Senate Bill S158

                                 BILL NUMBER:  S158

 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.