BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 109|
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UNFINISHED BUSINESS
Bill No: SB 109
Author: Calderon (D)
Amended: 6/8/09
Vote: 21
SENATE BUS., PROF. & ECON. DEVEL. COMMITTEE : 7-2, 4/13/09
AYES: Negrete McLeod, Wyland, Corbett, Florez, Oropeza,
Romero, Yee
NOES: Aanestad, Walters
NO VOTE RECORDED: Correa
SENATE JUDICIARY COMMITTEE : 4-1, 4/21/09
AYES: Corbett, Harman, Florez, Leno
NOES: Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 24-13, 5/14/09
AYES: Alquist, Calderon, Corbett, DeSaulnier, Ducheny,
Florez, Hancock, Harman, Kehoe, Leno, Liu, Lowenthal,
Maldonado, Negrete McLeod, Oropeza, Padilla, Pavley,
Romero, Simitian, Wiggins, Wolk, Wright, Wyland, Yee
NOES: Aanestad, Ashburn, Benoit, Cogdill, Correa, Cox,
Denham, Dutton, Hollingsworth, Huff, Runner, Strickland,
Walters
NO VOTE RECORDED: Cedillo, Steinberg, Vacancy
ASSEMBLY FLOOR : 50-27, 8/20/09 - See last page for vote
SUBJECT : Auctioneers: real estate
CONTINUED
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SOURCE : Author
DIGEST : This bill revises the definition of auction to
include real estate sales, as specified, and requires
notification to an auction audience of all fees that will
be levied as a condition of bidding, and an explanation of
certain terms relating to the auction. This bill also
requires the return of deposits and fees in a specified
time if the high bidder's offer is rejected or if the
seller does not respond to the offer.
Assembly Amendments allow an auctioneer or auction company
to satisfy the signage requirement under existing law for
an electronic auction by requiring any person who wishes to
bid to acknowledge electronically that the auction is being
conducted in compliance with relevant law before being
allowed to bid. In addition, the amendments allow an
auction company or auctioneer to satisfy the refund
requirement under the bill by instructing the escrow agent
to return all funds placed on deposit by the bidder, and
permits an auction company to act as the agent of the
seller, beneficiary, or mortgagee for this purpose.
ANALYSIS :
Existing law:
1.Requires every auctioneer and auction company to maintain
a $20,000 surety bond, as specified, and to file a copy
of the bond with the Secretary of State. The bond must
be in favor of, and payable to, the people of the State
of California and shall be for the benefit of any person
or persons damaged by any fraud, dishonesty,
misstatement, misrepresentation, deceit, unlawful acts of
omissions, or failure to provide the services of the
auctioneer or auction company in performance of the
auction by the auctioneer or auction company or its
agents, representatives, or employees while acting within
the scope of their employment. Existing law permits a
deposit to be made in lieu of a bond, as specified.
2.Provides that if an auctioneer or auction company fails
to perform any of the duties imposed under Title 2.96
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(Auctioneer and Auction Companies), any person may
maintain an action for enforcement of those duties or to
recover a civil penalty in the amount of $1,000, or both,
for enforcement and recovery, and allows a prevailing
plaintiff to recover reasonable attorney's fees and
costs.
3.Requires every auction company and auctioneer to, among
other things: disclose their name, telephone number, and
bond number in all advertising; post a specified sign at
the main entrance to each auction; post or distribute the
terms, conditions, restrictions, and procedures whereby
goods will be sold at the auction; disclose the existence
and amount of any liens or encumbrances; and return the
blank check or deposit of each buyer who purchased no
goods at the sale. Existing law imposes specified fines
for violation of the above provisions.
4.Exempts the following from the definition of auction:
(a) wholesale motor vehicle auction; and (b) a sale of
real estate or a sale of real estate with personal
property or fixtures or both in a unified sale in
accordance with Section 9604 of the Commercial Code.
This bill:
1.Deletes the general exemption of real property sales
under the definition of "auction, " except judicial and
nonjudicial foreclosure sales, as specified, and sales in
which an obligation secured by a security interest in
personal property or fixtures is also secured by an
interest or an estate in real property.
2.Includes real property in the definition of "goods."
3.Permits an auctioneer or auction company to satisfy the
signage requirement for an electronic auction by
requiring any person who wishes to bid to acknowledge
electronically that the auction is being conducted in
compliance with relevant law before being allowed to bid.
4.Requires an auctioneer or auction company to post or
distribute to the audience:
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A. The terms, conditions, restrictions, and
procedures whereby goods will be sold at the
auction, and a description of all fees, both
refundable and nonrefundable, that will be levied as
a condition of bidding, and announce any changes to
those terms, conditions, restrictions, procedures,
and fees prior to the beginning of the action sale.
