Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-06212/USCOURTS-ca10-90-06212-0/pdf.json

Nature of Suit Code: 690
Nature of Suit: Other Forfeiture and Penalty Suits
Cause of Action: 

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OFFICE OF THE CLERK 

United States Court of Appeals for the Tenth Circuit 

C-404 United States Courthouse 

1929 Stout Street 

Denver Colorado 80294 

January 23, 1992 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RE: 90-6212, USA v. Real Property Located at 2471 Venus 

Drive, LA, CA 

Filed November 19, 1991 by Judge Ebel 

Attached is a corrected cover page for the captioned 

opinion. 

Very truly yours, 

ROBERT L. HOECKER, Clerk 

Deputy Clerk 

Attachment 

Appellate Case: 90-6212 Document: 010110097005 Date Filed: 11/19/1991 Page: 1 
PUBLISH 

FILED 11/19/91 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

UNITED STATES OF AMERICA, ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) 

) 

REAL PROPERTY LOCATED AT 2471 ) 

VENUS DRIVE, LOS ANGELES, CALIFORNIA, ) 

) 

Defendant. ) 

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) 

) No. 

PATRICIA WILLIAMS, ) 

) 

Claimant, ) 

) 

GREAT WESTERN FINANCIAL SERVICES, ) 

a division of Great Western Bank, ) 

) 

Claimant-Appellant, ) 

) 

and ) 

) 

MARTHA W. GARDNER, ) 

) 

Petitioner-Appellant. ) 

90-6212 

Appeal from the United States District Court 

for the Western District of Oklahoma 

(D.C. No. CIV-88-1634-A) 

Joseph K. Haselton, Jr., of Phillips, McFall, Mccaffrey, Mcvay, 

Sheets & Lovelace, P.C., (Robert N. Sheets of Phillips, McFall, 

Mccaffrey, Mcvay, Sheets & Lovelace, P.C., and E. Elaine Schuster, 

assisting with the briefs), Oklahoma City, Oklahoma for 

Appellants. 

William Lee Borden, Jr., (Timothy D. Leonard, u. s. Attorney, 

assisting with the brief), Assistant u. S. Attorney, Oklahoma 

City, Oklahoma for Appellee. 

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Appellate Case: 90-6212 Document: 010110097005 Date Filed: 11/19/1991 Page: 2 
PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v. 

REAL PROPERTY LOCATED AT 2471 

VENUS DRIVE, LOS ANGELES, CALIFORNIA, 

Defendant. 

.FILED 

United States Court of Appeals Tenth Circuit 

NOV 19 1991 

ROBERT L. HOECKER 

Clerk 

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No. 90-6212 

PATRICIA WILLIAMS, 

Claimant, 

GREAT WESTERN FINANCIAL SERVICES, 

a division of Great Western Bank, 

Claimant-Appellant, 

and 

.MARTHA W. GARDNER, 

Petitioner-Appellant. 

Appeal from the United States District Court 

for the Western District of Oklahoma 

(D.C. No. CIV-88-1634-A) 

Joseph K. Haselton, Jr., (Robert N. Sheets assisting with the 

briefs), Oklahoma City, Oklahoma for Appellants. 

William Lee Borden, Jr., (Timothy D. Leonard, U. s. Attorney, 

assisting with the brief), Assistant u. S. Attorney, Oklahoma 

City, Oklahoma for Appellee. 

Appellate Case: 90-6212 Document: 010110097005 Date Filed: 11/19/1991 Page: 3 
Before .ANDERSON, BALDOCK, and EBEL, Circuit Judges. 

EBEL, Circuit Judge. 

The issue we decide is whether an innocent lienholder has the 

right to recover attorney's fees expended protecting its lien in a 

forfeiture action prosecuted by the United States against the 

property owner under 21 u.s.c. § 881(a)(7). According to that 

statutory provision, real property used to facilitate the 

commission of a drug offense is subject to forfeiture. We hold 

that where a pre-existing deed of trust gives a lienholder the 

right to recover attorney's fees, the innocent lienholder is 

entitled to recover such fees even though the attorney's fees are 

incurred after the acts giving rise to the forfeiture and after 

the government seizure of the property. 

FACTS 

In September of 1988, the United States, appellee, filed a 

forfeiture action against real property owned by Patricia Williams 

located at 2741 Venus Drive, Los Angeles, California. The United 

States alleged that Williams used the property to facilitate the 

commission of drug offenses and that the property was subject to 

forfeiture under 21 u.s.c. § 88l(a)(7). On March 7, 1989, Great 

Western Financial Services ("Great Western") filed a lienholder 

claim against the property. On August 1, 1989, Martha w. Gardner 

likewise filed a lienholder claim against the property. On 

January 19, 1990, the United States District Court for the Western 

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Appellate Case: 90-6212 Document: 010110097005 Date Filed: 11/19/1991 Page: 4 
District of Oklahoma entered a forfeiture judgment against the 

property. The judgment recognized the validity of the two liens 

and instructed the United States to dispose of the property 

subject to the liens. 

