MINUTES OF THE
SENATE Committee on Judiciary
Seventy-First Session
February 22, 2001
The Senate Committee on Judiciarywas called to order by Chairman Mark A. James, at 8:48 a.m., on Thursday, February 22, 2001, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Mark A. James, Chairman
Senator Jon C. Porter, Vice Chairman
Senator Mike McGinness
Senator Maurice Washington
Senator Dina Titus
Senator Valerie Wiener
Senator Terry Care
GUEST LEGISLATORS PRESENT:
Senator Dean A. Rhoads, Northern Nevada Senatorial District
Senator Bill R. O’Donnell, Clark County Senatorial District No. 5
STAFF MEMBERS PRESENT:
Bradley A. Wilkinson, Committee Counsel
Allison Combs, Committee Policy Analyst
Ann Bednarski, Committee Secretary
OTHERS PRESENT:
Jim List, Concerned Citizen
Richard A. McDougal, Nevada Nile Ranch Incorporated
Mike Phillips, Nevada Nile Ranch Incorporated
Alan List, List Cattle Company
Dan Hetrick, Concerned Citizen
Doug Busselman, Lobbyist, Nevada Farm Bureau
David Armstrong, Vice President of Lending, Intermountain Farm Credit
Andrew A. List, Lobbyist, Nevada Association of Counties
John P. Sande III, Lobbyist, Nevada Bankers Association
C. Joseph Guild III, Lobbyist, Nevada Cattlemen’s Association
John M. O’Brien, Agricultural Programs Coordinator, Plant Industry Division, State Department of Agriculture
Jim Dickey, Credit Manager, Western Nevada Supply Company
Gary E. Millikin, Lobbyist, Associated General Contractors-Las Vegas
Cheryl Blomstrom, Lobbyist, Nevada Chapter Associated General Contractors
Renee Lacey, Chief Deputy Secretary of State, Office of the Secretary of State
Laura (Bru) Ethridge, Coordinator, Digital Signatures, Office of the Secretary of State
Ben Graham, Lobbyist, Nevada District Attorneys’ Association
David S. Gibson, Lobbyist, Clark County
Chairman James opened the hearing with Bill Draft Request (BDR) 5-573 from the committee of the Assembly Concurrent Resolution (A.C.R.) 13 of the Seventieth Session, which examines the system of juvenile justice in Nevada. He acknowledged Senator Wiener as the chairman of this committee.
BILL DRAFT REQUEST 5-573: Requires certain state and local agencies to assess whether children of racial or ethnic minorities are disproportionately taken into custody, detained or referred to the system of juvenile justice. (Later introduced as Senate Bill 232.)
ASSEMBLY CONCURRENT RESOLUTION 13 OF THE SEVENTIETH SESSION: Directs Legislative Commission to continue study of system of juvenile justice in Nevada. (BDR R-224)
Chairman James said BDR 5-573 requires the Division of Child and Family Services of the Department of Human Resources to develop standards and procedures for conducting assessments to better serve the courts.
SENATOR PORTER MOVED TO INTRODUCE BDR 5-573.
SENATOR WIENER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Chairman James next introduced BDR 5-574 which is from the same committee; it seeks to revise provisions providing for detention homes for the temporary detention of children.
BILL DRAFT REQUEST 5-574: Revises provisions relating to detention homes for temporary detention of children. (Later introduced as Senate Bill 231.)
SENATOR PORTER MOVED TO INTRODUCE BDR 5-574.
SENATOR WIENER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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The next introduction by Chairman James was BDR 16-575, also sponsored by the committee for the Study of the System of Juvenile Justice in Nevada (A.C.R. 13 of the Seventieth Session). BDR 16- 575 would revise provisions related to juveniles who violate parole.
BILL DRAFT REQUEST 16-575: Makes various changes relating to juveniles who violate parole. (Later introduced as Senate Bill 230.)
SENATOR PORTER MOVED TO INTRODUCE BDR 16-575.
SENATOR WIENER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Next, Chairman James introduced BDR 14-340 from the Department of Administration Budget Division, which seeks to eliminate the Advisory Commission on Sentencing. Though he introduced this bill, Chairman James said it would not be processed in this committee as he has another bill that seeks to do something different with the Advisory Commission on Sentencing.
BILL DRAFT REQUEST 14-340: Eliminates the advisory commission on sentencing. (Later introduced as Senate Bill 229.)
The next introduction Chairman James made was BDR C-254 from the Senate Concurrent Resolution (S.C.R.) 19 of the Seventieth Session Committee to encourage businesses to organize and conduct business in Nevada. He said it proposes to amend the Constitution of Nevada to authorize the Legislature to establish a business court. This BDR, he stated, has been established by court rule but the judiciary committee is introducing the bill and will converse about processing it.
BILL DRAFT REQUEST C-254: Proposes to amend Nevada Constitution to authorize legislature to establish business court. (Later introduced as Senate Joint Resolution 5.)
SENATOR PORTER MOVED TO INTRODUCE BDR C-254.
SENATOR MCGINNESS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Chairman James next introduced BDR 16-1179 from the Senate Committee on Judiciary as requested on behalf of the correctional officers in Nevada. The BDR makes changes pertaining to correctional officers employed by the Department of Prisons.
