HOUSE LABOR AND COMMERCE STANDING COMMITTEE February 9, 2000 3:18 p.m. MEMBERS PRESENT Representative Andrew Halcro, Vice Chairman Representative Lisa Murkowski Representative John Harris Representative Sharon Cissna MEMBERS ABSENT Representative Norman Rokeberg Representative Tom Brice Representative Jerry Sanders COMMITTEE CALENDAR HOUSE BILL NO. 239 "An Act relating to the Uniform Commercial Code; relating to secured transactions; amending Rule 79, Alaska Rules of Civil Procedure; and providing for an effective date." - MOVED CSHB 239(L&C) OUT OF COMMITTEE PREVIOUS ACTION BILL: HB 239 SHORT TITLE: UCC SECURED TRANSACTIONS Jrn-Date Jrn-Page Action 5/14/99 1410 (H) READ THE FIRST TIME - REFERRAL(S) 5/14/99 1410 (H) L&C, JUD 2/09/00 (H) MINUTE(L&C) WITNESS REGISTER ART PETERSON, Private Attorney Uniform Law Commissioner for Alaska National Conference of Commissioners on Uniform State Laws The Ebner Building 350 North Franklin Street Juneau, Alaska 99801 POSITION STATEMENT: Answered questions regarding HB 239. JERRY KURTZ, Uniform Law Commissioner 1050 Beach Lane Anchorage, Alaska 99507 POSITION STATEMENT: Testified in favor of HB 239. SHARON YOUNG, State Recorder Department of Natural Resources Division of Support Services State Recorder's Office 3601 C Street, Suite 114 Anchorage, Alaska 99503-5947 POSITION STATEMENT: Answered questions regarding HB 239. BRYAN MERRELL, Underwriter First American Title Insurance Company 3035 C Street Anchorage, Alaska 99503 POSITION STATEMENT: Commented on HB 239. STEVE WEISE, Attorney Heller, Ehrman & Associates 601 South Figueroa Street, 40th Floor Los Angeles, California 90017 POSITION STATEMENT: Answered questions regarding HB 239. JERRY WEAVER, Secretary Alaska Bankers Association P.O. Box 100600 Anchorage, Alaska 99510 POSITION STATEMENT: Testified in favor of HB 239. NANCY USERA, Senior Vice President Alaska USA Federal Credit Union P.O. Box 196613 Anchorage, Alaska 99519 POSITION STATEMENT: Testified in favor of HB 239. MARY ELLEN BEARDSLEY, Assistant Attorney General Department of Law 1031 West 4th Avenue, Suite 200 Anchorage, Alaska 99501-1994 POSITION STATEMENT: Testified in favor of HB 239. MARY ANN ROWE, President Kachemak Bay Title Agency P.O. Box 15156 Fritz Creek Homer, Alaska 99603 POSITION STATEMENT: Testified in favor of HB 239. ACTION NARRATIVE TAPE 00-11, SIDE A Number 0001 VICE-CHAIR ANDREW HALCRO called the House Labor and Commerce Standing Committee meeting to order at 3:18 p.m. Members present at the call to order were Representatives Halcro, Murkowski, Harris, and Cissna. Representatives Sanders and Brice were absent. Representative Rokeberg was excused. HB 239-UCC SECURED TRANSACTIONS VICE-CHAIR HALCRO announced the first order of business is HOUSE BILL NO. 239, "An Act relating to the Uniform Commercial Code; relating to secured transactions; amending Rule 79, Alaska Rules of Civil Procedure; and providing for an effective date." Number 0053 REPRESENTATIVE MURKOWSKI explained HB 239 had been assigned during the session interim to a subcommittee consisting of herself and Representatives Rokeberg and Cissna. The subcommittee held a meeting on September 8, 1999 in conjunction with the Alaska Business Law Section and subsequent to that meeting they transmitted copies of HB 239 to all interested parties. The subcommittee has received comments regarding HB 239 from the Business Law Section, the Corporate Law Section and the Bankruptcy Section of the Alaska Bar Association, independent law firms, the State Recorder's Office, banks, banker's associations, credit unions, escrow associations, title agencies, Office of the U.S. Trustee and the Attorney General's office. REPRESENTATIVE MURKOWSKI announced that Draft G\Lauterbach/Bannister is a product of the subcommittee review. She made a motion to adopt the proposed CS for HB 239, version 1-LS0455\G, Lauterbach/Bannister, 1/14/00, as a work draft. There being no objection, proposed CSHB 239 was before the committee. Number 0179 REPRESENTATIVE MURKOWSKI noted that the document before the committee is a product of many years of effort on the part of national state commissioners of the Uniform Commercial Code (UCC). She said Alaska adopted the UCC, Article 9, Secured Transactions, in 1962. The latest revision was adopted in 1972 and Alaska is now long overdue for another revision. She explained the proposed CS brings Article 9, Secured Transactions, into the twenty-first century by recognizing that the financial world has changed since the UCC was adopted many years ago. REPRESENTATIVE MURKOWSKI informed the committee she has prepared a ten-page overview which explains what secured transactions are, how they work, and how the new changes affect the current UCC, Article 9. She said the 1998 UCC revisions are expanding the scope of Article 9; therefore, she will discuss perfection issues, choice of law, consumer transactions; whether debtor or consumer, update of filing systems (there is a full national commitment to centralized filing), and default enforcement provisions. Number 0606 ART PETERSON, Private Attorney and Uniform Law Commissioner for Alaska, National Conference of Commissioners on Uniform State Laws, said he supported Representative Murkowski's presentation. He informed the committee there had a been a few amendments to Article 9 since its initial adoption in 1962, but there has not been a comprehensive revision until this time. He further stated the proposed CS updates Article 9, expands its scope and brings Alaska into the modern commercial world. JERRY KURTZ, Uniform Law Commissioner, testified via teleconference from Anchorage, but deferred his testimony to Sharon Young. Number 0720 SHARON YOUNG, State Recorder, Department of Natural Resources, testified via teleconference from Anchorage. She stated the Department of Natural Resources (DNR) is very interested in the proposed CS because it has the potential of streamlining the State Recorder process. She explained that DNR had limited their review of the proposed CS to the filing provisions. Number 1830 BRYAN MERRELL, Underwriter, First American Title Insurance Company, testified via teleconference from Anchorage. He said his