senate Bill S4042A

Authorizes the chief administrator of the courts to establish rules for special proceedings authorized under section 9-518 of the uniform commercial code

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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  • 05 / Mar / 2013
    • REFERRED TO JUDICIARY
  • 16 / Apr / 2013
    • REPORTED AND COMMITTED TO CODES
  • 20 / May / 2013
    • 1ST REPORT CAL.637
  • 21 / May / 2013
    • 2ND REPORT CAL.
  • 22 / May / 2013
    • ADVANCED TO THIRD READING
  • 23 / May / 2013
    • PASSED SENATE
  • 23 / May / 2013
    • DELIVERED TO ASSEMBLY
  • 23 / May / 2013
    • REFERRED TO JUDICIARY
  • 14 / Jun / 2013
    • RECALLED FROM ASSEMBLY
  • 14 / Jun / 2013
    • RETURNED TO SENATE
  • 17 / Jun / 2013
    • VOTE RECONSIDERED - RESTORED TO THIRD READING
  • 17 / Jun / 2013
    • AMENDED ON THIRD READING (T) 4042A
  • 20 / Jun / 2013
    • SUBSTITUTED BY A8013

Summary

Authorizes the chief administrator of the courts to establish rules for special proceedings authorized under section 9-518 of the uniform commercial code relating to wrongful financial statements.

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Bill Details

See Assembly Version of this Bill:
A8013
Versions:
S4042
S4042A
Legislative Cycle:
2013-2014
Law Section:
Judiciary Law
Laws Affected:
Amd §212, Judy L; add §175.35, Pen L; amd §9-518, UCC

Sponsor Memo

BILL NUMBER:S4042A

TITLE OF BILL: An act to amend the judiciary law, the penal law and
the uniform commercial code, in relation to financing statements
falsely filed under the uniform commercial code

This measure is being introduced at the request of the Chief
Administrative Judge to redress "paper terrorism" against judges and
other public servants committed to harass them or to retaliate against
them for discharge of their official duties. This is a growing
problem, not just here in New York, but across the Nation. See
National Association of Secretaries of State, "State Strategies to
Subvert Fraudulent Uniform Commercial Code (UCC) Filings: A Report for
State Business Filing Agencies," available at
http://nass.org/indes,php?option=com content&view=article&id=
329%3Anews-release-new-ucc-report-aug12&catid=964%3Auncategorized-
news-release&itemid-1 (Aug 27, 2012).

The Uniform Commercial Code ("UCC") Article 9 provides a simple way
for a creditor to record an interest in a debtor's property with the
Department of State ("DOS"), thereby giving notice of that interest to
the debtor's future creditors. Typically such a recording, termed a
"financing statement" by the UCC, covers property purchased under a
security agreement subject to attachment (e.g., a vehicle), and is
necessary for a creditor to assert a claim. With the rise of the
Internet and especially smart-phones, filers instantly can record
financing statements, which promptly become publicly available by
searchable online database. Using this database, financial
institutions, prospective employers and members of the public can
determine whether someone has debts recorded against him or her, and
assess whether he or she may be a sound credit risk.

This UCC recording system, however, has been subject to much abuse.
Often, members of separatist groups asserting sovereign status,-prison
inmates and others believing themselves to be victims of unjust
government action use the system to retaliate against or harass the
government officials behind that action. They do this by filing
fraudulent financing statements against those officials thereby
potentially creating serious personal financial difficulties for them.
Such "paper terrorism" can take a variety of forms. These often
include the filing of outright false financing statements, asserting
claims that do not in fact exist. In New York, in particular, they
also may include statements asserting infringement of a copyright
enjoyed in one's name.' Moreover, whatever form the fraudulent filing
takes, it invariably runs afoul of the requirement, under UCC section
9509(a), that an alleged debtor authorize the filing of a financing
statement memorializing a claim against him or her.