BILL DRAFT REQUEST 16-1179: Revises provisions pertaining to correctional officers. (Later introduced as Senate Bill 233.)
SENATOR PORTER MOVED TO INTRODUCE BDR 16-1179.
SENATOR MCGINNESS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Chairman James continued the hearing with introduction of Senate Bill 88 and Senate Bill 93.
SENATE BILL 88: Provides for creation and foreclosure of liens for farm products. (BDR 9-643)
SENATE BILL 93: Provides that notice of mechanic’s lien must include reference to previous liens involving same labor or materials for same property. (BDR 9-74)
Senator Dean A. Rhoads, Northern Nevada Senatorial District, said S.B. 88 is very important to rural Nevada. He cited a bankrupt national seed company which lost about $150 million, several hundred thousands of it in Nevada. He said the company harvests grass seed and alfalfa seed and transports it to the processing plant in September and expects to be paid in February. The bankruptcy of this seed company occurred after receipt of the seed. As a result, many farmers in Lovelock, Winnemucca, Orovada, and other areas throughout the state (and throughout the nation) ended up with no money. The “tightening up” of the lien law in Nevada has been an issue for a long time, he said. Senate Bill 88 addresses this problem and would prevent such monetary losses from happening in the future, to a degree, he said. Senator Rhoads added, the bankers and specifically, Lobbyist John Sande, have some problems with this bill, as drafted, but are interested in working on it. He informed the committee there were many people present from Lovelock to testify.
Senator Porter added, for the record, though the judiciary committee is compromised of urban legislators, they are very concerned about rural Nevada. Chairman James reiterated this sentiment and thanked Senator Rhoads for being at the meeting.
Jim List, Concerned Citizen, said he is a grower in the Lovelock area and serves as the chairman of the Nevada Alfalfa Seed Growers Association. He claimed farmers have been raising seed in Nevada for over 50 years. Remote areas such as Humboldt and Pershing Counties account for substantial annual production totals of alfalfa seed both locally and nationwide. Alfalfa seed is produced, he continued, under contract pursuant to which the grower is provided with the unique variety of seed. The seed is propagated, harvested, and delivered by the grower to the processor, he said. The processor, in turn, cleans, conditions, and delivers the seed for sale, he added. For many years, Mr. Jim List continued, the entire process worked well in Nevada. Growers, he explained, developed strong ties and trusting relationships with independent seed companies. The growers received fair, multi-year contracts from these seed companies and, as a result, disputes over delivery and payment rarely ever arose. He noted the seed companies expected a quality product from the Nevada growers and, in turn, Nevada growers could expect prompt payment for the seed product they raised and delivered.
Mr. Jim List went on to explain in the late 1990s, AgriBioTech, Incorporated (ABT) became a primary processor of seed, having acquired many of the smaller seed companies that did business in Nevada and nationwide. Growers, he said, who were under contract with these smaller seed companies suddenly found themselves under contract, instead, with ABT. The business plan of ABT proved not to be infallible, he said. Factors such as weather and bulging inventories along with financing arrangements affected seed markets. The result of these factors was on January 25, 2000; ABT filed a Chapter 11 voluntary bankruptcy petition. A lending group who took a security interest in ABT’s inventory and accounts receivable financed the business of ABT. With these arrangements, ABT’s accounts were “swept” regularly by the lenders. The result, Mr. Jim List explained, was every time ABT sold seed the proceeds were paid to the lenders on an existing line of credit. This continued under Debtor and Possession Financing Orders subsequently entered in ABT’s bankruptcy case. AgriBioTech’s lenders have taken the position that included within ABT’s inventory was the 1999 seed crop delivered by growers. They claimed their security interest in this seed crop was subject only to prior perfected liens of growers, if any. This position asserted by lenders, he said, caused Nevada growers to discover, for the first time, an absence of statutory lien protection for agricultural products in general, and their 1999 crop in particular.
The absence of statutory lien protection will likely result in a loss to Nevada growers of the entire 1999 crop and the proceeds from it, Mr. Jim List added. It totals approximately $4 million, he stated, and some growers may not survive this loss and may be forced to shut down. This affects the state economically but may cause the end of the long-standing family tradition of farming, he said. He added the $4 million loss represented about 10 percent of the total loss to all affected growers in the ABT bankruptcy case. He stated this is significant, as approximately 22 growers in Nevada were affected. He added this loss would have been less if Nevada growers were protected by statutory liens for its growers.
The purpose of this lien statute, Mr. Jim List continued, is twofold. First, he said, statutory lien protection for agricultural products will bring Nevada in line with surrounding states such as California, Oregon, Washington and Idaho, which all offer some statutory lien protection for growers and agricultural producers. Second, it will provide growers with a measure of control over their crops by ensuring payment, he said. Hopefully, he added, lien protection will also prevent another devastating loss similar to the one caused by ABT. He strongly urged the passage ofS.B. 88. Mr. Jim List submitted a written statement of his support (Exhibit C).
Senator Care expressed a sympathetic attitude towards the bill then asked if this proposed legislation is consistent with Article 9, Secured Transactions, of the Uniform Commercial Code (UCC) addressing agricultural liens. Mr. Jim List said he had not been in a discussion about Article 9. Senator Care then asked, “Does the rest of the world have to have notice of a perfection [of] lien?” He suggested other testifiers address the question of Article 9.
