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Article Wanted On JLPP and Related Issues
In re Aura Systems, Inc., 347 B.R. 720 (Bankr. C.D. Cal.), holds that a C.C.P. §697.510 Judgment Lien on Personal Property recorded with the Secretary of State in California is not effective to create a lien on personal property in California owned by a judgment debtor that is not a California corporation. In that case the debtor was a Delaware corporation that filed a Chapter 11 petition in Los Angeles. A judgment creditor with a JLPP filed in Sacramento claimed secured creditor status and the D.I.P. objected claiming lack of perfection of the judgment lien. The court granted summary judgment determining the creditor to be unsecured because with the 2001 changes to the Commercial Code, the state of incorporation is the proper place to perfect a security interest in personal property. C.C.P. §697.530 specifically limits the obtaining of the JLPP to personalty "if a security interest in the property could be perfected under the Commercial Code by filing a financing statement at that time with the Secretary of State." Since you can’t perfect a security interest in Delaware corporations property by filing with the California Secretary of State, the JLPP recorded there doesn’t work either.
The court left open the question of whether filing the lien form with the Delaware Secretary of State would have been sufficient to perfect if there was no domestication of the California judgment in Delaware.
Since C.C.P. §488.500 provides that, "if equipment is attached pursuant to Section 488.375 or farm products or inventory is attached pursuant to Section 488.405, the attachment lien on the property covered by the attachment lien has the same force and effect as a judgment lien on personal property created at the same time would have pursuant to Sections 697.590 to 697.620, inclusive," does that mean that recording your writ of attachment with the California Secretary of State in an action against a foreign corporation is ineffective? There are undoubtedly other similar concerns.
We need someone to write an article on these issues. Volunteers should contact the Newsletter editor, Russell Rapoport of Plotkin, Rapoport & Nahmias, P.C., by e-mail to RRapoport@PRNlaw.com.