Legislature(2001 - 2002)
03/27/2002 01:40 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE JUDICIARY COMMITTEE
March 27, 2002
1:40 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chair
Senator Dave Donley, Vice Chair
Senator John Cowdery
Senator Gene Therriault
Senator Johnny Ellis
MEMBERS ABSENT
All Members Present
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 40(FIN)
"An Act providing for the revocation of driving privileges by a
court for a driver convicted of a violation of traffic laws in
connection with a fatal motor vehicle or commercial motor vehicle
accident; amending Rules 43 and 43.1, Alaska Rules of
Administration; and providing for an effective date."
MOVED SCS CSHB 40(JUD) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 157(JUD) am
"An Act relating to trust companies and providers of fiduciary
services; amending Rules 6 and 12, Alaska Rules of Civil
Procedure, Rule 40, Alaska Rules of Criminal Procedure, Rules
204, 403, 502, 602, and 611, Alaska Rules of Appellate Procedure,
and Rules 7.2 and 7.3, Alaska Rules of Professional Conduct; and
providing for an effective date."
MOVED SCS CSHB 157(JUD) OUT OF COMMITTEE
SENATE BILL NO. 263
"An Act relating to the subsequent acquisition of title to, or an
interest in, real property by a person to whom the property has
purportedly been granted in fee or fee simple; and providing for
an effective date."
MOVED CSSB 263(JUD) OUT OF COMMITTEE
SENATE BILL NO. 204
"An Act relating to wildfires and other natural disasters."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 313
"An Act repealing a provision relating to legislative approval of
construction projects of the Alaska Aerospace Development
Corporation."
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
HB 40 - See Judiciary minutes dated 2/20/02.
HB 157 - See Labor and Commerce minutes dated 1/29/02.
SB 263 - See Labor and Commerce minutes dated 2/12/02 and
Judiciary minutes dated 3/4/02.
WITNESS REGISTER
Ms. Anne Carpeneti
Assistant Attorney General
Criminal Division
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Testified on HB 40.
Ms. Kim Ross
Staff to Senator John Cowdery
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Read testimony from Mr. Alan Christopherson
on HB 40 into the record.
Mr. Chuck Hosack
Deputy Director
Division of Motor Vehicles
Department of Administration
PO Box 110200
Juneau, AK 99811-0200
POSITION STATEMENT: Testified on HB 40.
Ms. Mary Chrisopherson
No address given
POSITION STATEMENT: Testified on HB 40.
Ms. Robin Phillips
Staff to Representative Lisa Murkowski
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced HB 157.
Mr. Terry Lutz
Chief Financial Institution Examiner
Division of Banking, Securities & Corporations
Department of Community & Economic Development
P.O. Box 110807
Juneau, AK 99811-0807
POSITION STATEMENT: Testified on HB 157.
Mr. Terry Elder
Director
Division of Banking, Securities & Corporations
Department of Community & Economic Development
P.O. Box 110807
Juneau, AK 99811-0807
POSITION STATEMENT: Testified on HB 157.
Mr. Joe Newhouse
Newhouse & Vogler, CPAs
237 E. Fireweed Lane
Anchorage, AK 99503
POSITION STATEMENT: Testified on HB 157.
Mr. Dave Shaftel
th
550 W. 7 Ave.
Anchorage, AK 99501
POSITION STATEMENT: Testified in support of HB 157.
Mr. Dick Thwaites
Chairman
Alaska Trust Company
nd
604 W. 2 Ave.
Anchorage, AK 99501
POSITION STATEMENT: Testified in support of HB 157.
Mr. Kevin Sullivan
Baxter, Bruce & Sullivan
P.O. Box 32819
Juneau, AK 99803-2819
POSITION STATEMENT: Testified on HB 157.
Mr. Douglas Blattmachr
President
Alaska Trust Company
1029 W. Third Ave., Suite 601
Anchorage, AK 99501-1981
POSITION STATEMENT: Testified in support of HB 157.
Ms. Annette Kreitzer
Staff to Senator Loren Leman
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Testified on SB 263.
Mr. Bryan Merrell
First American Title Company of Alaska
3035 C St.
Anchorage, AK 99503
POSITION STATEMENT: Testified on SB 263.
Mr. Jon Tillinghast
Sealaska Corporation
One Sealaska Plaza Suite 300
Juneau, AK 99801
POSITION STATEMENT: Testified on SB 263.
ACTION NARRATIVE
TAPE 02-12, SIDE A
1:40 p.m.
CHAIRMAN ROBIN TAYLOR called the Senate Judiciary Committee
meeting to order at 1:40 p.m. Present were Senators Cowdery,
Donley and Chairman Taylor. Senators Ellis and Therriault
arrived shortly thereafter.
The first order of business before the committee was HB 40.
HB 40-REVOKE DRIVER'S LIC. FOR FATAL ACCIDENT
MS. ANNE CARPENETI, Assistant Attorney General, Department of Law
(DOL), noted that the committee had already heard HB 40 and a CS
was drafted according to suggestions made by Senators Donley and
Therriault. She explained the following changes in the J
version:
· On page 2, line 1, the word "shall" was changed to "may" to
allow for the discretion of the court in the revocation of a
driver's license.
· On page 2, line 10, the possible term of revocation was
changed from one year to up to three years to give the court
more discretion in consideration of circumstances.
