BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2364|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2364
Author: Wagner (R)
Amended: 8/21/12 in Senate
Vote: 21
SENATE BANKING & FINANCIAL INSTITUT. COMM. : 6-0, 6/27/12
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Walters
NO VOTE RECORDED: Padilla
SENATE JUDICIARY COMMITTEE : 4-0, 7/3/12
AYES: Evans, Blakeslee, Corbett, Leno
NO VOTE RECORDED: Harman
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/6/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 74-0, 5/29/12 - See last page for vote
SUBJECT : Civil procedure: attachment
SOURCE : Consumer Financial Services Committee of the
Business
Law Section of the California State Bar
DIGEST : This bill authorizes depository institutions
with fewer than ten California branches and require
depository institutions with ten or more California
branches to designate a central location for service of
process for attachments and enforcement of judgments
CONTINUED
AB 2364
Page
2
against deposit accounts and the contents of safe deposit
accounts held by those institutions, requires that service
of such process be made at the central location in all
cases where there is such a designation, and restricts the
reach of levies served at the central location to deposit
accounts and safe deposit boxes maintained at those
financial institutions' California locations. This bill
establishes mechanisms for use by judgment creditors, in
cases where a financial institution has not designated a
central location for service of process, and makes other
technical, conforming, and clarifying changes.
Senate Floor Amendments of 8/21/12 make technical and
clarifying changes.
ANALYSIS : Existing law:
1.Provides that attachment and execution levies served on
financial institutions affect only the accounts or
property held by the particular branch of the institution
at which service of process is made.
2.Authorizes, but does not require, a financial institution
to designate a central location at which it will accept
service of process related to levies in a manner that can
affect all accounts throughout the institution's branch
system, but does not clarify the manner in which a
levying creditor would learn whether such a designation
had been made. Further extends the reach of any levy
served at such a central location to any account
maintained by that institution anywhere in the United
States or in any other country.
This bill:
1.Provides that a financial institution may, and if it has
more than nine branches or offices in this state, shall
designate one or more central locations for service of
writs of attachment, execution levies, and other legal
process for enforcement of judgments within the state,
and provides that each designated location shall be
referred to as a "central location."
2.Requires any financial institution that designates a
CONTINUED
AB 2364
Page
3
central location for service of levies and other legal
process for attachments and enforcement of judgments to
file a notice of that designation with the Department of
Financial Institutions (DFI), as specified. The
information required to be included in this notice is
intended to allow an entity that wishes to perform
service of process directed at deposit accounts or safe
deposit boxes held at an institution to learn the
location, days and hours of service, and other relevant
information necessary to allow such service of process to
be accomplished.
3.Provides that, if a financial institution required to
designate a central location fails to do so, each branch
or office of that institution located in this state shall
be deemed to be a central location, and all of that
institution's branches and offices shall be deemed to be
branches and offices covered by central process. If such
a central location has not been identified, this bill
also provides a mechanism for use by a judgment creditor
to determine the branch at which a judgment debtor holds
an account, in order to facilitate the levy by that
judgment creditor of assets held by that judgment debtor
at that financial institution.
4.Provides that, except as specified, service of legal
process at a central location of a financial institution
shall be effective against all deposit accounts and all
property held for safekeeping, as specified, if those
accounts and that property are described in the legal
process and held by the financial institution at any
branch or office covered by central process and located
in this state.
5.Provides that, unless a financial institution voluntarily
elects to act upon process served at a location other
than its central location, that service of process shall
not be effective (thus, in order to be assured that
service of process to attach or execute upon a deposit
account or safe deposit box is effective, a process
server would have to serve that process at one of a
financial institution's central locations for service of
process).
CONTINUED
AB 2364
Page
4
6.Requires DFI to provide any person requesting it with a
copy of each current filing made by a financial
institution pursuant to this act, either by posting such
information on its Internet web site or by imposing a
reasonable fee for furnishing that information in another
manner, and requires DFI to update the information
available to the public within ten business days of
receiving any modification or revocation of a designation
from a financial institution.
7.Authorizes a financial institution to modify or revoke
any designation of a central location for service of
legal process by filing that modification or revocation
with DFI, provides a process by which the updated
information would become effective, and authorizes
judgment creditors to rely on the superseded designation
during the 30-day period immediately following the
effective date of a revocation or modification.
8.Makes a variety of other technical and conforming
amendments to related code sections, which are intended
to facilitate the operation of the proposed changes
described above.
Background
According to information provided by this bill's sponsor,
the process by which garnishments involving bank accounts
are served and processed in California is in need of
modernization and clarification. California's existing
rules were enacted in 1982, and reflected a period of time
when bank account and safe deposit box information was kept
on index cards at individual branches, rather than in
electronic databases accessible from multiple locations via
computer.
