BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 898
Assemblymember Lieu
As Introduced
Hearing Date: June 23, 2009
Civil Code; Commercial Code; Government Code
GMO:jd
SUBJECT
Notaries Public: Power of Attorney, Protests, and Other
Documents
DESCRIPTION
This bill would make three changes to the law governing notaries
public:
(1) It would authorize the Secretary of State to refuse to
process ("authenticate") documents that are clearly intended
for fraudulent purposes.
(2) It would prohibit the use of a subscribing witness when
establishing a power of attorney, just as a subscribing
witness cannot now be used for real property documents that
must be recorded.
(3) It would eliminate the duty of a notary public to process
antiquated documents (i.e., "protests" of nonpayment of
negotiable instruments), unless the notary public works for a
financial institution.
BACKGROUND
According to the Office of the Secretary of State (SOS), as many
as 15 bogus documents, i.e., those clearly intended for
fraudulent purposes, are received for authentication each month.
Authentication simply means the SOS certifies that the notary
public that acknowledged an executed document is a
state-certified notary public with a currently valid seal, and
has nothing to do with the truth or accuracy of the underlying
document that was notarized. The SOS states that although the
Secretary's staff cannot currently refuse to perform a service
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or refuse a filing that patently meets the minimum statutory
requirements but is clearly fraudulent, staff members have
identified several distinctive markings typically used by people
requesting authentication on their bogus documents. Those
markings may include, for example, a symbol after the person's
name, using a small "u" instead of a capital "U" when typing
"united States of America," and putting a punctuation before the
surname of the person (e.g., James-Johnson:Murphy). Apparently,
these bogus documents are frequently used by "tax defiers" who
attempt to negate their tax obligations by calling themselves
"sovereign citizens" not subject to the authority of the federal
or state government.
The same or similar group of "sovereign citizens," members of a
loose coalition of extremists whose members believe the U.S.
federal government's authority is illegitimate, have also
practiced "paper terrorism," according to the SOS, by filing
false financial claims against organizations and individuals.
This group has harassed organizations and individuals with false
financial claims, that are then documented with a "protest" for
nonpayment of the claim with the notary public's certification
that the claim has been "dishonored." The protest then serves
as a formal statement that a dishonor (of the financial claim)
has occurred and begins the civil legal process to recover the
money owed. One such financial claim, validated by a protest
signed by a notary public, claims that Respondent Timothy
Geithner, Secretary of the Treasury, has been ordered to place a
cash bond for $100 billion to be used as a setoff account
against the bond beneficiary's bills, taxes, claims against the
beneficiary, and the like, giving the Secretary 30 days to
dishonor the order for a bond. Although this document is
clearly fraudulent and without basis, the notary public's
issuance of such a document is within his or her authority, even
though there is no requirement that the notary investigate the
truth or validity of the financial claim. When authenticated by
the SOS that it was notarized by a certified notary public, the
document takes on the appearance of an official,
government-sanctioned valid document that can then be used for
nefarious purposes.
This bill is intended to limit a notary public's involvement in
issuing or acknowledging documents that are intended for
fraudulent purposes and to authorize the SOS to refuse
authenticating notarized documents that are clearly fraudulent
or clearly intended for fraudulent purposes.
CHANGES TO EXISTING LAW
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1. Existing law prohibits a proof of execution of any of
several types of specified documents, including a grant deed,
mortgage, deed of trust, quitclaim deed, or security agreement
as it relates to the recording of transfers of property, by
use of a "subscribing witness." (Civ. Code Sec. 1195.)
This bill would add, to the list of documents that may not be
acknowledged by use of a subscribing witness, a power of
attorney.
This bill would expressly prohibit the use of proof of
execution to acknowledge any instrument that requires a notary
public to obtain a thumbprint from the party signing the
document in the notary public's journal.
2. Existing law provides that a protest is a certificate of
dishonor (of a payment claimed) made by a United States consul
or vice consul, or a notary public or other person authorized
to administer oaths by the law of the place where the dishonor
occurs. (Cal. U. Com. Code Sec. 3505(b).)
This bill would permit only a notary public during the course
and scope of employment with a financial institution (in
addition to a U.S. consul or vice consul or other person
authorized by the law of the state, government or country
where the dishonor occurred) to issue a protest.
3. Existing law defines the duties of a notary public,
including the duty to demand acceptance and payment of foreign
and inland bills of exchange, or promissory notes, to protest
them for nonacceptance and nonpayment.
