Forfeiture Actions with a Lienholder
What happens if the property seized for forfeiture by law enforcement officers has a lien against it?
In almost all cases, the bona fide lienholder or judgment creditor is an “innocent owner” that is entitled to get the property back if they file a claim in a timely manner. Strict deadlines apply so the lienholder must act quickly to file a claim and contest the forfeiture action.
The seizing agency might offer to enter into a lienholder agreement that serves to dissuade the lienholder from returning the property to the owner, although the lienholder is not required to sign such an agreement.
By hiring an experienced attorney, the attorney can contact the law enforcement agency to arraign for the release of the property to the bona fide lienholder or judgment creditor.
It is rarely in the lienholder’s best interest to assert their right to be paid by the government once the property is sold.
As a practical matter, it is typically cost-prohibitive and impractical for the law enforcement agency at the state or federal level to pursue a forfeiture claim if the lienholder or judgment creditor assets their rights in a timely manner and comes forward with the proper documentation.
For this reason, the lienholder or judgment creditor might refuse to relinquish its claim for anything less than the full value of the remaining payments, or net equity in the property.
Attorneys for Lienholders in Forfeiture Actions
If you are a lienholder for property seized in a civil asset forfeiture action at the state or federal level, then contact an experienced civil asset forfeiture attorney at Sammis Law Firm.
We can help you file a claim for the property so that it can be released quickly. We can help you negotiate the return of the property by demanding nothing less than the full value of the remaining payments or net equity.
The attorneys at Sammis Law Firm represent innocent owners, lienholders, and judgment creditors in forfeiture actions throughout the State of Florida in both federal and state courts. We are often contacted by other attorneys to co-counsel with them on these cases throughout the United States.
For more information, call 813-250-0500 or send an email to info@sammislawfirm.com.
Lienholder Claims in Federal Forfeiture Actions
The Rules for Civil Forfeiture Proceedings provide that “[a]n innocent owner’s interest in property shall not be forfeited under any civil forfeiture statute.” 18 U.S.C. § 983(d)(1). In most cases, a lienholder easily qualifies as an innocent owner.
Under Federal law, 39 CFR 233.9(b)(10) defines the term “lienholder” to mean:
“a creditor whose claim or debt is secured by a specific right to obtain satisfaction against the particular property subject to forfeiture. A lien creditor qualifies as a lienholder if the lien:
(i) Was established by operation of law or contract;
(ii) Was created as a result of an exchange of money, goods, or services; and
(iii) Is perfected against the specific property forfeited for which remission or mitigation is sought (e.g., a real estate mortgage; a mechanic’s lien).”
Under Federal law, 39 CFR 233.9(b)(10) defines the term “net equity” to mean:
“….the amount of a lienholder’s monetary interest in the property subject to forfeiture.
Net equity shall be computed by determining the amount of unpaid principal and unpaid interest at the time of seizure, and by adding to that sum unpaid interest calculated from the date of seizure through the last full month prior to the date of the decision on the petition.
Where a rate of interest is set forth in a security agreement, the rate of interest to be used in this computation will be the annual percentage rate so specified in the security agreement that is the basis of the lienholder’s interest.
In this computation, however, there shall be no allowances for attorneys’ fees, accelerated or enhanced interest charges, amounts set by contract as damages, unearned extended warranty fees, insurance, service contract charges incurred after the date of seizure, allowances for dealer’s reserve, or any other similar charges.”
Forfeiture Actions Against Judgment Creditors
Special rules apply to a judgment creditor. In fact, 39 CFR 233.9(f)(6) provides that a judgment creditor will be recognized as a lienholder if:
- The judgment was duly recorded before the seizure of the property for forfeiture;
- Under applicable state or other local law, the judgment constitutes a valid lien on the property that attached to it before the seizure of the property for forfeiture; and
- The petitioner had no knowledge of the commission of any act or acts giving rise to the forfeiture at the time the judgment became a lien on the forfeited property.
Furthermore, 39 CFR 233.9(f)(6)(ii) provides:
A judgment creditor will not be recognized as a lienholder if the property in question is not property of which the judgment debtor is entitled to claim ownership under applicable state or other local law (e.g., stolen property). A judgment creditor is entitled under this part to no more than the amount of the judgment, exclusive of any interest, costs, or other fees including attorney’s fees associated with the action that led to the judgment or its collection.