Under existing law, attachment and execution levies served
on depository institutions only affect the accounts or
property held by the particular branch of the institution
at which service of process is made. Because of this, a
plaintiff seeking an attachment or a judgment creditor
seeking to enforce a judgment on assets held by a financial
institution must identify and separately serve every branch
of that institution at which the defendant or judgment
CONTINUED
AB 2364
Page
5
debtor has an account or safe deposit box, in order to
reach all of the deposits or safe deposit boxes of that
defendant or judgment debtor.
In the current age of computers, most banks that operate
more than a few branches elect to process levies on a
centralized basis, so that levies served on a particular
branch are forwarded to the bank's centralized levy
processing department, which then handles all aspects of
levy processing and prepares the bank's responses.
Existing law allows depository institutions to designate a
central location at which they will accept service of
levies that would affect all accounts throughout their
branch systems, but does not mandate service at the
designated locations. Existing law also lacks specificity
as to how a financial institution would designate a central
office, and how a levying creditor would determine whether
such a designation had been made. Existing law also has
the unfortunate characteristic of extending the reach of
any levy served at a central location to every account of
that institution, which is maintained anywhere in the
United States or in any other country. Multi-state and
multi-national depository institutions have refrained from
using existing central designation provisions, in part to
avoid having to search accounts and safe deposit boxes in
other states and countries, based on a California levy.
Another unfortunate consequence of existing law falls on
levying judgment creditors. Under existing law, in order
to identify the bank branch at which a debtor's account is
held, the levying creditor must first obtain an Order of
Examination of the Debtor and conduct a debtor examination
pursuant to specified sections of the Code of Civil
Procedure, or must notice a deposition or conduct other
post-judgment discovery to obtain this information. A
judgment debtor who wishes to frustrate collection of a
judgment is free to withdraw his or her funds upon being
served with an Order of Examination or discovery request,
or, alternatively, after testifying, and before the
judgment creditor has served the notice of levy and
memorandum of garnishee on the bank branch.
One alternative, used by a small number of creditors'
CONTINUED
AB 2364
Page
6
attorneys, is to serve levies on all bank branches within a
short distance of the judgment debtor's location, in the
hope that the judgment debtor maintains an account at one
of them. However, because service by a process server
costs approximately $50 per levy, and debtor examinations
and depositions can cost hundreds or thousands of dollars,
these are wasteful procedures. The sponsor observes that
these procedures can also add to the amount of the judgment
owed by the judgment debtor.
This bill would solve several of the problems inherent in
existing law, which are described above, by doing the
following: a) requiring financial institutions with ten or
more branches in California, and authorizing financial
institutions with nine or fewer branches in California, to
designate one or more central locations for service of
legal process for attachment and enforcement of judgments
in the state; b) establishing procedures for service of
attachments and other process for enforcement of judgments
at the financial institution's central location(s) and
other branches, c) requiring DFI to maintain a database of
current information regarding the central locations
designated by financial institutions in California, and to
make information in that database available to the public,
as specified; and d) establishing new procedures to be used
by judgment creditors and others seeking to attach or
enforce judgments against deposit accounts or safe deposit
boxes, which reflect the existence of central locations.
According to this bill's sponsor, the bill would not affect
procedures for service of a summons or complaint subpoena.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, ongoing
costs of approximately $75,000 (Financial Institutions
Fund) to the DFI to maintain and update the designations
filed by financial institutions.
SUPPORT : (Verified 8/8/12)
Consumer Financial Services Committee of the Business Law
CONTINUED
AB 2364
Page
7
Section of the California
State Bar (source)
California Bankers Association
Civil Justice Association of California
ARGUMENTS IN SUPPORT : The Consumer Financial Services
Committee of the Business Law Section of the State Bar is
sponsoring this bill for all of the reasons stated above.
The California Bankers Association writes that it worked
collaboratively with the State Bar on this measure, which
it believes will modernize the procedures applicable to
service of attachment and execution of levies.
The Civil Justice Association of California is also
supportive, because the bill would limit the liability of
financial institutions when carrying out attachment and
levy procedures. Although existing law authorizes
financial institutions to designate a central location for
court orders to be served, the law is unclear about how a
central location is designated, and whether a central
location would have to reach outside of the state. AB 2364
clarifies these issues and reduces the associated discovery
costs of carrying out those orders. The bill will also
help deter debtors from gaming the system by hiding assets
in different locations of a bank, or withdrawing them when
creditors seek to identify those locations.
ASSEMBLY FLOOR : 74-0, 5/29/12
AYES: Achadjian, Alejo, Allen, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Halderman, Harkey, Hayashi, Roger Hern�ndez,
Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight,
Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza,
Miller, Monning, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, Perea, V. Manuel P�rez, Portantino, Silva,
Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Ammiano, Cedillo, Fletcher, Hall,
Mitchell, Wieckowski
CONTINUED
AB 2364
Page
8
JJA:n 8/22/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED