BILL ANALYSIS �
AB 1698
Page 1
Date of Hearing: April 1, 2014
Counsel: Sandy Uribe
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Tom Ammiano, Chair
AB 1698 (Wagner) - As Introduced: February 13, 2014
SUMMARY : Requires the court to issue an order voiding a false
or forged instrument at its inception, when a defendant is
convicted of filing, registering, or recording such an
instrument. Specifically, this bill :
1)Requires a court to issue a written order declaring a false or
forged instrument to be judged void at its inception when:
a) A defendant is convicted of offering a false or forged
instrument for filing; or,
b) A defendant enters a plea in which a charge of offering
a false or forged instrument is dismissed, but he or she
agrees to let the court consider the dismissed charge for
purposes of sentencing.
2)Requires the order to state whether the instrument is false,
forged, or both, and to describe the nature of the falsity or
forgery.
3)Requires a copy of the false or forged instrument be attached
to the court order.
4)Requires a certified copy of the court order to be filed,
registered, or recorded.
EXISTING LAW :
1)Makes it a felony to knowingly procure, or offer any false or
forged document to be filed, registered, or recorded in any
public office within this state, which instrument, if genuine
might be filed, registered or recorded under any law of this
state or of the United States. (Pen. Code, � 115, subd. (a).)
2)States that each instrument offered to be filed, registered,
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or recorded is a separate violation. (Pen. Code, � 115, subd.
(b).)
3)Provides that a person who, with intent to defraud, signs the
name of another person or of a fictitious person to specified
items, knowing that he or she has no authority to do so, is
guilty of forgery. (Pen. Code, � 470.)
4)Defines grand theft generally as when the value of the money,
labor or real or personal property takes is more than $950.
(Pen. Code, � 487.)
5)Makes participation in a fraudulent conveyance a misdemeanor.
(Pen. Code, �� 531 & 531a.)
6)Defines mortgage fraud for the purpose of criminal
prosecution. (Pen. Code, � 532f.)
7)Permits a party to file a civil action, commonly known as a
"quiet title action," to establish title against adverse
claims to real or personal property or any interest therein.
(Code Civ. Proc., � 760.020, subd. (a).)
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "Penal Code
Section 115 makes filing a false or forged real estate deed or
other instruments a felony. But criminal courts can currently
only void forged deeds, not false ones. AB 1698 will amend PC
115 to specifically allow courts to void false and forged
deeds.
"A forged deed is where someone signs someone else's name
without permission. A false deed is where no forgery occurs,
but the deed is nonetheless false or untrue. In California, a
forged deed has long been held to be void under the law. But
there is no law that allows a judge to void a false deed.
This requires a homeowner or business who has been victimized
by false deeds to go to civil court for a 'quiet title action'
at their own expense, even after the bad guys are convicted in
criminal court.
"False deeds cost homeowners, business, and realtors unnecessary
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time and money. False deeds create vacant homes in
neighborhoods, which leads to diminished property values,
blight, and potential for increased crime. The perpetrators
of these schemes tend to prey on vulnerable populations in the
poorest neighborhoods that have been hit hard by foreclosures.
"AB 1698 is an opportunity to help those victims without
creating a new crime, enhancing sentences, increasing the
prison population, or putting additional strain on the state
budget."
2)Distinction Between Forged and False Documents : The purpose
of Penal Code section 115 is to preserve the integrity of
public documents. (People v. Denman (2013) 218 Cal.App.4th
800, 808-809.) The statute differentiates between false and
forged documents, but clearly proscribes either kind of
instrument. (Generes v. Justice Court (1980) 106 Cal.App.3d
678, 682.)
A forgery is a "'writing which falsely purports to be the
writing of another, . . .'" made with the "intent to defraud."
(Wutzke v. Bill Reid Painting Service, Inc. (1984) 151
Cal.App.3d 36, 41-42.)
A false instrument is one "'that has the effect of defrauding
one who acts on the instrument as genuine.'" (Generes v.
Justice Court (1980) 106 Cal.App.3d 678, 682.) In the context
of a deed, the court explained in more detail the notion of a
false deed: "Here the lack of an ownership interest in the
land goes to the deception itself. If Generes did not own the
interest she purported to convey, the instrument she filed was
clearly false. Having no right to grant or convey an
easement, her recording of a deed transferring an easement
would establish a cloud on the title of those persons who
lawfully owned interests in the land. A title searcher
encountering the spurious document who acted upon it as
genuine would of course be materially deceived." (Ibid.)
The sponsor gives the following examples as the types of cases
where fraud, but not forgery was an issue:
Alameda County: Defendants involved in a
foreclosure rescue scam collected $1,200 a month from
homeowners and deeded title to the properties to
non-existent companies on the promise of saving the home
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from foreclosure. Because the defendants signed their
own names on behalf of the non-existent companies, the
documents were "false" but not necessarily forged.
Shasta County: Defendant attempted to take title to
property by forging a grant deed conveying title to
himself. The defendant had no right to execute the deed,
making the document "false" but not necessarily forged.
