Untitled Texas Attorney General Opinion

The Attorney’ General of Texas
JIM MATTOX !;eptember23, 1986
Attorney General
Supreme Court Buildlng Honorable Benjamin Euresti, Jr. Opinion No. JM-550
P. 0. BOX 12546
Austin, TX. 76711-2546
Cameron County Attorney
512/475-2501 974 E. Harrison Street Rs: Disposition of funds received
Telex 9101674-1367 Brownsville, Texas '78520 from the sale of vehicles forfeited
Telecopier 512/475-0266 under section 5.08 of article
4476-15, V.T.C.S.
714 Jackson, Suite 700
Dallas, TX. 75202.4506 Dear Mr. Euresti:
214,742.6944
You ask our opinion on the following question:
4624 Alberta Ave., Suite 160
El Paso, TX. 79905.2793
May the Cameron County Sheriff deposit the
915/533-3464 money remived from the sale of [property that
has] beeu forfeited in accordance with article
4476-15, section 5.08, V.T.C.S., to be used for
1001 Texas, Suite 700 law enforcement purposes only, or, must the
p Mon. TX. 77002-3111
sheriff deliver the said proceeds to the Cameron
1223-5666
County District Clerk for forwarding, after paying
to any parties holding an interest in the property
606 Broadway, Suite 312 (in the form of a security interest or lien) the
Lubbock, TX. 79401.3479 'value' cf such property interest, to the Texas
6061747-5236
State Comptroller?
4309 N. Tenth, Suite B The Controlled Substances Act, article 4476-15, V.T.C.S.,
McAllen, TX. 76501-1665 provfdes for the :iorfeiture of various kinds of property used in
5124662.4547
connection with viol.ationsof the act. V.T.C.S. art. 4476-15, 95.03.
You suggest that there is a conflict within section 5.08 of the act
200 Main Plaza. Suite 400 concerning the disposition of the proceeds from the sale of forfeited
San Antonio, TX. 76205.2797 property. Section 5.08 provides, in pertinent part:
512,2254191
Sec. 5.08. (a) Regarding all controlled sub-
An Equal Opportunity/
stances, raw materials, and drug paraphernalia
Affirmative Action Employer which have been forfeited, the district court
shall by 11:sorder direct a law enforcement agency
to:
(1) r#ztain the property for its official
purposes;
(2) d#z:Liverthe property to a government
agency or department for official purposes;
P
p. 2436
Honorable Benjamin Euresti, .Jr.- Page 2 (JM-550)
(3) deliver the property to a person
authorized by the court to receive it; or
(4) destroy t:>eproperty that is not otherwise
disposed in the muner prescribed by section 5.081
of this Act.
(b) All othe:i property that has been for-
feited, except the money derived from the sale,
manufacture,mdist~c:Lbution,
dispensation, delivery,
or other commerc'ialundertakinn violative of this
Act, and except 2~ provided b&low. shall be sold
at a public auction under the direction of the
county sheriff after notice of public auction as
provided by law Em other sheriff's sales. The
proceeds of the sale shall be delivered to the
district clerk &d shall be disposed of as
follo"s:
(1) to any bona fide lienholder, secured
party, or other L&ty holding an interest in the
Property in the nature of a security interest, to
the extent of his-interest; and
(2) the balance, if any, after deduction of
all storage and c&t costs, shall be forwarded to
the state comptroller and deposited with and used
as general funds elf the state except as provided
by subsection (f)j>f this section.
(c) The state or au agency of the state or a
political subdivision of the state authorized by
law to employ peat:aofficers may maintain, repair,
use, and operate for official purposes all
property that bar; been forfeited to it if it is
free from any interest of a bona fide lienholder,
secured party, ot other party who holds an
interest in the property in the nature of a
security interest. The department or agency
receiving the for,feitedvehicle may purchase the
interest of a bon;%fide lienholder, secured party,
or other party wt.0 holds an interest so that the
property can be m:teased for use by the department
or agency receiv:tug the forfeited vehicle. The
department or agency receiving the forfeited
vehicle may maintrin. repair, use, and operate the
property with momy appropriated to the department
or agency for current operations. If the property
is a motor vehi::Le susceptible of registration
p. 2437
Honorable Benjamin Euresti, ,Jr.- Page 3 (``-550)
under the motor vehicle registration laws of this
state, the depa:rtment or agency receiving the
forfeited vehicls! is deemed to be the purchaser
and the certificate of title shall be issued to it
as required by Subsection (e) of this section.
