SB 195 - COMMON LAW LIENS Number 0037 CHAIRMAN ROKEBERG announced the committee's first order of business was 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." Number 0052 TIM BENITENDI, Legislative Assistant to Senator Tim Kelly, came forward to testify. He gave the following synopsis of SB 195, stating said the measure is designed to address the emerging problem of the filing of nuisance liens in the form of retribution. Such liens have been filed against real and personal property owned by public officials and others who have been in disfavor with certain groups and individuals who hold opposing viewpoints. These non-consensual common law liens never have true commercial foundation, but are used as a harassment tactic. The practice has now surfaced in Alaska, as officials from the Municipality of Anchorage can attest to. Common law liens differ from lumbermen's liens, mechanics' liens, and the like, in that they do not relate to the substance of improvement of the property filed against. Common law liens have dubious legal standing and were rare in Alaska until recently. They are non-specific claims being used when someone, or some group, feels its constitutional rights are being violated. SB 195 would make it a misdemeanor to record an invalid non-consensual common law lien without court approval, it would ease the process of releasing a lien, and it would provide for the filing of a notice of invalid lien by an attorney of those public officials. This legislation also sets out penalties against those who file such nuisance liens and provides for recovery of costs and damages from the filer. The bill carries two zero fiscal notes. No opposing testimony has occurred to date and SB 195 passed the Senate unanimously. Number 0198 CHAIRMAN ROKEBERG noted a witness from the Alaska Court System was available to respond to technical questions. Number 0224 DOUGLAS WOOLIVER, Administrative Attorney, Alaska Court System, came forward to testify. He offered to answer questions about why the court system requested that SB 195 be introduced or about the bill's content. Number 0246 CHAIRMAN ROKEBERG asked if the copy of the document, with the name Jimmy Drew Lockhart, Sr. in committee members' packets, is an example of a non-consensual common law lien. Number 0276 MR. WOOLIVER replied it is. He explained in that case, Mr. Lockhart's neighbor filed a complaint alleging that Mr. Lockhart was violating an Anchorage zoning ordinance. Zoning enforcement officers inspected his property and found the allegations to be true. As retribution, Mr. Lockhart recorded liens against all of the members of the Anchorage assembly, the mayor, and zoning enforcement officers. Mr. Wooliver noted that a copy of a subsequent case, where another person attempted to record liens against another person who was not an elected official, is also in committee files. Number 0341 CHAIRMAN ROKEBERG commented the file also contains a court order signed by Judge Michalski on February 14, 1997, that contains a list of Anchorage residents, including the city attorney and assembly members. He asked if individual liens were filed against the cited properties in the court order. MR. WOOLIVER said that was correct. CHAIRMAN ROKEBERG asked if all of the liens in the order were filed by the same person. Number 0384 MR. WOOLIVER answered the list contains all of the properties that Mr. Lockhart, Sr. filed liens against. Number 0400 REPRESENTATIVE JOHN COWDERY asked if it is correct to assume that no existing statute makes this activity illegal. Number 0411 MR. WOOLIVER stated that is correct. He said SB 195 amends an existing statute which pertains to recording a false document. That statute is not really aimed at this kind of activity; it applies when a false statement is filed and proof of intent to defraud is shown. The lien filed by Mr. Lockhart does not actually contain a false statement, rather it alleges certain damages. Mr. Wooliver explained the liens are invalid and can be removed by a court, but no penalty is on the books at this time to address this activity. Number 0463 CHAIRMAN ROKEBERG questioned the hand-written note on the bottom of one of the documents contained in the committee packet. Number 0471 MR. WOOLIVER replied had he noticed that note, he would not have used this lien as an example. He stated he had no idea what the note was about but offered to provide the committee with a copy of a different lien to be included in the floor packets for House members. Number 0505 REPRESENTATIVE JERRY SANDERS asked whether a person going to court to have a lien removed would have to do so at his or her own expenses. MR. WOOLIVER said that was correct. REPRESENTATIVE SANDERS asked how much that might cost. Number 0519 MR. WOOLIVER replied he does not know the exact cost. He added that the Municipality of Anchorage's attorney ended up doing all of the work to remove the liens on municipal officials' property. The attorney said the amount of work was extensive. Mr. Wooliver estimated the attorney's fees would cost at least several hundred dollars, and said that the process takes time as well. Number 0550 REPRESENTATIVE SANDERS maintained if the claimant had a good attorney and chose to fight the case, the case could be costly and take a long time. Number 0566 MR. WOOLIVER answered