SB 524
Modifies provisions regarding the assignment for benefit of creditors
Sponsor:
LR Number:
2259S.01I
Last Action:
3/4/2021 - Second Read and Referred S Judiciary and Civil and Criminal Jurisprudence Committee
Journal Page:
Title:
Calendar Position:
Effective Date:
August 28, 2021

Current Bill Summary

SB 524 - This act repeals and replaces the current provisions relating to the assignment for benefit of creditors.

The act provides that the circuit court for the county of the assignor's residence shall have authority over proceedings brought pursuant to this chapter. Additionally, the act specifies the residency and venue of assignors making a general assignment. All matters that require court authorization are to be brought by motion, unless the matter falls within certain categories designated in the act which shall be brought by an adjunct action. (Sections 426.510, 426.513, and 426.516)

No creditor shall obtain priority of payment out of the assets assigned on judgment rendered after the filing of a complaint if the assignment is set aside and voided. In actions to set aside any assignment, the assignee and assignor are indispensable parties to the case. Additionally, any preferred or unpreferred creditor may be made a plaintiff or defendant at any time. When an assignment is attacked as fraudulent or void, it is not necessary to prove that the assignee has knowledge of such fraud or notice to render the assignment void. (Sections 426.519, 426.522, and 423.525)

Any individual, entity, or unincorporated group that has the capacity to convey real property by deed may execute an assignment to one or more assignees in a trust for the benefit of creditors. Any general assignment made by partners in business may include only the partnership property. Assignments shall be subject to provisions of law regarding alter ego liability, piercing the corporate veil, and other equitable principles. Assignees shall be fiduciaries of creditors and other interested parties of the estate. Additionally, assignments shall be administered for the equal benefit of the assignor's creditors. (Sections 426.550, 426.553, 426.556, and 426.559)

An assignment shall not be void or set aside because of any defect, informality, or mistake in the assignment, bond, inventory, or accompanying list of creditors. The assignment may be amended and any such amendment shall relate back to the execution of the original assignment. Additionally, the assignment shall not be cancelled without a court order after notice and opportunity to be heard. The act provides that certain provisions of an assignment shall be void. (Sections 426.562, 426.565, and 426.568)

This act requires that every assignment be in writing and contain certain information. Additionally, the assignor shall attach a list of the inventory and creditors, equity holders, and other interested parties to the assignment. The assignor shall attest in writing to the accuracy of the assignment. The assignment shall be filed with the appropriate court within seven business days after execution. A notice of the assignment shall be recorded with the recorder's office in the county where the assigned real property is located. Such recording shall have the effect of conveying to the assignee both the legal and equitable title to the real property. (Section 426.600)

Any purchaser and encumbrancer in good faith and for value, where notice of the assignment has not been recorded in the appropriate county, shall take the property free of the interest of the assignee. The assignee is not prohibited from pursuing the proceeds of any conveyance or encumbrance from assignor. An assignment shall not include any property exempt from levy, sale, or from being applied to the payment of debts by any legal process, unless the exemption is expressly waived in the assignment. (Sections 426.603 and 426.606)

An assignee shall post a bond, to be approved by the court, that is double the amount of the estate and effects assigned, within three business days after filing the assignment with the court. The bond may be adjusted and shall be conditioned on the assignee's faithful discharge of duties. The bond runs in favor of all persons having an interest in the assignment proceeding or property. Anyone injured by a breach of the required conditions of the bond may bring an adjunct action. (Sections 426.609, 426.612, and 426.615)

Within 30 days after execution of assignment, notice of the assignee's appointment shall be published in newspaper located in the appropriate county once a week for three consecutive weeks and written notice shall be provided to each of the assignor's creditors, equity holders, and other interested parties. The notice shall include a date by which creditors are required to file their claims and such a date shall not be more than 180 days after written notice. (Section 426.650)

The assignee shall be paid a reasonable fee for services from the estate. Upon approval by the court, the assignee may employ counsel, accountants, appraisers, auctioneers, real estate brokers, or other appropriate professionals. The professionals shall be paid a reasonable fee from the estate. (Sections 426.653 and 426.656)

An assignee may sue, take possession of the estate of the assignor, settle any and all assigned claims and causes of action, redeem all mortgages and conditional contracts, sell property subject to encumbrances, sell property free and clear of all encumbrances, exercise powers granted to a trustee or assignee for the benefit of creditors, borrow money secured by the assigned assets, receive at the assignee's address all mail or deliveries, abandon assigned assets, rights, claims, and causes of action, and perform any acts necessary for the orderly liquidation of the assigned rights. An assignee may sell, lease, or otherwise dispose of all or part of the assets by public or private sale. (Sections 426.659 and 426.662)

