[BLANK_AUDIO] Judicial court please come to order, I wanna introduce first our house sergeant-at-arms that are helping us today David Latin is here to my left right click is right here to my right and [INAUDIBLE] is at the back and we are happy I think there are some pages I believe that are here with us [INAUDIBLE] Linear Chapman from Catawba county back at the back. [UNKNOWN] take note. >> Yes sir. >> Sarah Kim from Gilford County, is also back at the back. Freelam Pawson/g from Wake county and Gill Williams from Robertson County. David help the folks with a saucer. The first bill on the calendar today is house bill 1060 conform full payment check law to UCC. Representative Brian. [BLANK_AUDIO] >> Thank you, Mr. Chair, committee members. The bill that we're discussing today and for the most part coming from the general statutes commission and as you may or may not be aware, the general statute commission often deals with all the uniform codes around the country and then looks at North Carolina's alignment with those. We often have adopted parts of those and we often make reviews to see if we're still in alignment with them and then recommend changes to the Body. Most of these that you'll hear from me today are highly technical and hopefully won't put you to sleep. The first rule is House Bill 1080, and this relates to our [INAUDIBLE] sanction laws. And again, this is trying to match up what the Uniform Commercial Code does for most of the states surrounding us, with what [UNKNOWN] presently is. Basically the way to right now data confederal debt in good faith, and you probably heard of this. You send a check off to your debtor marked paid in full right? And if the debtor accepts that check, they've accepted that as full satisfaction. But one of the things, and I now see if there's a place where designated by the creditor of the person, office or place for where they're supposed to send that payment. If there's not, then the creditor has 90 days to repay the debtor of the amount back in full satisfaction and so if you have a debt of $10,000 you send a $1000 payment marked paid in full, this is the uniform code, this is not overall right now but the uniform code would allow that debtor, if it was deposited like some automated check depositing system it was deposited they would then, if they realized oh they've marked this pay in front, they can send it back to you within 90 days so you can't just void your debt by miraculously having it deposited. I think I may turn over to staff for any further explanation or clarification on what the bill does and I'm sorry, I can't remember >> [INAUDIBLE] why is work condition on staff if there are questions members of the committee would like to direct to her or why if there's some comment you feel would be appropriate for you to make in advance of questions. >> I'm [INAUDIBLE] Hall. I'm one of the staff attorneys for the general statutes commission. Actually we have a much more knowledgeable person here with us, Professor James Beckwith from NC Central who probably really would be the best person to [INAUDIBLE]. >> Before we go to Professor Beckwith, are there other questions for the bill sponsor or for Ms.
Hall at this point. Representative Richardson. >> I just wanna go on record saying I like the way of being able to send in whatever amount paid in full and [INAUDIBLE] that way. >> [LAUGH] >> I understand that. I'm sympathetic myself. >> [LAUGH] >> Thank you. Okay. Is our mic hooked up back here? [BLANK_AUDIO] Here's the mic up here, Professor Beckwith if you wanna come up to the mic, Representative Baskerville actually has a question. I don't know. It maybe that professor Beckwith will want to answer that. He may have some comments of his own after that, but let's go ahead and with your question. >> Thank you, Mr. Chair. I was gonna direct it to staff seeing how my sales and secure transactions professor, Mr. Beckwith, probably figured out that none of these answers are ready, but I will ask you that question, Professor. So is this an issue that ghettos were experiencing a problem or issues with the creditors. What's the impetus for this? The impetus was my observing for all the last 25 years since the statute became law, trying to explain the omission of subsection C2. Now to answer Representative Richardson's comment, I totally agree because according satisfaction by check is a good thing. It's a simple way to settle debts without having the litigation. So if you receive a full payment check and you decide to cash it, then that's it. Now the statute was drafted with two options to prevent accord and satisfaction. One is a business like a huge department store could have a special office, and if you didn't send your full payment check to that special office, then if the check was cashed it would not erase the debt you'd still have to settle or negotiate, the other is what if you didn't a smaller business didn't have an office, well another thing we assume is that automated check processing is a good thing that when businesses turn over their, if a business is receiving thousands of checks,the vast majority of checks are fine there is no we don't want to encourage businesses to scrutinize each check individually cuz that needlessly would raise the cost of doing business, which will be passed on to consumers and that's not a good thing. But on the other hand, if a business chooses to use what we call a lock box, which is automated check processing and they haven't got a special office designated, and someone sends in a full payment check and it goes to the lock box where nobody scrutinizes the detail language on the check. They're looking at the account by numbers. It's all by computer, it's efficient, it's a good thing but then a full payment check might go through and be cashed. And then the question is the creditor then for the very first time discovers that a full payment check has come through. They were not informed by the debtor that it was a full payment check. They had no idea it was gonna happen, then later after the check clears they discover, oh there was a full payment check. I didn't know anything about it and that gives them 90 days to repay the money if they still want to settle negotiate with the creditor, but if they knew a check was coming in sub section D which is not part of the bill cuz it's been under the law for 25 years, if you know what's full payment check is coming and you accepted and cash it that's it, you cannot repay the money, this addition of C2 which was omitted in 1995 addresses only a tiny fraction of check that are full payment but are cashed without the knowledge of the creditor then the creditor is given the opportunity if they wish to re-tender the money and then negotiate in that tiny small number of cases. >> Thank you, >> Representative Tobert. >> Thank you for that explanation.
