innocent owner defense in forfeiture cases (texas)

“Innocent Owner” Defense in Forfeiture Cases 1Charles B. “Brad” Frye (713) 236-8700

CHARLES B. “BRAD” FRYEMEMORANDUM ATTORNEY AND COUNSELOR AT LAW

LINDEMAN, ALVARADO & FRYE808 Travis, Suite 1101

Houston, Texas 77002(713) 236-8700

Fax: (713) 229- 8031

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This is a very general memorandum on the “innocent owner” defense in forfeiture cases. It is not intended to be an exhaustive discussion of the defense (or of the permutations of therules of civil procedure which apply in these situations) but should get you started on evaluatingthe availability of the defense, the factors to consider, and how to present it to the court.

Chapter 59 of the Texas Code of Criminal Procedure provides a safe harbor for "innocentowners." Pursuant to article 59.02(c), "[a]n owner or interest holder's interest in property may notbe forfeited . . . if the owner or interest holder: (1) acquired and perfected the interest before orduring the act or omission giving rise to forfeiture or, if the property is real property, he acquiredan ownership interest, security interest, or lien interest before a lis pendens notice was filed . . .;and (2) did not know or should not reasonably have known of the act or omission giving rise tothe forfeiture or that it was likely to occur at or before the time of acquiring and perfecting theinterest or, if the property is real property, at or before the time of acquiring the ownershipinterest, security interest, or lien interest." The statutory safe harbor is an affirmative defense.

You must plead “innocent owner” as an affirmative defense.

This is the applicable text of the statute:

Art. 59.02 CODE CRIM. P. Forfeiture of contraband

(c) An owner or interest holder's interest in property may not be forfeited under thischapter if the owner or interest holder proves by a preponderance of the evidence that theowner or interest holder acquired and perfected the interest:

(2) after the act or omission giving rise to the forfeiture, but before the seizure ofthe property, and only if the owner or interest holder: (A) was, at the time that theinterest in the property was acquired, an owner or interest holder for value; and(B) was without reasonable cause to believe that the property was contraband anddid not purposefully avoid learning that the property was contraband.

You should also consider filing a “motion to return” property or a motion to replevy, pre-trial, especially in the case of vehicles. Read that procedure in Art. 59 and be prepared to post


the bond required.

Now, the key to the “innocent owner” defense is not whether the property is contraband –one may concede that it is – but that it is excepted from the statute because of the standing ofanother person besides the criminal actor as an owner of the property.

Consider this case in which the “innocent owner” defense was applied. From STATE v.SOUTHWIND AUTO SALES, 951 S.W.2d 849 (Tex.App.-San Antonio 1997).

In this case, Southwind moved for summary judgment on its "innocent owner" defense.To prevail on this affirmative defense, Southwind needed to show: (1) that it acquired andperfected the interest before or during the act or omission giving rise to the forfeiture; and(2) that it did not know or should not reasonably have known of the act or omissiongiving rise to the forfeiture or that it was likely to occur at or before the time of acquiringand perfecting the interest. TEX. CODE CRIM. PROC. ANN. art. 59.02 (c) (VernonSupp. 1997).

The Texas Code of Criminal Procedure provides that if an owner or interest holderestablishes these facts, its interest in property may not be forfeited. Id. An "Owner" isdefined as "a person who claims an equitable or legal ownership interest in the property."Id. art. 59.01(6). The code defines an "Interest holder" as "the bona fide holder of aperfected lien or a perfected security interest in property." Id. art. 59.01(4). Southwindclaims that it established the first prong of the statutory test by demonstrating that theinterest it acquired and perfected was that of an "owner" having legal title to the 1985Cadillac.

Southwind contends that, as such an owner, it was not required to establish that it had aperfected security interest in the property. We agree. Southwind's summary judgmentevidence established that title was last assigned to Southwind, and that Southwind enteredinto an agreement with Regina McGowan for sale of the vehicle to her, but title to theCadillac was never transferred to McGowan because she failed to comply with the termsof the contract.

The summary judgment evidence included the following: (1) a copy of a title certificate tothe vehicle that was issued to Homer Crawford initially, but that was then assigned byCrawford to Gunn Olds, and by Gunn Olds to Southwind, with the assignments noted onthe certificate of title; (2) a copy of the retail installment contract between Southwind andRegina McGowan, which required proof of liability insurance and physical damagecoverage with specified deductibles; (3) a copy of the reassignment of title to McGowanand Application for Texas Certificate of Title for McGowan, which were never deliveredor submitted; and (4) the affidavit of Felix Pasedez, proprietor of Southwind, stating thatMcGowan never provided proof of the required liability and physical-damage coverage.


The affidavit of Pasedez also established that a licensed dealer may establish completelegal ownership of a vehicle held for resale by showing that title was assigned to it, eventhough a new title has not been issued registered in the dealer's name. Southwind arguedthat this evidence conclusively proved that it acquired title from Gunn by assignment andthat neither legal nor equitable title was conveyed to McGowan thereafter because thesale to her was invalid due to her failure to establish proof of financial responsibility. It istrue that a dealer perfects legal title to a vehicle if he holds an executed assignment oftitle, even though the dealer is not shown as the "registered" owner on a certificate of title.See First State Bank of Corpus Christi v. Austin, 315 S.W.2d 390, 392 (Tex.Civ.App. —San Antonio 1958, writ ref'd) (noting that transfer of title upon prescribed form by dealerholding assignment of title would convey legal title to vehicle).