The assignee shall dispose of all personal property and real estate and divide the proceeds among creditors. Upon reasonable notice, the assignee may call the creditors together at any time. At the meeting, the assignee shall compel the assignor to submit to an examination concerning the acts, conduct, assets, liabilities, and financial condition of the assignor or any matter related to the administration of the estate. The court may compel the appearance of the assignor or other persons requested by the assignee. (Sections 426.665 and 426.668)

At least every quarter, the assignee shall file with the court a written report regarding the assets of the assignment and other information reasonably requested. All proceeds arising from the sales of property will be deposited for safekeeping in a national bank within Missouri or a banking institution incorporated under Missouri law. (Sections 426.671 and 426.674)

Upon good cause and motion for substitution, a majority of the assignor's unsecured creditors may agree to the designation of a new assignee within 60 days following the filing of the inventory. The court shall remove or replace the assignee if the assignee has not executed and filed the bond, the assignee resigns, refuses, or fails to serve for any reason, or for good cause. If the removed or replaced assignee has accounted for and turned over all estate property and filed a report on all receipts and disbursements, then the court shall enter an order discharging the assignee from further duties, liabilities, and responsibilities after notice and a hearing. (Sections 426.677 and 426.680)

The assignee will have the right to occupy any business premises held under a real estate lease by the assignor for up to 90 days after the assignment, or longer if agreed upon or by court order. (Section 426.683)

This act provides that an assignee takes assets subject to the rights of persons other than the assignor. This shall not limit the assignee from seeking avoidance of transfers, defending against claims, or seeking any other relief. The assignee shall not be held liable for acts taken in execution of the trust if done in good faith and with reasonable exercise of business judgment. The assignee shall succeed to all rights of the assignor and may assert on behalf of the estate any claims to avoid fraudulent transfer. Additionally, the assignee may set aside any fraudulent conveyances and may recover property conveyed for the purpose of hindering, delaying, or defrauding creditors. If the assignee does not exercise such rights, then a creditor may exercise such rights upon motion, notice, and court approval. (Sections 426.686 and 426.692)

The act outlines the order of priority for distributions on claims. Creditors shall file their claims in written form setting forth the creditor's information and nature of claim along with any original or copies of writings for which a claim is based upon and evidence of perfection of any security interest. Execution and deliverance in accordance with this provision constitutes prima facie evidence of the validity and amount of the claim. (Sections 426.695 and 426.700)

Within 30 days following the claims bar date, the assignee must create and file with the court a register of all creditors who have filed claims and the reasonable costs of the administration. Any objection shall be in writing setting forth the nature of the objection. The assignee must allow a claim unless there is good reason to believe the claim is not just and true. The assignee must accept or deny a disputed claim within 30 days and this decision may be reviewed by the court upon motion. (Sections 426.703, 426.706, and 426.709)

The assignee may allow a claim that is not due at its present value by discounting it at the prime lending rate. If a creditor holds collateral that is worth less than a claim, the assignee may estimate the value of the collateral and allow the creditor, as an unsecured claim, the difference between it and the amount of the claim. Any creditor may present not only any debt due, but any debt to become due. The failure of a creditor to file a proof of claim shall not void a properly attached and perfected lien. (Sections 426.712, 426.715, and 426.718)

The making of a general assignment for the benefit of creditors terminates a lien of prejudgment and postjudgment attachment if the lien was created within 90 days before making the assignment. This shall not apply unless all liens of attachment on the defendant's property in other states that were created with 90 days of the assignment have terminated. If a lien of attachment terminates, the assignee under a general assignment may secure the release of the attached property by filing a request with the levying officer. The levying officer shall release the attachment after 10 days from notice of request for release to the plaintiff unless otherwise ordered by the court. (Sections 426.753 and 426.756)

The lien of prejudgment attachment that has been terminated shall be reinstated as if it had never been terminated in certain instances. Upon making an assignment that terminates a lien, the assignment shall be subrogated to the rights of the plaintiff under prejudgment attachment. (Sections 426.759 and 426.762)

This act is substantially similar to HB 1020 (2021), HB 2277 (2020), SB 422 (2019), HB 939 (2019) and HB 1655 (2018).

KATIE O'BRIEN

Amendments

No Amendments Found.