There's one piece in there I just can't grasp, and that piece is if I write you a full payment check, then that full payment has come from that number, that amount has come from something or somewhere. I'm under the assumption I'm paying off that debt by the writing of this check, sending it to you. Once you receive that check, whether it's cashed or not cashed, I know that I've paid off my debt. What it sounds like is how is there an assumption made simply because I didn't notify you to allow you 90 days to call me back to say actually you didn't pay off that check we have to come to an additional term for full payment. I'm missing that part right there. Cuz I paid off my debt. >> When you say you paid off your debt, is there 3311 presupposes the common law background, is there a good faith dispute as to what is owed? >> No. If I have a piece of paper saying your full debt payoff or if I call a bank for example and say your debt payoff on this date is XYZ, and so I write a check send it to bank, or a write a check send it to a whatever, but unless I've seen that payoff number from somewhere that was issued by the company which the debt is carried, how would I even know what the full debt payoff was so if I write a full debt payoff, I'm going with the assumption that I paid it off. >> Well I think in that case if there is no dispute as to whether a debt is owed or inability to calculate it 3311 isn't even gonna apply because it presupposes the common law background that full payment checks that work in accordance to satisfaction assume that either there is a bonafide dispute or an inability to calculate that it's called up. >> Okay, when you [UNKNOWN] if I call you and tell you that there's one coming and you acknowledge it done. >> Well is there a bonafide dispute? >> Correct. Understand that. >> Then if you have a disagreement with your creditor and you send them a full payment check and that creditor knows the check is coming and that creditor has authority over the debt and they cash it, it's settled. >> It's done. Okay. Now what's to prohibit the same assumption as the first that I've got a document from whoever owns the debt and I pay the amount due to pay off the debt early. I'm so thrilled, I'm happy I'm paying off already. So I pay that amount, and then to hear back within 90 days- >> You couldn't. Because in your hypothetical that's not a disputed debt. For example, you've gotten a pay-off quote, there is no disagreement as to how much is owed, 3.3.11 doesn't apply. >> Okay, so- >> One final one. So let's say I have a bill from the debtor- >> The creditor ad you're the debtor. >> And I'm the debtor, and I've gotta pay that back. So I've had the paperwork for 20 days, 25 days, I said I'm just gonna write this thing off, [INAUDIBLE] extra money, and be done with it, and I send it in. Is there an opportunity for the person I'm paying the loan off to [INAUDIBLE] back say, you didn't incorporate a $20 fee for processing or $30 service paper processing so please remit an additional 20 or 30 or 50 or whatever that might be. I'm trying to make sure it's as clean as a whistle, that's all I'm trying to do. [BLANK_AUDIO] >> I might try to venture a couple of thoughts. I think that might depend on whether or not you have the agreement you're raising doesn't allow for any kind of charge like that. Assuming it did not, I think to go back to Representative Fredrickson's/g somewhat joke, I think the main point is, let's say Representative Torra/g you have $5,000 owed on your car still, and you said I don't think this car is worth 5,000 more dollars, I'm gonna write them a $3,000 check marked paid in full on it. >> Well, but you can't do that. >> Well you can actually, and if they deposit it and then the 90 days go by and they don't do anything then you're done. I mean, you've paid it off for the lesser debt. So that you'd make the full payment, there's no dispute about the debts, if you're paying it off in full, this is if maybe we're arguing, maybe the company has told you that you owe 5,000 and you're like, I think I owe only 3,000 and you might [INAUDIBLE] 3,000 not paid in full, the goal is to an automated and this UCC role is in almost every other state think we're one of the few exceptions. Montana. But so if you do that, this allows for people to have an automated
