California Legislature—2015–16 Regular Session

Assembly BillNo. 556


Introduced by Assembly Member Irwin

February 23, 2015


An act to amend Section 17510.85 of the Business and Professions Code, to amend Section 2225 of, and to add Section 2226 to, the Civil Code, to add Sections 6816 and 8818 to the Corporations Code, and to amend Section 12596 of the Government Code, relating to trusts.

LEGISLATIVE COUNSEL’S DIGEST

AB 556, as introduced, Irwin. Trusts: regulation and enforcement.

Existing law requires an individual or entity who for compensation solicits funds or property for charitable purposes to disclose that the solicitation is being conducted by a commercial fundraiser for a charitable purpose and the registered name of the commercial fundraiser.

This bill would also require an individual or entity who solicits funds or property for charitable purposes with the participation of a fundraising counsel for charitable purposes to make specified disclosures regarding the fundraising counsel. The bill would require the disclosures, if printed or if presented electronically, to be in at least 12-point type.

Existing law, the Supervision of Trustees and Fundraisers for Charitable Purposes Act, generally regulates charitable corporations, trustees, and other legal entities holding property for charitable purposes, commercial fundraisers for charitable purposes, and fundraising counsel for charitable purposes, among others, over which the state or the Attorney General has enforcement or supervisory powers. Existing law requires the Attorney General to establish and maintain a register of charitable corporations, unincorporated associations, and trustees subject to these provisions and of the particular trust or other relationship under which they hold property for charitable purposes. Existing law authorizes the Attorney General to bring any action against trustees or against any charitable corporation or director or officer thereof, to enforce a charitable trust, to impress property with a trust for charitable purposes, or to recover property or the proceeds thereof at any time within 10 years after the cause of action accrued.

This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued. The bill would also authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of these provisions at any time within 10 years after the cause of action accrued.

Existing law provides that one who wrongfully detains a thing is an involuntary trustee thereof for the benefit of the owner, and that one who gains a thing by fraud, or other wrongful act is an involuntary trustee of the thing gained for the benefit of the owner.

This bill would authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of these provisions at any time within 10 years after the cause of action accrued.

Existing law also imposes an involuntary trust for a period of 5 years upon the proceeds and profits from the sale or transfer of any thing or right of a felon, the value of which is enhanced by the notoriety gained from the commission of the felony, and specifies procedures whereby the beneficiaries of the trust, as defined, are authorized to enforce their rights under the trust. Existing law authorizes the Attorney General to bring an action to require proceeds or profits by a convicted felon to be held in an express trust within one year after the receipt of proceeds or profits, or one year after the date of the conviction, whichever is later.

This bill would extend the period of the involuntary trust imposed upon the proceeds and profits of a felon to 10 years. The bill would authorize the Attorney General to bring an action to require the proceeds or profits of a felon to be held in an express trust within 10 years after the receipt of the proceeds or profits, or 10 years after the date of conviction, whichever is later. The bill would also authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued.

Existing law, the Nonprofit Corporation Law, set forth standards of conduct for directors and officers of nonprofit public benefit corporations and provides that it is a crime for any director or officer of any corporation among other things, to knowingly engage in specified acts relating to fraud, to make materially false reports, to receive or acquire possession of the property of the corporation, or to falsify the books or accounts of the corporation.

This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued. The bill would also authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of the standards of conduct for directors and officers of nonprofit public benefit corporations at any time within 10 years after the cause of action accrued.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P3    1

SECTION 1.  

Section 17510.85 of the Business and Professions
2Code
is amended to read:

3

17510.85.  

begin deleteAny end deletebegin insert(a)end insertbegin insertend insertbegin insertAn end insertindividual, corporation, or other legal
4entity who for compensation solicits funds or other property in
5this state for charitable purposes shall disclose prior to an oral
6solicitation or sales solicitation made by direct personal contact,
7radio, television, telephone, or over the Internet, or at the same
8time as a written solicitation or sales solicitation:begin delete (a) thatend delete

9begin insert(1)end insertbegin insertend insertbegin insertThatend insert the solicitation or sales solicitation is being conducted
10by a commercial fundraiser for charitablebegin delete purposes, and (b) theend delete
11begin insert purposes.end insert

12begin insert(2)end insertbegin insertend insertbegin insertTheend insert name of the commercial fundraiser for charitable
13purposes as registered with the Attorney General pursuant to
14Section 12599 of the Government Code.