· Page 3, lines 1-4 deleted the provision that the findings of
the court would not be admissible in subsequent civil,
criminal or administrative action. A provision was inserted
allowing the family of the victim to testify at proceedings
addressing revocation.
· Page 3, line 21 changed the effective date to September 1,
2002 rather than 2001.
CHAIRMAN TAYLOR said those were excellent changes.
SENATOR DONLEY asked if the Administration supported the CS.
MS. CARPENETI said yes.
SENATOR DONLEY moved the J version of HB 40 as the working
document.
There being no objection, the J version of HB 40 was adopted as
the working document.
CHAIRMAN TAYLOR asked if there were any further questions for Ms.
Carpeneti. There were none.
MS. KIM ROSS, Staff to Senator Cowdery, read the following
testimony from Mr. Alan Christopherson:
I understand that Sen. Robin Taylor, Sen. Dave Donley,
Sen. John Cowdery and others are reviewing HB 40. I
would like the committee to readdress the applicable
law(s) regarding uninsured motorists. As background,
our family is fully insured for four vehicles by two
national insurance firms.
The reason for my testimony is that my wife's auto has
been struck by two different uninsured motorists in the
last three years. The most recent incident occurred
last week and the other three years ago. In both
cases, the uninsured motorist was allowed to leave the
scene of the accident and in both cases the motorists
have been unwilling or unable to pay. In the case of
the first driver, we understand that he is still
driving three years after our accident without
insurance.
Although our insurance policies include uninsured
drivers coverage, our experience has shown that not all
repair costs such as the use of rental cars during
repairs are compensated by this coverage. Often,
insurance companies attempt to recover these costs
after the fact by the legal system or by garnishing a
motorist's future Permanent Fund Dividend. We found
these processes to be slow and flawed. We did receive
partial compensation from the first accident, although
only a portion of our costs were repaid by the
insurance company three years after the accident.
I understand the intent of the original bill was to
require each driver to show proof of insurance within
ten days after an accident or lose the privilege of an
Alaska driver's license. Before writing this testimony
I called the Anchorage Chief of Police about this
subject. He had me talk with a sergeant in Internal
Affairs, who confirmed that the current laws related to
uninsured motorists are not effective. He told me (as
I suspected) many uninsured motorists continue to drive
without a license or insurance. The police suggest
they could use tougher laws with regard to uninsured
motorists. In the case of my wife's most recent
accident by an uninsured motorist, the police could
only recommend to the uninsured motorist that he
provide compensation before he drove away.
Please consider adopting a law similar to what I
understand the state of Arizona has in effect. If the
operator of the vehicle does not have a valid insurance
certificate for the vehicle, it is immediately
impounded. The vehicle is not released until proof of
insurance is provided.
Please send the growing number of uninsured drivers a
message that they cannot continue to drive and put
others at financial risk.
As Sen. Cowdery and I know from our recent visit to
Elmendorf AFB we were required to show a valid drivers
license, a current vehicle registration and proof of
insurance to drive on the base. I think the same rules
should apply to the streets of Anchorage.
I realize that the issues related to uninsured motorist
insurance and the bill before the committee is more
complicated than the ideas I have presented in my
testimony. I trust that your committee will fully
study all available options and will determine the best
course of action.
I would like to thank the committee for hearing my
comments and for your tireless efforts in these and
other important matters before the State of Alaska.
Sincerely, Alan Christopherson
1:45 p.m.
CHAIRMAN TAYLOR said his staff, Senator Cowdery and Senator
Donley had all communicated with Mr. Christopherson. He said
while his testimony was not directly related to the bill, it did
relate to the revocation or suspension of driving privileges. He
asked Ms. Carpeneti to tell the committee what DOL was doing to
enforce the law requiring the revocation of the license of a
person without insurance who was involved in an accident. He
said Mr. Christopherson's testimony indicated that the Chief of
Police in Anchorage believed the law was not being enforced. He
asked why it wasn't being enforced.
MS. CARPENETI said she didn't know which statute Mr.
Christopherson was referring to. She said she would be happy to
talk with the Division of Motor Vehicles (DMV) to find out.
CHAIRMAN TAYLOR said a former legislator did subrogation work to
collect for damages on behalf of insurance companies. The
insurance companies would refer cases in which their liability
coverage had paid for the damages and the person causing the
accident had not paid them. He said the former legislator told
him about three years previously that Governor Knowles'
administration made a decision to not revoke driver's licenses
because it was too much work and they had higher priority issues
to deal with. He communicated with DMV and was informed that
they were revoking licenses. He said Mr. Christopherson's
testimony indicated that DMV wasn't following up on people who
failed to pay for the damages they had caused. He said they
should be revoking the driver's license until the money had been
paid.
SENATOR DONLEY said during a budget reduction proposal DMV said
they would have to stop enforcing the Motor Vehicle Safety
Responsibility Act that paralleled the Mandatory Motor Vehicle
Insurance provisions. He remembered working with DMV to provide
funding to continue enforcement. He had not heard that DMV
wasn't enforcing the Motor Vehicle Safety Responsibility Act. He
would be very disappointed if they were not.
