AEZ C.S.H.B. 1185 75(R)BILL ANALYSIS CRIMINAL JURISPRUDENCE C.S.H.B. 1185 By: Hightower 3-3-97 Committee Report (Substituted) BACKGROUND During the last two years, individuals and organizations have begun to take action based on their refusal to recognize the authority and sovereignty of the government of the State of Texas. These individuals have filed fraudulent judgment liens issued by so-called "common law courts" and fraudulent documents purporting to create liens or claims on personal and real property with the Secretary of State and many county and district clerks throughout the state. Many of the filings have been against the State of Texas and public officers and employees, as well as private individuals. At a minimum, the fraudulent filings have clogged the channels of commerce, an intended and espoused consequence advocated by so-called anti-government groups. Often these filings have amounted to harassment and intimidation of both public officials and ordinary citizens. PURPOSE CSHB 1185, if enacted, would provide civil remedies for those against whom such fraudulent filings have been made. In addition, it would provide for criminal sanctions to be levied against those who seek to file such fraudulent documents. The bill would amend the Penal Code by making it an offense to file a fraudulent court document or record, to exercise a function of a public office that has no lawful existence, to cause or induce a public servant to record a fraudulent court document, to deliver or cause to be delivered a document that simulates legal process, and to refuse to execute a release of a fraudulent instrument purporting to create a lien or claim. Additionally, the bill would make it a violation of the organized crime provisions of the Penal Code to exercise a function of a public office that has no lawful existence. The bill would create an expedited judicial process that permits someone aggrieved by a fraudulent filing to obtain a court order declaring the filing to be fraudulent. The bill would also create a private cause of action against a person who files fraudulent judgment liens or fraudulent documents purporting to create a lien or claim against real or personal property in favor of a person aggrieved by the filing or an attorney representing the state, county, or municipality. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 32.21 (e) and (f), Penal Code, by deleting "37.01(1)(C)" and adding "37.01(2)(C)" in subsections (e) and (f). SECTION 5 of this bill amends 37.01, by adding a new subdivision. This change is necessary in order to properly cite the subdivision of 37.01 dealing with governmental records. SECTION 2. Amends Section 32.46 of the Penal Code, by creating an offense for causing or inducing a public servant to record a fraudulent court document and expands the scope of the section to include as a penal offense causing or inducing a public servant to file or record any judicial process of a legal court, judicial entity or judicial officer created under the laws of this state or of the United States. An offense under the amendment is a state jail felony. The definition of "deception" in this section has the meaning assigned by Section 31.01 of the Penal Code. SECTION 3. Chapter 32, Penal Code, which governs the offense of fraud, is amended by adding Section 32.48, which expands the offense of "fraud" to include "simulating legal process." The proposed section provides that a person commits an offense if the person recklessly causes to be delivered to another any document which simulates a summons, complaint, judgment, or other court process. The intent of the document must include: inducing payment of a claim from another person or causing another to submit to the putative authority of the document or causing another to take any action or refrain from taking any action in response to the claim. The fact that the "simulating document" contains a statement that it is not legal process or that it purports to have been issued or authorized by a person who had no lawful authority to issue it is not a defense to the offense. If it is proven that the simulating document is filed with, presented to, or delivered to a clerk or any employee of a clerk of a court created by or established under the constitution or laws of this state or of the United States, there shall be a rebuttable presumption that the simulating document is filed with the intent of violating this section. The first violation of this section is a Class A misdemeanor; a subsequent violation is a state jail felony. SECTION 4. Amends Chapter 32, Penal Code, by adding Section 32.49. Section 32.49 makes it an offense if a person, with intent to defraud or harm another person, is the owner, holder, or beneficiary of a purported lien or claim asserted against real or personal property that is fraudulent, as defined by Section 51.901(c), Government Code and the owner of the lien refuses to execute a release within 21 days after receiving actual notice or written notice sent by either certified mail, return receipt requested, or by telephonic document transfer to the recipient's current telecopier requesting the execution of a release of the fraudulent lien or claim upon request of the obligor, debtor, or any person who owns the real or personal property or an interest in