Legislature(1995 - 1996)
03/29/1996 01:30 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE March 29, 1996 1:30 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Lyda Green, Vice-Chairman Senator Mike Miller MEMBERS ABSENT Senator Al Adams Senator Johnny Ellis COMMITTEE CALENDAR CS FOR SENATE BILL NO. 186(L&C) "An Act relating to partnerships; and providing for an effective date." CS FOR HOUSE BILL NO. 308(JUD) "An Act relating to the Uniform Probate Code, including nonprobate transfers, guardianships, trusts, and multiple-party accounts; relating to the Uniform Simultaneous Death Act; and providing for an effective date." CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 75(FIN) "An Act relating to vehicle theft and the consequences of vehicle theft, including revocation of a driver's license, privilege to drive, or privilege to obtain a license; amending Rule 32.1, Alaska Rules of Criminal Procedure; and providing for an effective date." CS FOR HOUSE BILL NO. 25(FIN) "An Act revising Rule 16, Alaska Rules of Criminal Procedure, relating to discovery and inspection in criminal proceedings; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 186 - See Labor and Commerce minutes dated 2/8/96, 2/29/96, and 3/7/96, and 3/12/96. HB 308 - No previous Senate committee action. HB 75 - No previous Senate committee action. HB 25 - No previous Senate committee action. WITNESS REGISTER Sherman Ernouf Legislative Aide Alaska State Capitol Juneau, Alaska 99811 POSITION STATEMENT: Testified for the sponsor of SB 186 Bob Manley 324 E. Cook Anchorage, AK 99501 POSITION STATEMENT: Supports SB 186 Peter Dinn Deloitte & Touche 550 W 7th Ave. Anchorage, Alaska POSITION STATEMENT: Testified in support of SB 186 Representative Sean Parnell Alaska State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Sponsor of HB 308 John George American Council of Life Insurers 3328 Fritz Cove Rd. Juneau, Alaska 99801 POSITION STATEMENT: Commented on HB 308 Art Peterson 350 North Franklin St. Juneau, Alaska 99801 POSITION STATEMENT: Testified in support of HB 308 Representative Jerry Sanders Alaska State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Sponsor of HB 75 Donna Schulz Juvenile Probation Officer Department of Health and Social Services 10002 Glacier Highway, Suite 305 Juneau, Alaska 99801 POSITION STATEMENT: Testified in support of HB 75 Anne Carpeneti Assistant Attorney General Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 POSITION STATEMENT: Testified in support of HB 75 and HB 25 Duane Udland, Deputy Chief of Police Anchorage Police Department 4501 So. Bragaw St. Anchorage, Alaska 99507-1599 POSITION STATEMENT: Testified in support of HB 75 First Sergeant Mike Corkill Alaska State Troopers 1979 Peger Rd. Fairbanks, Alaska 99709 POSITION STATEMENT: Testified in support of HB 75 Jerry Shriner Department of Corrections 240 Main Street, Suite 700 Juneau, Alaska 99801 POSITION STATEMENT: Testified in support of HB 75 ACTION NARRATIVE TAPE 96-30, SIDE A Number 000 SB 186 LIMITED LIABILITY PARTNERSHIPS CHAIRMAN TAYLOR called the Senate Judiciary Committee to order at 1:40 p.m. Also present were Senators Green and Miller. The first order of business before the committee was SB 186. SHERMAN ERNOUF, legislative aide to the Senate Labor and Commerce Committee, gave the following summary of SB 186. The bill was introduced by way of request, has been worked on for two years, and has had extensive input from Alaska bankers, the Alaska Board of Certified Public Accountants, and the Division of Banking and Securities. The limited liability partnership (LLP) is a new type of general partnership that is sweeping the nation. The District of Columbia and 38 states have adopted the LLP as a business form, and 12 states, including Alaska, are considering this type of legislation in 1996. The LLP is particularly appealing to small businesses and start-up ventures. The benefits to an LLP are: it is simple to and operate because there are no required articles of incorporation, board of directors' meetings, shareholders arrangements, etc.; tax liability flows through the LLP directly to the partners themselves; and it provides for partial limited liability for its partners. Individual partners in an LLP are not personally liable for the debts and obligations of the LLP arising out of errors, omissions, negligence, incompetence, or malfeasance committed in the course of the partnership business by another partner, or representatives of the partnership not working under their direction or supervision. All partners are personally liable for their own acts and omissions and for the acts and omissions for those persons over whom they exercise control. Additionally, all partners continue to be personally liable for all other debts and obligations of the partnership