begin insert

15(b) An individual, corporation, or other legal entity who solicits
16funds or other property in this state for charitable purposes with
17the participation of a fundraising counsel for charitable purposes,
18as defined in Section 12599.1 of the Government Code, shall
19disclose prior to an oral solicitation or sales solicitation made by
20direct personal contact, radio, television, telephone, or via the
21Internet, or at the same time as a written solicitation or sales
22solicitation:

end insert
begin insert

23(1) That the solicitation or sales solicitation is being conducted
24with the participation of a fundraising counsel for charitable
25purposes.

end insert
begin insert

P4    1(2) The name of the fundraising counsel for charitable purposes
2as registered with the Attorney General pursuant to Section
312599.1 of the Government Code.

end insert
begin insert

4(c) The disclosures required pursuant to this section, if printed
5or if presented electronically, shall be in at least 12-point type.

end insert
6

SEC. 2.  

Section 2225 of the Civil Code is amended to read:

7

2225.  

(a) As used in this section:

8(1) “Convicted felon” means any person convicted of a felony,
9or found not guilty by reason of insanity of a felony committed in
10California, either by a court or jury trial or by entry of a plea in
11court.

12(2) “Felony” means a felony defined by any California or United
13States statute.

14(3) (A) “Representative of the felon” means any person or entity
15receiving proceeds or profits by designation of that felon, on behalf
16of that felon, or in the stead of that felon, whether by the felon’s
17designation or by operation of law.

18(B) “Profiteer of the felony” means any person who sells or
19transfers for profit any memorabilia or other property or thing of
20the felon, the value of which is enhanced by the notoriety gained
21from the commission of the felony for which the felon was
22convicted. This subparagraph shall not apply to any media entity
23reporting on the felon’s story or on the sale of the materials,
24memorabilia, or other property or thing of the felon. Nor shall it
25apply to the sale of the materials, as the term is defined in
26paragraph (6),begin delete whereend deletebegin insert ifend insert the seller is exercising his or her first
27amendment rights. This subparagraph also shall not apply to the
28sale or transfer by a profiteer of any other expressive work
29protected by the First Amendment unless the sale or transfer is
30 primarily for a commercial or speculative purpose.

31(4) (A) “Beneficiary” means a person who, under applicable
32law, other than the provisions of this section, has or had a right to
33recover damages from the convicted felon for physical, mental, or
34emotional injury, or pecuniary loss proximately caused by the
35convicted felon as a result of the crime for which the felon was
36convicted.

37(B) If a beneficiary described in subparagraph (A) has died,
38“beneficiary” also includes a person or estate entitled to recover
39damages pursuant to Chapter 4 (commencing with Section 377.10)
40of Title 3 of Part 2 of the Code of Civil Procedure.

P5    1(C) If a person has died and the death was proximately caused
2by the convicted felon as a result of the crime for which the felon
3was convicted, “beneficiary” also includes a person described in
4Section 377.60 of the Code of Civil Procedure and any beneficiary
5of a will of the decedent who had a right under that will to receive
6more than 25 percent of the value of the estate of the decedent.

7(5) “Beneficiary’s interest” means that portion of the proceeds
8or profits necessary to pay the following:

9(A) In the case of a beneficiary described in subparagraph (A)
10or (B) of paragraph (4), those damages that, under applicable law,
11other than the provisions of this section, the beneficiary has or had
12a right to recover from the convicted felon for injuries proximately
13caused by the convicted felon as a result of the crime for which
14the felon was convicted.

15(B) In the case of a beneficiary described in subparagraph (C)
16of paragraph (4), those damages that, under all the circumstances
17of the case, may be just.

18(C) A beneficiary’s interest shall be reduced by the following
19amount:

20(i) Money paid to the beneficiary from the Restitution Fund
21because of the crime for which the felon was convicted.

22(ii) Money paid to the beneficiary by the convicted felon because
23of a requirement of restitution imposed by a court in connection
24with the crime for which the felon was convicted.

25(iii) Money paid to the beneficiary because of a judgment against
26the convicted felon based upon the crime for which the felon was
27convicted.

28(D) In the case of an unsatisfied existing judgment or order of
29restitution against the convicted felon and in favor of a beneficiary,
30any money paid to the beneficiary pursuant to this section shall be
31applied to reduce the amount of the unsatisfied judgment or order.

32(6) “Materials” means books, magazine or newspaper articles,
33movies, films, videotapes, sound recordings, interviews or
34appearances on television and radio stations, and live presentations
35of any kind.

