1. Alabama Business and Nonprofit Entities
(Ali Draft with Comments
Chairman: James Pruett
Reporter: Howard Walthall
In May 1999, a committee of the Law Institute began its study of all the entities in Alabama to clear up inconsistencies between the entities that can become a trap for lawyers and those with multiple entity organizations. Nine years later, with over 50 meetings held, the Institute drafting committee completed its study at a cost of over $2 million of donated legal services. The committee first drafted a law relating to conversions and mergers which passed the legislature in 2000. This is a comprehensive reorganization of the entity laws.
Purpose: The purpose of this Code is primarily non-substantive. It reorganizes the following types of Business Entities into one Code. They are as follows.
- Alabama Business Corporation Act;
- Alabama Non-Profit Corporation Act;
- Alabama Limited Liability Company Act;
- Alabama Revised Partnership Act;
- Alabama Revised Limited Partnership Act;
- Alabama Real Estate Investment Trust Act;
- Alabama Professional Corporations Act;
- Alabama Professional Associations Act; and
- Other existing provisions of Alabama statutes governing domestic and foreign business and non-profit entities
The re-organization will:
- re-arrange the business and non-business organizations into a more logical order;
- provide a smooth transition when a business needs to change from one entity to another;
- provide a numbering system designed to accommodate future expansion of the law;
- eliminating repealed, duplicative, expired, and other ineffective provisions; and
- simplify the language of the various acts.
The Code is organized on a “Hub and Spoke” model in Title 10. Article One, constituting the “Hub”, consists of provisions applicable to each of the various Business Entities. The remaining Articles are the “Spokes” of the Act and are the individual entities, such as the Business Corporation Act. When possible, each entity will retain its current Chapter designation in the “Spoke.” For example, business corporation provisions presently in Chapter 2 (of Title 10) will be in Chapter 2 of the new Act. This will make it easier to find for those familiar with the current law.
2. Uniform Residential Mortgage Satisfaction Act (Ali Draft with Comments)
Chairman: John M. Plunk
Reporter: Robert L. McCurley
This Act only applies to residential real estate in Alabama. The process of clearing title for residential real estate mortgage has been complicated by the failure of lenders to render a timely payoff statement and mortgage satisfaction when the mortgage is to be paid off or has been fully paid but not satisfied. In some instances the original lender is no longer in business and the mortgage has been sold to another party, however, the legal assignment has not been recorded or has become lost.
The Act basically does the following:
- Payoffs. The mortgage lender must give a payoff statement within 14 days after a written request. If the lender fails to do so, there is a $500 penalty payable to the borrower. This is identical to the penalty in section 7-9A-210 and 7-9A-625 of the UCC for failure to give a payoff statement for personal
- Mortgage Satisfaction. A mortgage lender has 30 days after receiving a full payment to submit a satisfaction document. A mortgagee that neglects to file a mortgage satisfaction within the thirty days after being paid may be subject to a $500 penalty. An identical penalty is in section 7-9A-210 and 7-9A-625 of the UCC for failure to satisfy a lien on personal property. (Since 1852 Alabama has had a $200 penalty for failure to satisfy a mortgage after 30 days, see section 35-10-30.). After a second 30 day notice, if the mortgage is still not satisfied and the mortgagor has to hire an attorney, the mortgagor may be awarded reasonable attorney’s fees.
- Self Help Satisfaction. When the mortgage lender cannot be found or is nonresponsive, the bill provides for a self-help method to remove the satisfied mortgage. After the lender receives full payment, a title insurance company or licensed attorney, under bond, can follow specified procedure of giving the mortgagee 30 days notice to satisfy the mortgage or object to a satisfaction and record an affidavit of satisfaction using a specific form. This results in a satisfying of the paid mortgage on the record. A satisfaction agent or anyone who knowingly makes a false satisfaction is liable for actual damages as well as attorney’s fees and costs.
3. Uniform Revised Limited Partnership Act (Ali Draft with Comments)
Chairman: Jack P. Stephenson, Jr.
Reporter: Professor James Bryce
Alabama last revised its Limited Partnership Act in 1983. This revision updates the Limited Partnership Act to reflect modern business practices. Limited partnerships are now used primarily in two ways: for family limited partnerships in estate planning arrangements, and for highly‐sophisticated, manager controlled limited partnerships.
A limited partnership is distinguished from a general partnership by the existence of limited partners who invest in the partnership; in return for limited liability, the limited partner usually relinquishes any right of control or management of partnership affairs. However, the general partner of a limited partnership traditionally
receives no direct liability protection.
This new act provides:
- Perpetual Entity. No termination of a Lt.P unless the agreement so provides. A limited partner who leaves does not dissolve the entity.
- Entity Status. A limited partner is clearly an entity.
- Convenience. The new Lt. Partnership Act (Lt. P.) provides a single, self-contained source of statutory authority for issues pertaining to limited partnerships. The act is no longer dependent upon the general partnership law for rules that are not contained within it.
