Existing law prohibits a person from filing or recording, or directing another to file or record, a lawsuit, lien, or other encumbrance against any person or entity, knowing that it is false, with the intent to harass the person or entity or to influence or hinder the person in discharging their official duties if the person is a public officer or employee. Existing law also provides that a person who files a lawsuit, lien, or other encumbrance against any person or entity in violation of this prohibition is liable for a civil penalty not to exceed $5,000.
This bill would instead provide that a person who files a lawsuit, lien, or other encumbrance against a person or entity in violation of the above-described prohibition is liable for a civil penalty not to exceed $15,000. The bill would also define "lien," for purposes of the above-described prohibition, to include a financing statement. The bill would prohibit a person from filing, or directing another to file, a financing statement for which no reasonable basis or legal cause exists. The bill would make related, conforming changes to these provisions.
The Uniform Commercial Code-Secured Transactions governs security interests in collateral, including personal property and fixtures, as well as certain sales of accounts, contract rights, and chattel paper. That code, among other things, specifies requirements and procedures regarding perfecting a security interest, including the filing of a financing statement with the Secretary of State or the county recorder, based on the property type. Existing law specifies that a financing statement is sufficient if it provides, among other things, the name of the debtor. If it is established that a secured party is not proceeding in accordance with the code, existing law authorizes a court to restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.
This bill would require the Secretary of State to notify the debtor named in the financing statement within 21 days after the financing statement is filed. The bill would additionally require any court fees incurred by a debtor to be paid at the end of the judicial proceeding, as specified. The bill would also make any party deemed to have violated above-described provision regarding lawsuits, liens, or other encumbrances liable to the debtor for three times all of the court fees paid.
This bill would authorize a person identified as a debtor in a financing statement or a person who reasonably appears to be the person intended to be identified as a debtor in a financing statement that was not permitted to be filed, as prescribed, to file an affidavit, under penalty of perjury, attesting as such with the filing office in which the statement was filed. The bill would require the Secretary of State to make available a form affidavit for use. The bill would require the filing office, following acceptance of a properly signed affidavit, to hold the affidavit in abeyance for a 30-day period. The bill would require the filing office, upon expiration of that 30-day period, if no court order enjoining the filing has been received, to file a termination statement with respect to the financing statement identified in the affidavit, in accordance with certain legal procedures and timelines.
The bill would authorize a secured party of record, identified in a financing statement for which an affidavit has been accepted, to petition the court to enjoin the filing office from filing the termination statement and for the court to determine whether the financing statement is valid and should be reinstated, as specified. The bill would authorize a court to award costs, reasonable attorney's fees, and, upon determining an affidavit was filed in bad faith, a $5,000 civil penalty. By expanding the crime of perjury and imposing new duties on county recorders, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that with regard to certain mandates no reimbursement is required by this act for a specified reason.
With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Statutes affected:
AB 501: 7120 CORP
02/10/25 - Introduced: 7120 CORP
03/24/25 - Amended Assembly: 7120 CORP
01/05/26 - Amended Assembly: 9625 COM, 9625 COM
06/01/26 - Amended Senate: 9625 COM
AB501: 9625 COM, 9625 COM