the real or personal property described in the document or instrument. Subsection (b) is added to provide presumption of intent to defraud or harm another if the person refused to execute a release of lien within 21 days after receipt of actual notice or written notice as provided. An offense under this section is a Class A misdemeanor. SECTION 5. Amends 37.01, Penal Code, which governs perjury and other falsification of governmental records or statements. Subdivision (1) is added which defines "court record". Subsequent subdivisions are renumbered accordingly. Under the amendment, a "court record" for purposes of Chapter 37 of the Penal Code is a decree, judgment, order, subpoena, minutes, or warrant. "Court record" also includes other documents issued by: a court of this state; another state; the United States; a foreign country recognized by an act of Congress or a treaty or other international convention to which the United States is a party; an Indian tribe recognized by the United States; or any other jurisdiction, territory, or protectorate entitled to the full faith and credit in this state under the United States Constitution. The definition of "governmental record" is expanded to include letter of patent. By adding a definition of "court record" to Section 37.01 of this section, and in conjunction with SECTION 6, the filing of fraudulent court records is an offense under Section 37.10 of the Penal Code, which governs tampering with a governmental record. SECTION 6. Amends Section 37.10, Penal Code, which governs the offense of tampering with a governmental record. Subsection (d) is amended to include "letter of patent" to the list of governmental records that tampering with constitutes an offense. Subsection (h) is added and provides that an offense under this section also constitutes an offense under Section 32.48 or Section 37.13 and that a person may be prosecuted under any one of these sections. SECTION 7. Amends Section 37.11, Penal Code, by adding Subdivision (2) to Subsection (a) and by amending Subsection (b). Currently, Section 37.11 of the code makes it an offense to impersonate a public servant with the intent to induce another to submit to his pretended official authority or to rely on his pretended official acts. The proposed addition of Subdivision (a)(2) would expand the offense of impersonating a public servant to include public officers. The expansion of the offense includes exercising by a person of any function of a public officer or public employee, including judges and courts, if that person does so knowingly and the office of position through which he purports to exercise a governmental function has no lawful existence under the Constitution or laws of the State of Texas or of the United States. Subsection (b) currently provides that an offense under Section 37.11, Penal Code, is a Class A misdemeanor unless the person impersonated a peace officer, in which event the offense is a third degree felony. The proposed amendment to Subsection (b) makes an offense under this section a felony of the third degree in all instances. SECTION 8. Amends Chapter 37, Penal Code, by adding Section 37.13. Section 37.13 makes it an offense if a person makes, presents, or uses any document or other record with the knowledge that the document or other record is not a record of a court created under or established by the constitution or laws of this state or of the United States and the person intends that the record be given the same legal effect as a lawfully constituted court. An offense under this section is a Class A misdemeanor unless convicted under this section on two or more occasions then it is a felony of the third degree. An offense under this section also constitutes an offense under Sections 32.48 or 37.10 which allows an election of prosecutors to choose for prosecution of strongest cases. SECTION 9. Amends Section 71.02(a), Penal Code, by amending Subdivisions (9) and (10) and by adding Subdivision (11). Chapter 71 of the Penal Code governs organized crime, making it an offense to engage in "organized criminal activity," as defined by the chapter. Section 71.02(a) of the Penal Code currently defines what constitutes engaging in organized criminal activity. The proposed amendment would expand the definition to include any offense under Sections 37.11(a) of the Penal Code, which makes it an offense to impersonate a public servant with intent to induce another to submit to his pretended official authority or to rely on his pretended official acts. Thus, a combination of three or more persons impersonating a public servant in violation of Section 37.11, Penal Code, constitutes "organized criminal activity" in violation of Section 71.02 of the code. SECTION 10. Amends chapter 37 of the Penal Code by adding Section 37.101, which makes it an offense to file a fraudulent financing statement. During the 74th Legislature, Section 9.412 of the Business and Commerce Code was amended by adding Subsection (c), which makes it a criminal offense to file a false financing statement that is forged, that contains a material statement that is false, or that is groundless; the provision also created a private cause of action by behalf of anyone aggrieved by the fraudulent filing. This addition to the Penal Code merely codifies in that code