that is particularly true in these types of cases because once some of the advocates of the common law courts and common law movement take such a case to court, they will fight jurisdiction, they will claim the wrong kind of flag is in the courtroom, the service of process did not have the correct upper and lower case letters, et cetera, resulting in an enormous amount of paperwork. He said several such cases are currently in the court system and they are a nightmare for the courts. The person trying to get the liens removed has to go through a wall of paperwork just to have a clearly invalid lien removed from his or her title. Number 0622 REPRESENTATIVE JOE RYAN asked whether the people who are filing the liens are claiming that is surety for damages. Number 0628 MR. WOOLIVER said yes, the filing acts like a pre-judgment lien, which does not really exist. One can get court approval of a pre- judgment attachment to property if a specific procedure is followed during litigation. These pre-judgment liens were filed claiming damages in the amount of $250,000 against each lienholder. The filings amount to several millions of dollars worth of liens, yet there is no judgment and they are not even part of a court case. Number 0648 REPRESENTATIVE RYAN commented that the opposing side will say that legislators, acting in an official capacity, are denying them their ability to protest. Number 0715 MR. WOOLIVER pointed out even under the common law these liens never existed. A common law lien, as it was used, was the right to retain a piece of property if one does work on it. Under common law, if a customer brought a car to a shop to have body work done, and did not pay for the work, the worker had the right to retain that property until paid. That common law lien was based on chattel rights. Nothing was recorded, it was merely the right to possess something that one improved upon. So, even though the liens filed in the court now are referred to as common law liens, they were never valid and there is no basis for their existence. Number 0764 REPRESENTATIVE SANDERS questioned whether the common law liens being filed in the Municipality of Anchorage cloud the title to one's property. Number 0776 MR. WOOLIVER said that is correct. Some title or mortgage companies ignore them, but some do not because they view those liens as potential lawsuits which they do not want to buy. Mr. Wooliver stated he spoke with many people from that industry in preparing for SB 195, and was told that unless a statute clarifies that these liens are invalid, they will not ignore those liens. Number 0812 CHAIRMAN ROKEBERG stated Mr. Wooliver mentioned that the historic antecedent to a common law lien was based on chattel rights for retention. He questioned whether real property rights are statutory in nature. Number 0825 MR. WOOLIVER replied liens have been filed on real property also; most property law goes back for centuries, but the common law lien was just the right to retain chattel that has been improved upon. These common law liens do not purport to have connection to any work done. Number 0853 CHAIRMAN ROKEBERG commented these alleged common law liens were filed against real properties so they would be distinguished from chattel. Number 0868 REPRESENTATIVE RYAN commented that the development of common law began in Great Britain during the reign of King Edward III until the United States became a country with a written constitution and a body of law based on case law. He asked how this country differentiates between statutory and common law. Number 0894 MR. WOOLIVER replied Alaska has a statute, as most states do, that provides that to the extent common law is not inconsistent with state or federal constitutions or laws adopted by the legislature, common law is adopted ["AS 01.10.010. Applicability of common law. So much of the common law not inconsistent with the Constitution of the State of Alaska or the Constitution of the United States or with any law passed by the legislature of the State of Alaska is the rule of decision in this state."]. If it is inconsistent, it is not. Alaska still has a tie to hundreds of years of case law and Blackstone's commentary is a large part of that. Over time, common law has been displaced by actions of the legislature. He added Title 34, Chapter 35, is the lien section and pertains to over a dozen different types of liens, including what used to be the common law lien which is now called improvement of chattels. Number 0953 CHAIRMAN ROKEBERG asked why the legislature previously had a common law lien in statute, AS 09.38.500 (9) ["(9) "lien" means a security interest, or a judicial, statutory, or common-law lien, or any other interest in property securing payment of a debt or performance of an obligation;"]. MR. WOOLIVER responded that statute was adopted at statehood, or shortly thereafter. He said while looking through the case law, he could not find any common law lien ever recognized by a court in Alaska. He stated its inclusion may have been redundant, but it is maintained in statute for the purpose of preventing the inadvertent foreclosure of a legitimate right that might exist. Number 1038 CHAIRMAN ROKEBERG said that answers why it was kept on the books, but he indicated there are some caveats with the two subsections under (C) on