- LLLP Status. Under this new act, limited partnerships may opt to become limited liability limited partnerships (LLLP), simply by so stating in the limited partnership agreement, and in the publicly filed certificate. The primary reason for a limited partnership to elect LLLP‐status is to provide direct protection from liability for debts and obligations of the partnership to the general partner of the limited partnership.
- Liability Shield. The current limited partnership law, provides only a restricted liability shield for limited partners. The new act provides a full, status‐based shield against limited partner liability for entity obligations. The shield applies whether or not the limited partnership is an LLLP.
- Express Default Statute. The act provides default provisions between the partners and between partners and the partnership. Therefore, when the partnership agreement does not define the relationship, there is a fall-back default law.
The act also addresses issues such as allocating power between general partners and limited partners; and setting fiduciary duties owed by general partners to other general and limited partners.
4. Redemption from Ad Valorem Tax Sales (Ali Draft with Comments)
When section 40-10-122 was amended in 2002 to limit 12% interest paid at tax sale to taxes and on the overbid up to 15% of assessed value, other sections of the law should have been amended. This bill will clarify and codify the current law by amending other relevant code sections concerning the redemption of property from ad valorem tax sales. It also codifies case law on redemption and delineates the counties’ responsibility with regard to holding and refunding an “overbid” by the tax sale purchaser who paid all taxes, fees and charges and any additional sums paid to the tax collector.
The bill also:
- Provides a procedure for redemption by the landowner from multiple tax sales.
- The owner who remains in possession after the sale may always redeem. (The owner has a statutory redemption period for 3 years from sale; there is an additional 3 years redemption period by the owner from the purchaser after the original 3 year statutory redemption period.)
- Allows the tax status for Class 3 property to remain to be taxed as Class 3 residential property so long as the owner occupies the property.
- After three years from the date of the tax sale, the probate judge must receive proof that all ad valorem taxes have been paid before a tax deed is issued.
- Provides a less complicated procedure for redeeming property sold at a tax sale.
- Bill is effective September 1, 2009.
5. Electronic Recording of Real Estate (Ali Draft with Comments)
Recording of real estate records is now available in 20 states due to the passage of the Uniform Real Property Electronic Recording Act. Tennessee, Florida, South Carolina and North Carolina have already adopted this Act.
As a result of the enactment of the Uniform Electronic Transactions Act passed by the Alabama Legislature in 2001, it is now possible to have contracts in electronic form with electronic signatures of the parties. However, real estate transactions require another step not addressed by the e-sign law.
Real estate documents must be recorded in public records in order to provide notice of the current owner of the property. Real estate records establish a chain of title based on filing the original document, preserving it by copying it, and recording the document in the probate office.
Another example of the growing use of electronic recording is the 2005 court rule by the Alabama Supreme Court, authorizing electronic filing of circuit and district court documents. Electronic filings occurs pursuant to this rule in 48 counties by registered users.
This Act does essentially 3 things:
- Equates electronic documents and electronic signatures to original paper documents and manual signatures. Thus, any requirements for original paper documents or manual signatures are satisfied by an electronic document and signature. The process is essentially a scan-in of the document and electronic filing by email.
- Establishes that electronic filing and storage of electronic records is purely an opt-in-option by probate offices in each of the 67 counties and does not mandate them. Those electing to have electronic recording will be able to do so while maintaining the procedure for walk-up filing of paper documents.
- Establishes a board to set uniform standards for filing electronically in every probate office that elects to opt-in to utilize electronic filing. This 13 person board consists of probate judges, lawyers, and other officials that have an interest in the recording process.
6. Criminal Procedures
Chairman: Honorable William Bowen
Reporter: Bob McCulrey
The Criminal Procedure Committee is now in its thirty-third year. The committee meets periodically to address issues concerning the Alabama Rules of Criminal Procedure or issues raised by the criminal procedure statutes.
7. Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (Uniform Act)
Chairman: Sandy Gunter
Reporter: Hugh Lee
The Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (UAGPPJA) deals only with jurisdiction and related issues in adult proceedings.
Questions of which state has jurisdiction to appoint a guardian or conservator can arise between an American state and another country, as well as between states. Article 1 contains definitions and provisions designed to facilitate cooperation between courts in different states.
Contested cases in which courts in more than one state have jurisdiction are becoming more frequent. Sometimes these cases arise because the adult is physically located in a state other than the adult’s domicile. Sometimes the case arises because of uncertainty as to the adult’s domicile, particularly if the adult owns a second home in another state. Article 2 will help resolve multi-jurisdictional disputes.
The principal objective of Article 2 is to assure that an appointment or order is made or issued in only one state except in cases of emergency or in situations where the individual owns property located in multiple states.
Article 3 is designed to provide an expedited process for transferring existing guardianship or conservatorship to other jurisdiction. This will avoid the need to relitigate incapacity and whether the guardian or conservator appointed in the first state was an appropriate selection.
Article 4 creates a registration procedure. Following registration of the guardianship or protective order in the second state, the guardian may exercise in the second state all powers authorized in the original state’s order of appointment except for powers that cannot be legally exercised in the second state.
8. Uniform Child Abduction Prevention Act (Uniform Act)
Chairman: Honorable Gorman Houston, Jr.
