11.2 Types of Collateral

11.2 Types of Collateral

Quick Answer: CDI tests two families. Real property secured by a deed of trust is 10 CCR 2088.3 plus Penal Code 1276.5, and it includes residential, commercial, industrial, and agricultural land. Personal property is the rest of the list: cash (including the Penal Code 1275.1 source-of-funds overlay), automobiles or mobile homes, water vessels, stocks and bonds, savings accounts, life insurance policies, other personal property such as jewelry, livestock, antiques, and art, plus irrevocable letters of credit and assignments of interest. A property bond posted to the court under Penal Code 1278–1280.1 is a different instrument from a deed of trust taken by a bail licensee.

One of the six collateral questions is types. The exam will not ask you to appraise a vineyard. It will ask whether a farm, a cabin cruiser, a savings assignment, or a letter of credit is in the catalog, and it will mix that catalog with the two Penal Code overlays that sit on cash and on real property.

Real property and the deed of trust

The educational objectives put real property and the deed of trust under 10 CCR 2088.3 and Penal Code 1276.5, then split the land into residential, commercial, industrial, and agricultural. A Fresno almond ranch, a Bakersfield warehouse, a Sacramento duplex, and an Oakland storefront are the same legal family for this item: real property pledged as security, usually by a note and deed of trust.

10 CCR 2088.3 has two duties that do not depend on whether the lot is a house or a shop. First, if a bail licensee receives as collateral any document that conveys title to real property, that document shall state on its face that it is executed as part of a security transaction. The face legend is how CDI stops an agency from taking what looks like an outright grant deed. Second, if the document is recorded, a reconveyance executed so that it may be recorded must be delivered to the person who executed the original conveyance, or to that person's heirs, legal representative, or successor in interest, immediately upon the responsible bail licensee or surety insurer learning of the satisfaction of the obligation secured. The responsible party must determine promptly whether the obligation has been discharged when the person entitled to the collateral asks for it back.

Penal Code 1276.5 is the consumer overlay on the same deed. At the initial application for a bail bond that will be secured by a lien against real property, the licensee must give the property owner this disclosure, in 14-point bold type, either as a separate document attached to or accompanying the application or as a clear and conspicuous statement on the face of the application:

DISCLOSURE OF LIEN AGAINST REAL PROPERTY. DO NOT SIGN THIS DOCUMENT UNTIL YOU READ AND UNDERSTAND IT! THIS BAIL BOND WILL BE SECURED BY REAL PROPERTY YOU OWN OR IN WHICH YOU HAVE AN INTEREST. THE FAILURE TO PAY THE BAIL BOND PREMIUMS WHEN DUE OR THE FAILURE OF THE DEFENDANT TO COMPLY WITH THE CONDITIONS OF BAIL COULD RESULT IN THE LOSS OF YOUR PROPERTY!

The owner must receive a completed copy of the disclosure and of the note and deed of trust or other lien instrument before executing any instrument that creates the lien. Failure to fully comply with those rules renders the deed of trust or other lien instrument voidable. A violation also makes the violator liable for the owner's actual damages plus $300 statutory damages, and the prevailing owner recovers costs and reasonable attorney's fees. Reconveyance timing under 1276.5(d) is a 30-day clock; that clock is taught with return in section 11.4. This section's exam point is the type plus the disclosure that makes the type usable.

The court property-bond path: Penal Code 1278 through 1280.1

Do not confuse a deed of trust taken by a bail licensee with real property posted to the court as bail. Penal Code 1278 puts bail in by a written undertaking executed by two sufficient sureties. Penal Code 1279 states the qualifications of those sureties. Each must be a resident, householder, or freeholder within the state, though the court or magistrate may refuse a person who is not a resident of the county where bail is offered. They must each be worth the amount specified in the undertaking, exclusive of property exempt from execution. If a surety is not worth that amount exclusive of exempt property but owns equity in real property, a hearing must be held. Witnesses may be examined, and if the magistrate is satisfied that the value of the equity is equal to twice the amount of the bond, that surety is justified. The court may allow more than two sureties to justify severally in smaller amounts if the whole justification equals sufficient bail.

Penal Code 1280 requires the bail, in all cases, to justify by affidavit taken before the magistrate that they possess those qualifications. The magistrate may further examine the bail on oath concerning sufficiency.

Penal Code 1280a is the contents statute. Every justification affidavit must set forth the amount of the bail undertaking; a notice that the affidavit shall constitute a lien upon the real property described immediately upon recordation with the county recorder under 1280b; the legal description and assessor's parcel numbers of the real estate owned by the bail; all encumbrances on that real estate known to the affiants; the number of bonds, if any, on which each bail has qualified within one year before the affidavit, with amount, date, county, and name of the principal; and the amount of each bail's liability on bonds executed in previous years and not yet exonerated. The affidavit must be signed and acknowledged by the owner of the real property.

Penal Code 1280b requires the judge or magistrate to file those affidavits with the clerk of the court within 24 hours after presentation, by delivering or mailing them to the clerk. Certified copies involving equity in real property may, upon the judge's or magistrate's written order, be recorded with the county recorder.