This bill would limit this duty to notaries public who are
employed by financial institutions.
The bill would make other conforming changes to the law
governing the charging of fees by notaries public.
COMMENT
1. Stated need for the bill
The author states:
As the economy worsens and home property values continue to
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drop dramatically, blatant and costly scams have arisen to
defraud hardworking Californians of their well-deserved money.
Many of these scams and fraudulent documents have become much
more sophisticated and appear to an average Californian as
being legitimate. These scams are pushing many Californians
into deeper debt and must be alleviated. AB 898 addresses
many of these activities by preventing document fraud.
2. Power of Attorney may not be acknowledged through one
"subscribing witness"
Currently, a person who wishes to appoint another as his or her
attorney-in-fact, to act in his or her stead and to do all that
the person may lawfully do, may execute a power of attorney,
which must be acknowledged by a notary. The notary's
certification is the proof that the document was signed by the
principal and that the signature of the principal is genuine
(proof of execution). A notary can make a proof of execution
even if the principal signer of the document is not present as
long as a subscribing witness testifies that the signature is
genuine. A subscribing witness is a person who witnesses the
signing of a document and then appears before a notary public on
behalf of the principal signer to attest to the authenticity of
the signature.
Due to the potential for fraud, California does not permit a
notary to certify the principal signer's signature through the
authority of a subscribing witness where the documents involve
mortgages, deeds of trust, grant deeds, quitclaim deeds, or
other security agreements (although a trustee's deed or deed of
reconveyance may be acknowledged through a proof of execution).
The Secretary of State claims that the potential for a single
individual, acting in the role of subscribing witness, to
falsely claim that another person had granted them ownership
over a mortgage or deed, is too great, hence the limitation
under the law.
A power of attorney is an extremely important document, as it
can convey to another person legal standing to execute other
documents that could result in impairment or transfer of
ownership interests in property, and denial of other legal
rights of the person who executed the power of attorney in the
first place. Under current law, a power of attorney may be
executed under authority of a subscribing witness. The SOS
argues this loophole must be closed. "[AB 898] closes a
dangerous loophole in current law. A fraudulent power of
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attorney could potentially cause far more harm than a single
fraudulent property document because an unscrupulous individual
could use the power of attorney to fraudulently sign multiple
property deeds and/or impact all aspects of a person's estate."
AB 898 would prohibit the notarization of a power of attorney
under authority of a subscribing witness. With respect to a
power of attorney for health care, however, a notary can still
acknowledge such a power of attorney, when signed in the
presence of the notary. Additionally, a power of attorney for
health care could still be valid when signed in the presence of
two qualified independent witnesses.
3. Notary public duty to issue protest curtailed
A "protest" is a written statement by a notary public or other
official authorized to administer oaths, identifying a document
such as a check or promissory note, and certifying that the
document was either submitted for payment or the reason why the
document was not submitted for payment. The statement also
includes the reason why the document was not accepted or was not
paid (i.e., "dishonored"). A protest serves as a formal
statement that a dishonor has occurred and begins the civil
process to recover the money owed.
For example, if a Bank of America check is presented for payment
to that bank, and there are insufficient funds in the account to
cover full payment of the check, Bank of America could request a
protest. It doesn't usually happen nowadays because a protest
is considered an archaic procedure that was created prior to
modern commercial law. The protest procedure is now handled by
financial institutions in most commercial situations through the
way they handle negotiable instruments, except for a few cases
linked to international commerce issues. The SOS contends that
because protests are mostly unnecessary, notaries public should
only file protests under the guidance of an attorney. The SOS
also states that most notarial experts agree with this
assessment.
AB 898 would prohibit a notary public from issuing a protest,
unless that notary issues the protest during the course and
scope of employment with a financial institution. Although this
is the stated intent of the bill, in several places where this
limitation appears in the bill, the requirement that the notary
public issuing the protest is acting within the scope and course
of employment by the financial institution is absent.
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Suggested amendment: to be consistent, the following language
should be added to continue to enable a notary to issue a
protest if AB 898 is enacted:
1) On page 4, line 31, strike out "employed" and insert:
"during the course and scope of employment"
2) On page 5, line 18, strike out "employed" and insert:
"acting in the course and scope of employment"
The SOS states that in recent years, several groups, most
prominently the Sovereign Citizen Movement, have begun to use
protests as a form of "paper terrorism" to harass organizations
and individuals with false financial claims. The SOS official
in charge of "special filings" reports that she has never seen a
valid protest submitted to the office in her over 20 years of
service to the agency.