Under the UCC as now written, there is no easy means by which to deter
or otherwise prevent such abuse. The DOS must accept each financing
statement filed for recording and subsequently make it available for
public viewing. The result: once a fraudulent financing statement is
recorded -- and if sufficient on its face when filed, it must be
recorded - that statement can raise red flags that substantially
prejudice the availability or price of credit, complicate employment
prospects and sully a public servant's reputation.


To combat this abuse, this measure proposes amendments to the Penal
Law and to the UCC. The former (see bill section three) would amend
section 175.35 of the Penal Law (entitled "Offering a false instrument
for filing in the first degree") to make it a class E felony offense
to commit the existing class A misdemeanor offense of Offering a False
Instrument for Filing in the Second Degree (see Penal Law § 175.30)
through the knowing filing of a fraudulent UCC financing statement
that identifies the debtor as a State or local officer under section
two of the Public Officers Law, or a judge or justice of the Unified
Court System, where that fraudulent filing is "in retaliation for the
performance of official duties" by the affected public servant. This
amendment is similar to Federal law making it a serious Federal
offense "to file, in any public record or in any private record which
is generally available to the public, any false lien or encumbrance
against the property of (a Federal judge or Federal law enforcement
officer), on account of the performance of official duties by that
individual, knowing or having reason to know that such lien or
encumbrance is false .. ," See 18 USC § 1521 (establishing the Federal
offense of Retaliating Against A Federal judge or Federal Law
Enforcement Officer By False Claim Or Slander Of Title).

The UCC amendments proposed by this measure (see bill section four)
would create a court procedure to summarily invalidate fraudulent
liens. Under this procedure, a State or local public employee or
criminal defense lawyer who has represented the filer in criminal
court listed as the debtor in a financing statement containing a false
statement or false information may under certain circumstances
commence a special proceeding for the expungement or redaction of the
financing statement. In this special proceeding, which is exempt from
court filing fees, the petitioner must plead that the offending
financing statement was falsely filed or amended to retaliate for the
petitioner's performance of official duties (or, where the petitioner
is a lawyer who is not a public employee, for the petitioner's
performance of his or her duties representing the filer in criminal
court); that the financing statement is not one relating to an
interest in a consumer transaction, a commercial transaction or any
other transaction between petitioner and respondent; that the
collateral covered in the financing statement is petitioner's
property; and that prompt redaction or invalidation of the financing
statement is necessary to avert or mitigate prejudice to the
petitioner. The UCC amendments proposed by this measure (see bill
section four)

Where the court finds that the UCC financing statement at issue was
falsely filed, the court may then direct expungement of the financing
statement or redaction of appropriate portions thereof. In such event,
the court must see that a copy of its order is filed with the
Secretary of State; and, if the wrongful filer is incarcerated, with
the head of the correctional facility. The court also may grant relief
authorized by UCC section 9-625 and bar the respondent wrongful filer
from filing other UCC statements without leave of court.

The special proceeding hereby authorized is narrowly-tailored so as
not to otherwise call liens arising from commercial transactions or
other valid liens into question, alter legitimate UCC incentives or
impose burdens upon commercial enterprises. Moreover, it is carefully
drawn to avoid placing burdens upon the DOS.


Finally, this measure also would direct the Chief Administrative Judge
to adopt rules to govern the special proceeding authorized herein,
including rules permitting the court to empower a referee to hear and
determine the matter so as to minimize delay and assure its
expeditious disposition (see bill section two).

As noted, this is by no means a problem that is unique to our State.
Nor do the remedies proposed by this measure promise total protection
for government officials here. Absent co-ordinated efforts by all
states to identify and rebuff abuse of the UCC recording system, there
is nothing New York can do to assure its public servants that they
will not be victims of fraudulent filings in other states. This said,
the instant measure is a significant first step in that it will give
law enforcement authorities the tools needed to discourage fraudulent
filings in New York; and public officials generally, along with
certain others who play an active role in the administration of
justice, the means by which to protect their credit and their good
name in the public record.

This measure would have no fiscal impact upon the State or any of its
political subdivisions. Bill sections one, two and four, addressed to
establishment of special proceedings to expunge a wrongfully filed UCC
financing statement, would take effect immediately. Section three,
criminalizing as a felony the wrongful filing of such a statement
under certain circumstances where the alleged debtor is a State or
local officer under the Public Officers Law or a judge or justice of
the Unified Court System, would take effect November first next
following the date on which this measure becomes a law.

Legislative History: None. New proposal.

{1} Here in New York we are receiving a growing number of reports of
judges who have been victimized, and we are aware that there are many
other State and local officials, in addition to criminal defense
attorneys, who likewise have been targeted.

{2} A dubious claim at best: viz., it is legally impossible to assert
a copyright in one's name against its use in a public proceeding.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 4042--A
    Cal. No. 637

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                              March 5, 2013
                               ___________

Introduced by Sens. BONACIC, HASSELL-THOMPSON, MAZIARZ -- (at request of
  the Office of Court Administration) -- read twice and ordered printed,
  and  when  printed  to  be  committed to the Committee on Judiciary --
  reported favorably from said committee and committed to the  Committee
  on  Codes  -- reported favorably from said committee, ordered to first
  and second report, ordered to a third reading, passed  by  Senate  and
  delivered  to  the  Assembly, recalled, vote reconsidered, restored to
  third reading, amended and ordered reprinted, retaining its  place  in
  the order of third reading

AN ACT to amend the judiciary law, the penal law and the uniform commer-
  cial code, in relation to financing statements falsely filed under the
  uniform commercial code

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Legislative findings. The legislature finds that the retal-
iatory filing of false financing statements under the uniform commercial
code by members of separatist  groups  against  New  Yorkers  in  public
service  and  private service is a growing and pernicious practice. As a
result of the proliferation of such filings, the credit of  New  Yorkers
in  public  service and private service has been impaired solely because
they were doing their jobs on behalf of the citizens of the state. It is
vital that all appropriate steps be  taken  to  counter  this  practice.
Accordingly, it is the objective of this act to discourage the filing of
false  financing  statements and to provide a meaningful and expeditious
remedy for those who have been harmed by such filings. It  is  also  the
objective  of  this  measure  to  declare the state's interest in future
effectuation of a second step: careful review of procedures  authorizing
the filing of financing statements under the uniform commercial code and
subsequent  modification  of  laws and procedures as may be necessary to
ensure that the public is  adequately  protected  against  the  kind  of

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD08971-07-3

S. 4042--A                          2

retaliatory  filing  of  false financing statements to which this act is
addressed.
  S  2.  Subdivision 2 of section 212 of the judiciary law is amended by
adding a new paragraph (s) to read as follows:
  (S) ESTABLISH RULES FOR SPECIAL PROCEEDINGS AUTHORIZED  BY  SUBSECTION
(D)  OF  SECTION  9--518  OF THE UNIFORM COMMERCIAL CODE. SUCH RULES MAY
AUTHORIZE THE COURT IN WHICH SUCH A SPECIAL  PROCEEDING  IS  PENDING  TO
ORDER A REFEREE TO HEAR AND DETERMINE SUCH SPECIAL PROCEEDING.
  S  3. Section 175.35 of the penal law, as amended by chapter 99 of the
laws of 1998, is amended to read as follows:
S 175.35 Offering a false instrument for filing in the first degree.
  A person is guilty of offering a false instrument for  filing  in  the
first degree when[,]:
  1.  knowing  that  a  written instrument contains a false statement or
false information, and with intent to defraud the state or any political
subdivision, public authority  or  public  benefit  corporation  of  the
state,  he OR SHE offers or presents it to a public office, public serv-
ant, public authority or public benefit corporation with  the  knowledge
or  belief  that  it  will  be  filed with, registered or recorded in or
otherwise become a part of the records of  such  public  office,  public
servant, public authority or public benefit corporation[.]; OR
  2.  (A) HE OR SHE COMMITS THE CRIME OF OFFERING A FALSE INSTRUMENT FOR
FILING IN THE SECOND DEGREE; AND
  (B) SUCH INSTRUMENT IS A FINANCING STATEMENT THE CONTENTS OF WHICH ARE
PRESCRIBED BY SECTION 9--502 OF THE UNIFORM COMMERCIAL CODE, THE COLLAT-
ERAL ASSERTED TO BE COVERED IN SUCH  STATEMENT  IS  THE  PROPERTY  OF  A
PERSON  WHO IS A STATE OR LOCAL OFFICER AS DEFINED BY SECTION TWO OF THE
PUBLIC OFFICERS LAW OR WHO OTHERWISE  IS  A  JUDGE  OR  JUSTICE  OF  THE
UNIFIED  COURT  SYSTEM,  SUCH  FINANCING STATEMENT DOES NOT RELATE TO AN
ACTUAL TRANSACTION, AND HE OR SHE  FILED  SUCH  FINANCING  STATEMENT  IN
RETALIATION FOR THE PERFORMANCE OF OFFICIAL DUTIES BY SUCH PERSON.
  Offering  a false instrument for filing in the first degree is a class
E felony.
  S 4. Section 9--518 of the  uniform  commercial  code  is  amended  by
adding a new subsection (d) to read as follows:
  (D) SPECIAL PROCEEDING TO REDACT OR EXPUNGE A FALSELY FILED OR AMENDED
FINANCING  STATEMENT. (1) PROVIDED HE OR SHE IS AN EMPLOYEE OF THE STATE
OR A POLITICAL SUBDIVISION THEREOF, A PERSON IDENTIFIED AS A DEBTOR IN A
FINANCING STATEMENT FILED PURSUANT TO THIS SUBPART MAY BRING  A  SPECIAL
PROCEEDING  AGAINST  THE  NAMED FILER OF SUCH STATEMENT OR ANY AMENDMENT
THEREOF TO INVALIDATE THE FILING OR AMENDMENT THEREOF WHERE SUCH  STATE-
MENT WAS FALSELY FILED OR AMENDED; EXCEPT THAT AN ATTORNEY WHO IS NOT AN
EMPLOYEE  OF THE STATE OR A POLITICAL SUBDIVISION THEREOF MAY ALSO BRING
A SPECIAL PROCEEDING HEREUNDER WHERE HE OR SHE REPRESENTS OR HAS REPRES-
ENTED THE RESPONDENT THEREIN IN A CRIMINAL COURT. SUCH SPECIAL  PROCEED-
ING  SHALL  BE  GOVERNED  BY  ARTICLE FOUR OF THE CIVIL PRACTICE LAW AND
RULES, AND SHALL BE COMMENCED IN THE SUPREME COURT OF ALBANY COUNTY, THE
COUNTY OF THE PETITIONER'S RESIDENCE OR A  COUNTY  WITHIN  THE  JUDICIAL
DISTRICT  IN  WHICH  ANY  PROPERTY COVERED BY THE FINANCING STATEMENT IS
LOCATED. NO FEE PURSUANT TO ARTICLE EIGHTY OF THE CIVIL PRACTICE LAW AND
RULES SHALL BE COLLECTED IN SUCH SPECIAL PROCEEDING.
  (2) THE PETITION IN A SPECIAL PROCEEDING HEREUNDER SHALL PLEAD THAT:
  (A) THE FINANCING STATEMENT FILED OR AMENDED BY THE RESPONDENT  PURSU-
ANT TO SECTION 9--509 WAS FALSELY FILED OR AMENDED TO RETALIATE FOR: (I)
THE PERFORMANCE OF THE PETITIONER'S OFFICIAL DUTIES IN HIS OR HER CAPAC-
ITY  AS  AN EMPLOYEE OF THE STATE OR A POLITICAL SUBDIVISION THEREOF, OR

