THE PEOPLE OF THE STATE OF
CALIFORNIA,

Plaintiff

v.

REAL PROPERTY LOCATED IN
EL DORADO COUNTY AT 1353
CEDAR OAKS ROAD, PLACERVILLE
CALIFORNIA, ASSESSORS PARCEL
NUMBER 051-481-55-100
INCLUDING APPURTENANCES AND
ATTACHMENTS THERETO,

Defendant,

CHARLES W. HOLLAND,
ETHEL CRIDDLE, &
EDNA BETTENCOURT

Real Parties In Interest.
No. PV92-0173
 

Charles Holland, Ethel Criddle and Edna Bettencourt (hereafter "Lienholders") file this motion for summary judgment and for expungement of the lis pendens.

The other claimants in this case are Roy and Linda Clayton, whose arrest for marijuana cultivation and distribution triggered this forfeiture case, and Roy's brother William Clayton and his wife Peggy Clayton, who were the title holders of the property. William and Peggy Clayton live out of state and were apparently not involved in the marijuana case.

Charles Holland, a construction contractor by trade, had originally purchased the property as undeveloped land, and had begun constructing a house for the purpose of resale. The cost of construction was financed by Ethel Criddle (Holland's grandmother) and Edna Bettencourt (Criddle's friend), who took interests in the property in exchange for their financial investments, with the expectation of reaping a share of the profits upon resale.

On September 6, 1991, real parties in interest Holland, Criddle and Bettencourt sold the property to William and Peggy Clayton,⁽¹⁾ and took back a note and First Deed of Trust. (Exhibit 2). The owner-financing was only supposed to be temporary -- until the Claytons could obtain bank financing. The note and first deed of trust provided that the entire note would come due and payable in October 1991 -- one month after it was executed. The Claytons attempted to obtain bank financing to pay off the first trust note. The process took longer than expected, as real estate loans often do, and the lienholders gave them an extension of time. They were still in the process of obtaining a loan six months later when this forfeiture action was filed.

On February 19, 1992, Roy and Linda Clayton were arrested and charged with marijuana cultivation and distribution. On March 13, 1992, the El Dorado District Attorney filed a forfeiture complaint and lis pendens against the defendant property, and the Claytons stopped trying to obtain financing to pay off the note.

The lienholders filed timely claims in the forfeiture action on March 20, 1992. Since then the case has languished in the system, with the District Attorney's office doing nothing to advance the forfeiture proceedings against the Claytons. Over the years this case has been pending, undersigned counsel repeatedly called and wrote the El Dorado District Attorney's Office, demanding that the State take action to move the case forward, with no results.

The People admitted in their answers to interrogatories that Charles Holland, Ethel Criddle and Edna Bettencourt were innocent owners of their note and first deed of trust.

The District Attorney's office has done nothing to protect the interests of the lienholders since putting this case in limbo and clouding the title with the lis pendens from this forfeiture case. As a result, the criminal defendants who triggered this forfeiture case with their illegal activity have enjoyed a windfall -- getting to live in the home rent-free and mortgage- free -- while the lienholders collected nothing on their note.

The Claytons have already served their sentences. Upon their release, they returned to the property, and live in it without paying rent, and without making payments on the note. They have never made any payments on the note.

On September 30, 1993, Holland, Criddle and Bettencourt foreclosed their lien and the property went to public auction. Holland, Criddle and Bettencourt bid in the note for the unpaid debt including other costs, totalling $105,144.49. The Trustee's Deed was recorded on October 5, 1993, and then re-recorded on April 7, 1994 to correct the legal description of the property. Exhibit 3.

I. The lienholders, real parties in interest Holland, Criddle and Bettencourt, validly foreclosed their lien against the property on September 30, 1993, and therefore, the Claytons own no interest in the property to forfeit
 

After waiting in vain for years to collect on their note, the Lienholders filed a non-judicial foreclosure. On September 30, 1993, the Lienholders were the highest bidders at the foreclosure sale, purchasing the property for $105,144.49 -- the amount of their unpaid debt on that date together with the costs of foreclosure. The foreclosure was conducted with the requisite notice and due process required by state law.

Apparently the People contend that the foreclosure was invalid because there was a lis pendens on the property which, they argue, prevented the lienholders from foreclosing. They misconstrue the law.

A lis pendens gives notice that a lawsuit has been filed which may, if the plaintiff prevails, affect title to or possession of the real property. F.D.I.C. v. Charlton (App. 2 Dist. 1993) 21 Cal. Rptr.2d 686, 17 Cal.App.4th 1066, rehearing denied, review denied.

Although a judgment of forfeiture, transferring title to the government, may prevent lienholders from foreclosing, a lis pendens alone does not have that effect.