B. With respect to auctions of real property, during
which one or more properties will be auctioned with
reserve, a clear explanation of the terms "auctioned
with reserve" and "sale subject to seller
confirmation, approval, or acceptance," and the
procedures and timelines to be used in connection
with sales that are subject to these requirements.
5.Requires an auctioneer or auction company to return, or
cause to be returned, all deposits and fees collected
from the bidder in connection with an auction as follows:
A. If a buyer did not purchase goods at the sale,
within two working days after an auction.
B. After an auction sale of real property sold
subject to seller confirmation, approval, or
acceptance:
(1) Within five working days after the high
bidder's offer is rejected.
(2) Within 15 working days after the high
bidder's offer is made and the seller fails to
respond to the offer.
C. In the case of an auction sale of real property
sold subject to beneficiary or mortgagee
confirmation, approval, or acceptance, if the
property is proposed to be sold for less than the
full amount owed the beneficiary or mortgagee:
(1) Within five working days after the high
bidder's offer is rejected by the beneficiary or
mortgagee.
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(2) Within five working days after a request by
the high bidder, if the beneficiary or mortgagee
fails to respond to the offer and more than 15
working days have passed since the date of the
auction.
6.Permits an auction company or auctioneer to satisfy the
refund requirements by instructing the escrow agent to
return all funds placed on deposit by the bidder, and
permits an auction company to act as the agent of the
seller, beneficiary, or mortgagee for this purpose.
Background
Currently, auctioneers and auction companies are regulated
by the provisions of the California Civil Code. Under the
law, an auctioneer or auction company must show proof that
they maintain a $20,000 surety bond, or cash deposit filed
with the Secretary of State. As described above, under the
"Existing Law" part of the analysis, auctioneers must make
certain disclosures and practices specified under that
Code.
In 1982, the Auctioneer and Auction Licensing Act in the
Business and Professions Code established a California
Auctioneer Commission. That act was intended to protect the
public from deceptive and fraudulent sales practices by
establishing minimal requirements for the licensure of
auctioneers and auction businesses and prohibiting certain
types of conduct.
During the state budget crisis of the early 1990s, under
the 1991-92 Budget Act, revenues in excess of three months'
operating "reserves" were transferred to the General Fund
from the special funds of various state boards and
commissions in order to help close the state's budget
deficit. The Auctioneer Commission (Commission)
challenged the legality of special fund transfers in 1992,
and the Legislature in turn took action to completely
de-fund the Commission. In the 1992-93 Budget Act, the
Commission received no appropriation, thereby effectively
dissolving the Commission. Furthermore, the Budget Act
reallocated the balance of the Commission's funds to the
General Fund. The Auctioneer and Auction Lic3nsing Act was
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stayed in 1992, and in 1993, the licensing and regulatory
requirements of the de-funded Commission were repealed and,
instead, bonding requirements were established to be
administered by the Secretary of State.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
ARGUMENTS IN SUPPORT : According to the author office,
California does have a law intended to establish rules for
auctioneers who auction other types of property, but sales
of real estate are explicitly exempted from existing law
requirements. As a result, there are no laws that protect
consumers who bid at these auctions. Frustrated bidders
have reported "winning" the auction on a property, only to
be informed after the auction that their bid did not meet
the bank's reserve, and that, for that reason, they may not
purchase the property for the amount of their winning bid.
Other bidders have reported having trouble obtaining
refunds of refundable deposits they placed with auction
companies, even after complying with the companies' rules
for claiming these refunds.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Block, Blumenfield,
Brownley, Buchanan, Caballero, Carter, Chesbro, Coto,
Davis, De La Torre, De Leon, Eng, Evans, Feuer, Fong,
Fuentes, Furutani, Galgiani, Hall, Hayashi, Hernandez,
Hill, Huber, Huffman, Jones, Krekorian, Lieu, Bonnie
Lowenthal, Ma, Mendoza, Monning, Nava, Nielsen, John A.
Perez, V. Manuel Perez, Portantino, Ruskin, Salas,
Saldana, Skinner, Solorio, Swanson, Torlakson, Torres,
Torrico, Yamada, Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Fletcher,
Fuller, Gaines, Garrick, Gilmore, Hagman, Harkey,
Jeffries, Knight, Logue, Miller, Nestande, Niello, Silva,
Smyth, Audra Strickland, Tran, Villines
NO VOTE RECORDED: Charles Calderon, Emmerson, Vacancy
JJA:do 8/24/09 Senate Floor Analyses
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SUPPORT/OPPOSITION: NONE RECEIVED
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