Richard A. McDougal, President of Nevada Nile Ranch Incorporated in Lovelock, said the Nevada Nile Ranch is a family-owned farming operation consisting of approximately 6000 acres. He said about 1000 acres are used to grow alfalfa seed and represents about 1-2 percent of the total U.S. production. He continued the result of AgriBioTech’s chapter 11 bankruptcy was a total loss of the 1999 crop, including the proceeds from that crop, valued at over a half million dollars. He said Mr. Jim List’s estimation of a $4 million loss in Nevada is correct. The lenders who financed ABT, he continued, claim both the crop and the proceeds as collateral for their loans to ABT. The ability of these lenders to claim Nevada Nile Ranch Incorporated’s 1999 crop as collateral resulted from the absence of a statutory lien protection for growers and other agricultural products. The effects of the ABT bankruptcy have demonstrated Nevada growers must have some type of statutory lien protection for crops grown in this state, he said. Senate Bill 88 will achieve that result, Mr. McDougal claimed. He offered to answer any questions regarding his support of this bill. Mr. McDougal presented a letter of support (Exhibit D).
Mike Phillips, Nevada Nile Ranch Incorporated, spoke for one of the ranch’s neighbors who could not attend the meeting, Allen Brinkerhoff of Brinkerhoff Seed Farms. Mr. Phillips read an endorsement of S.B. 88 prepared and signed by Mr. Brinkerhoff (Exhibit E).
Alan List, List Cattle Company, began by announcing he farms with his son, Jim, who had already testified. He said he is here in support of S.B. 88, the bill that would create lien laws relating to farm products in Nevada (Exhibit F). He, like many others, found it very difficult to file secured liens on their farm products. He said a group of farmers joined together to promote legislation to remedy the problem. Senate Bill 88 is the result of those efforts, he said. He added businesses today are being sold, consolidated, and discontinued at an ever-increasing pace. Mr. Alan List recalled the days when buying and selling was done with a handshake, but lamented today there is a need for protection under the law to help guarantee proper payment when there is a problem. He said he is asking, through this legislation, for the seed growers to be first in line for payment due for their crops. Though the catalytic problem was alfalfa crops, S.B. 88, however, is crafted to provide protection for all agricultural crops. All farmers will benefit throughout the state, he assured. He agreed to answer questions and closed his remarks with urging the passage of S.B. 88.
Senator Washington asked if S.B. 88 would apply to ranchers and/or dairy farmers, or if it is strictly agronomic. Mr. Alan List responded there are many protections already in place, particularly, for the cattle industry. This bill, he said, is designed principally for crops.
Dan Hetrick, Concerned Citizen, came forward next. He described himself as an Orovada farmer, and encouraged the passage of S.B. 88. He continued, noting Nevada is heavily involved in this agribusiness bankruptcy, which demonstrates how weak Nevada’s position is in comparison to neighboring states with strong agricultural lien laws. He stated he was a member of the official committee of “Unsecured Creditors” in the ABT bankruptcy case. He explained the committee, the debtors, and the grower groups from major alfalfa seed and turf grass seed production states worked out an agreement allowing the sales of the company segments as ongoing concerns and continuing the multi-year seed production contracts at least through the 2000 production year. Mr. Hetrick stated this agreement designated funds be equally divided between all participating growers, plus funds to be distributed according to the strength of each individual state’s lien laws. Nevada growers came up short, he said, due to lack of adequate lien protection. The result of this bankruptcy case is a number of states have bills before their legislatures to strengthen existing lien laws, and others, including Nevada, are seeking needed legislation for protection beyond what is presently available, he explained. He closed with a restatement of the need in Nevada for strong lien laws and submitted a written text of his comments (Exhibit G).
Senator McGinness announced that he fully supported S.B. 88, and then verified Mr. Hetrick was from Orovada. He then mentioned a group of youngsters from Orovada have expressed a desire to make Orovada soil the official state soil. He asked if Orovada soil was outstanding enough to be designated the state soil. Mr. Hetrick responded, “I have spent my life there and I am rather impressed with it.” Senator McGinness stated, “That’s good enough for me.”
Doug Busselman, Lobbyist, Nevada Farm Bureau, announced he was present to lend support to passage of S.B. 88, a measure working to ”enhance the status of agricultural producers in the collection of payment due for the sale of the products they produce and market.” Mr. Busselman continued, at the state convention last December, the farmer-rancher voting delegates adopted policy directing the bureau to work through the legislative process to establish a workable, payment-protection plan to assure producers of receiving the payments they are due. He said high-investment cost and narrow margins for most agricultural commodities do not allow much margin for error. Purchasers or brokers who buy agricultural commodities fail to make appropriate payments, producers greet serious consequences. Mr. Busselman concluded with a statement requesting an update of current lien laws in order to assure producers their investments can be adequately protected. He expressed an interest in working with the committee on this legislative proposal.
Senator Care asked Mr. Busselman to explain section 8, subsection 2, of S.B. 88 delineating between “agreed price” and “market price.” There are two different values, market value and contract price, Mr. Busselman cited. Senator Care noted there is mention of “date of delivery” and asked how that is determined.