system and if they check it through within 90 days, oh he tried to pay in full and we think his debt's actually 5,000, they can send you back your three in full and continue to argue about it. >> That gets to where I'm going to. Let's say if I may, Mr. Chairman I'm sorry. Just trying to get a full understanding. You've send in a check for three, you owe five. It goes through an automated system. Nobody's touched it. Nobody's seen it. It automatically throws it in the bank account somewhere and it's drawn out $3000 and it goes in. And sometime within 90 days somebody overseeing those accounts says, oh look. This guy sent three he owes five. If it's within the 90 days, they can go back and say actually we didn't accept the three. That being said, then what is the legal time limit to reimburse that individual the $3,000 that they sent in in the first place? Is it going to be 120 days? Is it going to be a 90 day? Is it gonna be 60 day?- >> I think it's the 90 days. >> They have to act within 90 days. >> You've got to send that back to them in 90 days. >> Thank you. >> Further questions? Representative Willingham. >> My question is kinda similar to that. I want to know if this law would apply to credit card companies. You wanna direct that to Professor Beckwith or to his staff or to Chairman Brian? You have a choice. >> [LAUGH] >> Okay. >> Representative Brian. >> Representative Brian. >> Maybe I'll just ask that to confirm, I think it applies to everyone. It would apply to anyone you gotta be writing a check and making it paid in full. If you are sending a check to pay off your credit card then you mark it paid in full, I think it would apply, I'm just asking. >> I might say. I think we're talking debtors and creditors would be a credit card company or anyone else to whom something is owed. And I'm assuming they could be making the claim that this is dealing with. The creditor could be a credit card company, right? >> [INAUDIBLE] The reason I ask that is that there's some, in another business, where the credit card company accepts money payment to what's owed and the assumption is that I've taken care of my obligation. But then 30 days later, I get a notice to my business, telling me that they recalculated something so even though I thought I paid a lot, to know you owe some more now because we recalculated so we taxing you more money you need to pay more for whatever reason. >> Professor or Ms. Bly, one of you wanna tackle that question. >> Well that's an interesting one cuz when the check was sent in there was no dispute. It's only after the fact. I hesitate to talk about credit card law because now we have the federal regulation, the new very aggressive regulations in the CFR and others, cuz when you involve a credit card, you bring in federal law and that complicates the question. This is focusing solely on state law and, the usual case but it could involve credit card companies as well. >> I wanna follow up if I may on Representative Willingham's question. You, in responding to it, Professor, indicated that under section 3.3 11 that maybe since there was not a dispute then it wouldn't apply but the section also says doesn't it that if there is an unliquidated plain, can you explain to the committee, that's a separate basis. What would constitute an unliquidated claim. >> It's one where there was no denial that there was a debt but either the debt could not be calculated because of uncertainty or disagreement as to how much was owed. >> Could not be calculated by a court could not be calculated by the debtor, could not be calculated by the claimant. >> Could be the difficulties, between the parties in calculating how much the debt was? >> Would that include this $20 extra charge that they come up with later that, could that constitute making the claim unliquidated? [SOUND] [BLANK_AUDIO] [INAUDIBLE] That question
>> I'm uncertain because the claim is coming later and the assumption is under, to preserve the prior common law view, it was, That's when the check is tendered. There is either a dispute in good faith or an inability to calculate how much is owed at the time the check is tendered. >> Representative Richardson, you had a question. >> I do and this one is serious. So if I send the $3000 in and I owe five, they are obligated to send it back to me otherwise if they keep the three then it voids the credit completely within that 90 days? >> If they go ahead and cash that check, and then within 90 days do not return it back to you, then that's right. The debt is satisfied. >> Thank you. Other members of the committee have questions? I've got a couple more if I may just for clarification. As I understand it, if we approve this we would be adding to the North Carolina version of the uniform commercial code, something that has been in the uniform Commercial code for many years. >> Since 1990. >> Do you know historically why we didn't include this back then? >> Well courtesy of Bly Hall, she is the institutional memory, I do know but I would