Chap. 264.—An ACT to amend the Code of Virginia by adding thereto a new sec-
tion numbered fifty-two hundred and twenty-four-a, defining the terms “fac-
toring”, “factor” and “factors” and relating to the creation of liens upon goods
or merchandise to provide for the recording of notice of such liens, their ap-
plication, enforcement and discharge. [H 239]

Approved March 16, 1944

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia be amended by adding a new section
numbered fifty-two hundred twenty-four-a, as follows:

Section 5224-a (1) Definitions. The term “factoring’”’ as used in
this act means the financing of a manufacturer in his purchases, manu-
facture and sales of goods and merchandise.

The terms “factor” and “factors”? wherever used in this act include
banks, persons, firms, and corporations, and their successors in interest,
engaged in whole or in part in the business of factoring or financing a
manufacturer in his purchases, manufacture or sales of goods, or merchan-
dise, who, as part of or incidental to such business, lend upon the security
of such goods or merchandise, and any consignee or consignees, pledges
or pledgees, who advance money on goods or merchandise consigned to
or pledged with them, whether or not such consignees or pledgees are
employed to sell such merchandise, and their successors in interest.

(2) Factor’s Liens. If so provided by any. written agreement, all
factors shall have a continuing general lien upon all goods and mer-
chandise from time to time consigned to or pledged with them, whether
in their constructive, actual, or exclusive occupancy or possession or not,
for all their loans and advances to or for the account of the person cre-
ating the lien (hereinafter called the borrower), together with interest
thereon, and also for the commission, charges, and expenses properly
chargeable against or due from said borrower and for the amount due
upon any notes or other obligations given to or received by them for or
upon account of any such loans or advances, interest, commissions,
charges, and expenses, and such lien shall be valid from the time of re-
cording the notice hereinafter referred to, whether such goods or mer-
chandise shall be in existence at the time of the agreement creating the
lien or at the time of recording such notice or shall come into existence
subsequently thereto or shall subsequently thereto be acquired by the
borrower; provided, there shall be placed and maintained on the door
or in a conspicuous place at the main entrance of each place of business,
or other premises in or at which such goods or merchandise, or any part
thereof, shall be located, kept or stored, a sign on which appears in
legible English the name of the factor and a designation of said factor
as factor; and provided, further, that a notice of the lien is recorded as
hereinafter provided stating:

a. The name of the factor, the name under which the factor does busi-
ness, if an assumed name; the principal place of business of the factor
within the state or if he has no place of business within the state. his
principal place of business outside of this state; and if the factor is a
partnership or association, the name of the partners, and if a corpora-
tion, the state under whose laws it was organized and the location of its
principal office ;

b. The name of the borrower, and the interest of such person in
the merchandise, as far as known to the factor ; and

c. The general character of the goods or merchandise subject to
the lien, or which may become subject thereto, and the period of time
during which such loans or advances may be made under tie terms of
the agreement providing for such loans or advances and for such. hen.
Amendments of the notice may be filed from time to time to record any
changes in the information contained in the original or prior notices.

(3) Recording. Such notice shall be acknowledged by the factor
or his duly authorized representative, in the form of acknowledgments
to deeds. The notice so acknowledged shall be filed for recording with
the clerk of the county or corporation where deeds are admitted to record
as provided by law, and in which the said goods or merchandise subject
to the lien, or any part thereof, shall be located, kept or stored. It shall
be the duty of the clerk to admit such notice to record and to endorse
thereon the day and time of day of the recordation of such notice. All
such notices shall be recorded by the clerk in the book known as ‘“‘Miscel-
laneous Lien Book” and indexed in the general index book for deeds
as well as the “Miscellaneous Lien Book” in the name of the borrower
as grantor and the factor as grantee. For recording such notice the
clerk shall receive such fees as are provided for by Section thirty-four
hundred eighty-four of the Code of Virginia and acts amendatory thereto.
The clerk, after recording such notice, shall upon request of the factor
return to him the original notice.

(4) Effect of Recording. Such notice may be recorded at any
time after the making of the agreement and shall be effectual from the
time such notice is admitted to record as against all claims of creditors
in or against such goods or merchandise thereafter arising, except anv
common-law or statutory liens of processors, mechanics, artisans, or
others, subsequently attaching to such goods or merchandise by reason
of work or services rendered thereon, and also except any common-law
or statutory liens in favor of any third party upon or in such goods er
merchandise which were duly recorded or were otherwise valid against
the factor and in existence at the time of the recording of the notice.
The lien of a landlord for rent shall be superior to the lien of a factor
created by this act. Purchasers for value from the borrower in the usual
course of business shall take free of the lien created by this act whether
they know of the lien or not.

(5) Satisfaction and Discharge. Upon payment or satisfaction of
the indebtedness secured by any lien specified in this act, the factor or
his legal representative shall cause the same to be marked satisfied upon
the margin of the page of the book where the lien is recorded, which
note of satisfaction, when signed by the factor or his duly authorized
agent or attorney, and attested by the clerk in whose office such lien is
recorded, or when made and signed by such clerk, who is authorized
and directed to make and sign the same upon the filing of an affidavit
by the factor, his assignee or duly authorized representative, attorney
or attorney in fact, with such clerk to the effect that the amount of the
indebtedness therein secured and intended to be released or discharged,
has been paid in full to such factor, his assignee or duly authorized repre-
sentative, attorney or attorney in fact, who was, when the said indebted-
ness was So paid entitled and authorized to receive the same, shall operate
as a release of all claims of such factor therein, and the clerk for attesting
such release or for making and signing the same upon affidavit filed as
aforesaid shall have a fee of fifty cents.

(6) Common Law Lien. When any factor, or any third party
for the account of any such factor, shall have possession of goods or
merchandise such factor by virtue of such possession shall have a contin-
uing general lien, as set forth in section two of this act, without record-
ing the notice and posting the sign provided for in this act.

(7) Construction. This Act is to be construed liberally to secure
the beneficial interest and purposes thereof. A substantial compliance
with its several provisions shall be sufficient for the validity of a lien
and to give jurisdiction to the courts to enforce the same. Nothing in
this Act shall be construed as affecting or limiting any existing or future
lien at common law or any rights at common law, or any right given by
any other statute or provision of the laws of Virginia.

(8) Application. As to any transaction falling within the pro-
visions both of this act and of any other law requiring filing or recording,
notice, publication, consent, or formalities of execution, the factor shall
not be required to comply with both, but by complying with the pro-
visions of either, at his election, may have the protection given by the
law complied with.