that part of Section 9.412 that creates a criminal offense. The offense for filing a fraudulent financing statement that is forged is a third degree felony, unless the defendant has been convicted two or more occasions, in which event the offense is a second degree felony. The offense for filing a fraudulent financing statement that contains a material statement that is false or that is groundless is a Class A misdemeanor, unless the document is filed with the intent to defraud or harm another, in which event the offense is state jail felony. SECTION 11. Amends Chapter 1, Code of Criminal Procedure, by adding Article 1.052, which governs signed pleadings by a defendant. Subsection (a) provides that every pleading, motion, or other paper filed by an accused person represented by an attorney must be signed by at least one attorney of record in the attorney's individual name and stating the attorney's address. Subsection (a) further provides that, if an accused person is not represented by an attorney, that accused person must sign any pleading, motion, or other paper filed for or on behalf of the accused person and state the accused person's address. Subsection (b) provides that the signatures of attorneys or of accused persons and defendants constitute a certificate by the signatories that they have read the pleadings and that, to the best of their knowledge, the instrument is not groundless or brought in bad faith or for harassment on unnecessary delay. Subsection (c) provides that if the pleading is not signed, the court shall strike it from the record, unless it is promptly signed after the omission is brought to the attention of the person filing the pleading. Subsection (d) provides that attorneys, accused persons, or defendants who file fictitious pleadings or make statements in pleadings that they know to be groundless or false for purposes of delay or harassment shall be held guilty of contempt. Subsection (e) provides that if a pleading, motion, or other document is signed in violation of this article, the court shall impose appropriate sanctions on motion or on its own initiative, after notice and hearing. The sanctions may include an order to pay to the other party or parties to the prosecution or to the general revenue fund of the county in which the document was filed the amount of reasonable expenses incurred because of the filing, including reasonable attorney's fees. Subsection (f) provides that courts shall presume that pleadings, motions, and other documents filed are filed in good faith; no sanctions may be imposed except for good cause state in the sanction order. Subsection (g) provides that a plea of "not guilty" or "no contest" or "nolo contendere" does not constitute a violation of this article. Subsection (h) defines "groundless" for purposes of this article to mean without basis in law or fact and not warranted by a good faith argument for the extension, modification, or reversal of existing law. SECTION 12. Amends Chapter 13, Code of Criminal Procedure, by adding Article 13.26, creating an offense under Sections 32.48, 32.46, 32.49, and 37.13 of the Penal Code, which makes it an offense to simulate legal process and may be prosecuted either in the county from which the material document was sent or in the county in which it was delivered. SECTION 13. Amends Section 51.605(c), Government Code, to include a requirement that clerks, district clerks, county clerks, and district and county clerks, who already are required to complete 20 hours of continuing education courses in the performance of their duties, must include at least one hour of continuing education regarding fraudulent court documents and fraudulent document filings. SECTION 14. Amends Chapter 51, Government Code, by adding Subchapter J. Currently, the clerks of courts are required to accept for filing whatever documents are presented to them; they have no discretion to reject a filing. Section 51.901(a) provides that if the Clerk of the Supreme Court, Clerk of the Court of Criminal Appeals, a Clerk of a Court of Appeals, a district clerk, a county clerk, district and county clerk or a municipal clerk has a reasonable basis to believe in good faith that a document or instrument previously filed or submitted for filing or for filing and recordation is fraudulent, as defined in the section, the clerk shall provide written notice of the filing or submitted filing to the stated or last known address of the person against whom a lien is filed. If the suspected document is a judgment lien, the person against whom the lien is filed shall be notified. If the suspected document is a lien or claim on real or personal property, or an interest therein the person who is the obligor or debtor or who owns the real or personal property or any interest in real or personal property or interest therein that is the subject of a purported lien or claim shall be notified in writing by the clerk. Subsection 51.901(b) states that the notice required by subsection (a) must be provided within two business days after the date that the document or instrument is submitted for filing or recording. If the document or instrument has been previously filed or recorded, notice must be given not later than the second business day after the date that the clerk becomes aware that the document or