let her tell you. [INAUDIBLE] and when the question came up [INAUDIBLE] The answer is, at that point in time, I made a check [INAUDIBLE] and it's one of the things that was done [INAUDIBLE] >> Okay. Under this new version and if we approve it, basically the debtor would be somewhat at risk for 90 days that what they thought was a settled claim and their check has already cleared their bank account, in fact it's still disputed and that sometime, as long as it's within 90 days, the creditor can basically say no that's not right. We now 90 days later, 60 days, 70 days, we give you your money back. We've got us a lot to claim still. Is that correct? >> It's only in a very tiny number of cases in which a full payment check went through automated check processing. And it's a surprise to the creditor to learn that a full payment check has come through. >> But it may be a surprise to the debtor when it comes back, right? >> Yes. >> And under the law if we amend it in this way, is there a way that the debtor can protect him or herself from such a surprise? [BLANK_AUDIO] >> [INAUDIBLE] >> Well subsection D which is always been part of the act, if the debtor wants to be absolutely certain that there is no surprise, you inform the creditor that the full payment check is coming because the surprise arises if the check goes through automated check processing and the creditor doesn't know it. So if you inform someone who has authority over settlement of debt and bill payment then if they choose under d, to cash the check that settles it. So if the debtor informs the creditor that a full payment check is coming and someone with authority knows it and they cash it then it's settled, but if you don't inform and it is no special office. And it goes through the lock box automated system. Yes, the debtor could be surprised. >> Thank you. One final question. Let's say that I am trying to do what you said under subsection D so I don't get surprised, and I'm dealing with a company that is a global company located with it's main headquarters n Seattle and it's got various regional headquarters.
How can I as a debtor in North Carolina know for sure, who it is I've got to give notice to and confirm they received it in order to have the protection of subsection D. >> Well you would have the protection of subsection D whether or not the debtor knew about it. If in fact someone with authority did know the check was coming. But if you were choosing to inform the creditor, so you could come within subsection D and avoid a repayment after it's going through a lockbox, you'd look at article one and the definition of notice, if you basically inform in a large business entity, you contact the place that regularly receives those kinds of notices, that will give notice to the enterprise, even though the CEO never receives it personally. But that's from article one. >> But subsection D appears to say that if I, the debtor can prove that someone who has direct responsibility with respect to the disputed obligation knew how do I know who's got direct responsibility with respect to the disputed obligation. Isn't that something that is dependent upon how responsibilities are assigned within the business organisation that I'm trying to deal with? >. That's exactly right. >> And how do I avoid them saying, well I'm sorry. Yeah they are over accounts receivable but they don't have direct responsibility that allows them to settle disputed claims. You should have gone to the vice president for finances? >> Well I can direct you to the language of the comment that talks about the difference about different parties in large entities and the comment for example distinguishes between the manager of a retail outlet verses the chief executive officer of a chain store. So that the local manager, for example, would typically be somebody who would have responsibility for payment. So they're looking lower in the chain of this large entity and then if you look at the notice provision under article one if you enter this communication into the chain of where you received these kinds of notices, it would be effective against the entity. Whether or not the actual party receives it. >> Further questions from members of the committee. Seeing on. is there a motion with respect to house IV- >> [INAUDIBLE] >> Yes, yes, yes. I'm sorry. >> Usually, and this is Professor Hailey/g from the General Statutes Commission who reminded me. Usually these large global companies are not gonna be under D because they will have established a full payment check special office, so they will typically have sent a to the debtor. If you wanna pay off the full payment check then send it