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Assemblyman Donald P. Wagner

You Don’t Get to Keep Stolen Property; Neither Should Your Bank

[Publisher’s Note: We are pleased to offer this original commentary from Assemblyman Don Wagner (R-Irvine) – Flash]

Assemblyman Don Wagne

You don’t get to keep stolen property.

That’s a pretty basic legal principle. If your property gets stolen and sold by the thief, the buyer does not get to keep it; you get your stolen property back. You might think everyone agrees with that, but you would be wrong. At a legislative hearing on Tuesday some pretty powerful business interests will argue that they should get to keep stolen property.

The bill raising this issue is AB 1698 and I am its author. It is in response to a growing problem involving real estate fraud and is supported by the California District Attorneys’ Association who see an increasing number of cases of criminals defrauding homeowners – often the elderly – out of title to their homes. The scam is deceptively easy. The criminal can merely record a deed to property, thereby appearing in the title records to actually own it, and then either sell the stolen property to a third party, who obtains a loan from a bank to finance the purchase, or to obtain a loan themselves by pledging the stolen property as security. The problem is that even if the criminal is convicted of the crime, the title remains clouded. Under current law, the true property owner/victim must later file a separate civil case to quiet title, and then pay tens of thousands of dollars or more to litigate the case and waste months or years doing so, hopefully to clear title at the end of that arduous process. Many defrauded elderly victims are not up to the task.

My AB 1698 eliminates the separate court case and the need for innocent homeowners to incur the sometimes ruinous extra expense. It allows the judge in the criminal case, after the crime has been proven “beyond a reasonable doubt,” to issue a recordable order clearing title immediately. After all, the victim should not be forced through the extra expense and legal delays to fix the fraud. In addition, of course, no one should get to keep stolen property.

Not so fast, say the banks and a few well-heeled business groups. They have formally opposed the bill and intend to send lobbyists and lawyers to argue against it at the committee hearing. They like the idea of a separate, expensive civil case. Why?

Because of the lower standard of proof. In criminal court, the judge must find guilt beyond a reasonable doubt. But in the civil courts, a much lower legal standard of proof, a mere “preponderance of the evidence,” is all the banks need to show to win. Thus, even if the banks haven’t worn down the victim after excess delay and expense, they can – maybe – still get to keep the stolen property or their security interests in that property by taking advantage of the much lower burden of proof.

I wish I could explain this opposition but I just can’t. The best these business interests can do is trot out the legal sounding but disingenuous argument that AB 1698 somehow violates their “due process.” Nonsense.

Under the important principle of constitutional due process, the government may not take your “life, liberty, or property” without giving you “due process.” But remember: You do not get to keep stolen property. The property the banks are wanting to keep is not their property, it is someone else’s stolen property. Due process means that the government cannot take your property away from you and give it to me. But the government can take your property away from me and give it back to you.

In addition, the process that is “due” is quite frankly up to the legislature to determine. Right now in California we have a “process” to clear title. It is time consuming, expensive, and inefficient. Absolutely nothing in the constitution and the due process clause prohibits the legislature, which has set up that deficient process, from changing it to a better one.

Finally, AB 1698 does not stop the banks, in the extremely rare case where they might actually think they have a legitimate claim – for example, when the homeowner is really in cahoots with the criminal – from filing their own quiet title action. The banks still can go to court. So much for their “due process” concerns. AB 1698 merely says that in the vast majority of these fraud cases, the elderly victim is not the one who needs to file the lawsuit.

Fraud and financial elder abuse put at risk the homes of some of our most vulnerable citizens. It’s a shame. You don’t get to keep stolen property. Neither should your bank.