company has been underwriting insurance policies in Alaska since 1965. He focused on security relating to assignments of mortgages and deeds of trust. He noted there is a slight conflict between the terms of the proposed changes to Article 9, section 45.09.308(e) and 45.09.502, wherein the Recording Act of the new proposed UCC would seem to permit UCC filings to perfect interests in mortgages and deeds of trust; whereas the current Recording Act would seem to require actual recording in the recorder's records. He suggested to Representative Murkowski in a letter of September 27, 1999 that those two sections be harmonized to conform with the expectations of people who deal with residential/commercial loans. He explained, in order to perfect an assignment of a mortgage or deed of trust, someone has to record the assignment in the recorder's records rather than with the UCC office. He requested that an amendment be considered before HB 239 passes because he thinks it is important to avoid confusion that may arise in the real estate and lending industries. Number 0985 REPRESENTATIVE MURKOWSKI promised to speak with Mr. Merrell by telephone sometime later this week to discuss his concern with HB 239. Number 1020 MR. KURTZ said he represents the Alaska Delegation of Commissioners to the National Conference of Commissioners of Uniform State Laws, which, in conjunction with the American Law Institute, sponsors the UCC. He explained that Article 9 had been drafted years ago in order to consolidate all old acts and common law concerning promissory notes, loans, commercial transactions, sales and anything involving the purchase or sale of personal property. He reiterated it is very important the proposed CS be adopted, hopefully this session. He said a national effort is being made to convince all states to adopt Article 9 and start using it by July 1, 2001. At the present time, seven states have adopted Article 9 of the UCC and a bill to adopt it has been introduced in 19 states. MR. KURTZ emphasized the main reason for this huge nationwide effort to pass Article 9 is because of filing provisions. He informed the committee that any time a piece of personal property is the subject of a credit transaction, where and how to file that transaction is a critical problem. He believes this attempt to standardize transaction filings by revising Article 9 is imperative since so many personal property transactions are taking place across state lines and worldwide. He said commissioners from the Alaska Delegation of Commissioners will study the proposed CS to determine when and if Alaska should adopt Article 9 of the UCC. MR. KURTZ first noted he does not think Article 9 would change the balance between creditors and debtors. Secondly, he feels the filing provisions of the proposed CS are absolutely critical to promote business in Alaska and control the cost of operating the recording office's filing responsibility. Number 1487 STEVE WEISE, Attorney, Heller, Ehrman & Associates, testified via teleconference from Los Angeles, California. He stated he is available to answer questions from the committee. Number 1516 JERRY WEAVER, Secretary, Alaska Bankers Association, testified via teleconference from Anchorage. He stated the original Article 9 of the UCC worked well for commerce in Alaska for many years. He noted that bank attorneys, commissioners, and the recorder's office all feel the revised Article 9 is better and his association agrees. Mr. Weaver, representing the Alaska Bankers Association, said he supports and endorses the proposed CS and hopes it will move quickly in order to meet the 2001 deadline. Number 1588 NANCY USERA, Senior Vice President, Alaska USA Federal Credit Union, said Alaska USA Federal Credit Union is the leading provider for consumer credit in the State of Alaska. She is also anxious to see the proposed CS pass soon. Because of the July 1, 2001 national deadline for implementing Article 9 of the UCC, she believes it would be very desirable to commence training financial institutions as soon as possible after passage of the proposed CS. She presented a letter of support for the proposed CS and a reference if the committee would like to consult Mr. Tom Green, Senior Vice President, Alaska USA Federal Credit Union. She also said she agreed with the amendments submitted by the recorder's office. VICE-CHAIR HALCRO asked if the recorder's office amendments had been incorporated into the proposed CS. REPRESENTATIVE MURKOWSKI replied yes. Number 1688 MARY ELLEN BEARDSLEY, Assistant Attorney General, Department of Law, testified via teleconference from Anchorage. She said the Department of Law supports the proposed CS because it promotes uniformity throughout the 50 states. Number 1714 MARY ANN ROWE, President, Kachemak Bay Title Agency, testified via teleconference from Homer. She stated she is co-chair of the legislative committee for the Alaska Lands and Title Association and represents them regarding the proposed CS. She informed the committee that she had reviewed the proposed CS with her committee. She pointed out she is only interested in the part of the proposed CS which affects the title industry and asked the committee to turn to pages 37-39. She directed the committee's attention to page 37, Section 45.09.308(e), which deals with perfection of a security interest in a mortgage or lien against real or personal property. She stated the association she represents does not feel this would be a hindrance or an encumbrance to the title industry standard or practice since it is viewed by them as a personal contract. She believes the proposed CS is good and would streamline title insurance industry processes. She encourages and supports passage of the proposed CS. Number 1796 REPRESENTATIVE HARRIS made a motion to move CSHB 239, 1-LS0455\G, Lauterbach/Bannister, 1/14/00, out of committee with individual recommendations and the attached fiscal note. There being no objection, CSHB 239(L&C) moved from the House Labor and Commerce Standing Committee. ADJOURNMENT There being no further business before the committee, the House Labor and Commerce Standing Committee meeting was adjourned at 3:50 p.m.