to office [INAUDIBLE] , so that if you didn't it wouldn't pay it off but if you did, then the check gets special attention. So the possibility that a large entity as you've described, given that they're probably gonna have a special payments office, that would probably be a rare occurrence. >> [INAUDIBLE] >> [INAUDIBLE] >> We're ready. >> Mr. Chair I move for a favorable House bill 1060. >> All right. Further discussion? Seeing none, those in favor will say aye. >> Aye. >> Opposed no. The ayes have it. The motion is adopted. The next bill to come before the committee is House Bill 1061, preserve tenancy by the entirety. Representative Brian. >> Thank you, Mr. Chair. My daughter would say that was much spicier than I expected so we'll see how this one goes. There's two parts to this bill and I'm a little apologetic for the second part and it may not follow perfectly but I think it is a
technical change supported by the real property section, and [INAUDIBLE] will talk about that in a minute, I guess the part one, is the PCS proper before us, thank you for the question. >> I'm just noticing. Is there a motion that the PCS [INAUDIBLE] by Representative Hagar to PCSs before us? >> Thank you Mr. Chair again the PCS, the part two that I'll talk about in a minute, the whole first part of this matches what we went through with the general statutes commission and I think is exactly the same for senate bill 806 on part one. We have a nice memo attached, that actually does a great job of explaining part one of this bill, that the general statutes commission put together [INAUDIBLE] and the short form explanation of what we're doing here, and as you look through and you see all these changes made, you'll see references, the husband and wife that have just changed to spouse or legally married definition [INAUDIBLE] I think this is a technical change to put the keepers in line with the [INAUDIBLE] so that the definitions are just talking about who is married and the point of doing this is to make sure we protect Tennessee in it's entirety as a form of ownership. So whatever the definitions of marriage are, whether you like what they are now, whether they change in the future or not, this is just keeping them as legally married using general terminology but will fit, I think, under any scenario and you were expecting the right to have a tenancy by the entirety and there's some history that this goes through in the past where, I think it was in South Carolina, sometimes the courts end up interjecting into this process and if we leave our statute exactly as it is, in light of [INAUDIBLE], a court may just come along and say you know what, we don't think your language is correct and we think that you can't have a tenancy by the entirety because you've treated these different groups of married people differently. And if they do that, you can throw all the tenancies by the entirety in the state into a very problematic situation because you would have a change in a law that impacts however many millions of married couples we have across the state and it turns to the ownership they have of their land. I see Mr. Chair that Representative Warren has a question and maybe I'll let him interject on that Warren. >> Oh okay. We had two questions out there. Representative Warren. >> Thank you Mr. Chair. I just wanted to ask the bill sponsor if the [INAUDIBLE] is to clarify the definition of marriage and make corresponding technical changes to that, I think that's true, I wouldn't even necessarily say we're trying to do anything with the definition of merits in as much we're trying to say [INAUDIBLE] we're just trying to make sure our definitions we don't think are in violation of that and maybe even objectively, we're trying to protect the tenancy by the entire debate using words and describing the married couple in such a way as they will not harm the general concept of a tenancy by the entirety in the state. So I think I'm trying to point out no matter what you're feelings are about any of the debates that have been had, I think this is technical to try to make sure we keep a tenancy by the entirety as a method protected as a form of ownership. >> Follow up. >> Okay, that's essentially what I was trying to ask. I guess we have to watch the nuances of our terminology when we talk about defining something like marriage. Again so that I'm understanding is that you're particularly making the clarification of what constitutes the arrangement between two people without going into this and then the rest of the bill is just making those corresponding changes throughout the existing statute. Is that correct? >> I think that's correct Mr.