Mr. Busselman responded contracts for buying agricultural commodities are set with schedules for delivery at various intervals, as buyers usually do not want the entire product at one time. The difference between market price and agreed value was delineated in the California law used as a model to draft S.B. 88.
Chairman James offered Senator Care an explanation, stating the proceeds amount of the processed farm product and the amount of lien are determined by the market value. Chairman James asked for assistance from John Sande, Renee Ashelman, Gary Millikin, and Joe Guild because, he said, this is not clearly understandable. A lien, he said, has three parts: an attachment, a perfection, and a priority in time. He specifically asked how a lien gets perfected. Then, how does the notice part occur, he asked.
Mr. Busselman offered lien perfection occurs automatically through the provisions of S.B. 88, as he understands it. The notice part of the lien, he said, is the intent of the bill. Mr. Busselman submitted a statement on behalf of the Farm Bureau Federation (Exhibit H).
David Armstrong, Vice President of Lending, Intermountain Farm Credit (IFC), stated IFC is part of the nationwide farm credit system of farm credit cooperatives that provide both short- and long-term credit and related services to farmers and ranchers and related businesses. The states of Nevada and California are part of Intermountain Farm Credit’s territory, and IFC is also the largest agricultural lender in the state of Nevada, he stated. Mr. Armstrong added passage of S.B. 88 would provide much-needed protection for Nevada producers and growers in the selling and marketing of their agricultural products. This kind of protection already exists in most other western states; this bill would equalize protection for agricultural growers between states, he said. Mr. Armstrong submitted a written endorsement for S.B. 88 (Exhibit I).
Andrew List, Lobbyist, Nevada Association of Counties (NACO), urged passage of S.B. 88. The reasons, he stated, include the enormous part agriculture plays in Nevada’s economic welfare. Despite efforts for diversification among Nevada’s policy makers in the economic base, it is important to protect the economic sectors already in existence such as agriculture, he explained. He quoted statistics from 1995 indicating agricultural earnings in Nevada approached $300 million; the earnings statement includes wages, salaries, and profits to agricultural businesses. Furthermore, Mr. Andrew List added, over 4000 people were employed as farm workers and more than 9000 individuals worked in agricultural services. The lack of a lien law puts all these people at risk, he explained. Senate Bill 88 will protect all growers and farmers who produce agricultural commodities, he said. He addressed Senator Washington’s question regarding dairy farmers, stating this bill refers to plant products. He closed urging protection of Nevada’s agricultural interests by enactment of S.B. 88 and submitted a written statement to that effect (Exhibit J).
John P. Sande III, Lobbyist, Nevada Bankers Association, expressed a desire to work with Senator Rhoads and Senator McGinness on S.B. 88 in order to improve it. He explained in the banking business, the protection offered by this bill is known as a “secret lien” because there is no way to know the lien exists until a lawsuit is filed. He added he is curious to find out how similar this law is to California’s lien law and, more importantly, how successful it has been. The Uniform Commercial Code (UCC), Article 9 addresses security interests he said he had been told. Banking experts, he continued, say a seller of farm products could file a UCC Article 1 with the secretary of state and have the same protection as S.B. 88 provides, and it would be on record so a lender would know about it. He explained the bankers association does not want to create a situation where processors are unable to secure financing.
Chairman James reacted to Mr. Sande’s information with questions pertaining to the value of the product, how much of it is available to use as security, and the attachment of the lien to the product. He talked about the integration aspect of S.B. 88 stating the lien attaches to the product no matter where it is, or, as he explained, the seed has grown into a farm product and there is no way to separate them. He said there was a need to figure out how to decide the value of the lien at the time it attaches, so a lender who comes in after the attachment knows, reasonably, how much can be loaned.
Mr. Sande agreed, stating Chairman James had properly identified the issue needing work. He added if a processor is out of Nevada, it is unclear which state’s law applies to the lien question. He indicated he wanted to research this further, noting an officer of a Minnesota lending institution who was doing business in Nevada has expressed concerns which could negatively impact lending. If however, other states have similar laws regarding liens, and, if they are working, work should continue on refining this bill, he said.
Senator Care asked Mr. Sande about his interest in the provision for injunctive relief, presumed irreparable harm, and the provision for misdemeanor, saying he said he believed this was not within Mr. Sande’s scope of interest. Mr. Sande agreed it was not.
Chairman James then said with regard to the criminal provision in S.B. 88 which prevents removal from Nevada of farm products with lien attachments, if it is removed, it is a misdemeanor offense? He said he felt it was an “odd thing to have in a lien law.” He asked if anyone could explain why there is a criminal provision in a lien law.
C. Joseph Guild III, Lobbyist, Nevada Cattlemen’s Association, stated many members of his organization were growers of farm products. He said his group supports this bill. He evaluated S.B. 88 as having an easily determined value and referred to section 8, subsection 2, of the bill. He said the market value of alfalfa seed could be easily established on dates of delivery because there is a known market price. Perfection, Mr. Guild continued, could be devised in notice form, such as a mechanics lien. Regarding the attachment, he said, it is spelled out in section 9, subsection 1, paragraph (a). Attachment, he explained, is the delivery date from the producer to the commodity processor. He said he felt all the elements of lien law were contained in S.B. 88. He said he agreed with Mr. Sande, a public notice clause should be considered and is currently not included. Whereas, UCC Article 1 protects farmers to an extent, but only when goods in question are in place, such as on the farm, he said he believed some work was needed. Mr. Guild said he was optimistic agricultural interests could strengthen the protection of their crops.