MR. CHUCK HOSACK, Deputy Director, DMV, confirmed that DMV was
enforcing both the Mandatory Motor Vehicle Insurance provisions
and the Motor Vehicle Safety Responsibility Act. He said both
the laws involved loss of a driver's license if a person was in
an accident and didn't provide proof of insurance. He said the
Mandatory Motor Vehicle Insurance provisions applied to all
drivers involved in an accident, whether they were the at-fault
driver or an innocent party. He said DMV looked at the accident
report to determine whether there was a possibility that a person
could be held liable. At that point, the financial
responsibility law went into effect and the driver's license
could be suspended for up to three years or until the damages
from the accident were paid. He said DMV had identified those
functions as possible program reductions in years past but never
had to cut them because funding was made available.
SENATOR DONLEY asked if the person got their driver's license
back after three years whether they paid the damages or not.
MR. HOSACK said one of the provisions for getting a license back
after three years was an SR-22 insurance policy. He thought the
reason for the three-year period was because civil liability
limitations ran out after three years.
SENATOR DONLEY said a judgment didn't expire after three years.
MR. HOSACK said that was correct. He said the suspension
continued until the judgment was satisfied.
CHAIRMAN TAYLOR thought a judgment had to be renewed every six
years if a person failed to execute.
SENATOR COWDERY said revocation of a driver's license wasn't a
very good penalty because people continued to drive without a
license. He asked if the vehicle could be impounded.
MR. HOSACK said when a person was pulled over by a police officer
they could be cited for driving while their license was suspended
or revoked. He said their license could be revoked again and
they could get jail time in some cases. He wasn't aware of a
vehicle forfeiture or impoundment provision.
SENATOR DONLEY believed there was mandatory jail time for second
offenses.
MS. CARPENETI said that was correct. She said there was a ten-
day jail time for the first offense, which could be suspended on
the condition that the person perform 80 hours of community
service. She said there was a mandatory jail time of ten days
for the second offense.
SENATOR COWDERY said that didn't seem adequate. He knew of a
person in the Wasilla area who was driving with a suspended
license and tried to use his brother's license when he was pulled
over. He said the man got ten days for that second offense. He
said if the problem was going to be solved, the vehicle must be
impounded regardless of ownership. He said we weren't getting
the attention of people who had had their license revoked with
the penalties in place.
SENATOR THERRIAULT said Mr. Christopherson's testimony led him to
believe that if a police officer pulled somebody without
insurance over, the officer would allow the person to get back in
the car and drive home and tell them not to do it anymore. He
asked if police officers could impound the vehicle of a person
driving without insurance.
SENATOR COWDERY said Mr. Christopherson told him the person was
able to get in their car and drive home after the accident. He
thought there were problems with the law.
SENATOR THERRIAULT asked if that was a choice the officer made.
MR. HOSACK said there was no requirement to carry proof of
insurance in the automobile and therefore an officer wouldn't ask
for proof of insurance during a normal traffic stop.
SENATOR THERRIAULT said there was an accident in Mr.
Christopherson's case.
MR. HOSACK said in the case of an accident the officer indicated
whether the person had insurance on the accident report. He said
enforcement then fell to DMV to take action against the license
of a person who didn't provide proof of insurance. He said there
was no law allowing the officer to impound the vehicle at the
accident scene.
SENATOR THERRIAULT asked if the officer would still allow the
person to drive away if he was told there was no insurance on a
vehicle that had been in an accident.
MR. HOSACK said yes.
CHAIRMAN TAYLOR asked why the persons who impacted Mr.
Christopherson's vehicles would still be driving.
MR. HOSACK said they were probably driving without licenses. He
said DMV or the court could take the license away but once the
person left the office or the court it was very difficult to keep
them from driving. He said even if their car was taken away they
could find another vehicle to drive. He said they would almost
have to be locked up for the term of their suspension to be kept
from driving.
CHAIRMAN TAYLOR asked if Mr. Hosack could work with Mr.
Christopherson's wife to determine whether the parties had Alaska
driver's licenses.
2:00 p.m.
MR. HOSACK said he could.
CHAIRMAN TAYLOR thought insurance companies notified DMV if they
were unable to get reimbursement for damages caused by an
uninsured driver.
SENATOR DONLEY asked if the burden was on the perpetrator.
MR. HOSACK said it was. He said they had to provide DMV with
proof of insurance. He said DMV did random spot checks as well.
He said their best indicator was the injured party's insurance
company. He said if the insurance company paid out of their
uninsured motorist claim they would go to the at-fault party to
get reimbursement. He said if they couldn't get reimbursement,
they oftentimes notified the DMV. DMV then checked their system
and could take action on the license.
CHAIRMAN TAYLOR said there were a couple of good triggering
events that motivated DMV to revoke licenses.
SENATOR DONLEY asked for an estimate of how many licenses were
suspended under the Mandatory Motor Vehicle Insurance provisions
and the Motor Vehicle Safety Responsibility Act the previous
year.
MR. HOSACK said he didn't have those numbers readily available.
He said DMV did collect those numbers and he would get them to
the committee.
SENATOR DONLEY said he asked the Division of Insurance (DOI) to
compare the number of accidents to the number of those that had
suspended licenses. He said DOI estimated 18% of motorists were
uninsured.
MR. HOSACK said DMV checked the percentage of the number of
accident reports that involved uninsured motorists. He said DMV
had to take action on 14% to 16% of those licenses in the
previous three years.