Chair but I'll ask staff. >> Not throughout the statutes, it's only with respect to [INAUDIBLE] >> Thank you, Mr. Chair? >> Yeah, follow up. >> Now is the appropriate time for motion. >> I think Representative Hager had a question, and I will try to come back to you, Representative Warren. >> Mr. Chair, I think Representative Warren's getting the point that I wanna get at. This seems to be technical corrections is springing up after the recent Supreme Court ruling. I really just technical changes seems to me so thank you for doing it. >> And I'll make a follow up and then I'll make a follow up on part two of the bill I think that is correct and in particular we are worried that [INAUDIBLE] is about the entirety in this room probably we may well own our property that way and if you sort of threw that into a problem that can create major problems across the state if a court order to read otherwise. The second part of the bill, which I believe is also a technical change, there was a lack of clarity. This gets really technical, and so I'm sorry for the highly technical nature, but you'll see in the statute the revision, I guess you need a [INAUDIBLE] part two of your [UNKNOWN] may be the easiest place to look. It's basically talking about if a mortgage or deed of trust is given by a purchaser to secure a loan, so this is what we would call a purchase money mortgage and in the adverse clause regardless of whether the secure party is the seller of the real property or a third party lender that the mortgage is good against a spouse not withstanding that they did not join in the execution of the mortgage. This is similar to the language that was already in place. It's just clarifying that a purchase money mortgage means a mortgage either that was given by the seller. So if you're a purchaser, you're actually taking a loan from the person that is selling you the property or a third party lender is the one giving you the money to purchase the property. There's a court case that had I guess there was a discrepancy about which situation it applied in and this is trying to clarify it applies whether the mortgage or the deed of trust is for the benefit of the seller or a third party lender. Glad to have staff or anyone answer any question. Representative Willingham. >> Mr. Chair, I wanna go back to the definition. Could someone explain to me in 30 seconds or 50 seconds what the [INAUDIBLE] >> [INAUDIBLE] you wanna tackle that? >> These two United State Supreme Court case about same sex marriage. >>Okay, follow up.>> Follow up. >> [INAUDIBLE] what was the [INAUDIBLE] what does it say? >> It's the case that says the state cannot register as marriage to just members of the opposite sex that same sex couples also have to be reported [INAUDIBLE] >> Follow up. >> Yes. >> Okay, with this bill then, does this mean that this would apply to persons who are married who are not different sex? >> I'll let staff answer that. >> I'm not quite sure I understand your question correctly but I'm gonna answer what I think you asked. What the first part of the bill does is address the tendency by the entirety of statutes that we have to match the fact that overspelled those where we're going to have same sex couples marriages and the reason for that is, if we don't do this, it's likely to be a court challenge on the basis of equal protection so that our statutes [INAUDIBLE] right now, and if you leave it up to a court, the court could wind up saying if every married couple can't have this,
no married couples can have it. >> Okay. Is that it? >> That's it. I just wanted that to be clear. >> Are there other questions from members of the committee? Seeing none, Representative Warren, you're recognized for a motion this is a PCS. >> Thank you Mr. Speaker [INAUDIBLE] house bill 1051 [INAUDIBLE] >> You've heard the motion, is there discussion, seeing none, those in favor say aye? >> Aye. >> Those opposed say no? The ayes have it, the motion is adopted, the next bill before the committee is house bill 262 [INAUDIBLE] access to digital assets Representative Brian, third time at [INAUDIBLE] [BLANK_AUDIO] Thank you, Mr. Chair. House Bill 1052. This bill [INAUDIBLE] the draft, the growing problem caused by the increasing use of electronic formats for documents in accounts, you can think of all the kinds of social media accounts and things people have [INAUDIBLE] it can also often be Be difficult to retrieve digital information so you can imagine if someone died, they had a Facebook account, Instagram, Snapchat, whatever kids like to use these days and people will need to go in and you can imagine bank accounts all kinds of digital passwords and getting access to that digital information Can be difficult. And so this basically sets forth a process and it even provides some various ways unaware that you can mark off how you want to as a person doing a role and how you sort of want to give that access out, it will require some things like a hearing before access is allowed. If somebody wants access to a bank account, they can't just get it, it is a process they have to go through which includes the hearing and then the fiduciary has to send a request to the custodian so if it's the bank or someone else for disclosure of the digital assets or if they wanna terminate an account and a custodian has to apply with that in certain period of time and if they don't comply the fiduciary can seek a court order, I think that's the very bar burn's/g version I might ask staff if they would like to add any further information on that, I'm not sure who was working on that one. [BLANK_AUDIO] >> I really don't have anything much to add except that I can tell you that this is the uniform act, with directive changes made to conform to style in the State, that the uniform act Product of years of negotiation between the various different parties and so bar associations, state planning and fiduciary law sections worked with the general statutes commission on it. We do have people from the Bar association here who might want to make a comment And I believe I know there's someone here from Facebook. >> Well we're about to run out of time. Let's see if there are questions from the committee first. Seeing none, is there a motion for favorable report to House Bill 1062 Representative Hager so moves. Is there a discussion? Seeing none, those in favor say aye. >> Aye. >> Those opposed no. The ayes have it. The meeting is adjourned.