BILL ANALYSIS Ó AB 1698 Page 1 ASSEMBLY THIRD READING AB 1698 (Wagner) As Amended May 28, 2014 Majority vote PUBLIC SAFETY 4-0 -------------------------------- |Ayes:|Ammiano, Jones-Sawyer, | | |Quirk, Stone | | | | -------------------------------- SUMMARY : Allows the court, upon motion of the prosecutor and after a holding a hearing on the matter, 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)Permits a court, upon motion of the prosecuting agency and after holding a hearing, to issue a written order declaring a false or forged instrument to be judged void at its inception when a defendant is convicted of offering a false or forged instrument for filing, or when 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 that a certified copy of the court order be filed, registered, or recorded. 5)Requires that the order be recorded with a county recorder if the order pertains to a false or forged instrument that has been recorded with a county recorder. 6)Requires the order to reference the county recorder's document recording number of any pendency of action. AB 1698 Page 2 7)States that specified recording fees are waived. 8)Requires the prosecuting agency to do the following when filing a motion to have a false or forged deed voided at its inception: a) Provide written notice by certified mail to all parties who have an interest in the affected property within 10 calendar days of the filing of the criminal complaint; b) Record a notice of pendency of action in the county in which the affected property is located within 10 calendar days of the filing of the criminal complaint; c) Record a withdrawal of pendency of action in the county in which the affected property is located if the case is adjudicated or dismissed without obtaining an order to declare the deed void. 9)Provides that the written notice and notice of pendency of action must inform the interested parties that a criminal action has begun, and of the right to be heard, and identifying the property by street address and legal description, if available. 10)States that failure of the prosecuting agency to timely provide written notice or to record a pending of action will not prohibit the agency from subsequently moving to declare the false or forged deed void at its inception, but the court must consider the omission as a reason to provide any interested parties with more time to respond, and will create a presumption that a civil proceeding is necessary to protect the interests of the parties. 11)States that if the instrument sought to be declared void involves real property, then "interested parties" include, but are not limited to, all parties who have recorded a deed, lien, mortgage, deed of trust, security interest, lease, or other instrument declaring an interest in the property. 12)Allows notice to be given to a party who is not required to receive it, if the party notifies the prosecuting agency in writing of its desire to be notified of a motion to void a false or forged instrument. AB 1698 Page 3 13)Requires the court to set a hearing on the motion to void a false or forged deed at which the defendant, prosecuting agency, and interested parties have the right to be heard and to present information to the court. 14)States that the court may decline to rule on the motion if it decides that the matter would be more appropriately determined in a civil proceeding in order to protect the interests of the parties or the property rights of any person. 15)Provides that, if prior to a hearing on a motion to void a false or forged deed, a party files a quiet title action seeking a determination of the validity of the same false or forged instrument, the court should take that into consideration in making its determination. 16)States that a final judgment previously entered in a quiet title action shall be followed to the extent otherwise required by law. 17)Defines "prosecuting agency" as "a city attorney, a district attorney, the Attorney General, or other state or local agency actively prosecuting a case under this section." 18)Provides that an order declaring a false or forged deed void at its inception as a result of the criminal conviction is a judgment and is subject to appeal under specified provisions of the Code of Civil Procedure. 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 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. AB 1698 Page 4 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. "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." AB 1698 Page 5 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 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 AB 1698 Page 6 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: 0003864