CHAIRMAN TAYLOR asked if there were any further questions for Mr.
Hosack. There were none.
MS. CARPENETI clarified that ten days was the mandatory minimum
sentence for a second offense. She said it was a class A
misdemeanor so the person could be put in jail for up to one
year.
CHAIRMAN TAYLOR asked Ms. Mary Christopherson to provide
testimony.
MS. MARY CHRISTOPHERSON said she seemed to run into only those
drivers who were uninsured. She said one insurance company
estimated that 22% to 30% of motorists in Alaska were uninsured.
She said she had been in two accidents in the past ten years. In
both cases the other party was uninsured. She said in both cases
the other party was able to get into their car and drive away
after the accident report was filed. She said it took over three
years to get reimbursed for one of the accidents in which there
was substantial damage to her vehicle. She paid $100 per year
for uninsured motorist insurance coverage with a $250 deductible.
She also had to pay $280 for a rental car. She said the person
was probably still driving without insurance. She said people
who didn't obey the laws regarding insurance coverage weren't
going to care if their license was taken away. She said the
vehicle needed to be impounded when they got into an accident and
they could get their car back after they proved they had
insurance.
CHAIRMAN TAYLOR thanked Ms. Christopherson for her testimony. He
said that wasn't the bill in front of the committee. He said
Senator Cowdery had indicated a strong interest in such a bill.
He and Senator Donley had been working on the issue for several
years.
SENATOR DONLEY said they had been told for many years that it
would be cost-prohibitive to confiscate motor vehicles. He said
it was good news that the Municipality of Anchorage had proved
the opposite and made a profit with their drunk driving vehicle
confiscation program. He said the key to dealing with the
problem at the state level would be to authorize local
governments to pass ordinances that would allow them to
confiscate vehicles if people were driving with a suspended
license or without insurance.
SENATOR COWDERY said he carried his proof of insurance in his
pocket. He thought many people got the proof of insurance and
just didn't put it in their vehicle. He thought one or two
impoundments would get their attention. He said he would like to
work toward that and thought he could fit the language in a bill
he had coming before the committee.
CHAIRMAN TAYLOR asked if there was anybody else who wished to
testify on HB 40. There was nobody.
SENATOR DONLEY moved SCS CSHB 40(JUD) out of committee with
attached fiscal note and individual recommendations.
There being no objection, SCS CSHB 40(JUD) moved out of committee
with attached fiscal note and individual recommendations.
The next order of business before the committee was HB 157.
HB 157-TRUST COMPANIES & FIDUCIARIES
MS. ROBIN PHILLIPS, Staff to Representative Lisa Murkowski, read
the following sponsor statement:
At the request of the Division of Banking and
Securities, [Representative Murkowski] introduced House
Bill 157, the Revised Alaska Trust Company Act. The
purpose of this bill is to update the existing Trust
Company Act which has not undergone any major revisions
since its adoption during the territorial days of 1949.
If enacted, this legislation will be a tool that will
enhance the process of formation, operation,
supervision and regulation of the trust industry in
Alaska.
Recent changes to Alaska trust laws make creation of
trust charters in Alaska more desirable. However, the
Alaska Trust Act does not provide guidance as to who or
what needs a charter, nor guidance for the formation
and organization of a trust entity, or provisions for
permissible activities including interstate or
intrastate business expansion.
The bill repeals existing AS 06.25 and replaces it with
AS 06.26 "Providers of Fiduciary Services." This
chapter clarifies who may provide fiduciary services in
Alaska, expands on who may be a trust company, what
their powers may be, and covers specific items such as
certificate of authority, required capital, operations
of offices, and the like.
[We] have worked with local trust companies, trust
attorneys and the Division to formulate this
legislation. This bill meets the needs of the Division
to adequately regulate new and existing trust companies
and also for those providing fiduciary services without
being a burden to their overall business activities.
[We] urge your support of this legislation.
CHAIRMAN TAYLOR asked for a background on uniform trust acts and
how HB 157 related to uniform trust acts adopted in other states.
MR. TERRY LUTZ, Chief Financial Institution Examiner, Division of
Banking, Securities & Corporations (DBSC), said they contacted
between 15 and 20 states while putting HB 157 together. He said
they also used portions of a model act from the Conference of
State Bank Supervisors.
CHAIRMAN TAYLOR asked about the involvement of the Bar
Association, attorneys and other professionals.
MR. LUTZ said they contacted the Bar Association and many
attorneys and had received many comments and questions from them.
He said there was also a lot of input from the trust industry.
He noted there were only two state chartered trust companies in
Alaska. He said there wasn't much input from banks because he
didn't believe any of them were involved in the trust business.
CHAIRMAN TAYLOR asked if Mr. Lutz had looked at the issues raised
by Theresa Bannister, Legislative Council, concerning federal
preemption.
MR. LUTZ said he wasn't aware of those issues.
