BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 2364 (Wagner)
As Amended April 30, 2012
Hearing Date: July 3, 2012
Fiscal: Yes
Urgency: No
RD
SUBJECT
Civil Procedure: Attachment
DESCRIPTION
This bill would require any financial institution that has more
than nine
branch offices in California to designate one or more central
locations for service of legal process within the state, and
would permit a financial institution with fewer than 10 branch
offices in California to do the same. If a financial
institution elects or is required to designate a central
location for service of legal process, the financial institution
shall file a notice of its designation with the Department of
Financial Institutions (DFI), as specified.
The bill would also establish procedures for service of process
and execution of levies at a financial institution's central
location and other branches, as well as procedures for a
judgment creditor to engage in a levy action against a specific
deposit account or safe deposit box at a financial institution,
including filing a written request with the financial
institution for enforcement against the account or safe deposit
box. Additionally, the bill would require a levying officer to
give at least three days' notice to the judgment creditor
regarding opening and seizing the contents of a safe deposit box
pursuant to these provisions, as specified.
BACKGROUND
California law provides for procedures by which parties may get
satisfaction for their outstanding debts or judgments and,
(more)
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relatedly, for specified procedures to service various legal
processes on financial institutions, including writs of
attachment and execution. A writ of attachment allows a
creditor to seize a debtor's property while an action is
pending, in order to hold that property to secure a judgment or
to sell it in satisfaction of a judgment, whereas a writ of
execution is a court order directing a sheriff or other officer
to enforce a judgment and therefore allows a judgment creditor
to take or seize property in execution of a judgment that has
been entered against the judgment debtor. Procedures for
attachment or execution of a levy, or legally sanctioned seizure
and sale of that property, served on financial institutions
requires service in connection with a levy to be made upon the
branch or at the office that has actual possession of the
property levied upon, or where the deposit account levied upon
is carried, as specified. In other words, a plaintiff or
judgment creditor seeking to levy an account is forced to
identify and separately serve each branch of a bank at which the
defendant or judgment debtor maintains accounts to reach all of
those deposits.
To modernize, simplify, and prevent gamesmanship in the judgment
collection process, this bill would require any financial
institution that has more than nine (i.e. 10 or more) branch
offices in California to designate one or more central locations
for service of legal process within the state, and would permit
a financial institution with fewer than 10 branch offices in
California to do the same. If a financial institution elects or
is required to designate a central location for service of legal
process, the financial institution shall file a notice of its
designation with the Department of Financial Institutions (DFI),
as specified. The bill would also establish procedures for
service of process and execution of levies at a financial
institution's central locations and other branches, as well as
procedures for a judgment creditor to engage in a levy action
against a specific deposit account or safe deposit box at a
financial institution, including by filing a written request
with the financial institution for enforcement against the
account or safe deposit box. Additionally, the bill would
require a levying officer to give at least three days' notice to
the judgment creditor regarding opening and seizing the contents
of a safe deposit box pursuant to these provisions, as
specified.
This bill was heard by the Senate Banking and Financial
Institutions Committee on June 29, 2011 and passed out on a vote
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of 6-0.
CHANGES TO EXISTING LAW
Existing law , in relevant part, provides that for pre-judgment
attachment of a defendant's deposit accounts in banks and other
financial institutions, the levying officer (i.e. the sheriff or
marshal) shall personally serve a copy of the writ of attachment
and a notice of attachment on the financial institution with
which the deposit account is maintained, or shall personally
serve the writ of attachment and notice of attachment on a
centralized location within the county designated by the
financial institution, as specified. Existing law specifies
that this provision does not require a financial institute to
designate a central location for personal service of the write
of execution and notice of levy. (Code Civ. Proc. Sec.
488.455(a).)
Existing law , in relevant part, provides that for pre-judgment
attachment of a defendant's safe-deposit boxes in banks and
other financial institutions, the levying officer shall
personally serve a copy of the writ of attachment and a notice
of attachment on the financial institution with which the
deposit account is maintained. Existing law provides that at
the time of levy or promptly thereafter, the levying officer
shall serve a copy of the writ of attachment and notice of
attachment on any third person in whose name the deposit stands.
(Code Civ. Proc. Sec. 488.460(a)-(b).)
Existing law provides that at the time of service of a copy of
specified writs and a notice of attachment or levy on a third
person, the levying officer shall request the third person to
give the levying officer a garnishee's memorandum containing
specified information and requires that the third person mail or
deliver the memorandum to the levying officer within 10 days of
the request, whether or not the levy is effective. Existing law
requires that the garnishee's memorandum describe, among other
things, any property, or the amount and terms of any obligation,
sought to be attached or levied upon that the third party is not
delivering to the levying officer and the reasons for not doing
so. (Code Civ. Proc. Secs. 488.610(a)-(b), 701.030(a)-(b).)
Existing law , in relevant part, requires personal service of any
writs, notices, orders, or other legal process on a bank or
financial institution, as specified, to be made at the office or
branch that has actual possession of the property levied upon or
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at which the deposit account levied upon is carried. (Code Civ.