Penal Code 1280.1 is the lien. From the time of recording an affidavit for the justification of bail, the affidavit constitutes an attachment lien governed by Code of Civil Procedure 488.500, 488.510, and 489.310 in the amount of the bail undertaking, until exonerated, released, or otherwise discharged. Any release of the undertaking is effected by a court order filed with the clerk, with a certified copy recorded in the county recorder's office. If the bail is forfeited and summary judgment is entered under Penal Code 1305 and 1306, the lien has the force and effect of a judgment lien by recordation of an abstract of judgment, enforceable under 1306 and the execution process in Code of Civil Procedure Title 9 starting at 680.010.

That is court-side real property. The commercial agent's deed of trust is licensee-side real property. Both appear in this domain because both are how California uses land to secure appearance. They are not interchangeable forms.

Personal property: the CDI catalog

The educational objectives then list personal property. Memorize the list; the exam writes it as a who-belongs-here item.

Cash, including Penal Code 1275.1. Currency, cashier's checks, and similar funds pledged to the licensee are personal-property collateral under 2081(b). They are also the most likely trigger for a 1275.1 source-of-funds hold. Penal Code 1275.1(a) says bail shall not be accepted unless a judge or magistrate finds that no portion of the consideration, pledge, security, deposit, or indemnification paid, given, made, or promised for its execution was feloniously obtained. Feloniously obtained means possessed, received, or obtained through an unlawful act, transaction, or occurrence constituting a felony (1275.1(k)). A hold on release is ordered only if a peace officer or a prosecutor files a penalty-of-perjury declaration setting forth probable cause, or if the magistrate or judge personally has that probable cause (1275.1(b)). Once probable cause exists, the defendant bears the burden by a preponderance of the evidence to show that no part of the pledge was obtained by felonious means (1275.1(c)). The defendant and counsel get a copy of the declaration no later than the Penal Code 825 date (1275.1(d)). A loan is not forbidden if it will be funded and repaid with funds not feloniously obtained (1275.1(e)). On request of a person providing any portion of the pledge, the evidentiary hearing may be closed to protect that person's financial privacy (1275.1(f)). If the declaration is filed and not acted on within 24 hours, the defendant shall be released from custody upon posting the amount of bail set (1275.1(g)). Willfully misleading the court about the source of bail may increase bail (1275.1(i)). After the defendant meets the burden, a holding order is vacated on the condition that the consideration for a surety bond is approved by the court (1275.1(j)). An Oakland narcotics booking with a paper bag of cash is the classic 1275.1 fact pattern. The agent who receipts dirty cash as 2081(b) collateral has taken an item the court may refuse.

Automobiles or mobile homes. Title, registration, lienholder position, and a written security agreement are the practical file. A mobile home can be personal property or, if installed as real property, can sit on the deed-of-trust side. The exam's listed type is the titled vehicle or mobile home pledged to the licensee.

Water vessels. Documented vessels and undocumented boats are personal property. A slip lease is not a vessel.

Stocks and bonds. Negotiable or assigned securities. Street-name brokerage positions need an assignment the custodian will honor.

Savings accounts. An assignment of the account, not a photocopy of a passbook the depositor can still drain.

Life insurance policies. A collateral assignment of cash value, not a change of beneficiary that strips the family if the insured dies during the case.

Other personal property — the objectives name jewelry, livestock, antiques, and art. A Kern County dairy herd, a Sacramento coin collection, and a San Diego gallery canvas are in the catalog. So is a Rolex. Possession plus a written pledge still needs 2083(m) and 2100(k) descriptions that a later auditor can identify.

Irrevocable letters of credit and assignments of interest. An ILOC is a bank's irrevocable promise, presented according to its terms after a qualifying default. An assignment of interest is a directed transfer of a contract right, account, or other interest. Neither is a handshake.

California scenario and traps

A defendant is booked in Fresno County on a $100,000 felony. His parents offer three things: a deed of trust on the family's agricultural parcel, a titled tractor, and $12,000 cash. The land is real-property collateral. 2088.3 requires the security-transaction legend, and 1276.5 requires the 14-point disclosure and completed copies before anyone signs the deed. The tractor is personal property (other personal property, and arguably equipment rather than an automobile; it still belongs in the personal-property catalog). The cash is 2081(b) collateral and is also 1275.1 consideration. If the district attorney files a 1275.1 declaration alleging the cash is drug proceeds, the court must act within 24 hours or the defendant is released on the posted amount. None of the three items is the filed premium. None of them is a Penal Code 1278 court property bond unless the family instead qualifies as personal sureties under 1279 and records a 1280a affidavit.

Traps. Do not treat a commercial building as ineligible because 1276.5 mentions a home in the consumer warning; the objectives expressly include commercial, industrial, and agricultural land. Do not take a grant deed that omits the 2088.3 security-transaction legend. Do not skip 1276.5 because the owner is a sophisticated landlord. Do not receipt cash the agent suspects is felony proceeds as if 1275.1 were optional office policy. Do not tell a family that recording a licensee deed of trust is the same as a 1280.1 court attachment lien. Do not accept a photocopy of a savings book, an expired insurance policy, or a revocable letter of credit and call it the listed type.