Santa Clara County: Sovereign citizen defendant
attempting to take possession of vacant homes for the
purpose of renting them for profit executes deeds in the
name of his sovereign nation, and signs the document with
his true name. The deed clouds title making the property
impossible for the legitimate homeowner to sell it. The
deed executed by the defendant is "false" but not
necessarily forged.
1)Distinction Between Void and Voidable Instruments : "A deed is
void if the grantor's signature is forged or if the grantor is
unaware of the nature of what he or she is signing." (Schiavon
v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 378.) Such a
deed is void ab initio; it constitutes a nullity, and cannot
be made the foundation of a good title, even by a bona fide
encumbrancer. (Erickson v. Bohme (1955) 130 Cal.App.2d 553,
557; Wutzke v. Bill Reid Painting Service, Inc., supra, 151
Cal.App.3d at p. 43.)
"A voidable deed, on the other hand, is one where the grantor is
aware of what he or she is executing, but has been induced to
do so through fraudulent misrepresentations." (Schiavon v.
Arnaudo Brothers, supra, 84 Cal.App.4th at p. 378.)
Ordinarily, a bona fide purchaser or encumbrancer may rely on
and enforce voidable instruments. (See Fallon v. Triangle
Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106;
accord, Schiavon, supra, 84 Cal.App.4th at p. 378; see also
Wutzke, supra, 151 Cal.App.3d at pp. 42-43 [innocent
encumbrancer entitled to same protections as innocent
purchaser].)
2)Argument in Support : The California District Attorneys
Association , the sponsor of this bill, writes, "With the
proliferation of real estate fraud crimes over the past 10
years, the need for prosecutors to help victims of real estate
fraud clear title to their property is greater than ever.
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There are many cases throughout California where prosecutors
successfully convict defendants of filing false or fraudulent
deeds, liens, conveyances, etc. to real property, but a
criminal court declines to adjudge the false or fraudulent
deed void for lack of clear law on the subject. ?
"The only remedy for victims in these cases is through a civil
quiet title action. This is often time consuming,
economically and mentally taxing for the victim, and sometimes
unsuccessful. The victim must fight on his or her own to
clear title to property that was clouded by a defendant who
has suffered a criminal conviction, thereby adding another
level of injury. This result flies in the face of justice."
3)Arguments in Opposition :
a) According to the California Land Title Association
(CLTA) , "As currently drafted, a criminal court in
California, at the prompting of a district attorney, could
void a deed of trust or other related document, thus
putting at risk the security interest of the new home buyer
(bona fide purchaser -BFP) and their purchase money
mortgage lender (bona fide encumbrancer) who innocently
relied upon what they thought was a legitimate deed or
document in the chain of title.
"In addition, nothing in AB 1698 requires the recordation of
a "lis pendens" document in the county recorder's office
signaling that a criminal trial to invalidate a document
(or documents) that district attorney's consider to be
either fraudulent or false took place. Because nothing of
record would signal such a trial is underway, a diligent
title search of the property would not raise red flags for
a title company, Realtor, lender, or new homebuyer. Thus,
even those exercising caution in buying and lending on a
new home could be the next victims after the criminal trial
voids the deeds or relevant documents.
"By allowing a criminal court to 'void' a deed without
holding harmless BFP and BFEs merely creates a new set of
victims that have no due process rights or protections
under this bill. CLTA strongly believes that seeking to
protect one victim while creating others is not sound
public policy."
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b) Multiple trade associations, including the California
Bankers Association write, "This measure violates basic due
process rights by failing to provide notice to persons with
a recorded interest in the real property, which circumvents
a process to evaluate the validity of other parties'
interests in the real property and automatically deems the
instrument void. Existing law establishes a civil process
known as quiet title actions to deal with circumstances
where title is clouded. That process observes due process
rights by requiring notice to parties with a recorded
interest in the real property. This measure established a
criminal law process that, for the sake of expediency,
ignores the rights of others.
By way of example, this bill punishes innocent homebuyers,
first time or otherwise, who think they are purchasing a
property free of title defect. In these circumstances, the
individuals may have relocated their family, transferred
their children to the local school district or accepted
employment in the surrounding area. Similarly, the measure
hurts lenders who extended credit, as well as any other
party that provided down payment assistance (i.e. family
members), who must now take a financial loss."
4)Related Legislation : AB 1894 (Wieckowski) makes it a crime
for a person to file, or attempt to file, a false lien against
the property of a peace officer. AB 1894 is pending hearing
in this Committee.
5)Prior Legislation : SB 803 (DeSaulnier), of the 2013-14
Legislative Session, as introduced, would have allowed the
court in a criminal action for fraud, relating to real
property, to declare void the instrument that was found
fraudulent. SB was withdrawn from the Senate Public Safety
Committee and substantially amendment.
REGISTERED SUPPORT / OPPOSITION :
Support
California District Attorneys Association (Sponsor)
Sacramento County District Attorney
San Joaquin County District Attorney
Siskiyou County District Attorney
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Opposition
California Association of Realtors
California Bankers Association
California Chamber of Commerce
California Credit Union League
California Escrow Association
California Financial Services Association
California Independent Bankers
California Land Title Association
California Mortgage Association
California Mortgage Bankers Association
United Trustees Association
Analysis Prepared by : Sandy Uribe / PUB. S. / (916) 319-3744