BILL ANALYSIS Ó AB 1856 Page 1 Date of Hearing: April 22, 2014 ASSEMBLY COMMITTEE ON JUDICIARY Bob Wieckowski, Chair AB 1856 (Wilk) - As Amended: April 21, 2014 PROPOSED CONSENT SUBJECT : Deposit in Lieu of Bond KEY ISSUE : Should a cashier's check be added to the list of instruments that may be submitted to the court in lieu of a surety bond requirement, and should the provision for filing "bearer" bonds and notes in lieu of posting bond be clarified to reflect more modern forms? SYNOPSIS Under existing law, a party may be required to post a surety bond or some other "undertaking" with the court in order to secure a contested judgment upon appeal. As a general rule, a trial court judgment or order is stayed upon appeal; the bond ensures that if the judgment or order is affirmed, the funds will be there to satisfy the judgment. However, existing law has long allowed a party to substitute, in lieu of a bond, some other functional equivalent, such as directly depositing with the court any of the following: cash, bearer bonds or bearer notes of the United States or California, certificates of deposit, certificates of share accounts, investment certificates, or savings accounts assigned to the officer of the court. This non-controversial bill would add to the existing list of substitutes a cashier's check. The bill also seeks to update the existing statute to reflect modern forms of bonds and notes. For example, read literally, the existing statute only permits the use of "bearer" bonds or notes, even though "bearer" bonds have not been issued by the U.S. Treasury since 1982. According to the sponsor, the Conference of California Bar Associations, this measure will clarify what is essentially existing practice in many, and perhaps most, courts: acceptance of cashier's checks and all validly-issued bonds and notes, including, but not limited to, the older "bearer" bonds or notes. There is no opposition to this bill, which passed out of the Assembly Banking & Finance Committee on consent. SUMMARY : Allows cashier's checks to be deposited with the AB 1856 Page 2 appropriate officer of the court in lieu of a bond, and makes clarifying changes relating to the use of bonds or notes of the United States or the State of California in lieu of bond. Specifically, this bill : 1)Clarifies that bonds or notes, including, but not limited to, bearer bonds and bearer notes, of the United States or the State of California may be deposited with the appropriate officer of the court instead of giving bond. Specifies that the bond or note shall be filed with the court and served upon all parties and, with appropriate instructions, upon the appropriate officer of the bank holding the bond or note. 2)Provides that a cashier's check, issued by a bank or savings association that is insured by the Federal Deposit Insurance Corporation and made payable to the appropriate officer of the court, may be submitted in lieu of giving bond. Requires the officer to deposit the cashier's check in an interest-bearing trust account. EXISTING LAW : 1)Defines "officer" as a sheriff, marshal, clerk of court, judge or magistrate (if there is no clerk), board, commission, department, or other public official or entity to whom the bond is given or with whom a copy of the bond is filed or who is required to determine the sufficiency of the sureties or to approve the bond. (Code of Civil Procedure Section 995.160.) 2)Defines "principal" as a person who gives a bond. (Code of Civil Procedure Section 995.170.) 3)Provides that the principal may, instead of giving a bond, deposit with the officer any of the following: a) Lawful money of the United States. b) Bearer bonds or bearer notes of the United States or the State of California. c) Certificates of deposit payable to the officer. d) Savings accounts assigned to the officer. e) Investment certificates or share accounts assigned to AB 1856 Page 3 the officer. f) Certificates for funds or share accounts assigned to the officer. (Code of Civil Procedure Section 995.710.) FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. COMMENTS : Under existing law, a party may be required to post bond or provide some other form of security to the court in order to secure the amount of any judgment or order of a trial court, if that trial court judgment or order is appealed. However, where such a security is required, existing law has long allowed a person, in lieu of posting bond, to directly deposit with the appropriate officer of the court some functional equivalent to the bond, including cash, bearer bonds or bearer notes of the United States or California, certificates of deposit, investment certificates, or savings accounts assigned to the officer of the court. This bill would add to that list of substitutes a cashier's check and clarify provisions relating to the depositing of bonds and notes of the United States or California in lieu of posting bond. The sponsor believes that a cashier's check should be added to the list of substitutes since it is the functional equivalent of the other substitutes now accepted. Many court clerks already accept cashier's checks, but others, reportedly, refuse to accept them absent a separate motion and court order. These courts do not refuse cashier's checks because they provide any less security than the other instruments accepted; rather, according to the sponsor, they refuse cashier's checks because they are not expressly listed in the Code of Civil Procedure. In addition, this bill seeks to eliminate some "archaic" language in the existing provision permitting the use of treasury bonds and notes of the United States and California. For example, the existing statute, read literally, only permits "bearer bonds" or "bearer notes," even though the U.S. Treasury ceased issuing "bearer" bonds in 1982. This bill would still permit the use of bearer bonds and bearer notes for those who still hold them; however, it will clarify that U.S. and California bonds and notes, including bearer bonds and bearer notes, may be submitted to, and accepted by, the court in lieu of posting bond. ARGUMENTS IN SUPPORT : According to the Conference of California Bar Associations (the sponsor), "AB 1856 would amend selected AB 1856 Page 4 provisions of California's Bond and Undertaking Law to update the list of financial instruments that may be deposited with the court in lieu of an appeal bond to stay execution of a judgment pending appeal. The purpose of the bill is to update the list of acceptable forms of security to reflect current instruments of unquestioned value, and thereby to eliminate the need to expend the litigants' and court's time and resources on unnecessary motions to have these forms of security approved." The sponsor concludes that this measure is "a straightforward and valuable bill to improve the administration of justice in California for the benefit of litigants, courts, and, by extension, taxpayers." REGISTERED SUPPORT / OPPOSITION : Support Conference of California Bar Associations (sponsor) Appellate Courts Section of the Los Angeles County Bar Association Opposition None on file Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334