Chairman James questioned, again, the notice of lien. He verified with Bradley A. Wilkinson, Committee Counsel, S.B. 88 was fashioned after lien laws in California. Mr. Wilkinson said this bill is patterned very closely on the law in California. He further verified there are farm/agricultural provisions in the UCC in Article 9, but it is broader in scope than S.B. 88 because it extends to livestock and dairy products. Noting he was unsure of the protection offered in UCC law, Mr. Wilkinson stated S.B. 88 would supersede the provisions of the UCC to the extent they were consistent and it was specific.
Chairman James asked if there is a perfection provision included. Mr. Wilkinson said he is not certain. He asked Mr. Guild to explain how to determine the value of the lien, delineating between the farm product and the market value of the farm product. Mr. Guild explained section 8, subsection 2, of S.B. 88 specifies the value of the farm product is determined by the market value on the date of delivery. He said the market value is easily determined on any given day. Chairman James asked for further clarification. Mr. McDougal explained there is a difference between processed alfalfa seed product and farm products. The value of alfalfa seed is agreed upon in contracts covering several years of production on a set number of acres. Alfalfa seed has to be cleaned out or processed, unlike hay, which is sold by the ton. The market value for any farm product is determined on the day of delivery. Both Chairman James and Mr. McDougal agreed the language of S.B. 88 could be clarified.
Senator Care asked consideration and explanation is given for specific clauses in the bill. The first one deals with section 15 and filing suit in Nevada. He said he wondered why it was included. In section 16, subsection 3, the sentence referring to the court making the final determination regarding the length of time the lien stays in effect may be a provision for appeal, but is unclear, he said. In section 19, Senator Care questioned the words “seeking” as opposed to “obtaining” injunctive relief and the presumption of irreparable harm. He said if a farmer does not get paid, it is irreparable harm, in his mind. Finally, in section 20, subsection 4, Senator Care questioned the meaning of the phrase, “farms products in the possession or under the control of the dependant processor.”
Senator Wiener queried whether there might be joint claimants in a lien suit and how proportionate amounts and order of payment would be determined. Mr. Guild said those claimants could be suppliers of things like fertilizers and bees, and others in the chain of production. He noted their priority in payment is another part of S.B. 88 that must be explored.
Chairman James welcomed John M. O’Brien, Agricultural Programs Coordinator, Plant Industry Division, State Department of Agriculture, who made a statement of encouragement to fine-tune the bill and stated he supported legislation protecting Nevada farmers.
Mr. Armstrong spoke again about unsecured loans on products with lien attachments. He said without the protection of a lien law, the position of Intermountain Farm Credit was secondary in ABT bankruptcy.
Senator Care expressed a concern for protecting farmers, but cautioned he did not want them to think they are protected when they are not, because the bill is poorly drafted. Chairman James concurred and assured interested parties the committee would do further work on S.B. 88. He appointed Senator Care to the subcommittee to investigate and work with agricultural representatives. Chairman James closed discussion on S.B. 88, promising to make it a good piece of legislation.
Chairman James opened discussion on Senate Bill 93 by asking Senator O’Donnell to address the committee.
SENATE BILL 93: Provides that notice of mechanic’s lien must include reference to previous liens involving same labor or materials for same property. (BDR 9-74)
Senator Bill O’Donnell, Clark County Senatorial District No. 5, described S.B. 93 as a “little bill that solves a big issue.” He used the example of a drywall subcontractor who is hired by a general contractor as part of a $20,000 contract. The drywall man furnishes all the materials for the job such as the framing, taping, mud, and labor. Therefore multiple people are involved and should there be a problem the multiple people who can file a lien against the property is based upon their portion of the contract, he said. Continuing with the example of a $20,000 drywall contract, Senator O’Donnell said $8000 could be for the framing, $5000 could be for materials, and $6000 could be labor costs for various subcontractors. If a dispute occurs about the job, the main contractor can file a lien against the property, but the subcontractors, also, can file a lien for their portions of the job, making it conceivable this $20,000 contract could end up with $40,000 to $60,000 in liens against the same property, he explained. The situation gets worse, he continued, because the contractor may not have the wherewithal to perfect the lien, but the subcontractor may. If the subcontractor files action in court to perfect his lien and is subsequently paid his portion, the general contractor still has his lien of $20,000, he said, as may the other subcontractors hired by the general contractor. The problem gets exacerbated when the property owner tries to refinance and finds it is impossible to do with liens on the property. A lender will require a bond in the amount of the liens, which costs the owner more money, Senator O’Donnell said. Senate Bill 93 attempts to solve the escalating cost/multiple liens on the same contract problem, though it appears there may have to be some work done on it, Senator O’Donnell conceded. He added all mechanic’s liens are filed in the recorder’s office where the property’s ownership is registered, therefore, it is possible to reference a lien filed by a subcontractor before another lien is filed by a different contractor for the same supplies or service.
