BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1698
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          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.









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          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.









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          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.









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          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."








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          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  








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            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 


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