BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1856|
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THIRD READING
Bill No: AB 1856
Author: Wilk (R)
Amended: 6/10/14 in Senate
Vote: 21
SENATE BANKING & FINANCIAL INSTITUTIONS COMM. : 8-0, 6/4/14
AYES: Evans, Block, Correa, Hill, Morrell, Roth, Torres, Vidak
NO VOTE RECORDED: Hueso
SENATE JUDICIARY COMMITTEE : 6-0, 6/17/14
AYES: Jackson, Corbett, Lara, Leno, Monning, Vidak
NO VOTE RECORDED: Anderson
ASSEMBLY FLOOR : 78-0, 4/28/14 (Consent) - See last page for
vote
SUBJECT : Deposit in lieu of bond
SOURCE : Conference of California Bar Associations
DIGEST : This bill updates Californias Bond and Undertaking
Law to add cashiers checks and bonds and notes of the United
States and the State of California to the list of items of value
that may be deposited with a court in lieu of a bond.
ANALYSIS :
Existing law:
1.Provides that unless an undertaking is given, the perfecting
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of an appeal shall not stay enforcement of the judgment or
order of a trial court if the judgment or order is for either
money or the payment of money, or costs awarded by the court,
as specified.
2.Establishes the procedures and requirements for executing,
posting, filing, furnishing, or otherwise providing a bond or
undertaking as security.
3.Provides that the Bond and Undertaking Law applies to any bond
or undertaking given as security pursuant to any statute of
this state, except to an undertaking of bail or where another
statute prescribes a different rule or is inconsistent.
4.Authorizes, pursuant to the Bond and Undertaking Law, the
deposit of several different types of assets with a court in
lieu of a bond, including lawful money of the U.S., bearer
bonds and bearer notes, certificates of deposit payable to the
officer of the court, and insured savings accounts or share
accounts assigned to the officer of the court.
5.Provides that a deposit in lieu of bond shall be in an amount
or have a face value, or in the case of bearer bonds or bearer
notes have a market value, equal to or in excess of the amount
that would be required to be secured by the bond if the bond
were given by an admitted surety insurer.
6.Provides that a deposit in lieu of bond shall be accompanied
by an agreement executed by the depositor authorizing the
officer to collect, sell, or otherwise apply the deposit to
enforce the liability of the principal on the deposit.
This bill:
1.Provides that, except as specified or to the extent a statute
providing for a bond precludes a deposit in lieu of bond or
limits the form of deposit, a person may instead of giving a
bond and without prior court approval, deposit with a
designated officer any asset permitted by the Bond and
Undertaking Law.
2.Expands the Bond and Undertaking Law to include a cashier's
check, made payable to a designated officer, issued by a bank,
savings association, or credit union authorized to do business
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in this state, among the assets that may be deposited in lieu
of bond.
3.Provides that all bonds or notes, including bearer bonds and
bearer notes, of the United States or the State of California,
may be deposited in lieu of bond under the Bond and
Undertaking Law; and specifies the terms upon which the
deposit of a bond or note shall be accomplished.
4.Makes other conforming changes to the Bond and Undertaking Law
reflecting the expanded class of assets that may be deposited
in lieu of bond.
Background
Existing law allows parties to deposit cash or other cash
equivalents with the court, in lieu of a bond, and prescribes
the types of monetary instruments that are acceptable for use in
this context. California's Bond and Undertaking Law was a
product of the California Law Revision Commission (CLRC).
According to information obtained from CLRC's Web site, the Bond
and Undertaking Law, enacted in 1982, was intended to
standardize what had previously been over 500 different
statutory provisions governing bonds and undertakings, and bring
sense and consistency to this area of the law.
The provisions of the Bond and Undertaking Law that this bill
proposes to amend read in much the same way they did, when they
were enacted in 1982. They refer to bearer bonds and bearer
notes backed by the State of California or the United States,
none of which have been issued since the 1980s, and to the
Department of Financial Institutions, which was merged with the
Department of Corporations into the Department of Business
Oversight in 2013. These provisions also fail to reference
bonds and notes other than bearer bonds and bearer notes, and
fail to reference cashier's checks, which are generally
understood to be cash equivalents.
One of the sections of law that this bill proposes to amend
authorizes the deposit of several different types of cash
equivalents with the court in lieu of a bond. Existing law
requires most of these cash equivalents to be federally insured
by the Federal Deposit Insurance Corporation or the National
Credit Union Association or to be guaranteed by an agency
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approved by the Department of Financial Institutions.
Under existing law, the only type of security that is not
required to be federally insured when deposited with a court in
lieu of a bond is cash. This bill proposes to treat cashier's
checks deposited in lieu of a bond just as cash is treated under
existing law (i.e., in an uninsured manner).
According to the Judicial Council of California, the court
system currently banks with Bank of America. Pursuant to
Government Code Section 16521, a bank is only eligible to
receive demand or time deposits from state or local entities, if
that bank deposits security with the State Treasurer equal to at
least 110% of the amounts deposited with that bank. In order to
be eligible to accept a $1 million deposit from the courts, Bank
of America must deposit at least $1.1 million in eligible
securities with the State Treasurer. This excess security
serves to protect state deposits, and precludes a need for cash
and cashier's checks deposited with a court in lieu of a bond to
be placed in individual accounts, each of which is below the
federal deposit insurance limit.
Comments
According to the author's office, this bill amends California's
Bond and Undertaking Law to update the instruments that may be
deposited to stay enforcement of a money judgment pending
appeal. This bill will benefit all parties to the suit, as well
as the courts, by streamlining the appeal process and
eliminating unnecessary motions that waste time and resources of
all concerned, both litigants and courts.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/19/14)
Conference of California Bar Associations (source)
Appellate Courts Section of the Los Angeles County Bar
Association
California Appellate Law Group
ARGUMENTS IN SUPPORT : The Conference of California Bar
Associations (CCBA), sponsor of this bill, is seeking to update
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the list of acceptable forms of security that may be deposited
with the court, to reflect current instruments of unquestioned
value, and thereby eliminate the need to expend litigants' and
courts' time and resources on unnecessary motions to have these
forms of security approved. Making deposits in lieu of a bond
can provide equal or greater security to a judgment creditor,
because the deposit is cash or a cash equivalent, rather than a
promise to pay. Deposits in lieu of bonds may be quicker for
the judgment debtor to obtain, and presumably less expensive,
because the judgment debtor will be spared the cost of bond
premiums. CCBA states, "The list of instruments acceptable for
deposit under the law has not been updated since 1982. As a
result, the list includes instruments (e.g., bearer bonds and
bearer notes) which are no longer issued, but does not include
common instruments of acknowledged stability and value, such as
U.S. Treasury bonds, bonds issued by the State of California,
and cashier's checks, which are the functional equivalent of
cash."
ASSEMBLY FLOOR : 78-0, 4/28/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, V. Manuel P�rez,
Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas,
Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,
Wilk, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Mansoor, Vacancy
MW:nl 6/20/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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