36(7) “Story” means a depiction, portrayal, or reenactment of a
37felony and shall not be taken to mean a passing mention of the
38felony, as in a footnote or bibliography.

39(8) “Sale” includes lease, license, or any other transfer or
40alienation taking place in California or elsewhere.

P6    1(9) “Proceeds” means all fees, royalties, real property, or other
2consideration of any and every kind or nature received by or owing
3to a felon or his or her representatives for the preparation for the
4purpose of sale of materials, for the sale of the rights to materials,
5or the sale or distribution by the convicted felon of materials
6whether earned, accrued, or paid before or after the conviction. It
7includes any interest, earnings, or accretions upon proceeds, and
8any property received in exchange for proceeds.

9(10) “Profits” means all income from anything sold or
10transferred by the felon, a representative of the felon, or a profiteer
11of the felony, including any right, the value of which thing or right
12is enhanced by the notoriety gained from the commission of a
13felony for which a convicted felon was convicted. This income
14may have been accrued, earned, or paid before or after the
15conviction. However, voluntary donations or contributions to a
16defendant to assist in the defense of criminal charges shall not be
17deemed to be “profits,” provided the donation or contribution to
18that defense is not given in exchange for some material of value.

19(b) (1) All proceeds from the preparation for the purpose of
20sale, the sale of the rights to, or the sale of materials that include
21or are based on the story of a felony for which a convicted felon
22was convicted, shall be subject to an involuntary trust for the
23benefit of the beneficiaries set forth in this section. That trust shall
24continue untilbegin delete fiveend deletebegin insert 10end insert years after the time of payment of the
25proceeds to the felon orbegin delete fiveend deletebegin insert 10end insert years after the date of conviction,
26whichever is later. If an action is filed by a beneficiary to recover
27his or her interest in a trust within those time limitations, the trust
28character of the property shall continue until the conclusion of the
29action. At the end of thebegin delete five-yearend deletebegin insert 10-yearend insert trust period, any
30proceeds that remain in trust that have not been claimed by a
31beneficiary shall be transferred to the Controller, to be allocated
32to the Restitutionbegin delete Fund for the payment of claims pursuant to
33Section 13969 of the Government Code.end delete
begin insert Fund.end insert

34(2) All profits shall be subject to an involuntary trust for the
35benefit of the beneficiaries set forth in this section. That trust shall
36continue untilbegin delete fiveend deletebegin insert 10end insert years after the time of payment of the profits
37to the felon orbegin delete fiveend deletebegin insert 10end insert years after the date of conviction, whichever
38is later. If an action is filed by a beneficiary to recover his or her
39interest in a trust within those time limitations, the trust character
40of the property shall continue until the conclusion of the action.
P7    1At the end of thebegin delete five-yearend deletebegin insert 10-yearend insert trust period, any profits that
2remain in trust that have not been claimed by a beneficiary shall
3be transferred to the Controller, to be allocated to the Restitution
4begin delete Fund for the payment of claims pursuant to Section 13969 of the
5Government Code.end delete
begin insert Fund.end insert

6(3) Notwithstanding paragraph (2), in the case of a sale or
7transfer by a profiteer of the felony, the court in an action under
8subdivision (c) shall, upon an adequate showing by the profiteer
9of the felony, exclude from the involuntary trust that portion of
10the profits that represents the inherent value of the memorabilia,
11property, or thing sold or transferred and exclusive of the amount
12of the enhancement to the value due to the notoriety of the
13convicted felon.

14(c) (1) Any beneficiary may bring an action against a convicted
15felon, representative of the felon, or a profiteer of a felony to
16recover his or her interest in the trust established by this section.

17(2) That action may be brought in the superior court of the
18county in which the beneficiary resides, or of the county in which
19the convicted felon resides, or of the county in which proceeds or
20profits are located.

21(3) If the court determines that a beneficiary is entitled to
22proceeds or profits pursuant to this section, the court shall order
23the payment from proceeds or profits that have been received, and,
24if that is insufficient, from proceeds or profits that may be received
25in the future.

26(d) If there are two or more beneficiaries and if the available
27proceeds or profits are insufficient to pay all beneficiaries, the
28proceeds or profits shall be equitably apportioned among the
29beneficiaries taking into account the impact of the crime upon
30them.