itself. The LLP remains liable for all actions of its owners and employees, and the LLP owners personally remain liable for those persons under their control. Beyond any investments in the LLP itself, the personal assets of the owners and their families need not be sacrificed to pay judgments arising from events or actions over which they exercise no control. MR. ERNOUF noted concern expressed during hearings in the Labor and Commerce Committee about people switching to a limited liability partnership to avoid tax liability. The Division of Banking does not expect a mass exodus of people changing from one business form to another. The bill is narrowly tailored to assist firms that do business in several states, particularly accounting firms. He knew of no opposition to the bill. Number 107 BOB MANLEY testified in support of SB 186 since many major accounting firms are operating as limited liability partnerships in other states. CHAIRMAN TAYLOR asked if law firms could form under limited liability partnerships. PETER DINN replied a limited liability partnership is not dissimilar to a limited liability corporation; it has less limitation as to the openness of the partners, but is simpler to form and operate in. He imagined a partnership of attorneys could form as a LLP. CHAIRMAN TAYLOR asked if they would gain the ability to limit liability to only those people directly under their management or control by doing so. He was under the impression that the Professional Corporations Act did not provide any shield from liability but was created for tax and other corporate purposes. Mr. Dinn was unsure, but clarified the LLP is for those partners who are not directly involved, so that the assets of the organization are available and partners are responsible for all of the general liabilities, but it limits them from the acts of someone outside of the norm. A law firm may look to the professional corporation or sub S corporation as providing a better form of protection. CHAIRMAN TAYLOR believed there is no protection in either of those forms because liability pierces through to all members of the corporation. SENATOR GREEN moved SB 186 out of committee with individual recommendations. There being no objection, the motion carried. HB 308 UNIFORM PROBATE CODE REVISIONS REPRESENTATIVE SEAN PARNELL, sponsor of HB 308, reviewed the measure as follows. The National Conference of Commissioners on Uniform State Law has prepared a revision of the Uniform Probate Code which was enacted 24 years ago. HB 308 contains those revisions, which are designed to update and clarify the UPC. HB 308 has been reviewed and supported by the Estate Planning Section of the Alaska Bar Association. Number 207 BOB MANLEY explained HB 308 contains a number of technical fixes and responds to problems that have developed. It expands the Uniform Simultaneous Death Act to a 120 hour survival requirement to joint bank accounts and joint property to better carry out people's expectations if they have not properly planned their estate. It also expands the automatic revocation of disposition of property by divorce to life insurance policies. Problems have occurred in cases where a person divorced ten years ago started a new family but forgot to change the beneficiary designation on the life insurance policy. In such a case, the ex-spouse would obtain all of the life insurance to the detriment of the new family. HB 308 changes the intestacy law to better reflect social patterns over the past twenty years, to deal with blended families. HB 308 also expands the ability to disclaim property to nonprobate property. Frivolous disclaimers are used to fix faulty estate planning after a person has passed away. SENATOR GREEN asked if it would supersede the naming of the beneficiary if you have a succeeding family. MR. MANLEY responded HB 308 would provide for an automatic revocation of an ex-spouse as a beneficiary if a person is divorced. The divorced parties can reinstate, after the divorce, the ex-spouse as a beneficiary if so inclined, however if that is not done, the revocation would occur. SENATOR GREEN remarked the person who bought the policy and designated beneficiaries would not have to take responsibility for their own business. MR. MANLEY stated that in the divorce context, people occasionally forget to redesignate beneficiaries. He has seen cases where an ex-spouse may receive the proceeds from a policy, while the new spouse and children receive nothing at all. CHAIRMAN TAYLOR stated the no-fault divorce policy removes the legal profession from many divorce cases, and often results in oversights. JOHN GEORGE, representing the American Council of Life Insurance, testified in opposition to the inclusion of life insurance in the Probate Code. Insurance proceeds might be designated