BILL ANALYSIS Ó AB 1698 Page 1 ASSEMBLY THIRD READING AB 1698 (Wagner) As Introduced February 13, 2014 Majority vote PUBLIC SAFETY 4-0 -------------------------------- |Ayes:|Ammiano, Jones-Sawyer, | | |Quirk, Stone | | | | -------------------------------- SUMMARY : Requires the court to issue an order voiding a false or forged instrument at its inception, when a defendant is convicted of filing, registering, or recording such an instrument. Specifically, this bill : 1)Requires a court to issue a written order declaring a false or forged instrument to be judged void at its inception when: a) A defendant is convicted of offering a false or forged instrument for filing; or, b) A defendant enters a plea in which a charge of offering a false or forged instrument is dismissed, but he or she agrees to let the court consider the dismissed charge for purposes of sentencing. 2)Requires the order to state whether the instrument is false, forged, or both, and to describe the nature of the falsity or forgery. 3)Requires a copy of the false or forged instrument be attached to the court order. 4)Requires a certified copy of the court order to be filed, registered, or recorded. EXISTING LAW : 1)Makes it a felony to knowingly procure, or offer any false or forged document to be filed, registered, or recorded in any public office within this state, which instrument, if genuine might be filed, registered or recorded under any law of this AB 1698 Page 2 state or of the United States. 2)States that each instrument offered to be filed, registered, or recorded is a separate violation. 3)Provides that a person who, with intent to defraud, signs the name of another person or of a fictitious person to specified items, knowing that he or she has no authority to do so, is guilty of forgery. 4)Defines grand theft generally as when the value of the money, labor or real or personal property taken is more than $950. 5)Makes participation in a fraudulent conveyance a misdemeanor. 6)Defines mortgage fraud for the purpose of criminal prosecution. 7)Permits a party to file a civil action, commonly known as a "quiet title action," to establish title against adverse claims to real or personal property or any interest therein. FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the Legislative Counsel. COMMENTS : 1)Author's statement : According to the author, "Penal Code (PC) Section 115 makes filing a false or forged real estate deed or other instruments a felony. But criminal courts can currently only void forged deeds, not false ones. AB 1698 will amend PC 115 to specifically allow courts to void false and forged deeds. "A forged deed is where someone signs someone else's name without permission. A false deed is where no forgery occurs, but the deed is nonetheless false or untrue. In California, a forged deed has long been held to be void under the law. But there is no law that allows a judge to void a false deed. This requires a homeowner or business who has been victimized by false deeds to go to civil court for a 'quiet title action' at their own expense, even after the bad guys are convicted in criminal court. AB 1698 Page 3 "False deeds cost homeowners, business, and realtors unnecessary time and money. False deeds create vacant homes in neighborhoods, which leads to diminished property values, blight, and potential for increased crime. The perpetrators of these schemes tend to prey on vulnerable populations in the poorest neighborhoods that have been hit hard by foreclosures. "AB 1698 is an opportunity to help those victims without creating a new crime, enhancing sentences, increasing the prison population, or putting additional strain on the state budget." 2)Distinction between forged and false documents : The purpose of Penal Code section 115 is to preserve the integrity of public documents. (People v. Denman (2013) 218 Cal.App.4th 800, 808-809.) The statute differentiates between false and forged documents, but clearly proscribes either kind of instrument. (Generes v. Justice Court (1980) 106 Cal.App.3d 678, 682.) A forgery is a "writing which falsely purports to be the writing of another..." made with the "intent to defraud." (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 41-42.) A false instrument is one "that has the effect of defrauding one who acts on the instrument as genuine." (Generes v. Justice Court, supra, 106 Cal.App.3d at p. 682.) In the context of a deed, the court explained in more detail the notion of a false deed: "Here the lack of an ownership interest in the land goes to the deception itself. If Generes did not own the interest she purported to convey, the instrument she filed was clearly false. Having no right to grant or convey an easement, her recording of a deed transferring an easement would establish a cloud on the title of those persons who lawfully owned interests in the land. A title searcher encountering the spurious document who acted upon it as genuine would of course be materially deceived." (Ibid.) 3)Distinction between void and voidable instruments : "A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing." (Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 378.) Such a deed is void ab initio; it constitutes a nullity, and cannot AB 1698 Page 4 be made the foundation of a good title, even by a bona fide encumbrancer. (Erickson v. Bohme (1955) 130 Cal.App.2d 553, 557; Wutzke v. Bill Reid Painting Service, Inc., supra, 151 Cal.App.3d at p. 43.) "A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations." (Schiavon v. Arnaudo Brothers, supra, 84 Cal.App.4th at p. 378.) Ordinarily, a bona fide purchaser or encumbrancer may rely on and enforce voidable instruments. (See Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106; accord, Schiavon, supra, 84 Cal.App.4th at p. 378; see also Wutzke, supra, 151 Cal.App.3d at pp. 42-43 [innocent encumbrancer entitled to same protections as innocent purchaser].) Please see the policy committee analysis for a full discussion of this bill. Analysis Prepared by : Sandy Uribe / PUB. S. / (916) 319-3744 FN: 0003104