CHAIRMAN TAYLOR read the following from Ms. Bannister's
memorandum dated March 27, 2002:
Please be aware that there may be a federal preemption
issue present in this bill to the extent that financial
institutions organized under federal law are covered by
the requirements of the new chapter. Although proposed
AS 06.26.010(4)-(5) exclude national banks and
federally chartered savings associations, the exclusion
is limited to those associations and banks that have
their principal offices in this state. Whenever you
have a financial institution established under federal
law, it is possible that it may not be subject to the
particular state regulation involved. From the limited
research that I have been able to do, it appears that
some state laws limiting the right and power of a
national bank under federal law may not be binding on a
national bank and that if there is a conflict between
state law and federal law that cannot otherwise be
reconciled or resolved, federal law will prevail. I do
not know if this is a serious problem, but I wanted to
bring it to your attention as you review the bill.
MR. LUTZ didn't know to what extent federal law might preempt HB
157. He said DBSC regulated nine different types of entities and
there were federal laws that preempted state law with a lot of
those entities. He said there wasn't much that could be done
about that.
CHAIRMAN TAYLOR assumed DBSC and other states that used the model
act had addressed most of the federal preemption issues.
MR. LUTZ said most of the acts they looked at had been rewritten
recently so he assumed most of the bill would not have a problem
with preemption.
SENATOR DONLEY said Sec. 06.26.670 dealt with dissenting
shareholders of a proposed merger. He asked for an example of a
merger or a consolidation of a trust that could occur.
MR. LUTZ said that provision was necessary in case there were
trust companies in Alaska that wished to merge.
CHAIRMAN TAYLOR said it was interesting that the model code
considered the possibility because mergers weren't uncommon. He
appreciated the fact that it provided for a continuity of
responsibility and integrity as far as finances and
capitalization required and types of officers involved. He said
that protection was in HB 157 so a company couldn't merge its way
into or out of some level of liability.
SENATOR DONLEY asked if there was anything in HB 157 that would
affect how trusts functioned in regards to the rights of
beneficiaries.
MR. LUTZ didn't believe so. He said that would be in other areas
of law that covered trusts. He said HB 157 didn't attempt to
regulate trusts, only the trust companies and the way they did
business.
SENATOR DONLEY asked for the Chairman's intent in dealing with
the concerns raised by Ms. Bannister.
CHAIRMAN TAYLOR said Ms. Bannister suggested a sort of savings
clause that said if a portion of the legislation was preempted by
federal law it didn't apply.
SENATOR DONLEY asked about the second concern raised in the
memorandum:
Also, we have noticed another oddity, not caused by the
committee's amendment. AS 06.26.900(7) authorizes
examinations of subsidiaries of private trust
companies, but does not specifically mention private
trust companies themselves.
MR. TERRY ELDER, Director, DBSC, said private trust companies
didn't offer services to the public and while they were subject
to examination they weren't routinely examined. He said there
might be a problem if DBSC was only able to examine private trust
company subsidiaries and not private trust companies themselves.
He said DBSC would normally only be verifying whether or not they
were in fact private and not offering services to the public.
CHAIRMAN TAYLOR said they would be examined if they offered
services to the public.
MR. ELDER said they would be routinely examined. He didn't
anticipate examining private trust companies on a regular basis.
He said they would also examine private trust companies to see if
there was a violation of the law.
CHAIRMAN TAYLOR asked why they would be examining the
subsidiaries.
MR. ELDER thought the only issue they would have with a private
trust company would be whether they were in fact a private trust
company and they wouldn't look beyond that. He said they could
deal with that issue with the trust company itself and not with
the subsidiaries unless the company was offering services to the
public through a subsidiary.
MR. LUTZ thought the language meant examining a series of trust
companies and private fiduciaries.
SENATOR DONLEY thought the problem was with the conjunctive and
"subsidiaries of" should apply to trust companies and private
trust companies. He thought the section should read, "perform
examinations of trust companies, private trust companies, branch
offices, representative offices, and subsidiaries of trust
companies and private trust companies."
CHAIRMAN TAYLOR asked if taking out the first "and" and putting a
comma in place of it would take care of the problem.
SENATOR DONLEY thought they wanted the subsidiaries of both types
of trust companies to be covered. He thought the drafters would
be able to fix the problem.
MR. ELDER also thought it was just a matter of rearranging the
sentence.
SENATOR DONLEY moved the B version of HB 157 as the working
document.
There being no objection, the B version of HB 157 was adopted as
the working document.
SENATOR DONLEY moved conceptual Amendment #1 to redraft AS
06.26.900(7) on page 53 to include both subsidiaries and primary
companies of both private trust companies and trust companies.
There being no objection, Amendment #1 was adopted.
TAPE 02-12, SIDE B
2:30 p.m.
MR. JOE NEWHOUSE said he was a certified public accountant (CPA)
with the firm of Newhouse & Vogler in Anchorage. He said he had
been in the CPA business for about 20 years.
He was contacted three years previously by an attorney in
Connecticut asking him to serve as trustee on some trusts,
providing a more cost-effective service for smaller estate
planning trusts. He acted as a trustee for about 50 of those
types of trusts. He said most of those trusts were simple life
insurance trusts with a savings account of about $10,000 and
maybe a CD. He noted this was not much in the way of liquid
assets. He didn't manage the assets of the trusts and didn't
want to. He said his duties included taking some gifts into the
trusts, paying for life insurance premiums, sending notices to
the beneficiaries, running a tally at the end of the year and
filing a tax return if required.