Reporter: Kimberly Bart
- Provides states with a tool for deterring domestic and international child abductions.
- Identifies families at risk for abduction and provides methods for preventing the abduction of children.
- Brings uniformity of law for prevention of child abductions, which is necessary due to the high number of abductions that occur across state and international lines.
- Guides the courts by providing factors for determining whether a credible risk exists that a child will be abducted
- If the court determines that an abduction is likely, the judge can order an “abduction prevention order”.
- The courts can require a party traveling outside a specific area to provide relevant information about where the child is and how to contact the child.
- The court can impose restrictions on passports and/or travel restrictions.
- The court may impose restrictions on visitation, such as requiring supervised visitation.
- If the court finds a credible risk of “imminent” abduction, the court may issue a warrant to take physical custody of the child.
- Judges can place appropriate restrictions on either pre- or post- decrees.
- This act seeks to fill in gaps left by the Uniform Child Custody Jurisdiction and Enforcement Act (UCCJEA), which does not apply to intrastate cases, nor to pre-decree cases.
- Confidentiality provisions are also included to protect domestic violence victims.
9. Real Estate Standby Committee
Chairman: John M. Plunk
Reporter: Robert L. McCurley, Jr.
A new Real Estate Standby Committee was formed to review various real estate acts for possible recommendation to the Alabama Legislature.
There are several areas of real estate law that have been studied by the Committee. These studies may result in the recommendation of several acts. Among those recommended are:
- Uniform Conservation Easement Act - Enacted
- Uniform Assignment of Rents Act
- Uniform Non-Judicial Foreclosure Act
- Uniform Real Property Electronic Recording Act
- Eminent Domain Procedure
- Partition Statutes
- Unlawful Detainer Statutes
10. Revised Uniform Limited Liability Company Act (Uniform Act)
Chairman: Kent Henslee
Reporter: Professor James Bryce
The Uniform Limited Liability Company Act (ULLCA) was first adopted by the Conference in 1995. By that time nearly every state had adopted an LLC statute, and those statutes varied considerably in both form and substance.
Much has changed since then. In 1997, the tax classification context changed radically when the IRS check-the-box regulations became effective. Under these regulations, an unincorporated business entity is taxed either as a partnership or disregarded entity (depending upon the number of owners) unless it elects to be taxed as a corporation. In general, tax classification concerns no longer constrain the structure of LLCs and the content of LLC statutes.
- The new acts noteworthy provisions concern:
- the operating agreement;
- fiduciary duty;
- the ability to pre-file a certificate of organization without having a member at the time of the filing;
- the power of a member or manager to bind the limited liability company;
- default rules on management structure;
- charging orders;
- a remedy for oppressive conduct; and
- derivative claims and special litigation committees.
11. Nonprofit Corporation Act (Uniform Act)
Chairman: L. B. Feld
Reporter: Professor James Bryce
The Institute has formed a committee to begin review of this act once the final draft has been completed. It is anticipated that the new act will make significant changes to the current law. It is drafted by the American Bar Association.
12. Uniform Durable Power of Attorney Act
Chairman: Richard Cater
Reporter: Professor Tom Jones
This act provides a simple way for people to deal with their property by providing a power of attorney that survives the incompetence of the principal. While the act is primarily a set of default rules that can be altered by specific provisions within a power of attorney, the act also contains safeguards for the protection of an incapacitated principal.
The 1969 act was originally enacted in almost every state, but amendments from state to state have eroded uniformity between the states. UPOAA requires that certain powers be expressly and specifically conferred rather than be general powers; this eliminates questions about the agents authority and are cautionary in intent.
UPOAA provides a form power of attorney that must be accepted by any third party. There are civil penalties for refusal to accept if the third party has assets of the principal. There are other provisions that protect the principal from a dishonest agent.
Sections 119 and 120 of the act address the problem of persons refusing to accept an agents authority. Section 119 provides protection from liability for persons that in good faith accept an acknowledged power of attorney. Section 120 sanctions refusal to accept an acknowledged power of attorney unless the refusal meets limited statutory exceptions. An alternate Section 120 is provided for states that may wish to limit sanctions to refusal of an acknowledged statutory form power of attorney.
In exchange for mandated acceptance of an agents authority, the act does not require persons that deal with an agent to investigate the agent or the agents actions. Instead, safeguards against abuse are provided through heightened requirements for grant authority.
The act consists of 4 articles. The basic substance of the act is located in Articles 1 and 2. Article 3 contains the optional statutory form and Article 4 consists of miscellaneous provisions dealing with general application of the act and repeal of certain prior acts.
13. Criminal Warrant and Indictment Committee
Chairman: Tommy Smith
Reporter: Bill Lindsey
A new Criminal Warrant and Indictment Committee was formed in the Spring of 2007 in order to update the Warrant & Indictment Manual. The Manual, first written in 1978, was previously revised in 1988 and 1997. The committee is composed of judges, district attorneys, and criminal defense attorneys from throughout the state. Over the past ten years, several sections of the Code have been amended, thus creating a need for revision. With assistance from the Administrative Office of Courts, updated forms will also be included in the Manual.