Provides that the warehouseman's lien under the uniform commercial code is superior to any other security interest and attaches on the date the receipt is issued

BILL NUMBER:S2044

Title of bill

An act to amend the uniform commercial code, in relation to the lien of a warehouseman

Purpose

Clarification of the law covering the priority of warehouseman's liens Over prior perfected security interests.

Summary of provisions

Amends subsection (3) and adds a new subsection (5) to §7-209 of the Uniform Commercial Code to provide that a warehouseman's lien is prior in interest to other perfected security interests.

Justification

At the present time, there is a substantial amount of legal activity involving claims by holders of security interest in bailed personal property (e.g., banks, finance companies, etc.) against household goods warehousemen. These other lienholders assert that their claims are prior in right to lien of warehouseman initiating the warehouseman's lien sale procedure.

There are several ways to describe the dispute that commonly arises under current law. The basic facts usually involve a storage depositor who has filed for protection under the federal bankruptcy laws or defaulted in the payment of a loan to a lender while that storage depositor is delinquent in the payment of his storage charges (and related charges) to the warehouseman. When the situation arises, a bankruptcy trustee or institutional lender will frequently demand delivery of personal property held in storage by the warehouseman, without providing for payment of storage and related expenses.

Currently, there is legal authority to support both the position that lenders and bankruptcy trustees with prior perfected security interests have priority over the warehouseman's lien, and the position that the lien of a warehouseman is prior in interest to the lien of the holder of the security interests or the bankruptcy trustee. Most of the disputes between the warehousemen and the holder of the security interest or bankruptcy trustee are resolved by a settlement which frequently involves the release of the personal property by the warehouseman, with the warehouseman's lien still attaching to the property, and a further agreement that the warehouseman's storage and related charges will be paid out of the proceeds of an auction of the property to be conducted by the bankruptcy trustee or lender. Clarification of the law in this area would alleviate the problem of seeking a dispute resolution procedure every time a storage depositor files for bankruptcy protection or defaults on a loan. Section 182 of the Lien Law currently provides that a self-service storage owner's license lien, by specific provision in the statute, has priority over any other liens or security interests. Giving a warehouseman's lien priority over all other security interests or liens by express provision of the UCC would be

consistent with these provisions of the Lien Law.

Fiscal impact

None to state or local governments.

Effective date

On the first of September next succeeding the date on which it shall have become a law.