Case Information
*1 The Attorney’ General of Texas !;eptember 23, 1986 JIM MATTOX
Attorney General Honorable Benjamin Euresti, Jr. Opinion No. JM-550
Supreme Court Buildlng P. 0. BOX 12546 Cameron County Attorney Austin, TX. 76711-2546 974 E. Harrison Street Rs: Disposition of funds received 512/475-2501 Brownsville, Texas '78520 from the sale of vehicles forfeited Telex 9101674-1367 under section 5.08 of article Telecopier 512/475-0266 4476-15, V.T.C.S. [714] Jackson, Suite 700 Dallas, TX. 75202.4506 214,742.6944
Dear Mr. Euresti: You ask our opinion on the following question: [4624] Alberta Ave., Suite 160 915/533-3464 El Paso, TX. 79905.2793 money remived from the sale of [property that has] beeu forfeited in accordance with article the May Cameron County Sheriff deposit the
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 6061747-5236 Lubbock, TX. 79401.3479 State Comptroller? (in the form of a security interest or lien) the 'value' cf such property interest, to the Texas The Controlled Substances Act, article 4476-15, V.T.C.S.,
4309 N. Tenth, Suite B provfdes for the :iorfeiture of various kinds of property used in McAllen, TX. 76501-1665 5124662.4547 connection with viol.ations of 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 400 512,2254191 San Antonio, TX. 76205.2797 property. Section 5.08 provides, in pertinent part: concerning the disposition of the proceeds from the sale of forfeited
Sec. 5.08. (a) Regarding all controlled sub- stances, raw materials, and drug paraphernalia An Equal Opportunity/ which have been forfeited, the district court Affirmative Action Employer shall by 11:s order direct a law enforcement agency
to:
(1) r#ztain the property for its official purposes;
(2) d#z:Liver the property to a government agency or department for official purposes; P
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:>e property 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'ial undertakinn 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:a officers 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,feited vehicle 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 *3 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;i in 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!ly for the investigation of any alleged violatior~ of the criminal laws of this state. . . . (EmpIhasis added).
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'eds into 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,isposition of 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.
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'erty lose 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,:ject to 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 :tu article 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 diritributed first 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 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 :in section 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:I in 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 *6 .
Honorable Benjamin Euresti, .Jr. - Page 6 (JM-550)
property forfeited to an agency of the state or a political subdivi,sion of 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.
Very truly yours J .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