Proc. Sec. 684.110(c).)
Existing law provides that for post-judgment executions of levy
on a judgment debtor's deposit accounts in banks and other
financial institutions, the levying officer shall personally
serve a copy of the writ of execution and a notice of levy on
the financial institution with which the deposit account is
maintained, or shall personally serve the writ of execution and
notice of levy to a centralized location within this state as
designated by the financial institution, as specified. Existing
law specifies that this provision does not require a financial
institute to designate a central location for personal service
of the write of execution and notice of levy. (Code Civ. Proc.
Sec. 700.140(a).)
Existing law provides that a judgment creditor cannot levy on a
bank account standing in the name of someone other than the
judgment debtor unless the levy is authorized by court order.
(Code Civ. Proc. Sec. 700.160(a).)
Existing law requires a bank, upon delivery of an affidavit by
an adverse claimant, to refuse to pay out a deposit account or
to deliver property to the account holder, if the bank receives
an affidavit from an adverse claimant, as defined, attesting
that the account holder is a fiduciary of the adverse claimant
and is about to misappropriate the funds or property. Existing
law provides that the bank shall comply, without liability on
its part, with any court order or injunction properly served by
an adverse claimant seeking to freeze the account, as specified.
(Fin. Code Sec. 1450.)
Existing law similarly requires a bank maintaining a safety
deposit box to refuse access to the box or to deliver the
personal property upon receiving an affidavit from an adverse
claimant, as specified above. (Fin. Code Sec. 1620.)
Existing law authorizes the director of the Employment
Development Department (EDD) to levy on a deposit account or
personal property of an employer being held by a bank, for the
purpose of collecting delinquent employer contributions with
respect to unemployment compensation. Existing law requires the
notice of the levy to be delivered or mailed to a central
location designated by the bank. (Unemp. Ins. Code. Sec. 1755.)
Existing law provides that, in order to implement the above
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section, EDD may serve notice to an address, as specified, for
any bank or savings and loan association by means of magnetic
media, electronic transmission, or other electronic technology.
(Unemp. Ins. Code Sec. 1755.1.)
This bill would provide that a financial institution may, and if
it has more than nine branches or offices in this state, shall
designate one or more central locations for service of writs of
attachment, execution levies, and other legal process for
enforcement of judgments within the state, and would provide
that each designated location shall be referred to as a "central
location."
This bill would require any financial institution that
designates a central location for service of levies and other
legal process for attachments and enforcement of judgments to
file a notice of that designation with the Department of
Financial Institutions (DFI), as specified.
This bill would require DFI to provide any person requesting it
with a copy of each current filing made by a financial
institution pursuant to this act, either by posting such
information on its Internet Web site or by imposing a reasonable
fee for furnishing that information in another manner, and would
require DFI to update the information available to the public
within ten business days of receiving any modification or
revocation of a designation from a financial institution.
This bill would provide that, if a financial institution
required to designate a central location fails to do so, each
branch or office of that institution located in this state shall
be deemed to be a central location, and all of that
institution's branches and offices shall be deemed to be
branches and offices covered by central process. The bill would
also provide a mechanism for use by a judgment creditor to
determine the branch at which a judgment debtor holds an
account, in order to facilitate the levy by that judgment
creditor of assets held by that judgment debtor at that
financial institution, if such a central location has not been
identified.
This bill would provide that, except as specified, service of
legal process at a central location of a financial institution
shall be effective against all deposit accounts and all property
held for safekeeping, as specified, if those accounts and that
property are described in the legal process and held by the
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financial institution at any branch or office covered by central
process and located in this state.
This bill would provide that, unless a financial institution
voluntarily elects to act upon process served at a location
other than its central location, that service of process shall
not be effective.
This bill would authorize a financial institution to modify or
revoke any designation of a central location for service of
legal process by filing that modification or revocation with
DFI, provide a process by which the updated information would
become effective, and authorize judgment creditors to rely on
the superseded designation during the 30-day period immediately
following the effective date of a revocation or modification.
This bill would make other technical or conforming changes.
COMMENT
1. Stated need for the bill
According to the author:
This Żb]ill seeks to modernize the service of levies on bank
accounts and safe deposit boxes so that judgment creditors no
longer will have to identify the branch of a bank at which the
account or safe deposit box is maintained in order to serve a
levy. As a practical matter, current law facilitates evasion
by judgment debtors who can frustrate collection of judgments
by withdrawing their funds and emptying their safe deposit
boxes when served with an OEX Żorder of examination] or
discovery request seeking to identify the branch bank where
the accounts and safe deposit boxes are maintained. The need
under current law to serve levies at a particular branch dates
from the time when bank account and safe deposit box
information was kept on index cards at branches and was not
accessible from a central location via computer.