Finally, 39 CFR 233.9(f)(6)(iii) provides:
A judgment creditor’s lien must be registered in the district where the property is located if the judgment was obtained outside the district.
Lienholder Claims in Florida Forfeiture Actions
In state court, the lienholder is protected from a civil asset forfeiture case pursuant to Section 932.703(7)(b) which provides:
A bona fide lienholder’s interest that has been perfected in the manner prescribed by law prior to the seizure may not be forfeited under the Florida Contraband Forfeiture Act unless the seizing agency establishes by a preponderance of the evidence that the lienholder had actual knowledge, at the time the lien was made, that the property was being employed or was likely to be employed in criminal activity.
If a lienholder’s interest is not subject to forfeiture under the requirements of this section, such interest shall be preserved by the court by ordering the lienholder’s interest to be paid as provided in s. 932.7055.
Pursuant to Section 932.7055(3) regarding the disposition of liens and forfeited property, if the forfeited property is subject to a lien preserved by the court as provided in s. 932.703(7)(b), the agency shall:
- Sell the property with the proceeds being used towards satisfaction of any liens; or
- Have the lien satisfied prior to taking any action authorized by subsection (1).
After the sale, Section 932.7055(4) requires the proceeds from the sale of forfeited property shall be disbursed in the following priority:
- Payment of the balance due on any lien preserved by the court in the forfeiture proceedings.
- Payment of the cost incurred by the seizing agency in connection with the storage, maintenance, security, and forfeiture of such property.
- Payment of court costs incurred in the forfeiture proceeding.
Sample Lienhold Forfeiture Agreement in State Actions
Law enforcement agencies in Florida often request that the lienholder enters into an agreement before releasing the property, although the lienholder is not required to do so.
The purpose of the agreement is to put the lienholder on notice that the seized asset was used in violation of the Florida Contraband Forfeiture Act. That way, if the property is returned to the owner and seized a second time, the law enforcement agency might be able to allege that the lienholder is not an “innocent owner.”
A typical settlement agreement might provide:
LIENHOLDER AGREEMENT AND ACKNOWLEDGEMENT
THIS AGREEMENT is made by and between the [law enforcement agency] and ________________ (“LIENHOLDER”) this ________ day of ______________, 2022.
- [Law enforcement agency] and LIENHOLDER acknowledge the benefits to each other by avoiding forfeiture litigation and enter into this Agreement for the sole purpose of preventing same, and in consideration of the mutual covenants which are herein contained.
- The property which is the subject matter of this Agreement is as follows: ________________, VIN #____________.
- LIENHOLDER represents that it has a valid and perfected security interest and/or valid first lien in or against the subject vehicle, which said security interest and/or first lien is superior to any and all interests of _____________________ (registered owner).
- LIENHOLDER represents that it is entitled to immediate possession of the subject vehicle by virtue of its contract with ___________________, owner of the subject vehicle, a copy of which contract is attached hereto and by reference made a part hereof.
- [Law enforcement agency] agrees to surrender whatever right, title, or interest it may have in the subject vehicle by operation of Chapter 932, Florida Statutes, and agrees to surrender possession of same to LIENHOLDER.
- LIENHOLDER represents to [Law enforcement agency] that all statements in this Agreement are true and further agrees to hold harmless and indemnify [Law enforcement agency] or any of its employees, agents, deputies, or servants from any and all damages, actions, suits, claims of whatsoever kind made by or on behalf of any person, including owner, as a result of [Law enforcement agency] surrendering possession of the said vehicle to LIENHOLDER.
- LIENHOLDER represents by the execution of this Agreement that it has been given actual notice regarding the arrest of the registered owner(s) or other persons using said vehicle, and the charges filed against him/her.
In the event the lienholder releases the vehicle to the registered owner, Lienholder acknowledges that it might not be considered an innocent owner should the vehicle again be utilized by the registered owner in violation of the Florida Contraband Forfeiture Act
___________________________________
LIENHOLDER/Authorized Agent
___________________________________
Lienholder Address
___________________________________
City, State, Zip Code
[Include Notary Block]
This article was last updated on Monday, June 20, 2022.
