AB501 - Lawsuits, liens, and other encumbrances.

Enrolled August 26, 2026 Passed IN Senate August 20, 2026 Passed IN Assembly August 24, 2026 Amended IN Senate June 01, 2026 Amended IN Assembly January 05, 2026 Amended IN Assembly May 12, 2025 Amended IN Assembly April 03, 2025 Amended IN Assembly March 24, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 501 Introduced by Assembly Member Papan February 10, 2025 An act to amend Sections 765.010 and 765.040 of the Code of Civil Procedure, and to amend Section 9625 of, and to add Sections 9513.1 and 9529 to, the Commercial Code, relating to civil proceedings. LEGISLATIVE COUNSEL'S DIGEST AB 501, Papan. Lawsuits, liens, and other encumbrances. 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. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES Bill Text The people of the State of California do enact as follows: SECTION 1. Section 765.010 of the Code of Civil Procedure is amended to read: 765.010. (a) For purposes of this section: (1) “Harass” means engage in knowing and willful conduct that serves no legitimate purpose. (2) “Entity” includes both governmental and private entities. (3) “Lien” includes a financing statement, as defined in Section 9102 of the Commercial Code. (b) (1) A person shall not file or record, or direct another to file or record, a lawsuit, lien, or other encumbrance, including a notice of lis pendens, against another person or entity knowing 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. (2) A person shall not file, or direct another to file, a financing statement for which no reasonable basis or legal cause exists. (c) (1) A person or entity whose property is subject to a lien or encumbrance or who is named in a lawsuit, financing statement, or notice of lis pendens in violation of this section may petition the superior court of the county in which the person or entity resides, in which the financing statement was filed, or in which the property is located for an order, which may be granted ex parte, directing the lien or other encumbrance claimant to appear at a hearing before the court and show cause why the lien or other encumbrance should not be stricken and other relief provided by this article should not be granted. (2) The court shall schedule the hearing no earlier than 14 days after the date of the order. The scheduled date of the hearing shall allow adequate time for notice of the hearing. SEC. 2. Section 765.040 of the Code of Civil Procedure is amended to read: 765.040. Any lien or encumbrance claimant who records or files, or directs another to record or file, a lawsuit, lien, or other encumbrance in violation of paragraph (1) of subdivision (b) of Section 765.010 shall be liable to the person subject to the lawsuit or the owner of the property bound by the lien or other encumbrance for a civil penalty of up to fifteen thousand dollars ($15,000). SEC. 3. Section 9513.1 is added to the Commercial Code, to read: 9513.1. (a) 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, including where the financing statement identifies the debtor by a trade name, fictitious business name, former name, misspelling or truncation, that was not permitted to be filed under Section 9509 of this code or was filed in violation of subdivision (b) of Section 765.010 of the Code of Civil Procedure may, under penalty of perjury, file an affidavit attesting as such with the filing office in which the statement was filed. The Secretary of State shall make available a form affidavit for use. The filing office shall reject an affidavit filed under this subdivision if the affidavit is incomplete or violates subdivision (i). (b) Following acceptance of an affidavit properly filed under subdivision (a), the filing office shall hold the affidavit in abeyance for 30 days. Upon the expiration of the 30-day period, if no court order enjoining the filing has been received, the filing office shall file a termination statement with respect to the financing statement identified in the affidavit. Notwithstanding Section 9510, the termination statement shall be immediately effective upon filing. The termination statement shall indicate that the statement was filed under this section and include a copy of the affidavit. (c) Immediately upon acceptance of an affidavit filed under subdivision (a), the filing office shall send notice of the pending termination of the financing statement to each secured party of record identified in the financing statement at the mailing address provided in the financing statement. (d) A secured party of record identified in a financing statement for which an affidavit has been accepted under subdivision (b) may petition the superior court of the county in which the filing office is located, or in which the secured party of record resides or has its principal place of business, for preliminary injunctive relief to enjoin the filing office from filing the termination statement and for an order, which may be granted ex parte, directing the affiant to appear at a hearing before the court at which the court