instrument may be fraudulent. Subsection (c) of Section 51.901 defines a fraudulent judgment lien as one judgment that is issued by a purported court or judicial officer that is not created or established by the constitution or laws of this state or of the United States. The subsection further defines a fraudulent lien or claim as one that: (1) is asserted against real or personal property or an interest in real or personal property; (2) is not provided for by specific state or federal statute or constitutional provision; (3) is not created by implied or express consent or agreement of the obligor, debtor, or the owner of the real or personal property or an interest in the real or personal property or by the implied or express agreement consent, fiduciary, or other representative of that person; (4) is not an equitable, constructive, or other lien imposed by a lawful court with jurisdiction. Section 51.902 is added which permits the filing of an action on fraudulent judgment liens and sets forth model forms that may be used, both by the plaintiff seeking an order and by a judge issuing an order. Subsection (a) sets forth the suggested form of the verified motion to be filed with the district clerk by a person against whom a purported judgment was rendered. Subsection (b) is added which provides an affidavit to be signed and notarized, swearing to the truth of the allegations. Subsection (c) permits a district judge having jurisdiction over real property matters in the county in which the subject document was filed to review solely the documents in contention in an ex parte proceeding without notice to any party and without hearing evidence. The court's ruling is unappealable if it is substantially similar to the form suggested in Subsection (g). Subsection (d) prohibits a district clerk from collecting a fee for filing the motion. Subsection (e) provides that the ruling must be filed and indexed in the same class of records in which the subject document was originally indexed. Subsection (f) prohibits a county clerk from collecting a fee for filing the judge's finding of fact and conclusion of law under this section. Subsection (g) sets forth a suggested model form of the findings of fact and conclusion of law to be issued by the judge. Section 51.903 permits a person who is the purported debtor or obligor or who owns real or personal property or an interest in real or personal property and who has reason to believe that the document purporting to create a non-judicial lien or a claim against the real or personal property is fraudulent to file a motion seeking judicial review of the document in a judicial review process substantially similar to that set out in Section 51.902. Like Section 51.902, Section 51.903 sets forth suggested model forms for the motion to be filed by a plaintiff and the ruling to be issued by a judge having proper jurisdiction, verified and reviewing only the documents in contention and without hearing evidence. Any appeal under this section shall be expedited by the appellate courts. Section 51.904 provides that a clerk shall post a sign, in letters at least one inch in height, in or near the clerk's office stating that it is a crime to knowingly and intentionally file a fraudulent court record or instrument with the clerk. Section 51.905(a) authorizes a person to file certified copies a judicial finding of fact and conclusion of law authorized by this section with the secretary of state to be filed in the records of the same class. Subsection (b) authorizes the secretary of state to charge a filing fee of $15 for filing such a document. SECTION 15. Amends Section 12.013, Property Code, which currently provides that a judgment or an abstract of judgment may be recorded if the judgment is attested under the signature and seal of the clerk of the court that rendered the judgment. Under the proposed amendment, the phrase "judgment of a court of this state" is qualified by the phrase "expressly created or established under the Constitution or the laws of this State or of the United States", courts of a foreign country recognized by congressional act, treaty, or international agreement of the United States, or other jurisdiction entitled to the full faith and credit of the United States, thereby ensuring that only judgments and abstracts of judgments of authentic courts may be filed. SECTION 16. Amends Subtitle A, Title 2, Civil Practice and Remedies Code, by adding Chapter 11, which permits the filing of an injunction and creates a private cause of action against a person who files a fraudulent court document or fraudulent lien or claim. An action under this chapter may be brought by an attorney representing the state or municipality a person who is the debtor or obligor or who owns the real or personal property or the interest in real or personal property that is encumbered by the fraudulent lien or claim. Liability attaches to individuals who file liens knowing that they are fraudulent with intent to give the same effect as a recognized valid lien with intent to cause physical injury, financial injury and injury or mental anguish or emotional distress. An action under this section may be brought in any district court in the county where the recorded document was filed or is where the real property is located. A filing fee for