Under California law, the title of the state to property seized for forfeiture is inchoate or incomplete until such time as there is a judicial determination of the forfeiture. People v. Broad (1932) 216 Cal. 1, 4, cert. den. 287 U.S. 661. Even under the "relation back doctrine," a statutory provision that provides that the government's title to forfeited property "relates back" to the date of the offense giving rise to the forfeiture, the "relation back" does not occur until judgment of forfeiture is entered. See United States v. 92 Buena Vista Avenue, Rumson, New Jersey, (1993) 113 S.Ct. 1126.

A lis pendens puts the world on notice of the pendency of an action, but it does not give the claimant who placed the lis pendens on the property any interest in the property, and especially not any priority over prior recorded interests. Under recognized California law, "The interest of any party in real property generally is subject to previously duly and properly recorded estates or liens." Miller & Starr, California Real Estate Law 2d §8:36, p. 343 (main volume).

"An encumbrancer in good faith and for value means a person who has taken or purchased a lien, . . . and who has parted with something of value in consideration thereof." Fulkerson v. Stiles (1909) 156 C. 703, 706 [105 P. 966]. Clearly the lienholders here are encumbrancers in good faith and for value.

C.C.P. §405.24 states that:

From the time of recording the notice of pendency of action, a purchaser, encumbrancer, or other transferee of the real property described in the notice shall be deemed to have constructive notice of the pendency of the noticed action as it relates to the real property and only of its pendency against parties not fictitiously named. The rights and interest of the claimant⁽²⁾ in the property, as ultimately determined in the pending noticed action, shall relate back to the date of the recording of the notice.

Charles Holland et. al, owned the property, and then a first deed of trust purchase-money- mortgage on the property -- before the lis pendens was filed. Their interest predated the forfeiture lis pendens, and was superior to any other liens on the property. Since the government concedes the Lienholders are innocent owners, their interest cannot be forfeited under state law.

The state of California sought to forfeit the Claytons' interest in the property. But since the Claytons never paid the first deed of trust note -- they had no equity in the property for the government to forfeit. Their second deed of trust lien for materials they purchased during the construction of the house was junior to the Holland lien, and was therefore wiped out by the foreclosure of the first deed of trust.

Had the property sold at foreclosure for more than the unpaid first deed of trust note, with interest and costs, the trustee would have been required to notify all persons with recorded interests in the property that they should file a written claim to the excess proceeds. The trustee then must determine the priority of the claims, and pay the extra proceeds to those who file claims, in the order of their priority. If there are conflicting claims, the trustee is required to pay the proceeds into the clerk of the court. Civil Code §2924j. If that had occurred in this case, the state of California would have had the opportunity to claim the excess proceeds, as would the Claytons, and the excess amount would have been held in escrow pending the outcome of this forfeiture case.

In this foreclosure, there were no bids for more than the amount of the outstanding first deed of trust, and therefore there was nothing to distribute under C.C.C. §2924j. Thus, foreclosure of the first trust lien wiped out the second deed of trust lien, and left no equity for the Claytons and the government to fight over in this case.

For these reasons, the lis pendens in this case should be expunged, pursuant to C.C.P. §405.30, and this forfeiture case dismissed with prejudice.
 

II. Because the applicable forfeiture statutes -- California Health and Safety Code §11470 et seq. -- expired on January 1, 1994, and this forfeiture proceeding was begun but not concluded before that time, this forfeiture proceeding is barred anyway
 

This civil forfeiture proceeding was brought under California Health & Safety Code §11470 et seq., on March 13, 1992.

The legislative history of §11470 et seq. shows a patchwork of amendments, repealers and sunsets. A careful tracing of these statutes, with their varying sunset clauses, shows that the key California forfeiture statutes were repealed by their own terms when the 1988 law, as amended, sunset in 1994.

In 1988, the state legislature amended several provisions of the forfeiture law. See Stats. 1988, ch. 1492, §§1, 9, 10, pp. 5285, 5288-5291 (hereinafter cited as "1988 law".) Section 16⁽³⁾ of the 1988 law contained a sunset clause which stated:

The provisions of the Health and Safety Code amended by this act⁽⁴⁾ shall remain in effect only until January 1, 1994, at which time those sections as they read on December 31, 1988, shall have the same force and effect as if they had not been amended.
 

The problem is, the version of the forfeiture law in effect on December 31, 1988 (Stats. 1987, Ch. 924, hereafter cited as "1987 law") contained its own sunset clause, which stated:

This section shall remain in effect only until January 1, 1989, and as of that date is repealed, unless a later enacted statute, which is enacted before January 1, 1989, deletes or extends that date.
 