. . . .
(f) All money, securities, certificates of
deposit, negotid>:Le instruments, stocks, bonds,
businesses or business investments, contractual
rights, real est;lte,personal property and other
things of value, and the proceeds from the sale of
an item described-in this subsection that are for-
feited to the seizing agencies of the state or an
agency or office of a political subdivision of the
state authorized ?ly law to employ peace officers
shall be depositc;iin a special fund to be admin-
istered by the serzing agencies or office to which
they are forfeitcz. Except as otherwise provided
by this subsect&, expenditures from this fund
shall be used solr!lyfor the investigation of any
alleged violatior~ of the criminal laws of this
state. . . . (EmpIhasisadded).
V.T.C.S. art. 4476-15, 55.08.
You suggest that sect:tons 5.08(b)(2) and 5.08(f) are contra-
dictory because section 5.%3(b)(2) places proceeds from the sale of
forfeited property into the state's general revenue fund, whereas
section 5.08(f) places proce'edsinto a special fund for the use of the
seizing agency of the state or agency or office of a political suh-
division to whom the property was forfeited.
We find no such conflLct in section 5.08. Section 5.08 must be
read in the context of t& entire act. Section 5.07 of the act
provides for a forfeiture hearing. At a forfeiture hearing the court
may order the seized property forfeited (1) to the state or (2) to an
agency of the state or ':o a political subdivision of the state
authorized by law to emplcy peace officers. V.T.C.S. art. 4476-15,
895.07(a), (d). The proper disposition of sale proceeds depends on
whether the court orders property to be forfeited to the state or to
one of the other eligibl~z entities. Section 5.08(f) governs the
disposition of proceeds from a sale if the court orders the seized
property forfeited to an eligible entity other than the state. Section
5.08(b)(2), which governs i,ispositionof proceeds "except as provided
by subsection (f)" governs disposition of proceeds from the sale of
property forfeited to the state. Therefore, section 5.08(b)(2) and
section 5.08(f) are not in conflict.
p. 2438
Honorable Benjamin Euresti, Jr. - Page 4 (JM-550)
Also, your question seems to imply that if section 5.08(f)
controls the disposition elf proceeds, persons who hold security
interests in forfeited proL'ertylose their protection under the act.
In other words, your question implies that when property is sold that
has been forfeited to an eligible entity other than the state,
proceeds do not first go to satisfy the claims of secured parties. We
do not think that is a corr'xt reading of the act.
Section 5.08(f) itself wakes no reference to the rights of
secured parties. Therefore, one might conclude upon reading section
5.08(f) in isolation that a secured party is not protected if seized
property is forfeited to any entity other than the state. The act as
a whole, however, makes clear that the rights of secured parties are
to be protected in all forfeiture proceedings.
Section 5.03(c) of the act states:
A forfeiture cf property encumbered by a bona
fide security interest is subject to the interest
of the secured party if he neither had knowledge
of nor consented. to the act which caused the
property to be su,:jectto forfeiture.
See also V.T.C.S. art. 4476-15, 515.05(b)(2). (3), (e), (g), (h);
595.07(c), cd). We do not think that section 5.08(f), which was added
to the act in 1981, was intended as an exception to section 5.03(c).
Section 5.03(c) and other provisions regarding the protection of
secured parties have been :tuarticle 4476-15 since it was enacted in
1973. Acts 1973, 63rd Leg., ch. 429, at 1132. In the 1973 version of
article 4476-15 property could be forfeited only to the Department of
Public Safety. Id. at 1161.. DPS could keep and use the property if
it was free of acbona fide security interest. Id. at 1162. If the
property was encumbered by a security interest, ithad to be sold, and
the proceeds were to be diritributedfirst to secured parties and then
to the comptroller to be deposited in the state general revenue fund.