the first page. He asked if the only common law lien that could exist would be with the consent of the owner or through the court's consent. MR. WOOLIVER said that is correct. Number 1053 CHAIRMAN ROKEBERG asked whether a common law lien at this time is what is described on page 2, line 5, in Section (D) as: "(D) any interest in property other than one described in (A) - (C) of this paragraph securing payment of a debt or performance of an obligation;" Number 1087 MR. WOOLIVER said if it was recognized in Alaska. He repeated the inclusion of that section is an attempt to not accidentally shut any doors. He indicated a 1980 attorney general's opinion says that common law liens almost certainly do not exist in Alaska at all because Alaska has such a comprehensive statutory scheme that governs liens. CHAIRMAN ROKEBERG said they would exist if SB 195 passes. MR. WOOLIVER replied the bill adds one more. Number 1124 CHAIRMAN ROKEBERG expressed concern about doing so. He commented that language on page 3 refers to ex parte actions and states that the lien claimant shall "pay the costs and actual reasonable attorney fees incurred by the party making the request" and asked how that squares with existing court rules. Number 1142 MR. WOOLIVER responded those court rules are accepted as otherwise provided by statute. CHAIRMAN ROKEBERG questioned whether "actual reasonable attorney fees" would equal 100 percent reimbursement. Number 1159 MR. WOOLIVER replied that is correct, as long as the fees are reasonable. Number 1162 CHAIRMAN ROKEBERG clarified that Rule 82 and the others that pertain to the allocation does not come into play in this situation. MR. WOOLIVER said that is true. Number 1176 REPRESENTATIVE RYAN asked if Rule 82 equates to 15 or 20 percent of the cost and requires some reasonableness. MR. WOOLIVER replied he does not know offhand and would have to check Rule 82. Number 1176 REPRESENTATIVE RYAN asked if Rule 82 applies to everyone else, why a more punitive provision is included in SB 195 allowing reimbursement of the full amount. Number 1216 MR. WOOLIVER replied a lot of legislation comes with that same language requiring "actual reasonable attorney fees." Its purpose is to act as an extra disincentive for harassment action. Rule 82 was designed to not discourage legitimate lawsuits where the cost of attorneys' fees can preclude a person from pursuing a case. Number 1259 REPRESENTATIVE SANDERS questioned whether the phrase "reasonable attorney fees" is an oxymoron. Number 1268 REPRESENTATIVE RYAN suggested revisiting the statutes to see if requiring reimbursement of actual attorney fees would be appropriate for the plethora of lawsuits filed by the environmental community. CHAIRMAN ROKEBERG offered to co-sponsor such legislation with Representative Ryan. Number 1296 CHAIRMAN ROKEBERG informed committee members the bill contains a definition of "non-consensual common law liens" on page 3. He asked why officers or employees of the military or naval forces, and members of the National Guard, are included in the definition of public servants (page 4, lines 11 - 15). Number 1332 MR. WOOLIVER said he was not entirely sure unless problems have occurred in other states with liens being recorded against those groups of people for doing their jobs as well. He pointed out that although these liens have not become a huge problem in Alaska, they have been recorded against everybody under the sun in some of the other states, including trustees of a variety of boards and commissions, pension funds, et cetera. Number 1368 CHAIRMAN ROKEBERG referred to the definition of the word "record" on page 4, beginning on line 19 and asked if any other such definition is contained in Alaska Statute. MR. WOOLIVER replied Title 40, Chapter 17 is the recorder statute but he was unsure whether it contains the same definition. CHAIRMAN ROKEBERG asked for clarification of the intent of lines 22 and 23 on page 4. Number 1425 MR. WOOLIVER explained that language was included to ensure that the provision does not only apply when a person goes to the proper place to record the lien. Without that language, a person could record the lien in an improper place and argue that the offense would not apply. He clarified that language was taken out of AS 40.17.900 which is the public records and recorders' statute. He added that statute contains the same definition of "record" as that included in SB 195. Number 1472 CHAIRMAN ROKEBERG noted SB 195 creates two different levels of offense for recording a false document: first and second degrees. He questioned whether recording a non-consensual lien is a first or second degree offense. Number 1491 MR. WOOLIVER replied it is a misdemeanor. He explained the felony offense exists under current law but is difficult to apply to this activity. SB 195 amends current law to more effectively deal with this type of activity. Number 1506 CHAIRMAN ROKEBERG asked if one would need a court order to record a non-consensual lien in the future, according to SB 195. MR. WOOLIVER said that is correct. Number 1555 REPRESENTATIVE COWDERY made a motion to move SB 195 out of committee with individual recommendations and its accompanying zero fiscal notes. Number 1569 CHAIRMAN ROKEBERG asked if there were any objections. There being none, it was so ordered.