S. 4042--A                          3

(II) IN THE CASE OF A SPECIAL PROCEEDING BROUGHT BY AN ATTORNEY  WHO  IS
NOT  AN  EMPLOYEE  OF  THE  STATE OR A POLITICAL SUBDIVISION THEREOF, TO
RETALIATE FOR THE PERFORMANCE OF THE PETITIONER'S DUTIES IN HIS  OR  HER
CAPACITY AS AN ATTORNEY FOR THE RESPONDENT IN A CRIMINAL COURT; AND
  (B)  SUCH  FINANCING  STATEMENT  DOES  NOT  RELATE TO AN INTEREST IN A
CONSUMER-GOODS TRANSACTION, A COMMERCIAL TRANSACTION, OR ANY OTHER ACTU-
AL TRANSACTION BETWEEN THE PETITIONER AND THE RESPONDENT; AND
  (C) THE COLLATERAL COVERED IN SUCH FINANCING STATEMENT IS THE PROPERTY
OF THE PETITIONER; AND
  (D) PROMPT REDACTION OR INVALIDATION OF  THE  FINANCING  STATEMENT  IS
NECESSARY TO AVERT OR MITIGATE PREJUDICE TO THE PETITIONER.
  (3) IF THE COURT MAKES A WRITTEN FINDING THAT THE ALLEGATIONS IN PARA-
GRAPH  TWO OF THIS SUBSECTION ARE ESTABLISHED, THE COURT SHALL ORDER THE
EXPUNGEMENT OF SUCH STATEMENT OR ITS REDACTION IN THE PUBLIC RECORDS  IN
THE  OFFICE  IN  WHICH THE FINANCING STATEMENT IS FILED, AS APPROPRIATE,
AND MAY GRANT ANY ADDITIONAL RELIEF AUTHORIZED  BY  SECTION  9--625.  IN
SUCH  CASE,  THE  COURT SHALL CAUSE A COPY OF ITS ORDER TO BE FILED WITH
THE SECRETARY OF STATE OR OTHER APPROPRIATE FILING  OFFICE  PURSUANT  TO
THIS  CHAPTER.  UPON  A  FINDING  THAT  THE  RESPONDENT HAS ENGAGED IN A
REPEATED PATTERN OF FALSE FILINGS AS FOUND UNDER  THIS  SUBSECTION,  THE
COURT ALSO MAY ENJOIN THE RESPONDENT FROM FILING OR AMENDING ANY FURTHER
FINANCING STATEMENT PURSUANT TO THIS ARTICLE WITHOUT LEAVE OF THE COURT.
IF  THE RESPONDENT IS INCARCERATED AT THE TIME THE COURT ISSUES AN ORDER
CONTAINING SUCH AN INJUNCTION, THE COURT SHALL CAUSE  THE  HEAD  OF  THE
CORRECTIONAL FACILITY IN WHICH THE RESPONDENT IS INCARCERATED TO RECEIVE
A  COPY OF SUCH DETERMINATION. THE HEAD OF SUCH A FACILITY SHALL CAUSE A
COPY OF SUCH ORDER TO BE PROVIDED TO THE RESPONDENT. IN ANY INSTANCES OF
THE ISSUANCE OF SUCH AN INJUNCTION WHERE THE RESPONDENT  HAS  DEFAULTED,
THE COURT SHALL DIRECT SERVICE OF SUCH INJUNCTION UPON THE RESPONDENT.
  S  5.  This  act  shall take effect immediately; provided that section
three of this act shall take  effect  on  the  first  of  November  next
succeeding  the  date  on  which  it  shall have become a law; provided,
further, subdivision 2 of section 175.35 of the penal law, as  added  by
section three of this act, shall apply solely to the filing or amendment
of  financing  statements  under subpart 1 of part 5 of article 9 of the
uniform commercial code on or after such effective date.

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