The sponsor of this bill, the Consumer Financial Services
Committee of the Business Law Section of the State Bar of
California, writes that "Że]nactment of AB 2364 would modernize
the levy process by requiring all financial institutions with
ten or more California branches, and permitting smaller
financial institutions, to designate a central location at which
they will accept service of levies and other process that would
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be effective as to all accounts statewide. This will
substantially simplify and expedite the process by which a
judgment creditor can realize on its judgments and eliminate
unnecessary costs, delay and gamesmanship in the judgment
collection process. Because the amendments would also require
that all levies be served at the designated central location,
the process by which financial institutions handle levies would
be substantially simplified."
2. Modernizing and simplifying the procedures relating serving
attachments and executions of levies on large financial
institutions
Even though existing law actually authorizes a financial
institution to elect a centralized location for the service of
process of specified writs and other legal processes, this bill
would require larger institutions to do so. Specifically, this
bill would, among other things, require any financial
institution that has more than nine (i.e. 10 or more) branch
offices in California to designate one or more central locations
for service of legal process within the state, and would permit
a financial institution with fewer than 10 branch offices in
California to do the same.
The sponsor of the bill writes that:
The current procedures reflect the pre-Information Age
practice by which all of a bank's customer records were
maintained locally at the branch at which the account was
maintained, often on index cards. One branch of a bank did
not have the tools to readily identify bank-customer
relationships at other locations of the same bank. Hence,
existing law was crafted to require service of levies on the
particular branch at which the account was maintained and
serviced.
As a consequence, a plaintiff or judgment creditor seeking to
levy on an account currently has to identify and separately
serve each branch of a bank at which the defendant or judgment
debtor maintains accounts to reach all of those deposits.
Conducting discovery or a debtor's examination to identify the
proper branch can add hundreds or even thousands of dollars of
unnecessary expenses to the cost of judgment collection, a
cost that may be added to the amount owed by the judgment
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debtor. The requirement that the judgment creditor serve the
proper branch can also facilitate the concealment of assets by
a dishonest judgment debtor, because an examination of the
debtor to identify the branch can prompt the debtor to move
the funds and game the system.
The development of information processing systems has enabled
financial institutions to centrally process account
information throughout their branch systems, and most banks
that operate more than a few branches have elected to
centralize their business, including the processing of levies.
The effect under current law is that even though the reach of
a levy is limited to accounts maintained at the branch that is
served, following service, the levy papers have to be
forwarded from the branch to the bank's centralized levy
processing department for handling, introducing extra burdens
and causing handling delays.
The sponsor also recognizes that the law authorizes, but does
not require, a bank to designate a central location at which it
would accept service of levies that would affect all accounts
throughout its branch system, but argues that banks have
declined to make that designation for two reasons: "(1) under
current law, the designation would have the effect of extending
the reach of any levy not only statewide, but to accounts
located in other states and countries, creating a potential duty
to conduct nationwide and worldwide searches of databases that
banks have been unwilling to assume; and (2) the current law
lacks specificity as to how the designation would be made or
communicated to a creditor seeking to serve the bank with a
levy."
In addition to requiring financial institutions that have more
than nine branch offices in California to designate one or more
central locations for service of legal process within the state,
this bill further simplifies the process by requiring the
financial institution to provide that information to the
Department of Financial Institutions (DFI) and in turn requiring
the DFI to make the current designations of a financial
institution or the pertinent information therein available to
the any members of the public who ask for it-a requirement that
DFI could satisfy by posting that information on its public
website. Moreover, if an institution that has more than nine
branches fails to designate a central location, the bill would
specify that each branch or office of that institution located
in this state shall be deemed to be a central location, and that
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all of that institution's branches and offices shall be deemed
to be branches and offices covered by central process. The bill
would also provide a mechanism for use by a judgment creditor to
determine the branch at which a judgment debtor holds an
account, in order to facilitate the levy by that judgment
creditor of assets held by that judgment debtor at that
financial institution, if such a central location has not been
identified.
Given the problems outlined by the proponents with the current
system, and particularly with the concern that judgment debtors
are able to frustrate, if not evade judgment, and given the
large number of branches for various financial institutions
today, this bill appears to be an appropriate measure to
streamline service so that people can seek enforcement of their
judgments and also stop a bad-acting debtor who would seek to
evade an anticipated judgment by attaching property while the
action is still pending.
3. Amendments taken in prior committee
In the prior committee, the author accepted the following
amendments to delete the penalty of perjury from this bill,
while still furthering the bill's intent:
Page 14, line 14, strike "A declaration" and insert: An
affidavit
Page 14, line 31, strike "request" and insert: affidavit
Support : California Bankers Association; Civil Justice
Association of California
Opposition : None Known
HISTORY
Source : Consumer Financial Services Committee of the Business
Law Section of the State Bar of California
Related Pending Legislation : None Known
Prior Legislation : None Known
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Prior Vote :
Senate Banking & Financial Institutions Committee (Ayes 6, Noes
0)
Assembly Floor (Ayes 74, Noes 0)
Assembly Appropriations Committee (Ayes 17, Noes 0)
Assembly Judiciary Committee (Ayes 9, Noes 1)
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