ABC History in California: How Did California’s ABC Laws Get From There To Here?

🎶 California dreamin’ 🎶 (photo by Marilyn Swanson)

California’s assignment for benefit of creditors laws (“ABC”) are unusual.

Back in the late 1800s, California enacted an ABC statutory scheme, but California also allowed ABCs under the common law.

Today, however, ABCs in California are under the common law, exclusively, with statutory wrinkles added in.

I’ve always wondered how that happened in California. So, I did some research. Here’s what I found.

Today’s ABC Laws in California

An April 5, 2026, summary of California’s ABC laws[Fn. 1] goes like this:

“there is no single comprehensive California ABC statute”;
California’s ABC process “rests primarily on common law, supplemented by scattered provisions in the Code of Civil Procedure and the Civil Code”; and
such statutory provisions “address specific procedural requirements like creditor notice, preference recovery, and fraudulent transfer avoidance.”

Various California statutes dealing with ABCs include, according to the same summary:

Code of Civil Procedure (CCP) §§ 493.010 – 493.060 “address how a general assignment interacts with attachment liens and bankruptcy proceedings”;
CCP § 493.010 “defines a valid general assignment as one that covers all of the debtor’s transferable, non-exempt assets, benefits all creditors, and does not itself create a preference among them”;
CCP §§ 1800 – 1802 “give the assignee power to recover preferential transfers and set out the mandatory creditor notice and claims process”; and
“the Uniform Voidable Transactions Act” (Civil Code § 3439 et seq.) “provides tools to unwind fraudulent transfers.”

Other statutes dealing with ABCs, not mentioned in the summary, include California’s UCC § 6-103 (bulk sale exemption), UCC § 9-627(c)(4) (sale by ABC assignee presumed commercially reasonable), and UCC § 9-309(12) (perfection of an ABC upon attachment).

The same summary adds:

“Because the process is largely common law, the assignment agreement itself carries significant weight”; and
the assignment agreement “typically spells out the assignee’s specific powers, the scope of assets transferred, the procedures for conducting sales, and the terms under which the assignee may hire professionals.”

ABC Laws in California Before 1980

Before repeal in 1980, California Civil Code §§ 3449-3473 established a comprehensive statutory scheme for ABCs. Such statutes, enacted in the late 1800s, had many bells and whistles, including bond and court supervision requirements.

–Two-Track System

Such statutes governed ABCs, but not exclusively. California law also upheld ABCs under the common law—i.e., ABCs that did not follow the statutory procedures.

Evidence of such two-track system for ABC is apparent from California Statutes containing, back then, such language as:

“A common law or statutory assignment for the benefit of creditors . . .” (see, e.g., Financial Code § 12100(h); emphasis added); or
“any general assignment for the benefit of creditors, whether common law or otherwise” (see e.g., CCP § 1204.5, CCP § 690.60, CCP § 1800(b)&(d); emphasis added).

In 1984, the California Supreme Court explained the ABC situation like this[fn. 2]:

“For a period of time in California, both the common law type and a statutory alternative type of such assignment existed at the same time”;
“Sections 3449 to 3473 inclusive, of the Civil Code provided a statutory method of making an assignment for benefit of creditors”;
“Section 3448 of that code provided that the common law assignment for benefit of creditors is expressly recognized and that the statutory method is strictly an alternative to the common law method and is not to be construed as preventing or invalidating a common law assignment”;
“The statutory provisions for this alternative method of making an assignment for benefit of creditors were repealed by Statutes 1980,” and thereafter “common law assignments are to be used exclusively”; and
“The assignment in our case on appeal was executed after the effective date of the repeal of the statutory alternate method” so it is “governed by common law as applied by the California decisions.”

–Common Law ABCs Were Utilized, But Statutory ABC’s Were Not

As noted by a 1979 Report (see discussion below), ABC practitioners back then were choosing—unanimously—to use the common law of ABCs. And they chose—unanimously—to not utilize the ABC scheme established by California statutes.

That’s because California’s statutory ABC scheme was expensive, inefficient and unworkable.

1979 Report for Changing California’s ABC laws

A September 1979 Report on Assignments for the Benefit of Creditors, from the California Law Revision Commission,[fn. 3] provides the following findings and recommendation.

–Findings

An ABC is a business liquidation device available as an alternative to bankruptcy. Its use is prevalent in the commercial credit community in the larger urban areas.

ABCs are handled predominantly by large creditors’ associations and by attorneys who specialize in the field. An ABC is most successful when there is cooperation among debtor, creditors, and assignee.

There is a statute that purports to govern assignments (Civil Code §§ 3448-3473), but the cases have upheld common law assignments not made pursuant to the statute.

As a practical matter, statutory assignments are no longer made, and ABCs are now made exclusively under the common law.

The Commission’s investigation of common law ABCs was prompted by reports of abuse, but the Commission has been informed by the major assignees in the state that they have received few, if any, complaints concerning the operation of ABCs. The Commission has learned only of unverified isolated instances of problems; and

there does not appear to be widespread concern about or general dissatisfaction with the common law of ABCs among persons affected by ABCs.

The major assignees indicate that, although the common law governing ABCs has shortcomings, ABCs under the common law are preferable to a regulatory scheme that may render assignments more expensive or less effective and thereby destroy their usefulness as an alternative to bankruptcy.

A creditor who is dissatisfied with the operation of an assignment has the remedy of an involuntary bankruptcy.

–Recommendation

The Commission has concluded that:

further legislation governing assignments is inadvisable; and
The existing ABC statutory scheme, which is not used, should be repealed (emphasis added).

Such conclusion is emphasized in a cover letter, penned by the California Law Revision Commission’s “Chairperson,” addressed to the “Governor of California and The Legislature of California,” and dated September 1979, like this:

“The Commission recommends that the obsolete statute purporting to govern assignments for the benefit of creditors be repealed”; and
“the repeal would not affect the existing commercial practice of making common law assignments.”

–Results

The results arising from the foregoing Report and its recommendation are:

California repealed its assignment for benefit of creditor statutes (California Civil Code §§ 3448-3473) in 1980 ; and
ABCs have continued flourishing in California, to the present time, under the common law as clarified by a variety of California statutes.

Conclusion

California’s ABC statutory scheme, enacted back in the late 1800s, proved to be unworkable and unusable—and practitioners chose to use the common law ABC process instead.

That is the conclusion of (i) California’s 1979 Report described above, and (ii) California’s Legislature that adopted such Report.

Other states with similar ABC statutes enacted in the late 1800s, which are similarly under-utilized, should follow suit (i.e., repeal the under-utilized statutory scheme and replace it with the common law of ABC). The best way is to replace the statutory ABC scheme with the Uniform Assignment for Benefit of Creditors Act, which updates and codifies the common law of ABC.

———————-

Footnote 1. The summary article is titled “California Assignment for the Benefit of Creditors Statute,” published on April 5, 2026, by LegalClarity California, and is linked here.

Footnote 2. The explanation is from Credit Mangers Association of Southern California v. National Independent Business Alliance, 162 Cal. App. 3d 1166, 1169-70, 209 Cal. Rptr. 119, 120 (1984).

Footnote 3. The Report on Assignments for the Benefit of Creditors is dated September of 1979, and appears at pages 1117 through 1135 at this linked website.

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