The National Notary Association supports AB 898 because it
"provides needed updates to certain California notarial statutes
and will better equip Notaries to serve as the state's front
line of defense against document fraud. ? The NNA is in
agreement with AB 898's stipulation that only Notaries in
financial institutions be allowed to perform the Protest. Our
experience has shown that Notaries who perform this as a
notarial act should have the appropriate business/commercial
training and we therefore concur that the act should only be
performed by Notaries within financial organizations."
The City of Riverside specifically supports this part of AB 898
because of its experience with protests that were turned into
judgment liens filed with the Secretary of State against public
officials. (See Comment 4 below). The city had to take costly
legal action to erase from the public record fraudulent lien
notices filed against city officials.
4. Secretary of State may refuse to perform a service or a
filing based on reasonable belief the document would promote
unlawful purpose
This bill would authorize the Secretary of State's office to
refuse to perform a service or refuse a filing based on a
reasonable belief that the service or filing is being requested
for an unlawful, false, or fraudulent purpose, to promote or
conduct an illegitimate object or purpose, or is being requested
or submitted in bad faith or for the purpose of harassing or
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defrauding a person or entity. (Proposed Gov. Code Sec. 12181.)
One of the duties of the Secretary of State is to authenticate
notary public signatures and seals on notarized documents. When
a notarized document is submitted to the SOS for authentication,
the law currently only permits the Secretary's office staff to
determine the authenticity of the notary's signature and seal,
not the authenticity of the document itself. If the notary's
signature and seal are valid, the Secretary's staff must
authenticate the notary's signature.
Apparently, people such as members of the Sovereign Citizens
Movement have taken advantage of this fact to submit "bogus"
documents such as travel documents, identification affidavits,
public notices, declarations, badges, and unlawful protests to
the Secretary of State, knowing that the documents would be
"authenticated." Once "authenticated," the document appears as
if officially-issued and with the imprimatur of the state, and
can be used for all kinds of purposes. This result is
particularly troublesome, the SOS states, because the SOS office
provides authentication for public official signatures on
documents to be used outside of the United States (depending on
the country of destination, these are known as either
"Apostiles" or "Certifications"). Members of the Sovereign
Citizens Movement have leveraged this "authentication"
procedure, the Secretary says, to produce fraudulent
identification documents indicating diplomatic immunity that
appear legitimate to some governmental and private entities.
City of Riverside public officials have been victimized by
practitioners of these frivolous liens, which were recorded with
the Secretary of State Uniform Commercial Code Filing Office.
These judgment liens remain as public records for five years,
and can thus be accessed by anyone investigating the
creditworthiness of an individual. As stated earlier, the city
engaged in a costly process to clear the records of the city
officials against whom judgment liens were recorded with the
Secretary of State.
Staff has examined some of the sample documents provided by the
Secretary of State that had been presented to the office for
authentication. Some are written in a strange version of the
English language, with claims of sovereign citizenship outside
the jurisdiction of the United States of America (while claiming
to reside here), and others claim outrageous sums of money that
the government "owes" them. One document was used to claim
diplomatic status to avoid customs inspection before boarding an
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airplane, and the person using the "diplomatic badge" was
arrested for trying to take large sums of money out of the
country.
According to the Secretary of State, these "bogus" documents
exhibit or contain some readily identifiable symbols or words,
and the office staff who sees them should be able to form the
reasonable belief, required by AB 898, that the document is to
be or is being used for an unlawful purpose.
For the Secretary of State's office to refuse authenticating a
document, the staff has to have this reasonable belief (that the
service or filing is being requested for an unlawful, false, or
fraudulent purpose, or to promote or conduct an illegitimate
object or purpose, or is being requested or submitted in bad
faith or for the purpose of harassing or defrauding a person or
entity). Based on experience, and a list of likely symbols and
words contained in those documents, the SOS believes that it can
catch a significant amount of fraudulent documents submitted for
authentication if given this authority by AB 898.
Support: American Society of Notaries; United States Notary
Association; City of Riverside; National Notary Association
Opposition : None Known
HISTORY
Source : Secretary of State Debra Bowen
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote :
Assembly Business and Professions Committee (Ayes 6, Noes 4)
Assembly Floor (Ayes 49, Noes 29)
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