MR. NEWHOUSE said Alaska trusts were attractive to many of the
attorney's clients. He said they had to set up trusts through a
trust company or an Alaska resident. Trust services were well
within the scope of what attorneys and CPAs could and did do on a
regular basis. He said the Alaska Trust Company had a minimum
fee that was fairly expensive and he thought Alaska USA did as
well. He said his fees were at most 25% of what the trust
companies were charging.
He said he wanted to offer testimony supporting some language to
reduce regulation for attorneys and CPAs providing trust
services. He understood HB 157 would potentially limit the
number of trusts he could serve as a trustee for.
CHAIRMAN TAYLOR said there was nothing in the bill that limited
him.
MR. NEWHOUSE said he was worried about potential regulation. He
thought Chairman Taylor had also spoken with Mr. Kevin Sullivan
regarding these issues.
CHAIRMAN TAYLOR said the concerns Mr. Sullivan had shared with
him were that the Department of Community & Economic Development
(DCED) might in the future constrain or regulate professionals
who were doing small amounts of trust work. DCED told him they
were only concerned when and if an individual practitioner or
firm took on so many trusts that they were primarily a trust
company. He noted that DCED could not tell him what number of
trusts that might be. He said when they felt that had happened
they might feel some form of bonding or additional liability
coverage and annual reviews might be in order.
He and Mr. Sullivan had looked at an amendment to limit trustees
to 20 trusts, each of which was not to exceed $50,000 in
liquidity. He was fearful that establishing a number might be
premature because five years down the road, each trustee might be
handling 50 trusts. He said at that point somebody would have to
come back to the legislature and put a bill through the process
to change that arbitrary number. He said the law of unintended
consequences had often come back to haunt him. He estimated that
10% to 15% of the legislation coming before the committee that
year was nothing more than clean-up language changing some number
that was put into some bill with the best of intentions. He said
that was the reason he backed off that amendment. He thought
they were better off to trust the professionals within DCED. He
said if trustees felt they were subject to regulations that
appeared to be onerous or without good cause, it would be just as
easy to get a bill introduced to debate the policy calls before
the legislature.
MR. NEWHOUSE appreciated Chairman Taylor's comments. He said not
capping trusts at a certain number was a wise thing to do. He
was fearful that there might be over-regulation down the road.
He said not limiting the number would alleviate some of that
threat. He said trusts were an ancillary part of his business he
didn't intend to spend a lot of time on. He said the attorney
from Connecticut referred 75% of the approximately 50 trusts he
managed. He did not actively pursue trusts as part of his
business. He said his firm was in general practice and they
weren't ever going to get away from that. He said trust laws
were intended to bring money into Alaska. He wanted to make sure
that there wasn't anything in HB 157 that was going to create an
oligopoly where the big companies had more opportunities than the
attorneys and CPAs because of regulations.
He said CPAs were required to carry errors & omissions insurance.
He said that insurance policy required them to write down the
trusts they served as trustee for and the assets in those trusts
to provide for adequate protection.
CHAIRMAN TAYLOR asked if there were any further questions for Mr.
Newhouse. There were none.
MR. DAVE SHAFTEL said he was a member of an informal group of
estate planning attorneys who worked with the legislature
regarding estate planning and estate trust legislation. He said
they reviewed HB 157 carefully and worked with Representative
Murkowski's office and Mr. Lutz on the bill. He said they were
supportive of the bill.
He said there were some exemptions they were concerned about to
make sure that family members and friends could serve as
trustees. Those exemptions were put into HB 157. They were also
concerned that charitable organizations would be able to serve as
trustees and those provisions were also added to the bill. He
asked about the amendment that was to be offered regarding
private trust companies.
CHAIRMAN TAYLOR said that was in the CS.
MR. SHAFTEL said they were very supportive of that amendment
dealing with private trust companies, which were used extensively
on the east coast. He had just returned from a convention where
there was an hour and a half presentation dealing with family
offices and private trust companies. He said this was an area
that may develop further work for the financial industry in
Alaska.
CHAIRMAN TAYLOR thanked Mr. Shaftel for his testimony and his
years of work in the field and the assistance he provided to the
committee.
MR. DICK THWAITES, Chairman, Alaska Trust Company, said he was an
attorney in Anchorage. He said the Alaska Trust Company
supported HB 157. He thought it clarified a lot of issues. They
supported the exemptions mentioned earlier and thought the
committee should rely on the administration to make decisions.
CHAIRMAN TAYLOR asked where Alaska's original trust laws came
from and how long it had been since they had been changed or
modified.
MR. THWAITES noted that HB 157 didn't address trust law. It
addressed trust company regulation law. He said that came from
1949. He said most of the other trust law came from territorial
statutes and federal common law. Adopting uniform probate code
in 1969 amended that. He said there were certain provisions that
dealt with trusts but not very extensively. He said they started
working on the new trust laws in 1995 and the first of those laws
passed in 1997.
He said those laws placed Alaska in the forefront as the
preeminent state finance jurisdiction in the United States. He
said Alaska still had that lead although Delaware, Rhode Island,
South Dakota and Nevada were attempting to catch up. He said
Delaware recently passed laws similar to Alaska's. He said
Delaware had a lot of weight because everybody thought of
Delaware as the banking jurisdiction of the United States and for
corporations. He said Alaska, being a small state, had a fair
amount of luck establishing itself as the preeminent
jurisdiction. He said we're trying to keep things a little bit
ahead of the Internal Revenue Service and Delaware.