Id.
In 1977 the legislature amended section 5.07 of the act to allow
a court to order that seized property be forfeited either to the state
or to "any agency or urdt of government employing the seizing
officer." Acts 1977, 65th L,eg.,ch. 492, at 1269. In 1979 the legis-
lature changed that language somewhat to allow forfeiture to the state
or to "an agency of the state or to a political subdivision of the
state authorized by law to employ peace officers." Acts 1979, 66th
Leg., ch. 37, at 60. When the legislature made those amendments to
section 5.07, it also amended section 5.08(c) to permit any agency or
office to whom the property was forfeited to keep and use the property
if it was free of any bone fide security interest. Acts 1977, 65th
p. 2439
.
Honorable Benjamin Euresti, Jr. - Page 5 (JM-550)
Leg., ch. 492, at 1270; Acts 1979, 66th Leg., ch. 37, at 61. It was
not until 1981, however, that the legislature added section 5.08(f),
allowing an entity other than the state to receive proceeds from the
sale of forfeited property. Acts 1981, 67th Leg., ch. 268, at 705.
We think that section 5.08(f) was intended to fit into the
existing structure of the act and that it must be read in conjunction
with section 5.08(c) and section 5.08(b). Section 5.08(f) governs how
entities other than the state may use forfeited property and proceeds
from the sale of forfeited property. It does not provide for when
property may be retained, ,&en it must be sold, or how it is to be
sold. Therefore, section 5.08(f) must be read together with section
5.08(c), which sets out when forfeited property may be retained and
when it must be sold, and section 5.08(b), which sets out how
forfeited property is to be sold. Section 5.08(c) states that a
seizing agency or office mar keep and use property only if it is free
of any bona fide security interest. If the property is not free of
any bona fide security interest, it must be sold in order to satisfy
the claims of secured 'parties. Section 5.08(b), which applies to all
property that has been forfeited other than property described in
section 5.08(a), governs tt,e sale except insofar as the distribution
of the balance of the proceeds is concerned. Cf. 95.08(b)(2);
55.08(f). In other words, section 5.08(b)(l), whichdirects proceeds
to go first to secured parties , must be followed before the provision
in section 5.08(f) concerning distribution of proceeds comes into
Play. Thus, the provision :insection 5.08(f) concerning proceeds from
the sale of forfeited property is an alternative to section 5.08(b)(2)
only, not to section 5.08(b:Iin its entirety.
A 1985 amendment to section 5.08(b)(2) supports our construction
of section 5.08. In 1985 xhe legislature amended section 5.08(b)(2)
to add the language "except as provided by subsection (f) of this
section." Acts 1985, 69th 'Leg.,ch. 227, at, 1867. We think that the
addition of .that language to section 5.08(b)(2) makes clear that
language in subsection (f) regarding disposition of proceeds from the
sale of forfeited properq is an alternative to subsection (b)(2)
only, not to subsection (b) in its entirety. When subsection (f) is
read as providing an alterxntive to subsection (b)(2) alone and not
subsection (b) in its entirety, the general principle set out in
section 5.03(c) -- that tie act is intended to protect bona fide
security interest -- is lef.:intact.
SUMMARY
Article 4476-15, section 5.08(b)(2), controls
the disposition of proceeds from a sale of for-
feited property :Lf a court has ordered the
property forfeite3 to the state. Section 5.08(f)
controls the disposition if a court orders the
p. 2440
.
Honorable Benjamin Euresti, .Jr.- Page 6 (JM-550)
property forfeited to an agency of the state or a
political subdivi,sionof the state authorized by
law to employ peace officers.
Article 4476-U. section 5.08(f), does not
permit an agency or office to receive proceeds
from the sale of forfeited property until the
claims of bona fide secured parties have been
satisfied.
J
Very truly yours
.
.M
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney Gexral
MARY KELLER
Executive Assistant Attorne:!General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Sarah Woelk
Assistant Attorney General
p. 2441