The Texas Certificate of Title Act, as it existed at the time relevant to this forfeitureaction, specifically exempted dealers from the requirement that a certificate of title beissued in the name of the owner prior to a sale. TEX. REV. CIV. STAT. ANN. art. 6687-1 §27 (Vernon 1977) (amended 1995) (current version at TEX. TRANSP. CODE ANN.§501.022 (Vernon Pamphlet 1997)). Accordingly, Southwind, by proving that it receivedan assignment of title to the vehicle from Gunn and that the subsequent sale to McGowanwas never finalized, established conclusively that it was the legal owner of the vehicle atthe time of the forfeiture.

In summary, the requirements of the “Innocent Owner” defense as set out in MITCHELLv. STATE, 819 S.W.2d 659 (Tex.App.-El Paso 1991):

In response to the State's forfeiture suit, Appellant Carrol Mitchell filed a verifiedanswer asserting that he was the owner of the Cadillac, the Rolex watch and the$1,683.00 in currency. Appellant also pled that he acquired his interest in theproperty prior to the commission of the offense; and that he did not know, norconsent to the use of the property in the commission of a felony. By pleadingsuch facts, Appellant raised a defense known as the innocent owner defenseallowed by Tex. Code Crim.Pro.Ann. art. 59.02(c)(2). The burden of proof for thisdefense is placed on the owner of the property. If the owner sustains this burden,the property is not forfeitable. McDorman v. State, 757 S.W.2d 905 (Tex.App. —Eastland 1988, writ denied); Gaston v. State, 641 S.W.2d 261 (Tex.App. —Houston [14th Dist] 1982, no writ).

“Proportionality” is another defense which must be plead in your answer.

If it has been established that the property in question is contraband, the court must thenapply a "proportionality" test as set forth in United States v. Bajakajian,524 U.S. 321, 118 S.Ct.2028, 141 L.Ed.2d 314 (1998). Bajakajian pertained to a forfeiture of currency under a FederalStatute making it a crime to carry more than $10,000 in currency out of the country withoutreporting it. Respondent pled guilty to the criminal violation of failure to report. The government


also sought forfeiture of the entire amount of cash carried by Respondent, $357,144. The districtcourt ruled that under the statute the entire sum was subject to forfeiture, but declined to entersuch a judgment, holding that such a result would violate the Excessive Fines Clause. The NinthCircuit affirmed. Id. at 326-27.

The Supreme Court held: (1) forfeitures, i.e., payments in kind, are "fines" subject to thelimitations of the Eighth Amendment if they constitute punishment for an offense, Id. at 328; (2)the forfeiture of currency under the subject statute is a form of punishment; it is an additionalsanction available when imposing a sentence for violation of the criminal statute, imposed at theculmination of criminal proceedings and cannot be imposed on an "innocent owner," Id.; and (3)modern statutory forfeiture provisions are "fines" for Eighth Amendment purposes, if theyconstitute, even in part, punishment, Id. at 332-34. Therefore, the forfeiture of currency wassubject to the Excessive Fines Clause. Id. at 334.

In determining whether the fine is excessive, the district court first, and the court ofappeals de novo on appeal, must consider proportionality, i.e., the amount of the forfeiture mustbear some relationship to the gravity of the offense that it is designed to punish. Id. at 334, 335-36. In determining whether the forfeiture of the entire sum was "excessive" or "grosslydisproportional," the Court examined the nature of the offense (essentially, a reporting violation),the relationship of the offense to other illegal activities (none), the class of offenders addressedby the forfeiture (Respondents did not fit the class), and the harm caused (little or none). TheCourt held that the forfeiture of the entire sum of money, $357,144, bore no correlation to anydamages sustained by society or to the cost of enforcing the law. Id. at 340; 118 S.Ct. 2028; seeAustin, 509 U.S. at 621, 113 S.Ct. 2801.

Often, because of the expense of litigation versus the value of the seized property is amajor consideration, one should consider trying to resolve the case through summary judgment,rather than trial. Keep in mind that the “innocent owner” defense is an affirmative defense, andthey are treated differently under the rules applicable to summary judgment.

A defending party may move for summary judgment based on an affirmative defense.Montgomery v. Kennedy, 669 S.W.2d 309, 310-11 (Tex. 1984); Hidalgo v. Surety Savs. & LoanAss'n, 462 S.W.2d 540, 545 (Tex. 1971). A defendant moving for summary judgment upon anaffirmative defense must prove conclusively each element of the defense as a matter of law.Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972). Once each element of an affirmative defenseis conclusively established, the movant has met his burden and the burden of raising a disputedissue of material fact shifts to the non-movant. Palmer v. Enserch Corp., 728 S.W.2d 431, 435(Tex.App. — Austin 1987, writ ref'd n.r.e.).

In summary, the “innocent owner” defense is very fact-specific and it is important togather those facts in support of the defense at the outset to ensure that the client has a reasonablechance to prevail in litigation.

innocent owner defense in forfeiture cases (texas)

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