                                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




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