to take care of children from a prior marriage, or a prior spouse, as part of a divorce settlement. CHAIRMAN TAYLOR commented if a divorced person wanted to retain the ex-spouse as a beneficiary, he/she would only have to reinstate that person on the policy, which is no more difficult than changing the name of a beneficiary. He asked why the insurance industry would care who the beneficiary is. MR. GEORGE replied the insurance industry believes once a policy holder dies, if the named beneficiaries do not receive the proceeds, the insurance company will have to become involved. If the provision applies to policies sold after the date of passage, agents can inform clients when they purchase policies. Number 320 SENATOR GREEN stated she believes it is bad policy for the legislature to step in and allow a party to negate a contract. She repeated it is the policy holder's responsibility to indicate who the beneficiary of the policy will be. CHAIRMAN TAYLOR explained that one of the primary reasons that wills were included in the Uniform Probate Code was because people frequently forget to change their wills. If the previous spouse is designated as the beneficiary in a will, he/she receives 50 percent, while the current spouse receives 50 percent under the Intestate Code. REPRESENTATIVE PARNELL clarified Mr. George was referring to the spousal elective share of 33 percent. Under current law, if a person tries to disinherit a current spouse and leaves that spouse with no assets, but has left a life insurance policy to another person, the spousal elective share provides the spouse with 33 percent of anything in the augmented estate. Life insurance policies are not considered part of the augmented estate. HB 308 would include life insurance policies in the augmented estate but the spouse would have to make the claim against the beneficiary, not the insurance company, for 33 percent. This bill would enforce a policy against leaving a spouse with nothing. Number 373 SENATOR GREEN asked if an ex-spouse could claim against the current spouse for 33 percent. REPRESENTATIVE PARNELL answered no. CHAIRMAN TAYLOR noted this would impact people who do not get remarried because it is triggered on the divorce. REPRESENTATIVE PARNELL commented the spousal elective share would not be triggered if the policy holder was not married when he/she died. CHAIRMAN TAYLOR asked if the beneficiary provision of the insurance policy would revoke upon the action of the divorce, if the prime beneficiary is one of the spouses being divorced. MR. MANLEY replied that is correct; the revocation would be automatic and could be reinstated only by completing new beneficiary forms. The insurance industry's concern is bureaucratic; it simply wants to pay the designated beneficiary. Life insurance would be included in the augmented estate under HB 308 because the Uniform Probate Code set up the augmented estate to prevent disinheriting thousands but left a large loopholes. ART PETERSON, Uniform Law Commissioner for the State of Alaska, agreed with Mr. Manley and Representative Parnell. He explained the bill does not include life insurance in probate; it includes life insurance in the augmented estate which has a very limited role in probate matters. Its use occurs when a spouse is disinherited. All states, except Georgia, have some sort of spousal elective share provision. That policy kicks in when the disinherited spouse elects to exercise his or her right. HB 308 would no longer exempt life insurance from the augmented estate in such an occurrence. Number 455 SENATOR GREEN asked who would be responsible in a case where a mistake was made and the settlement was contrary to the originally named beneficiary, and that beneficiary made a claim for that settlement. CHAIRMAN TAYLOR questioned how the following scenario would be handled. There is an original contract of insurance which insures husband A with the beneficiary as wife B. HB 308 passes. At a later date, husband A and wife B divorce. The divorce action pursuant to HB 308 would nullify the beneficiary provision of that contract of insurance. The insurance company is not notified of the divorce. Husband A has remarried wife C, and then dies. The insurance company pays wife B because of an existing instruction, then wife C finds out the policy has been paid. She failed to give prompt notification to the insurance company that husband A died, but had she done so, she would have received the beneficiary portion as opposed to wife B. Now the company has mistakenly paid everything to wife B. Wife C chooses to exercise her right to an augmented share to the deceased's estate and asks that the life insurance policy be included in that estate. Would she be limited to bringing a cause of action against wife B? MR. PETERSON replied if the