Hoping that I can get some guidance on some issues that may come up at a hearing.
Here are the general facts. Law enforcement seized vehicle last April. The vehicle was financed by local bank. Kelly Blue book value is roughly 17,000. Bank was owed 11,700 as of date of seizure. Claimant and Bank were both served; Claimant never answered but Bank did.
Question 1: Can court return vehicle to the bank?
Tx. Code Crim. Proc 59.05(e) states, "If the court finds that all or any part of the property is subject to forfeiture, the judge shall forfeit the property to the state" . . . "except that if the court finds that the nonforfeitable interest of an interest holder in the property is valued in an amount greater than or substantially equal to the present value of the property, the court shall order the property released to the interest holder." What is substantially equal mean? In this case the difference is about 5k (assuming vehicle sells for anything close to the blue book value).
Question 2: Can the court award post-seizure interest and fees to lienholder?
Tx.Code.Crim.Proc 59.06(f) states "A final judgment of forfeiture under this chapter perfects the title of the state to the property as of the date that the contraband was seized or the date the forfeiture action was filed, whichever occurred first . . ."
However, bank in this case is claiming that as an innocent party, its interest should be protected. Bank is seeking to recover ~13700 instead of the 11700 because of post-seizure interest and fees. Is there any other sections that addresses this question?
Question 3: Does court have authority to award attorney fees to the bank?
On this one, I am drawing a blank. Where would I look for more guidance on this issue?
Thanks for any help anyone can give me.
Can the court return the vehicle to the bank?
The recognized book value is 45% greater than the loan balance (as of the date of seizure). If 45% is not "substantially greater," then what is? That is the plain meaning of the statute. Haden v. David J. Sacks, P.C., 332 S.W.3d 523, 530 (Tex. App.—Houston [1st Dist.] 2009) ("If the language of the statute is clear and unambiguous, we seek the legislature's intent from the plain meaning of the words of the statute.") Thus, the loan value is "substantially less" than the present value of the property, and the vehicle should be forfeited. art. 59.05(e)) The only caveat here is if takes so long to get to trial that the "present value" of the vehicle declines to the point it is "substantially equal to the present value." To avoid this, the State could ask the court pursuant to 59.02(e) to order the sale of the vehicle, with the proceeds to be paid into the registry of the court until the case is resolved.
Can the court award post-seizure interest and fees to the lienholder?
I am not aware of a case directly on point, but the State has an argument here.
Fees, accrued interest, and other penalties for failing to make the vehicle loan payments are owed only because of the loan contract, and specifically because of a breach of that contract. They can be collected only through a breach of contract action against the party who breached. The State is not a party to the contract and did not breach the contract.
The State does not subrogate for the borrower. The State is not a party to the contract between the lender and the borrower. It was not the State who failed to make payments on the loan and thereby accrued penalties and interest. Nothing prevented the borrower from making a replevy bond and continuing to make payments on the vehicle loan in anticipation of recovering the vehicle at the conclusion of the forfeiture case. For that matter, nothing prevented the borrower from making payments on the loan even while the State had custody of the vehicle, again anticipating recovering the vehicle at the conclusion of the forfeiture case. (This might be rare, but it does happen.)
Chapter 59 protects "the interest of an interest holder," and "Interest holder" is a defined term: "Interest holder means the bona fide holder of a perfected lien or a perfected security interest in property." art. 59.01(4). Thus, "interest" is implicitly defined to mean a "perfected lien" or a "perfected security interest." The amount lent (the principal) should be the amount protected. Notably, the definition does not include any reference to fees, penalties, or accrued interest. If the legislature wanted to protect such items, it could have chosen to do so when it defined the statute's terms, but it didn't. Fees, penalties, and interest are ancillary to the amount lent and should only be owed by the party to the contract who breaches the contract. To interpret the statute as the bank wants would be to make the State a perfect subrogee of the borrower, and the statute simply does not say that. If the bank wants to collect fees in addition to the principal balance, its legal remedy is to file a B/K action against the borrower.
Any other statute that appears to make recovery of fees and penalties part of the security interest are arguably excluded by the doctrine of in pari materia, though the bank might argue that the court should rely on the definition of the other statute to inform its construction of a lien under Chapter 59.
Also, making the State responsible for fees and other penalties would make prosecution of such cases more difficult by making them cost-prohibitive, thereby undermining the purpose of the statute.
“In Texas, attorney's fees may not be recovered from an opposing party unless such recovery is provided for by statute or by contract between the parties. See Dallas Central Appraisal Dist. v. Seven Investment Co., 835 S.W.2d 75, 77 (Tex.1992); New Amsterdam Cas. Co. v. Texas Indus., 414 S.W.2d 914, 915 (Tex.1967). The authorization of attorney's fees in civil cases may not be inferred; rather it “must be provided for by the express terms of the statute in question.” First City Bank—Farmers Branch v. Guex, 677 S.W.2d 25, 30 (Tex.1984).”
Travelers Indem. Co. of Connecticut v. Mayfield, 923 S.W.2d 590, 593 (Tex. 1996)
Chapter 59 does not provide for attorney's fees. Any respondent or other party claiming attorney's fees has the burden to show the legal basis authorizing a court to award the fees: "In Texas, attorney's fees are not recoverable unless authorized by statute or contract. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310–11 (Tex.2006). As a general rule, the party seeking to recover attorney's fees carries the burden of proof."
In re B.N.L.-B., 375 S.W.3d 557, 566 (Tex. App.—Dallas 2012)
Thank you, thank you, thank you. I am newly assigned to asset forfeitures and very much appreciate your guidance.
I agree with Brent. The other argument I would press on the interest, fees and attorney's fee issues is that they are monetary claims against the State barred by sovereign immunity. It is true that the State may waive immunity under the Supreme Court's opinion in Reata Constr. Co. v. City of Dallas by asserting an affirmative claim for relief. However, the waiver extends only to opposing claims that are germane to and defensive against the State's claim for affirmative relief. While the claim to the vehicle might fall within this rubric, the claim for additional monetary relief would not.
At least, that's what I would argue.
I would anticipate that the bank will argue for post-seizure interest and fees under 59.02(d); "The interest holder's rights remain in effect during the pendency of proceedings . . . "
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