shall determine whether the financing statement is valid and should be reinstated. The court shall schedule the hearing no earlier than 14 days after the date of the order. The scheduled date of the hearing shall allow adequate time for notice of the hearing. An action under this subdivision must be brought not later than the 90th day after the date on which the termination statement is filed. (e) (1) If the affiant fails to appear at the hearing after proper service, and upon a prima facie showing by the petitioner, the court may deem the financing statement valid and issue an order to that effect. (2) If the court determines that the financing statement is invalid, the court shall issue an order to that effect and may award costs and reasonable attorney’s fees to the affiant to be paid by the petitioner. (3) If the court determines that the financing statement is valid and should be reinstated, the court shall issue an order to that effect and may award costs and reasonable attorney’s fees to the petitioner to be paid by the affiant. If the court further determines that the affidavit filed was made in bad faith, it may additionally award the petitioner actual damages and may impose a civil penalty not to exceed five thousand dollars ($5,000) against the affiant. This subdivision does not limit criminal liability for perjury or other applicable offenses. (f) (1) Upon receipt of a certified order of the court that a terminated financing statement is valid and should be reinstated, the filing office shall promptly file an amendment to the financing statement indicating that the financing statement has been reinstated. (2) Upon receipt of a certified order of the court that a financing statement for which no termination statement has been filed under subdivision (b) is invalid, the filing office shall promptly file such termination statement. (g) A financing statement reinstated under subdivision (f) is effective from the initial filing date and is considered to have never been ineffective against all persons and for all purposes except against a purchaser of the collateral described in the financing statement who gave value in reliance on the termination statement. (h) If the period of effectiveness of a financing statement reinstated under subdivision (f) would have lapsed during the period of termination, a secured party of record may file a continuation statement not later than the 30th day after the financing statement is reinstated, and the continuation statement shall have the same effect as if it had been filed during the six-month period prescribed by subdivision (d) of Section 9515 of this code. (i) An affidavit filed under subdivision (a) and any termination statement filed under subdivision (b) are not effective with respect to a financing statement filed by or on behalf of a financial institution, as defined in subdivision (a) of Section 14161 of the Penal Code or Section 481.113 of the Code of Civil Procedure, or a public entity, as defined in Section 481.200 of the Code of Civil Procedure. (j) If an affidavit under subdivision (a) is filed by or on behalf of a public officer or employee, the state or local agency that employs the public officer or employee may provide counsel for the public officer or employee in an action brought under subdivision (d). (k) The filing office or an employee of the filing office may not be subject to liability for the termination or amendment of a financing statement in the lawful performance of the duties of the filing office under this section. (l) The provisions of this section are not exclusive. The remedies provided in this section shall be in addition to any other procedures or remedies for any violation or conduct provided for in any other law. SEC. 4. Section 9529 is added to the Commercial Code, to read: 9529. The Secretary of State shall notify the debtor named in the financing statement within 21 days after the financing statement is filed. SEC. 5. Section 9625 of the Commercial Code is amended to read: 9625. (a) (1) If it is established that a secured party is not proceeding in accordance with this division, a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions. (2) Any court fees incurred by a debtor shall be paid at the end of the judicial proceeding brought pursuant to this section. Any party deemed to have violated Section 765.010 of the Code of Civil Procedure shall be liable to the debtor for three times all of the court fees paid. (b) Subject to subdivisions (c), (d), and (f), a person is liable for damages in the amount of any loss caused by a failure to comply with this division. Loss caused by a failure to comply may include loss resulting from the debtor’s inability to obtain, or increased costs of, alternative financing. (c) Except as otherwise provided in Section 9628, a person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under subdivision (b) for its loss. (d) A debtor whose deficiency is eliminated under Section 9626 may recover damages for the loss [Text truncated for display. Full text available on Congress.gov.]