Chairman James asked Senator O’Donnell if there is a need to bond around the total contract price plus all the mechanic’s liens. Senator O’Donnell responded the bonding is done around the total of all the mechanic’s liens. He explained the lender does not know whether one lien from a subcontractor is also part of a lien from the general contractor, therefore, the total of all mechanic’s liens are required to be bonded. He said S.B. 93 solves this duplication of liens by mandating referencing one to the other.
Chairman James asked if there is not a statute to release the lien upon payment, and if subcontractors are paid off if the general contractor’s lien remains in place. Senator O’Donnell responded affirmatively.
Senator Porter said he had heard of this a lot with swimming pool contracts. He explained the subcontractors would file liens against property owners because the general contractor skipped out without paying them. Subsequently, the owners were unable to sell their homes until liens were bonded or satisfied. Senator Porter indicated the bill needed improvement but added this lien problem is in need of attention from lawmakers.
Chairman James suggested the bill might need to go farther because, he said, as written, it only provides notice but does nothing to stop multiple liens on the same work. Senator O’Donnell responded lenders and bonding companies are amenable to bonding if they know all the liens are for a $20,000 contract.
Senator O’Donnell stated the situation gets further complicated if, in the process of contracted work being done, the property owner dies and the building goes into an estate. The court does not know which contractors were independent or subcontracted under a general contract, which could cause multiple liens in the estate, he said. He stressed the value of a referencing system for liens on the same job that is fair and equitable.
Senator Care asked, if someone files a lien and is required to make reference to a previously recorded lien and the first lien is subsequently discharged, what does the second lien holder have to do. He concluded a search on the property would disclose this information and Senator O’Donnell agreed. Senator O’Donnell added if part of the total contract is paid, the general contractor is not currently required to amend his lien to adjust the amount owed.
Chairman James noted there are other lien bills in the committee and offered to work on this issue in conjunction with the other lien issues. Both senators agreed this problem needed to be addressed. Chairman James said the committee would discuss it again when the “lien experts” convene.
Jim Dickey, Credit Manager, Western Nevada Supply Company, said when a lien is paid off, it essentially “dies” after 6 months. He continued, if Western Nevada Supply Company is paid on a mechanic’s lien, the company files a release of lien. Mr. Dickey clarified:
As a material supplier when they file a mechanic’s lien and there is a lien in place by a subcontractor that we supply, we do not know if their lien includes our material. Only the amount of the lien is required on a mechanic’s lien, it does not delineate the breakdown of the total.
He said it would be difficult for a property owner to separate liens. The only way to avoid multiple liens, he said, is for the general contractor and the subcontractor to describe their mechanic’s liens.
Senator Porter asked Mr. Dickey to clarify if it is possible for a general contractor to have been paid but his subcontractors and suppliers only partially paid, resulting in the property owner paying four to five times for the same labor and materials. Mr. Dickey said, yes, it could happen if there was a preliminary lien notice placed on property. He added there is a fund available now to cover this kind of multiple payments; there is also a misdemeanor classification in the mechanic’s lien.
Chairman James acknowledged he knew of the misdemeanor classification and said it is for filing a false lien. Conversely, the misdemeanor crime related to farm products is for removing products with lien attachments from the state, he said. He again reassured this bill would be included in discussions about other bills relating to liens.
Gary Millikin, Lobbyist, Association of General Contractors-Las Vegas, acknowledged Senator O’Donnell addressed a problem, but expressed doubt S.B. 93, as written, would resolve the problem. He said he wanted to note the owner of property is in the best position to know when liens are filed and when they are released. He added, what is needed is for everybody involved be informed of a property’s lien status. He closed with an expressed interest in working with the committee.
Cheryl Blomstrom, Lobbyist, Nevada Chapter, Associated General Contractors, came forward and testified she agreed with her colleague, Gary Millikin.
Chairman James closed the hearing on S.B. 93 and opened a work session, referencing with a document of the work session agenda (Exhibit K). He opened discussion on Senate Bill 31.
SENATE BILL 31: Revises provisions pertaining to assault and battery. (BDR 15-284)
SENATOR WIENER MOTIONED TO DO PASS SENATE BILL 31.
SENATOR TITUS SECONDED THE MOTION.
Senator Titus requested clarification about amending the wording of the bill to specifically include juvenile offenders. Allison Combs, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, explained adding “juvenile offenders” would complicate the intent of the bill and the felony penalties referenced. Juvenile officers who make home visits are already covered under the definition of “officer,” she said.
Senator Washington asked how S.B. 31 would bear upon abuse-of-power issues raised by a constituent who had an incident with a dogcatcher who the constituent felt had abused him in the process of retrieving a dog. Bradley A. Wilkinson, Committee Counsel, Legal Division, Legislative Counsel Bureau, responded this bill only refers to penalties if a criminal act was committed against an officer. He said the dogcatcher incident does not apply to this bill.
Chairman James verified there are no changes to S.B. 31 and asked for a vote.
THE MOTION PASSED UNANIMOUSLY.
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Chairman James appointed Senator Porter to explain to Senator Carlton, who had introduced S.B. 31, any questions about this committee’s processing of the bill.