insurance company did not have notice and paid the original beneficiary, it would not be required to pay twice. The issue would be the value amount of the augmented estate. Wife C has the right to have that value included in the augmented estate. If an insurance company knows of a dispute, it can pay the money into the court. Wife C's recourse would be to take action against the estate. MR. MANLEY referred to lines 17-24 on page 64, and explained that section removes any risk from the insurance company unless they've ignored notices provided to them. MR. PETERSON noted the AARP strongly endorses HB 308, as does the Alaska Commission on Aging. SENATOR MILLER moved CSHB 308(JUD) out of committee with individual recommendations. There being no objection, the motion carried. HB 75 VEHICLE THEFT AND JOYRIDING REPRESENTATIVE JERRY SANDERS, sponsor of HB 75, explained the bill raises vehicle theft to a class C felony with the exception of first offense theft of snow machines and other off-road vehicles. HB 75 provides a strong deterrent to those who might otherwise commit vehicle theft. Under current law, those caught joyriding can only be convicted of a class A misdemeanor. Current law ties the hands of police and provides no deterrent for the car thief unless he/she caused $500 in damage or is caught for a second offense. HB 75 calls for license revocation, mandatory restitution to be paid to the victim, raises the maximum jail time from one to five years, and changes the maximum fine from $5,000 to $50,000. The bill was drafted to address extreme problems in Anchorage, but should be helpful in deterring car theft around the state. CHAIRMAN TAYLOR asked about the fiscal note. REPRESENTATIVE SANDERS replied DOC estimated $1,049,000. CHAIRMAN TAYLOR commented that last year the committee tried to create an effective bill but it was watered down at the request of the Department of Law. The Governor then vetoed the bill because he wanted to create a more comprehensive juvenile crime package. REPRESENTATIVE SANDERS indicated HB 75 provides for heavier sanctions, but does not waive minors into Superior Court automatically. Prosecutors would have that option, however. SENATOR GREEN asked if there is an age component included in the bill. ANNE CARPENETI, Assistant Attorney General, responded the offender would be treated as a minor if under the age of 18. CHAIRMAN TAYLOR noted the bill makes the adult offense more serious but does not address juvenile offenses. REPRESENTATIVE SANDERS explained the offense has been raised to a felony for both minors and adults. CHAIRMAN TAYLOR observed many offenders are not prosecuted while the crime is considered a misdemeanor. DONNA SCHULZ, a probation officer with the Division of Family and Youth Services, testified in support of HB 75 since it acknowledges vehicle theft for what it is. By raising the offense to a felony, DFYS will petition such juvenile cases to court. Currently it tries to handle 60 to 70 percent of misdemeanor cases in-house. CHAIRMAN TAYLOR asked why, if 3,000 cars are stolen per year in Anchorage, and at least 50 percent of those cars are stolen by minors, more cases are not petitioned into court. MS. SCHULZ did not have DFYS data available and explained statistics are not specific as to the number of auto thefts. CHAIRMAN TAYLOR expressed frustration that the problem of car theft by juveniles is not being addressed now and questioned how changing the classification will change the level of enforcement. He noted the fiscal note for the Department of Corrections appears to apply to car thieves over the age of 18. He asked Ms. Schulz if she believed more minors will be brought to court if HB 75 passes. MS. SCHULZ believed that would occur because the offense would be raised to the felony level. MS. CARPENETI noted there were 600 arrests for joyriding in 1994, 403 of which were for adults, and 205 were for juveniles. That number does not reflect the number of cars stolen, only the number of arrests made. The Department of Law supports HB 75. DUANE UPLAND, Deputy Chief of the Anchorage Police Department, stated law enforcement agrees that the crime of car theft should be a felony. Law enforcement has been frustrated with both minor and adult convictions as a misdemeanor offense because it is not treated seriously. He urged committee members to raise the offense to a felony. CHAIRMAN TAYLOR asked Mr. Udland what the normal protocol is if an officer pulls over a stolen car with three juveniles in it, and the juvenile driver was speeding. He asked if the juvenile driver would be treated as an adult for the moving traffic violations, but as a juvenile for the actual theft of the car. MR. UDLAND replied that is correct and causes a lot of frustration for law enforcement officers. CHAIRMAN TAYLOR asked