Innocent Lienholder's Rights in Forfeiture
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Scribd Government DocsInnocent Lienholder's Rights in Forfeiture
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Scribd Government Docs920 F.
2d 798
UNITED STATES of America, Plaintiff-Appellee,
v.
SIX PARCELS OF REAL PROPERTY SITUATED IN
BLOUNT COUNTY,
TENNESSEE, with all Buildings, Improvements and
Appurtenances Thereto more Particularly
Described Hereinafter, Defendants,
First Tennessee Bank National Association
Defendant-Intervenor, Appellant.
No. 89-7889.
United States Court of Appeals,
Eleventh Circuit.
Jan. 7, 1991.
Alex L. Holtsford, Jr., Nix & Holtsford, Montgomery, Ala., Courtney N.
Pearre, Heiskell, Donelson, Bearman, Adams, Williams & Kirsch,
Knoxville, Tenn., for defendant-intervenor, appellant.
John T. Harmon, Asst. U.S. Atty., Montgomery, Ala., for plaintiffappellee.
Martha S.L. Black, Kizer and Black, Maryville, Tenn., for Six Parcels of
Real Property.
Appeal from the United States District Court for the Middle District of
Alabama.
Before ANDERSON and EDMONDSON, Circuit Judges and MORGAN,
Senior Circuit Judge.
MORGAN, Senior Circuit Judge:
INTRODUCTION
This civil forfeiture action was brought against the defendant property on
August 29, 1988, pursuant to Sec. 511(a)(6) of the Comprehensive Drug Abuse
Prevention and Control Act of 1970, 21 U.S.C. Sec. 881(a)(6). IntervenorAppellant First Tennessee Bank National Association (hereinafter "the Bank")
moved to intervene based upon its interest in three parcels of the defendant
property.
The Bank sought to recover amounts owing on promissory notes secured by a
deed of trust on the three parcels. The district court found the Bank to be an
"innocent owner" under Sec. 881(a)(6). The court held that the Bank should
recover the unpaid principal balance on the notes, plus interest. The notes on
which the Bank recovers, however, provide additionally for payment of
attorneys' fees and other costs. The district court held that the Bank could not
recover attorneys' fees and costs, despite this provision in the notes. This part of
the judgment below we reverse.
DISCUSSION
3
The Bank's status as an innocent lienholder is not disputed by the government.
The only issue before this Court is whether the "interest" of an innocent
lienholder in real property that is protected by Sec. 881(a)(6) extends to
attorneys' fees and costs of collection for which the loan documents provide.
The government argues it does not. It advances several theories to this Court to
suggest how we should define the lienholder's interest. The government states
correctly that the forfeiture statute does not provide attorneys' fees for innocent
owners. It notes that Congress was more concerned about seeing that the
government satisfied its costs of forfeiture from the proceeds of forfeited
property than about providing for the innocent owner's cost of defense. The
government argues that the lienholder's interest should be determined by
reference to an administrative remission and mitigation practice followed prior
to amendments which added Sec. 811(a)(6) and provided for the innocent
owner exception here at issue.
It is true that this issue has not been decided before by this Court. The district
courts, lacking guidance in construing Sec. 881(a)(6), have resolved this issue
in varying ways. Compare United States v. Real Property Titled in Name of
Shasin, Ltd., 680 F.Supp. 332, 337 (D.Haw.1987) (holding lienholder's
protected interest defined by its loan documents) and United States v. All that
Tract & Parcel of Land, 602 F.Supp. 307, 313-14 (N.D.Ga.1985) (same) with
United States v. Certain Real Property Known as Gulfstream West, 710 F.Supp.
792, 794-96 (S.D.Fla.1989) (following administrative practice and permitting
recovery of only principal balance and pre-seizure interest) and United States v.
One Piece of Real Estate, 571 F.Supp. 723, 725-26 (W.D.Tex.1983) (same).
6
We find relevant only one court of appeals case, In re Metmor Financial, Inc.,
819 F.2d 446 (4th Cir.1987). In Metmor, on facts similar to those of the instant
case, the loan documents provided lien status for interest payments required
until the principal balance was fully paid. The Fourth Circuit held that to deny
post-seizure interest would be a deprivation of the innocent lienholder's rights
in forfeited property. Id. at 449-51.
We believe the Fourth Circuit was correct in reaching this conclusion. The
legislative history of the 1978 amendments, thoroughly reviewed in Metmor,
id., strongly supports this result. Cf. United States v. One Single Family
Residence, 894 F.2d 1511 (11th Cir.1990). Relying on Metmor and legislative
history, this Court held that full protection of an innocent owner's interest was
mandated by Congress and thus the property at issue was completely
nonforfeitable because it had been held by the innocent owner spouse as a
tenant by the entirety. Id. at 1513-20.
Therefore, in this case as well, we believe the bank is entitled to full protection
of its interest. Thus, we hold that to deny the Bank its costs and attorneys' fees,
though provided in its loan documents, would be a deprivation of its rights in
the forfeited property. We believe such deprivation is not permitted by Sec.
881(a)(6) and was not intended to be allowed by Congress.
CONCLUSION
9
To the extent that the court below held that the Bank could not recover its costs
and attorneys' fees, we REVERSE and REMAND for further proceedings.