Thus, on January 1, 1994, the forfeiture law as it existed the day before reverted in pertinent part to the law as it existed on December 31, 1988, but that law was then repealed by its own terms, effective January 1, 1989.

Although the forfeiture statutes were amended several times between 1987 and 1994, none of the amendments removed this repealer. If anything, they created new repealers and more confusion.

In 1990, the Legislature passed a law -- Stats. 1990, ch. 1200, §§1-8 (hereafter cited as "1990 law") -- amending sections 11470, 11488.1, 11488.2, 11488.4, 11488.5, 11488.6 and 11492. Four of these sections had previously been amended in 1988 -- sections 11470, 11488.4, 11488.5 and 11488.6.⁽⁵⁾ These four sections, as amended by the 1990 law, contain the following sunset clause:

This section shall remain in effect only until January 1, 1994, and as of that date is repealed.

Thus, the 1990 amendment eliminated the portion of the 1988 sunset clause which caused the law to revert back to a previous version of the law upon operation of the January 1, 1994 sunset. Instead of reverting to prior law, the 1990 amendment repealed these sections, effective January 1, 1994.

In 1991, the legislature passed a bill Stats. 1991, ch. 641 §1 (hereafter cited as 1991 law), which amended, repealed and added three versions of Health and Safety Code §11489. Section 11489 was the only forfeiture provision affected by the 1991 law. The 1991 law has a sunset clause⁽⁶⁾ which applied to the rest of the 1991 law except §11489.

In August, 1993, the legislative session came to an end without the legislature passing any new forfeiture bills, and on December 31, 1993, the old forfeiture law sunset.

On November 24, 1993, the Legislative Counsel of California, an arm of the state legislature, prepared a report for then Assemblyman John Burton detailing the effect of the January 1, 1994 sunset. Their conclusion: the state forfeiture law ceased to exist on January 1, 1994 as a result of the above quoted provisions. See Exhibit 6.

In 1994, the state legislature, concerned that there was no longer an operative state forfeiture law, enacted the Burton Bill, AB-114, as an urgency measure. Stats. 1994, ch. 314, §22, 26 (hereafter "1994 law.") Section 11494 of that law stated:

In the case of any property seized or forfeiture proceeding initiated before January 1, 1994, the proceeding to forfeit the property and the distribution of any forfeited property shall be subject to the provisions of this cahpter in effect on December 31, 1993, as if those sections had not been repealed, replaced or amended.
 

A. The operative provisions of the California forfeiture law ceased to exist on January 1, 1994, leaving no functioning forfeiture statute

The law abhors a forfeiture, it used to be said. A still-popular vestige of that concept is the rule of statutory construction that forfeiture statutes are disfavored, and thus are strictly construed.  Baca v. Minier (1991) 229 Cal.App.3d 1253, 1265.

The California forfeiture statutes, after the amendments set out above, were in shambles as of January 1, 1994. Even those who believed there was a forfeiture statute left at all had difficulty discerning what law was applicable. The California courts are still widely divided on this issue. Several courts attempted to divine what the legislature must have meant. However, this is improper in the face of language which is clear, however irrational. The court interpreting a statute cannot omit a sunset clause merely because it is illogical -- the court's job is only to interpret what the legislature wrote.

In construing a statute the function of the judge is simply to ascertain what in terms or substance is already there and not to insert what has been omitted or omit what has been inserted. Under the guise of construction the court will not rewrite a law; it will not supply an omission; and it will not give the words an effect different from the plain and direct import of the terms used.

B. The 1994 law's language that purported to resurrect the expired law after the fact was an invalid ex post facto law

It has been held in a long line of cases that the repeal of a statute creating a penalty, running either to an individual or the state, at any time before final judgment, extinguishes the right to recover the penalty.

People v. One 1953 Buick (1962) 57 Cal.2d 358, 363 (citations omitted). Forfeiture under Health and Safety Code §11470 et seq. is such a penalty. People v. One 1986 Toyota Pickup (1995) 31 Cal.App.4th 254, 262. "[I]ts penal character being obvious, the repeal of the statute authorizing the forfeiture extinguishes the right of forfeiture." People v. One 1961 Austin Healey Sprite Roadster (1969) 1 Cal.App.3d 316, 318.

III. The four year delay since seizure violates the Lienholders' rights to a speedy trial

In United States v. $8,850 (1983) 461 U.S. 555 (hereinafter cited as $8850), the United States Supreme Court held that the four factor balancing test of Barker v. Wingo (1972) 407 U.S. 514 -- used to determine when delay in trial of criminal proceedings violates the accused's rights to a speedy trial -- also applies in civil forfeiture actions.