Chairman James opened discussion on S.B. 49 and asked Ms. Combs to explain the proposed amendments.
SENATE BILL 49: Adopts Uniform Electronic Transactions Act. (BDR 59-258)
Ms. Combs said there are two clarifying amendments. The first amends section 27 to mirror the provision of the federal law to include electronic transactions that are notarized, verified, or made under oath. She said the other amendment deletes language in section 40 regarding acknowledgment of signatures and would eliminate an internal conflict with section 27 of S.B. 49 authorizing acknowledgment of electronic signatures.
Renee Lacey, Chief Deputy Secretary of State, Office of the Secretary of State, responded to Chairman James’ question regarding the effect of this bill on notaries. She went on to say that currently there are no procedures for electronic notarization, explaining her office has contacted other states and has discovered some are holding off adopting electronic notary procedures. Ms. Lacey informed the committee of a lawsuit pending involving a patented procedure for notarization, and several states have given their secretary of state’s offices regulation for the time when there is a uniform procedure. Nevada has another bill, she said, that has been amended to provide regulation for electronic notarization procedure. Section 27 of Senate Bill 49 is the enabling statute for electronic notarized signature, provided all other notary requirements are met, she said.
Chairman James asked Ms. Lacey to verify this is not a foreclosing issue, but rather an enabling of it, and once the lawsuit is resolved or the means of doing electronic notarizations become available, this law enables doing electronic notarized signatures.
Ms. Lacey responded affirmatively and added as soon as the procedure is available and the Legislature approves regulation authority, we can either notarize electronically through regulation or return for statutory adoption of procedures.
Chairman James verified until the time a procedure is available, notarizing documents would continue to be done manually. Ms. Lacey answered, “Yes, and no,” and stated the electronic signature definition could be used for a notary’s signature and further explained the problem is transmitting the notary stamp. Another notary would have to be present to watch the transmission, record in the book, stamp the document, and then attach the electronic signature, she explained.
Chairman James announced there are two amendments to S.B. 49, a preemption amendment and the conflict amendment.
SENATOR PORTER MADE A MOTION TO AMEND AND DO PASS SENATE BILL 49.
SENATOR MCGINNESS SECONDED THE MOTION.
Senator Care asked to change language in section 29 from “must” to “may,” in reference to the exclusion of a signature because it is electronically transmitted. He said the admissibility of the electronic signature has to be protected, citing the rules of evidence. He added, for the record, he accepts the current language of the bill, but the rules of evidence still have to apply.
Senator Wiener added, section 27 refers to a signature of record and asked for an explanation of the phrase’s meaning and how the electronic signature reference registers with the secretary of state’s office. She asked if this is called “digital registration.”
Chairman James asked Ms. Lacey to respond, but Laura (Bru) Ethridge, Coordinator, Digital Signatures, Office of the Secretary of State, answered after Chairman James read section 27 of the bill. Ms. Ethridge explained when a signature is notarized on paper, the notary’s journal must show a record and signature. In a digital registration in the journal, the requirement is the same: the notary must identify the signer of the notarized document. Ms. Lacey explained how this would be accomplished by citing amended comments on Section 27 (Exhibit L).
Chairman James asked for a vote.
THE MOTION CARRIED UNANIMOUSLY.
*****
The next order of business in the work session was Senate Bill 32, Chairman James announced.
SENATE BILL 32: Allows witnesses to testify at preliminary examination or before grand jury through use of audiovisual technology under certain circumstances. (BDR 14-637)
Chairman James said Ben Graham, Lobbyist, Nevada District Attorneys’ Association, was distributing proposed amendments to this bill (Exhibit M). Senator Care said he was satisfied with the amendments, as written.
Mr. Graham started his testimony announcing there was not a meeting of the minds with those who oppose S.B. 32. Therefore, he added, these amendments do not represent a compromise situation. Mr. Graham said he had added some safeguards to the provisions, one safeguard was there would be notification, and with it, an opportunity to be heard. He noted the preliminary hearing and the videoconferencing would have to be live, and proposed the addition of “prosecuting attorney,” instead of the limiting language of “district attorney.” Mr. Graham continued enclosed is a memorandum setting forth the constitutional standards discussed during the hearing. He said there was some concern in the defense bar with regard to the confrontation clause. The preliminary hearing is a “creature of statute,” and therefore a number of things can be added or subtracted, he explained. He said some states, including California, have strictly “hearsay” preliminary hearings based upon someone called a “professional reader” reading depositions of witnesses which, he said, is constitutionally sound. Though Nevada’s procedures are not even close, the participants are asking, in the event a witness is out of the courtroom or in a grand jury situation, live-videoconferencing could be permitted. He said he believes as technology improves, the use of videoconferencing would increase. His suggestions include providing a list of everyone present to those conferencing from another location. Mr. Graham added it is constitutionally sound to allow this and the law enforcement community has asked for assistance. He concluded his remarks saying this is a natural progression with technology and there is no legal reason to avoid videoconferencing.
