Report Title:

Prevention of the filing of frivolous financing statements

Description:

Prevents the filing of frivolous financing statements with the bureau of conveyances by assuring that the filing of the financing statements are authorized by the debtors. (HB2443 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

2443

TWENTY-FIRST LEGISLATURE, 2002

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO THE PREVENTION OF THE FILING OF FRIVOLOUS FINANCING STATEMENTS.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Section 507D-2, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read:

""Financing statement" means a record filed under article 9 of chapter 490."

SECTION 2. Section 507D-1, Hawaii Revised Statutes, is amended to read as follows:

"[[]§507D-1[]] Findings and purpose. The legislature finds that there is a problem with the recording at the land court or the bureau of conveyances of invalid instruments which purport to affect the property interests of various persons, including but not limited to government officers and employees. These instruments, which have no basis in fact or law, have a seriously disruptive effect on property interests and titles. They appear on title searches and other disclosures based on public records, and are costly and time-consuming to expunge. When they so appear, they may obstruct a property owner's ability to transfer title or obtain title insurance and financing.

The bureau of conveyances does not have the discretionary authority to refuse to record instruments so long as those instruments comply with certain minimal format requirements. It would be inefficient and require substantial governmental expenditures to have the bureau of conveyances determine the legal sufficiency of instruments submitted for recordation. The land court's registrar screens instruments submitted for recordation, but has no mechanism to prevent the filing of frivolous lien claims during the pendency of litigation. Similarly, the bureau of conveyances is in need of a mechanism to address the filing of frivolous financing statements.

The legislature finds that it is necessary and in the best interests of the State and private parties to legislatively provide a means to relieve this problem, and to limit the circumstances in which nonconsensual common law liens shall be recognized in this State[.] and to prevent the filing of frivolous financing statements."

SECTION 3. Section 507D-4, Hawaii Revised Statutes, is amended to read as follows:

"§507D-4 Contesting validity of recorded instruments; injunctions. (a) A party in interest in real or personal property which is subject to a claim of nonconsensual common law lien, who believes the claim of lien is invalid, may file a petition in the appropriate circuit court to contest the validity of that purported lien and to enjoin the lien claimant from making further filings with the registrar. The petition shall state the grounds upon which relief is requested, and shall be supported by the affidavit of the petitioner or the petitioner's attorney setting forth a concise statement of the facts upon which the petition is based. The procedure for obtaining injunctions and temporary restraining orders shall apply in cases brought under this section or section 507D-7(b).

(b) Any party in interest in fixtures or personal property which is covered by a financing statement, who believes the filing of the financing statement was unauthorized, may file a request with the registrar to determine the validity of the filing. Upon the receipt of the request which shall identify the financing statement by document number, the registrar shall send a demand, by certified or registered mail, to the secured party, at the address as set forth on the financing statement, that the secured party provide a copy of the security agreement which purportedly authorized the filing of the financing statement to the registrar no later than thirty days following the postmarked date of the registrar's notice. If the security agreement is not received by the registrar within the thirty-day period, the registrar shall issue to the party in interest and shall accept for filing a notice of unauthorized filing of financing statement. The filing of a notice of unauthorized filing of financing statement shall effectively terminate the unauthorized financing statement.

[(b)] (c) Subsection (a) shall not apply to any instrument that is recorded by the United States, the State, or any county."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2002.