CHAIRMAN TAYLOR asked if there were any further questions for Mr.
Thwaites. There were none. He thanked Mr. Thwaites for the hard
work that he and his colleagues had done. He also thanked DBSC
for their effort on HB 157.
MR. KEVIN SULLIVAN, Baxter, Bruce & Sullivan, read the following
testimony:
My name is [Kevin Sullivan]. I am a lawyer [with] the
law firm of Baxter, Bruce & Sullivan here in Juneau.
Approximately 90% of my practice is estate planning
work - wills, trusts, post mortem administration,
wealth transfer, and related matters.
[The] purpose of my testimony is to inform the
committee of the type of work I do that will be
impacted by this legislation and to give committee
members the opportunity to ask questions should there
be interest.
As background, the AK Trust Act and AK Community
Property Trust Act were intended, in part, to bring
trust business to Alaska.
As a consequence of my estate planning work, I attend
conferences, continuing legal education seminars and
other events where I have met lawyers from different
states. When the AK Trust Act and Alaska Community
Property Act became law, I was asked by lawyers Outside
to serve as a trustee for trusts that their clients
wanted to establish in Alaska. This work is a small
and ancillary part of my practice.
In terms of administration, as a lawyer I have a $2
million Errors & Omissions insurance policy and I have
a letter from my insurer expressly addressing my
service as a trustee pursuant to the Acts and outlining
that such trustee service is covered by my policy.
Given the structure of the trusts for which I serve and
that I do not manage any trust assets, my insurer
indicates that my work is within the policy definition
of professional services and legal services for an
attorney who acts as a trustee.
In terms of structure of these trusts:
· I often serve with [a] co-trustee and both co-
trustees must act jointly - a checks and balances
[system].
· Assets held in a trust are typically a small
deposit account - less than $10,000, and an
insurance policy or limited partnership interests,
or limited liability Company interests - assets
that are not publicly traded. I do not manage
liquid assets and have no desire to manage or hold
substantial liquid assets. Concerning the goal of
protection of beneficiaries, my access to the
liquid assets of a trust is virtually nonexistent
given the structure of these trusts.
· These trusts have very low activity - for example,
I may pay an annual premium on an insurance policy
or receive a distribution and then disburse the
funds as payment on a note for the [purpose] of
limited partnership interests. Transaction
activity.
· Lawyers I work with have told me they want me to
serve in this capacity because I am more
responsive than an institutional trustee, and
provide a much lower cost alternative for these
small trusts.
· I have never [engaged] in any advertising for this
service whatsoever.
I understand the purpose of this legislation, in part,
is to better determine the type and volume of trust
activity occurring here in Alaska.
As drafted, the exemption portion of the bill provides
that the state Department of Community and Economic
Development will establish the number of trusts for
which I may serve as a trustee. Further, when
establishing that number, the Department shall consider
protection of the public, effect on efficient delivery
of trust services at a reasonable cost and the
likelihood that the particular exemption can make the
trust services available to persons who need the
service.
I have been communicating with Dept. staff on this
issue for some time and I have been assured that the
Dept. will be responsive to the statutory direction,
and that the intent of this legislation is not to
disrupt existing business relationships or activity
customarily addressed by lawyers and certified public
accountants. I welcome the opportunity to work with
the Department in that regard.
CHAIRMAN TAYLOR thanked Mr. Sullivan for his testimony and the
amount of work he had put in on HB 157. He wanted to establish
for the record that HB 157 did not intend to allow DCED to pass
regulations to constrict or restrict the trustee activities that
attorneys and CPAs were starting to participate in. He thought
at some point in the future DCED would wish to regulate and he
hoped the standards Mr. Sullivan enunciated were sufficient
guidance to DCED to act on behalf of the public good. He said
the public would need the low-cost services that would be
provided by CPAs and attorneys. He said as long as the CPAs and
attorneys didn't get involved in the administrative aspects of
liquid assets, everything should be fine.
He had some fear that we would start to see the things that were
going on in Anchorage with the CAPA problems where people had
opportunities to play with private trust assets and were doing so
without much regulation or opportunity for enforcement of those
fiduciary responsibilities. He had faith that DCED would take a
period of time to get a feel for what the trust business was all
about and they would work with people such as Mr. Sullivan to
determine the appropriate level of regulation.
MR. DOUGLAS BLATTMACHR, President, Alaska Trust Company,
expressed support for HB 157.
SENATOR TAYLOR asked if there was anybody else who wished to
provide testimony on HB 157. There was nobody.
SENATOR COWDERY moved SCS CSHB 157(JUD) out of committee with
attached fiscal note and individual recommendations.
There being no objection, SCS CSHB 157(JUD) moved out of
committee with attached fiscal note and individual
recommendations.
The final order of business before the committee was SB 263.
SB 263-AFTER ACQUIRED TITLE IN REAL PROPERTY
CHAIRMAN TAYLOR asked Ms. Annette Kreitzer if she had any further
testimony to provide on SB 263.
MS. ANNETTE KREITZER, Staff to Senator Loren Leman, sponsor of SB
263, said she had completed her remarks. She said Chairman
Taylor was going to speak with a gentleman who testified at the
previous meeting.