what the law officer does with the juveniles in the car under that scenario. MR. UDLAND stated there are a number of variables, but police would have the option of booking them into juvenile intake if they all had knowledge the vehicle was stolen, but odds are they would be cited for reckless driving or speeding and would be summoned into court at a later date. CHAIRMAN TAYLOR asked if any of the juveniles end up booked or locked up. MR. UDLAND replied it depends on their ages, past records, availability of parents, and a number of other variables. If the offense is a felony, police officers will lean more towards a booking. CHAIRMAN TAYLOR stated the offender needs to be booked and to wake up in jail. MR. UDLAND stated more times than not, juveniles are only cited for moving traffic violations. He noted the frustration often stems from the fact that the jail or juvenile intake system is often full which dictates whether an offender is booked. Police are requested to bring in only the most serious offenders on nights when there is limited space at the jails. He stated the question in his mind is which system will deal with juveniles most appropriately. At this time, he does not believe a Superior Court judge will sentence minors to jail for a long term, whereas minors at McLaughlin would probably get longer sentences. He did not agree that the adult court system is necessarily the best place to deal with juveniles. FIRST SERGEANT MIKE CORKILL, Alaska State Troopers, testified in support of HB 75 as it will help people protect one of their major investments - vehicles. JERRY SHRINER, representing the Department of Corrections (DOC), testified in support of HB 75. He explained the fiscal note submitted with the original version of the bill was reduced in the House Finance Committee. The fiscal note was calculated using a standard procedure consisting of the average daily cost of care across the state which is $107. The committee objected to that calculation because DOC did not know how many prisoners would be housed in which facility. DOC then calculated the total amount by using the same estimate of 32 people but placing them in the Palmer facility. That calculation requires an additional post at that facility which is actually five positions, working around the clock. The amount equals the amount in the original fiscal note. Number 427 CHAIRMAN TAYLOR asked how many new prisoners DOC expects to receive. MR. SHRINER replied the primary cost will be to house people convicted of a second felony. It is expected that most people convicted of a first felony charge will go to halfway houses. Second time convicts will spend approximately two years in prison. CHAIRMAN TAYLOR commented that the fiscal matters can be taken up in the Senate Finance Committee. SENATOR GREEN moved CSSSHB 75(FIN) out of committee with individual recommendations. There being no objection, the bill moved from committee. HB 25 CRIMINAL DISCOVERY RULES REPRESENTATIVE PARNELL, sponsor of HB 25, explained the bill pertains to criminal rules of discovery. In the civil context, discovery is an open exchange of relevant and non-privileged information. In the criminal context, the flow of information is a one-way street: from the prosecution to the defense. HB 25 requires reciprocal discovery. He referred to a spreadsheet in members' packets delineating who would be required to provide what information at what time. The underlying issue is fairness; HB 25 will eliminate surprise witnesses, will avoid delays in trial, will inform victims and witnesses whether their character or distant past will be questioned in court and will guarantee a fair process when confidential records are sought by the defense. HB 25 still gives the defense early access to information about the prosecution's case, and contains a uniform procedure for the defense to get access to confidential records. Most requirements on the spreadsheet are from Rule 16, the others are from the American Bar Association's Model Criminal Code. The Department of Law and Public Defenders' Office have provided input on HB 25. CHAIRMAN TAYLOR asked Ms. Carpeneti if the Department of Law supports HB 25. MS. CARPENETI replied the Department strongly supports HB 25 and worked extensively with Representative Parnell's staff and the Public Defenders' Agency to address concerns. CHAIRMAN TAYLOR noted it is his understanding the Public Defenders' Office does not object to this legislation. Number 358 CHAIRMAN TAYLOR congratulated Representative Parnell for working on this legislation as it will provide a roadmap for those people involved in the practice of criminal law. SENATOR GREEN moved CSHB 25(FIN) from committee with individual recommendations. There being no objection, the motion carried. CHAIRMAN TAYLOR adjourned the meeting.