David S. Gibson, Lobbyist, Clark County, stated there was no compromising agreement made. His concern, he explained, is with the quality of the environment when this kind of testimony is given. He said he felt the ability to gather all the desired information was limited by teleconferencing. He went on to agree with Mr. Graham regarding the accused person’s right to confront accusers, the confrontation clause. Clark County’s problem remains, he said, as do the ramifications of “leaving the box” during a preliminary hearing. He explained evidence or testimony used to determine probable cause could come back as evidence in the trial to show guilt beyond a reasonable doubt. If a person testified from a different location via teleconferencing, unseen, he felt the quality of the testimony would not be as strong as that of a person in the courtroom.
Senator James asked if a person who testified at a preliminary hearing dies before the trial, could his testimony be read at the trial as evidence. Mr. Gibson responded affirmatively, but added, from a defense position, seeing and talking to a witness is advantageous when arguing before a jury. The testimony of an absent person is read in a neutral manner, which is not the same as seeing and hearing the witness testify in person, he said.
Chairman James said he empathized with Mr. Gibson and added he does not like to cross-examine via videoconferencing. But, he explained, it alleviates having whole prosecutions being dismissed because the witness cannot be there. He asked if there should be standards to be met before this kind of questioning of a witness is allowed. He expressed concern if this law is passed, the videoconferencing method would be used all the time.
Mr. Graham responded he understood feelings of nervousness about using new technology, but asked those concerned to keep in mind, it is the weight of the evidence, and not its admissibility. As a prosecutor, he said, the weight of videoconferenced testimony is significantly less than that of one testifying in person. If a person goes to trial, every effort would be made to bring witnesses into the courtroom because of the significance it adds to the trial. He suggested adding to the provision, “after notification of the attorney of record,” the phrase, “upon good cause appearing.” He said then an argument could be made that defense counsel can argue against, leaving it to the judge to rule. The court, he explained, could order appearance.
Senator Porter said he would be more comfortable with “good cause” being shown. He said he had an opportunity to attend his first videoconferenced parole hearing with Emory Crews, a Senate staff employee, whose son was violently murdered. The man convicted of this murder, serving a life sentence in Ely State Prison, was asking for parole, his second attempt, and Mr. Crews’ family was allowed to view and participate in this very traumatic hearing, he reported. He said he recalled similar arguments regarding parole hearings when the Legislature last reviewed teleconferencing for parole hearings. “Now,” Senator Porter said, “there must be a legitimate way to make this work in some cases.” He said he encourages working on a way to make teleconferencing right for all parties.
Senator Titus disagreed with Senator Porter, stating she understands the movement in this direction, but cautioned the technology is not advanced enough yet. She expressed there is currently some distortion, a skewed sense of things, as they are transmitted on the video screen. She said she felt this was also something to consider in the future.
Senator Care responded to Senator Titus stating there is a clear distinction between probable cause and beyond a shadow of doubt, explaining he understands technology is not perfect, but he is not confused by it.
Chairman James said his concern revolves around how probable cause testimony could become trial testimony. The confrontation issues are different, he added. He requested an attempt to reach a consensus as a committee outside the hearing room.
Senator Porter asked if videoconferencing was a way to have more witnesses testify, specifically, if more evidence could be provided if the use of video technology was readily available.
Mr. Graham responded he felt it was entirely possible. He reminded the committee preliminary hearing evidence is minimal and has nothing to do with the guilt or innocence of the accused. He added having additional witnesses might be beneficial to the state and to the defense because some people could conceivably be testifying who normally, would not be included.
Mr. Gibson responded to Senator Porter’s question, stating every time a piece of legislation like this comes before the committee, the only party who can do it is the state, and not the defense. He said he recognized at a preliminary hearing the defense very seldom presents evidence. With this bill drafted as it is, defense attorneys would not be able to present at all, because it just provides for the prosecution. He added he felt it would be very expensive to videoconference, and therefore agreed with Mr. Graham this would not happen often. He said he believed it would be difficult to gain the cooperation of other jurisdictions. He added defense attorneys do not have as much “pull” as prosecutors for the state. He said he is seeking equality for both defense and prosecution in the use of videoconferencing.
Mr. Wilkinson commented the way S.B. 32 is drafted, it does not limit the request to just the prosecution. The defense, he said, could also make the same request.
Senator Titus asked who would pay for the service if the defense requested it. Mr. Gibson replied money is always a problem, but if this became an important tool to the court, it would be figured out. Some, he said, might have to petition the court to help them pay for it. Senator Titus noted the court petition could be perceived as another unfair burden.
Chairman James asked Mr. Graham if the preservation of testimony was also a concern at issue in another bill. Mr. Graham responded affirmatively. Chairman James requested further negotiation on S.B. 32 in order to reach a consensus.
Chairman James announced a hearing was scheduled for February 23, 2001, regarding slot machine malfunction, on Senate Bill 100. Ms. Combs passed out a paper concerning the decision of the Nevada Supreme Court case of Sengel v. IGT [2 P.3d 258 (2000)] (Exhibit N). This decision laid out the common law on this issue, he said, adding tomorrow’s hearing is on a bill seeking to change that, he said. He suggested the committee read this case before the meeting.
Chairman James adjourned the meeting at 10:45 a.m.
RESPECTFULLY SUBMITTED:
Ann Bednarski,
Committee Secretary
APPROVED BY:
Senator Mark A. James, Chairman
DATE: