in which Badger Towing sent out letters within five days. He said Badger Towing understood that the vehicle owner was in good standing with the lienholder, but the lienholder repossessed the vehicle anyway. The towing company's bill was approximately $300, but the lienholder ended up charging the vehicle owner almost $1,100 to get his vehicle back. CHAIR RAMRAS asked Mr. Ross if he supports the bill "in its present form." MR. ROSS responded yes. In response to Chair Ramras, he related that there are currently approximately 30 members of ATA, and they range across the state and "part of the Northwest." He said Sitka, Soldotna, Nenana, and Anderson are included in the list of those communities with memberships in ATA. 2:51:07 PM REPRESENTATIVE GATTO noted that Section 2 would require the aforementioned notification to be given to "the registered owner  or primary lienholder", but sent to "the registered owner and  primary lienholder". He said he finds the change from and to or confusing. MR. ROSS concurred, and opined that the word "and" should be used in both cases. 2:52:08 PM MR. HABEGER related that the bill drafter said the "or" and "and" need to be used as is. He reminded the committee that the notification language is part of the 60-day process. He explained that currently a towing company has the right to have a lien against the vehicle for 60 days. Under Version E, if the towing company wants to have that possessory title past 60 days, it has to notify the lienholder and owner in five working days. REPRESENTATIVE GATTO expressed dissatisfaction with that rationale. 2:53:37 PM MARK ANTHONY DAVIS, President, Interior Towing & Salvage, Inc., testified that he agrees with Section 1, but expressed concern with language in Section 2, page 2, line 5, which read: "(b) A lien under this section is limited to towing and storage charges." He indicated the language needs to specify associated charges at the end of that sentence, which would cover the cost of the letters and certification. Further, regarding language on page 2, line 10, he said he thinks the requirement to send notification "within five working days" should be changed to seven working days. He stated his belief that towing companies need the extra two days, because many vehicles are registered outside the state, and towing companies would require extra time to find out what application form is needed to request the information. Furthermore, the extra two days would help when the days include a weekend. Mr. Davis concluded, "But other than that I 100 percent believe that this bill needs to go forward." 2:55:06 PM ELISABETH GRISWOLD, Owner/Manager, Gabe's Towing, said towing companies have been struggling with credit unions not paying the charges when repossessing vehicles. Credit unions would hire lawyers that sent the towing companies letters stating that the credit union would pay "a reasonable tow fee" and storage for three to five days; however, the reasonable tow fees were way below market price. Ms. Griswold expressed appreciation for the language change in Section 1, but concurred with Mr. Davis regarding the suggested changes to Section 2. 2:56:35 PM WILLIAM R. SATTERBERG, JR., Attorney at Law, Satterberg Law Offices, Fairbanks, Alaska, told the committee that although he has associations with and/or has served as lawyer to some of the individuals who have testified, he is testifying on his own behalf. He said he was involved in the case Ms. Griswold related, and he confirmed that [Gabe's Towing] had a storage lien trumped by a credit union, and it was a fight to get the company paid for the job it did. He said he supports HB 251; however he said he thinks the towing liens need to take priority. He concurred with Representative Gatto regarding the disjointed language in section 2. Finally, he recommended the requirement for notification be set within "seven days, excluding weekends and holidays." 2:57:51 PM REPRESENTATIVE GATTO moved to adopt Conceptual Amendment 1, "to change the registered owner or primary leaseholder to registered owner and primary leaseholder in the two places where I see it and in any other places." There being no objection, Conceptual Amendment 1 was adopted. CHAIR RAMRAS moved to adopt Conceptual Amendment 2, so that the sentence on page 2, line 5 would read, "A lien under this section is limited to towing, storage, and associated charges." REPRESENTATIVE GATTO objected. He said he would understand if the associated charges were specified as mailing fees, but he expressed concern that without that limitation the language is too wide open. CHAIR RAMRAS [treated Representative Gatto's remark as a motion to adopt a conceptual amendment to Conceptual Amendment 2], whereby the sentence on page 2, line 5 would read, "A lien under this section is limited to towing, storage, and associated mailing charges." He announced that there being no objection, the Conceptual Amendment to Conceptual Amendment 2 was adopted. REPRESENTATIVE GATTO removed his objection to Conceptual Amendment 2, [as amended]. There being no further objection, Conceptual Amendment 2, [as amended], was adopted. CHAIR RAMRAS moved to adopt Conceptual Amendment 3, on page 2, line 10, so that the language would read, "seven working days, excluding weekends and holidays". REPRESENTATIVE GATTO objected. He asked if that would mean 7 working days. CHAIR RAMRAS said he thinks "seven working days, excluding weekends and holidays" would be the same as seven working days, but could be as much as 10 days with a weekend. MR. SATERBERG explained that his previous recommendation regarding this language is copied from Civil Rule 6. He explained that the court system will often exclude weekends and holidays if the time period is less than seven days. He said he foresees the use of the term "working days" as being problematic. 3:01:00 PM REPRESENTATIVE GATTO asked if the act of sending a letter and asking for a return receipt satisfies all obligations, because the person to whom the letter is sent may never receive it. MR. SATTERBERG said that can be a problem. He said presumably a person who is being served will sign certified mail. He said he does not know how the problem Representative Gatto described would be handled. REPRESENTATIVE GATTO expressed concern that the committee may be making legislation that would lead to difficulty. 3:02:33 PM REPRESENTATIVE HOLMES said she has no problem with the part of Conceptual Amendment 3 that would change "five" to "seven"; however, she expressed concern about the rest of the phrasing. She said Civil Rule 6 defines the meaning of "days" under the court system rule. She offered her understanding that Alaska Statute has similar definitions regarding working days. She said she thinks it would be better to use the term "working days" and leave off "except weekends and holidays", and then rely on Alaska Statute beyond that. REPRESENTATIVE LYNN questioned what the exact meaning of "holiday" would be. 3:03:32 PM CHAIR RAMRAS withdrew Conceptual Amendment 3. CHAIR RAMRAS moved to adopt Conceptual Amendment 4, to change "five" to "seven". There being no objection, Conceptual Amendment 4 was adopted. 3:03:53 PM REPRESENTATIVE GATTO said the committee has not yet addressed the issue of whether or not it is sufficient to send the notification or if proof of its receipt is necessary. He said he considers the latter sufficient. 3:04:32 PM MR. SATTERBERG noted that the language in Section 2 would require the notification to be sent "by certified letter, return  receipt requested". He offered his understanding that once a towing company has sent notification in that manner, it would have met the requirement of notification. REPRESENTATIVE GATTO argued, though, that it is the obligation of the sender to ensure that the recipient receives the notification. MR. SATTERBERG said traditionally the obligation in many of Alaska's notification statutes is to send [to] the last known address. He said the Division of Motor Vehicles has that requirement and sends notification of license withdrawal to the last known address. He stated, "It would seem to me that if it's been sent to the proper address ... by registered mail, the sender's met the obligation." REPRESENTATIVE DAHLSTROM mentioned that she'd sent something to someone who had moved without her knowing, and she got the missive back in the mail. She suggested that the same thing would happen in this case. 3:06:40 PM MR. SATTERBERG said it is possible; however, he stated that there is "an obligation on all of us to make sure we have proper addresses on record." REPRESENTATIVE GATTO said typically notices from the phone company or the Internal Revenue Service (IRS) are 30-day notices. He indicated that seven days is too short a time for a recipient to respond. He said not everyone checks his/her mail daily. He expressed his hope that consideration would be made to hold the bill over to address this issue further. 3:07:56 PM JANE PIERSON, Staff, Representative Jay Ramras, Alaska State Legislature, on behalf of Representative Ramras, sponsor, stated that current statute allows for 60 days [before storage charges "cease to be part of the lien"], and sometimes notice is not sent out until the 59th day. Under the proposed legislation [as amended], she said, that notice would have to be sent out within seven days, which provides added security to the person who owns the vehicle. REPRESENTATIVE GATTO expressed dissatisfaction with the language, because he offered his understanding that the people who are supposed to get the notification will suffer if they don't check their mail. MS. PIERSON told Representative Gatto that those people would actually suffer less, because of the proposed legislation, as amended. REPRESENTATIVE GATTO argued, though, that "they're not notified if they didn't get notified." MS. PIERSON stated her belief that it is not the obligation of the towing company to "chase these people down." She said she would rather receive notification within seven days and only have to pay seven days worth of storage charges, than have a $2,000 bill - [resulting from a notice sent out much later] - which she may not be able to pay. 3:10:14 PM REPRESENTATIVE DAHLSTROM moved to report the proposed committee substitute (CS) for HB 251, Version 26-LS0786\E, Luckhaupt, 3/15/10, as amended, out of committee with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE GATTO objected. A roll call vote was taken. Representatives Herron, Lynn, Holmes, Dahlstrom, and Ramras voted in favor of reporting the proposed committee substitute (CS) for HB 251, Version 26- LS0786\E, Luckhaupt, 3/15/10, as amended, out of committee with individual recommendations and the accompanying fiscal notes. Representative Gatto voted against it. Therefore, CSHB 251(JUD) was reported out of the House Judiciary Standing Committee by a vote of 5-1.