31Prior to any distribution of any proceeds to a beneficiary, the
32court shall determine whether the convicted felon has failed to pay
33any portion of a restitution fine or penalty fine imposed by a court,
34or any restitution imposed as a condition of probation. The court
35shall also determine whether the felon is obligated to reimburse a
36governmental entity for the costs of his or her defense and whether
37a portion of the proceeds is needed to cover his or her reasonable
38attorney’s fees incurred in the criminal proceeding related to the
39felony, or any appeal or other related proceeding, or in the defense
40of the action brought under this section. The court shall order
P8    1payment of these obligations prior to any payment to a beneficiary,
2except that 60 percent of the proceeds or profits shall be reserved
3for payment to the beneficiaries.

4(e) (1) The Attorney General may bring an action to require
5proceeds or profits received by a convicted felon to be held in an
6express trust in a bank authorized to act as a trustee.

7(2) An action may be brought under this subdivision withinbegin delete one
8yearend delete
begin insert 10 yearsend insert after the receipt of proceeds or profits by a convicted
9felon orbegin delete one yearend deletebegin insert 10 yearsend insert after the date of conviction, whichever
10is later.

11That action may be brought in the superior court of any county
12in which the Attorney General has an office.

13(3) If the Attorney General proves that the proceeds or profits
14are proceeds or profits from the sale of a story or thing of value
15that are subject to an involuntary trust pursuant to this section, and
16that it is more probable than not that there are beneficiaries within
17the meaning of this section, the court shall order that all proceeds
18or profits be deposited in a bank and held by the bank as trustee
19of the trust until an order of disposition is made by a court pursuant
20to subdivision (d), or until the expiration of the period specified
21in subdivision (b).

22(4) If the Attorney General prevails in an action under this
23subdivision, the court shall order the payment from the proceeds
24or profits to the Attorney General of reasonable costs and attorney’s
25fees.

26(f) (1) In any action brought pursuant to this section, upon
27motion of a party the court shall grant a preliminary injunction to
28prevent any waste of proceeds or profits if it appears that the
29proceeds or profits are subject to the provisions of this section,
30and that they may be subject to waste.

31(2) Upon motion of the Attorney General or any potential
32beneficiary, the court shall grant a preliminary injunction against
33a person against whom an indictment or information for a felony
34has been filed in superior court to prevent any waste of proceeds
35or profits if there is probable cause to believe that the proceeds or
36profits would be subject to an involuntary trust pursuant to this
37section upon conviction of this person, and that they may be subject
38to waste.

39(g) Any violation of an order of a court made pursuant to this
40section shall be punishable as contempt.

P9    1(h) The remedies provided by this section are in addition to
2other remedies provided by law.

3No period of limitations, except those provided by this section,
4shall limit the right of recovery under this section.

5

SEC. 3.  

Section 2226 is added to the Civil Code, to read:

6

2226.  

An action brought by the Attorney General pursuant to
7this title may be brought at any time within 10 years after the cause
8of action accrued.

9

SEC. 4.  

Section 6816 is added to the Corporations Code, to
10read:

11

6816.  

An action brought by the Attorney General for a violation
12of this chapter may be brought at any time within 10 years after
13the cause of the action accrued.

14

SEC. 5.  

Section 8818 is added to the Corporations Code, to
15read:

16

8818.  

An action brought by the Attorney General for a violation
17of this chapter may be brought at any time within 10 years after
18the cause of the action accrued.

19

SEC. 6.  

Section 12596 of the Government Code is amended
20to read:

21

12596.  

begin deleteAny end deletebegin insert(a)end insertbegin insertend insertbegin insertAn end insertaction brought by the Attorney General
22against trustees or other persons holding property in trust for
23charitable purposes or against any charitable corporation or any
24director or officer thereof to enforce a charitable trust or to impress
25property with a trust for charitable purposes or to recover property
26or the proceeds thereof for and on behalf of any charitable trust or
27corporation, may be brought at any time withinbegin delete ten (10)end deletebegin insert 10end insert years
28after the cause of actionbegin delete shall haveend delete accrued.

begin insert

29(b) An action brought by the Attorney General for a violation
30of this article, pursuant to Title 8 (commencing with Section 2223)
31of Part 4 of Division 3 of the Civil Code, or pursuant to Division
322 (commencing with Section 5000) of Title 1 of the Corporations
33Code, may be brought at any time within 10 years after the cause
34of action accrued.

end insert
begin insert

35(c) Notwithstanding Section 12581, the Attorney General may
36bring an action for civil liability against a person who aids or
37abets a violation of this article, Section 2223 or 2224 of the Civil
38Code, or Article 3 (commencing with Section 5230) of Chapter 2
P10   1of Division 2 of Title 1 of the Corporations Code, at any time within
210 years after the cause of action accrued.

end insert


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