an action brought is $15 to be paid to the Clerk of the Court. No other additional fees or costs may be charged except for service of notice for which a $20 fee for personal service shall be levied and the cost of postage if by registered or certified mail. If unable to pay the fee, the plaintiff can file a pauper's oath under TRCP. If the plaintiff prevails and the fees imposed are less than similar filings, the court may order the defendant to pay the difference. In addition, the chapter provides for criminal remedies. Liability is limited to the greater of $10,000 or the actual damages caused by the violation, in addition to court costs and reasonable attorney's fees. Additionally, a court may impose punitive damages. SECTION 17. Repeals Section 9.412(c) of the Business and Commerce Code. SECTION 18. Provides that an action for an order brought under Subchapter J, Chapter 51, Government Code, may be brought without regard to whether the document was filed before, on, or after the effective date of this Act. SECTION 19. Requires clerks to complete one hour of continuing education regarding fraudulent court documents before September 1, 1998. SECTION 20. Provides that the change in law made by Section 16 of this Act applies only to a cause of action that accrues on or after the effective date of this Act. SECTION 21. Provides that the effective date with regard to criminal opposes applies may after the effective date of this Act. By offense or element of offense accruing before the effective date of this Act is covered by former law. SECTION 22. EMERGENCY CLAUSE. COMPARISON OF ORIGINAL TO SUBSTITUTE Except for the following sections in which substantive differences occur, the substitute is substantively identical to the original: (1) SECTION 1 amends Penal Code, Section 32.21 (e) and (f), by deleting "37.01(1)(C)" and replacing with "37.01(2)(C)". This is a new provision and all subsequent sections are renumbered throughout the bill. (2) SECTION 3 amends Chapter 32, Penal Code by adding Section 32.48 and adds language in subsection (a)"causes to be delivered" in the explanation of simulating legal process. Subsection (a)(1) is changed by adding "from another person". (3) SECTION 4 is changed by amending the title of the section to "Refusal to Execute Release of Fraudulent Lien or Claim". Section 4 also includes new language creating a process whereby a person against whom a fraudulent lien or claim has been filed and ruled invalid may request that the lien holder execute a release of said lien. Should the lien holder fail to execute a release of the purported lien or claim within twenty-one days after receipt of actual or written notice, intent to harm or defraud another is presumed. An offense under this newly created section of the Penal Code is a Class A misdemeanor. (4) SECTION 5 includes the term "minutes" in the definition of "court record". (5) SECTION 7 amends Section 37.11, Penal Code and the language "knowingly purports to exercise" is added in subsection (a)(2). (6) SECTION 8 adds section 37.13 to the Penal Code. The title of this section has been changed from "FRAUDULENT COURT RECORDS" to "RECORD OF A FRAUDULENT COURT" to better reflect the changes therein. Additionally, the phrase "genuine court record" has been deleted and the phrase "record of a court created under or established by the constitution or laws of this state or of the United States" has been added. The penalty for violation of this section has also increased from a Class B to a Class A misdemeanor and a third degree felony for subsequent offenses. (7) SECTION 14 includes new language in Section 51.901, Subsection (a), by adding "has a reasonable basis to believe in good faith" to the provision regarding the clerks' suspicion of fraudulent documents or instruments. Subsection (a)(2) is changed by adding "personal" property along with real property which was contained in the original version. Subsection (b)(2) is changed by deleting "is" and adding "may be" to clarify language. Subsection (2)(B) is changed by adding "or agreement" to provision regarding whether a document or instrument purports to create a lien or claim. Also, Subsection (2)(B) is amended by deleting "by the originally signed and attested or acknowledged signature". Affidavit forms are also added to Section 51.902 and Section 51.903 which provides for a sworn statement. Section 51.903, Subsection (c) is amended by adding "An appellate court shall expedite review of a court's finding under this section." Section 51.902 is changed by adding paragraph IV as follows: IV. Movant further attests that the assertions contained herein are true and correct. Section 51.902 is also changed by adding paragraphs IV and V as follows: IV. Movant attests that assertions herein are true and correct. V. Movant does not request the court to make a finding as to any underlying claim of the parties involved and acknowledges that this motion does not seek to invalidate a legitimate lien. Movant further acknowledges that movant may be subject to sanctions, as provided by Chapter 10, Civil Practice and Remedies Code, if this motion is determined to be frivolous. (8) SECTION 19 is changed by adding a requirement for clerks to complete one hour of continuing education regarding fraudulent court documents before September 1, 1998.