The "Innocent Owner" Defense in Texas Asset Forfeiture Cases
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 the rules of civil procedure which apply in these situations) but should get you started on evaluating the availability of the defense, the factors to consider, and how it may be presented to the Court. Chapter 59 of the Texas Code of Criminal Procedure provides a safe harbor for "innocent owners." Pursuant to article 59.02(c), "[a]n owner or interest holder's interest in property may not be forfeited . . . if the owner or interest holder: (1) acquired and perfected the interest before or during the act or omission giving rise to forfeiture or, if the property is real property, he acquired an 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 to the forfeiture or that it was likely to occur at or before the time of acquiring and perfecting the interest or, if the property is real property, at or before the time of acquiring the ownership interest, security interest, or lien interest." The statutory safe harbor is an affirmative defense. You must plead "innocent owner" as an affirmative defense, meaning that you will have to take some responsibility for proving your status. You should also consider discussing with your lawyer filing a "motion to return" property or a motion to replevy, pre-trial, especially in the case of vehicles. Part of this part of the process is that you must be prepared to post the bond required in order to have possession of the property during the time when the forfeiture lawsuit is pending. 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 of another 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 and perfected 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 omission giving rise to the forfeiture or that it was likely to occur at or before the time of acquiring and perfecting the interest. TEX. CODE CRIM. PROC. ANN. art. 59.02 (c) (Vernon Supp. 1997). The Texas Code of Criminal Procedure provides that if an owner or interest holder establishes these facts, its interest in property may not be forfeited. Id. An "Owner" is defined 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 a perfected lien or a perfected security interest in property." Id. art. 59.01(4). Southwind claims that it established the first prong of the statutory test by demonstrating that the interest it acquired and perfected was that of an "owner" having legal title to the 1985 Cadillac. Southwind contends that, as such an owner, it was not required to establish that it had a perfected security interest in the property. We agree. Southwind's summary judgment evidence established that title was last assigned to Southwind, and that Southwind entered into an agreement with Regina McGowan for sale of the vehicle to her, but title to the Cadillac was never transferred to McGowan because she failed to comply with the terms of the contract. The summary judgment evidence included the following: (1) a copy of a title certificate to the vehicle that was issued to Homer Crawford initially, but that was then assigned by Crawford to Gunn Olds, and by Gunn Olds to Southwind, with the assignments noted on the certificate of title; (2) a copy of the retail installment contract between Southwind and Regina McGowan, which required proof of liability insurance and physical damage coverage with specified deductibles; (3) a copy of the reassignment of title to McGowan and Application for Texas Certificate of Title for McGowan, which were never delivered or submitted; and (4) the affidavit of Felix Pasedez, proprietor of Southwind, stating that McGowan never provided proof of the required liability and physical-damage coverage. The affidavit of Pasedez also established that a licensed dealer may establish complete legal ownership of a vehicle held for resale by showing that title was assigned to it, even though a new title has not been issued registered in the dealer's name. Southwind argued that this evidence conclusively proved that it acquired title from Gunn by assignment and that neither legal nor equitable title was conveyed to McGowan thereafter because the sale to her was invalid due to her failure to establish proof of financial responsibility. It is true that a dealer perfects legal title to a vehicle if he holds an executed assignment of title, 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 dealer holding assignment of title would convey legal title to vehicle). The Texas Certificate of Title Act, as it existed at the time relevant to this forfeiture action, specifically exempted dealers from the requirement that a certificate of title be issued 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 received an assignment of title to the vehicle from Gunn and that the subsequent sale to McGowan was never finalized, established conclusively that it was the legal owner of the vehicle at the time of the forfeiture. In summary, the requirements of the "Innocent Owner" defense as set out in MITCHELL v. STATE, 819 S.W.2d 659 (Tex.App.-El Paso 1991): In response to the State's forfeiture suit, Appellant Carrol Mitchell filed a verified answer 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 the property prior to the commission of the offense; and that he did not know, nor consent to the use of the property in the commission of a felony. By pleading such facts, Appellant raised a defense known as the innocent owner defense allowed by Tex. Code Crim.Pro.Ann. art. 59.02(c)(2). The burden of proof for this defense 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). As you can see from these Texas cases, you must prove you are an "innocent owner" if you want to preserve your rights in the property the State is seeking to forfeit. In summary, the "innocent owner" defense is very fact-specific and it is important to gather those facts in support of the defense at the outset to ensure that the client has a reasonable chance to prevail in litigation. This situation demonstrates the need to retain an attorney who has a broad background in the law, as issues involving criminal law, community property, vehicle titles, and other commercial and civil concepts may be central to resolving your forfeiture case.