CHAIRMAN TAYLOR said he had heard from the gentleman but had been
unable to come to any conclusions regarding his concerns. He did
not have any amendments to offer. He asked if there was anybody
who wished to testify on SB 263.
MR. BRYAN MERRELL, First American Title Company of Alaska, said
he was the gentleman they were speaking of. He said he had a
lengthy conversation with Mr. Jon Tillinghast and others from
Sealaska and they weren't able to come to a resolution to answer
his concerns. He said they could attempt to fashion the bill so
that it only applied to the situation facing Sealaska but he had
concerns regarding the constitutionality of doing so. He said
others in his industry were concerned as well. He said the Land
Title Association for the state of Alaska, which was made up of
underwriters and title insurance agents throughout the state,
voted at its board meeting to oppose SB 263 because of those
concerns. He said those concerns had not changed and he hadn't
seen any suggestions which would alleviate those concerns.
CHAIRMAN TAYLOR asked Mr. Merrell to reiterate his concerns.
MR. MERRELL said his concerns came from changing an aspect of the
common law to address one particular situation that had arisen
with Sealaska. He was also concerned with the exception to the
rule for state-related entities, which meant the rule wouldn't
apply uniformly. He said that would cause anomalies in
attempting to examine and produce a title report or title policy
related to a piece of property and make it difficult for an
examiner to make a determination of the intent of the parties.
He said the situation might arise where a quitclaim deed would be
issued involving formerly state-owned property. He said there
was confusion and concern about how far it could go and when it
would stop automatic pass through a title when a quitclaim deed
was used rather than a warranty deed. He couldn't find any other
state that had made a similar exception. He said many times
quitclaim deeds were used to transfer titles in and amongst
family members, not realizing the potential effect of passing
after-acquired interest and whether or not that would continue
passing through family members. He said there were no stopping
points and nothing to indicate when that would or wouldn't
happen.
CHAIRMAN TAYLOR asked if he had discussed amending the bill to
more narrowly constrain it. He said SB 263 as written would
apply to people and corporations that may have conveyed by
quitclaim deed. He said it specifically excluded the
Legislature, a state agency, the executive branch, the judicial
branch, the University of Alaska and the Alaska Railroad
Corporation. He said if the railroad granted a quitclaim deed to
somebody, they wouldn't be required to convey any after-acquired
interest. But if he as a private person conveyed by quitclaim
deed, any after-acquired interest would be conveyed. He
suggested removing subsection (b) on page 2 and rewriting
subsection (a) on page 1 so it would specifically apply to Native
corporations.
MR. MERRELL said they had not discussed that solution. He said
the concept was somewhat attractive. He said subsection (b) was
added at the request of the administration because they didn't
want the new rule to apply to them.
CHAIRMAN TAYLOR said the State had tentatively selected certain
lands, some of which had been sold. He said some might have been
issued a quitclaim deed because the State didn't have full title
or final patent or because the State cannot convey subsurface
rights. He said a change in the law by Congress could cause
Alaskans to own subsurface rights, just as Native corporations
did. He noted that Congress had said it was permissible to own
subsurface rights for one type of owner but not another. He said
instead of trying to figure out who should be excluded, they
should try to figure out who wanted to be included.
MR. JON TILLINGHAST, Sealaska Corporation, said he drafted an
amendment to that end that would work for them. He said
subsection (a) could read something like, "In addition to any
estate passed by the grantor under AS 34.15.070, whenever a
person purports by either (1) a warranty deed or (2) in the case
of real property conveyed under the Alaska Native Claims
Settlement Act, a quitclaim deed to grant real property and then
subsequently acquired interest then the title passes." He said
the new rule would apply in two situations: the warranty deed for
everybody; and the quitclaim deed for property conveyed under the
Alaska Native Claims Settlement Act (ANSCA). He said subsection
(b) could be deleted entirely.
CHAIRMAN TAYLOR liked that solution because it limited the new
rule enough so that the title companies would know that would be
the only situation they would have to worry about in their search
for defects in title.
MR. TILLINGHAST was confident it would withstand special
legislation criticism.
CHAIRMAN TAYLOR moved Amendment #1 to insert Mr. Tillinghast's
words into subsection (a) beginning on page 1 and delete
subsection (b) on page 2. He asked if Sec. 3 and Sec. 4 were
still necessary.
MR. TILLINGHAST said they were.
CHAIRMAN TAYLOR asked if there was any objection to Amendment #1.
There being no objection, Amendment #1 was adopted.
CHAIRMAN TAYLOR asked if Mr. Tillinghast had anything further to
provide. He did not. He asked Mr. Merrell if he understood the
amendment.
MR. MERRELL believed he did and believed it would alleviate their
concerns. He noted that he would like to see the language.
CHAIRMAN TAYLOR thanked Mr. Merrell and Mr. Tillinghast for their
participation. He asked if there was anybody else who wished to
provide testimony on SB 263. There was nobody.
SENATOR ELLIS moved CSSB 263(JUD) out of committee with attached
zero fiscal note and individual recommendations.
There being no objection, CSSB 263(JUD) moved out of committee
with attached fiscal note and individual recommendations.
ADJOURNMENT
There being no further business before the committee, the Senate
Judiciary Committee meeting was adjourned at 3:05 p.m.
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