The four factors set out by Barker v. Wingo and $8850 are: "length of delay, the reason for the delay, the defendant's assertion of his right, and prejudice to the defendant." $8850 at 565. Applying these factors to the facts of this case, it is clear that a due process violation has occurred.

A. Length of Delay

In $8850 the Supreme Court held that a delay of 18 months did not violate due process. However, the Court made it clear that although 18 months was an extraordinary delay, the length of the delay alone is not determinative:

Little can be said on when a delay becomes presumptively improper, for the determination necessarily depends on the facts of the particular case. Our inquiry is the constitutional one of due process; we are not establishing a statute of limitation. Obviously, short delays -- of perhaps a month or so -- need less justification than longer delays. We regard the delay here -- some 18 months -- as quite significant. Being deprived of this substantial sum of money for a year and a half is undoubtedly a significant burden.

The Lienholders here have been deprived of their property for over four years and no trial date has yet been set. In $8850 the only issue raised was the delay between seizure and the filing of the forfeiture complaint. However, it is clear that the due process requirement of promptness does not end with the filing of the forfeiture complaint. In United States v. Banco Cafetero Panama (2d Cir. 1986) 797 F.2d 1154, the court held that due process also requires that the forfeiture trial be held within a reasonable time:

To require prompt filing of a forfeiture action but allow indefinite postponement of the trial would reduce the filing requirement to a nullity. Under the Barker test, which we think applies to the holding of the forfeiture trial as well as to the filing of the action, there is a due process violation at some point.

B. Reason for the Delay

In this case, unlike $8850, the government cannot rely upon the pendency of criminal proceedings, administrative remedies, or ongoing investigation to justify the delay in instituting the forfeiture action. There were no administrative proceedings. The investigation and criminal case against the Claytons ended long ago. The Claytons have already served their time and are being treated to a rent-free, mortgage-free residence -- at the Lienholders' expense -- while the innocent lienholders are still being punished!

In United States v. $23,407.69, 715 F.2d 162, 165, the Fifth Circuit noted

[O]f critical importance in this case. . . is the fact that for the first six months period nothing was done by the government. . . .

Under the test supplied by $8850, the lack of justification for the delay in this case would be an "overarching factor," and should alone be reason to sismiss this case.

C. Assertion of the Right

In $8850 the Supreme Court suggested several ways a person could assert his right to speedy resolution of his claim to property seized by the government under color of the forfeiture laws. They include: informal requests for speedy resolution of his claim to the property, the filing of "an equitable action seeking an order compelling the . . . return of the seized property," or a motion for the return of property under Criminal Rule 41(e). 461 U.S. at 569-70. The Court noted that the claimant had not made any effort to assert her right to a speedy resolution of the forfeiture action.

The lienholders here, in contrast, have written letter after letter to the District Attorney seeking a prompt resolution of the case. See Exhibit 7.

D. Prejudice to the Defendant

The primary inquiry here is whether the delay has hampered the claimant in presenting a defense on the merits, through, for example, the loss of witnesses or other important evidence. Such prejudice could be a weighty factor indicating that the delay was unreasonable.

While the value of allowing the Government time to pursue its investigation applies to the civil forfeiture situation as well as the criminal proceeding, a major distinction exists. A suspect who has not been indicted retains his liberty; a claimant whose property has been seized, however, has been entirely deprived of the use of the property.

For the foregoing reasons and any other reasons as may arise during a hearing on this motion, Lienholders' motion for summary judgment should be granted, the lis pendens should be expunged, and the court should grant reasonable attorneys fees and costs to lienholders.

Dated:

1. Roy and Linda Clayton, who eventually lived in the house, were involved in the purchase. They told the lienholders that because they lacked the credit to qualify for financing, Roy's brother William and his wife Peggy would purchase the property in their names, using their credit.

2. A "claimant" is "a party to an action who asserts a real property claim and records a notice of the pendency of the action." C.C.P. §405.1.

3. Section 16 of the 1988 law was not codified for some reason.

4. The "provisions of the Health and Safety Code amended by this act" were §§11470, 11473, 11473.2, 11473.3, 11488, 11488.4, 11488.5, 11488.6 and 11489. Stats. 1988, ch. 1492, §§1, 9, 10, p. 5285. These are key provisions of the forfeiture law, without which the forfeiture laws could not operate.

5. The 1990 statutes also amended three sections of the forfeiture law not amended in 1988 -- 11488.1, 11488.2 and 11492. Since they were not amended in 1988, the sunset clause of §16 of the 1988 statute did not apply to those sections.

6. This sunset clause stated: "The provisions of the Health and Safety Code amended by this act, except Section 11489, shall remain in effect only until January 1, 1994, at which time those sections as they read on December 31, 1988, shall have the same force and effect as if they had not been amended." Stats. 1991, ch. 641 §14.