Great Western and Gardner, the appellants, asserted that 

their liens entitled them to recover (1) post-seizure interest and 

costs, and (2) post-seizure attorney's fees incurred to protect 

their lien interests during the government's foreclosure action. 

Pursuant to agreement between the parties, the court ordered that 

the appellants were entitled to post-seizure interest and costs. 

However, the court rejected the appellants' claim that they were 

entitled to recover post-seizure attorney's fees expended in 

protecting their lien interests. Great Western and Gardner have 

appealed the district court's decision to deny them their 

attorney's fees. 

DISCUSSION 

Williams' property was forfeited pursuant to 21 U.S.C. § 

88l(a)(7), which provides that the real property used to 

"facilitate the commission of .•. a violation of [the Food and 

Drug] Title punishable by more than one year's imprisonment" shall 

be forfeited to the United States. Section 88l(a)(7), however, 

protects innocent lienholders from losing their property 

interests: "no property shall be forfeited under this paragraph, 

to the extent of an interest of an owner, by reason of any act or 

omission established by that owner to have been committed or 

omitted without the knowledge or consent of that owner." The 

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Appellate Case: 90-6212 Document: 010110097005 Date Filed: 11/19/1991 Page: 5 
appellants contend (and the United States does not dispute) that 

the appellants were unaware that Williams was using the property 

to facilitate the commission of drug offenses, and that therefore 

their interests in the property were not forfeited. The issue in 

this case is whether the right provided in the pre-existing Deed 

of Trust to recover attorney's fees constitutes an interest in the 

property. We hold that it does. 

The Deed of Trust executed by Williams in favor of Great 

Western provided that the property 11 secure[s] payment of all loans 

made to me [Williams], [as well as] the performance of my other 

obligations under an Adjustable Rate Open End Credit Agreement 

••• between you and me. II Appellants' Br. in Chief, 

attach. 4. The Adjustable Rate Open End Credit Agreement provides 

that 11 [i]f this agreement is referred to an attorney, not our 

salaried employee, for collection or to enforce our rights 

hereunder, you agree to pay court costs and to pay reasonable 

attorneys' fees which shall in no event exceed 15% of the unpaid 

balance. 11 Id. , attach. 3. 

The Deed of Trust executed in favor of Gardner provides that 

[t]o protect the security of this Deed of Trust, Truster 

[Williams] agrees ••• [t]o appear in and defend any 

action or proceeding purporting to affect the security 

hereof or the rights or powers of Beneficiary or 

Trustee; and to pay all costs and expenses, including 

cost of evidence of title and attorney's fees in a 

reasonable sum, in any such action or proceeding in 

which Beneficiary or Trustee may appear, or in any 

action or proceeding instituted by Beneficiary or 

Trustee to protect or enforce the security of this Deed 

of Trust or the obligations secured hereby. 

Id., attach. 8. 

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In both cases, the appellants' right to recover attorney's 

fees is secured by the property. Therefore, their right to 

recover such fees is an interest in the property. See United 

States v. Federal Nat'l Mortgage Ass'n, No. 91-7012, 1991 WL 

188738 (4th Cir. Sept. 26, 1991); United States v. Six Parcels of 

Real Property Situated in Blount County, Tennessee, 920 F.2d 798, 

799 (11th Cir. 1991). 

Our conclusion is supported by United States v. Stowell, 133 

U.S. 1 (1890). In Stowell the United States instituted forfeiture 

proceedings against individuals who were distilling spirits 

without paying taxes on the spirits distilled. A mortgage had 

been taken on the land before the offense was committed. The 

Court noted that "the mortgage is valid as against the United 

States, and that, so far as concerns the real estate, the judgment 

of condemnation must be against the equity of redemption only." 

Id. at 20. 

The United States argues that Stowell stands for the 

proposition that because the attorney's fees were expended after 

the illegal acts that led to the forfeiture, they cannot be 

recovered by the appellants. In support of this argument, they 

cite the following language: 

By the settled doctrine of this court, whenever a 

statute enacts that upon the commission of a certain act 

specific property used in or connected with that act 

shall be forfeited, the forfeiture takes effect 

immediately upon the commission of the act; the right to 

the property then vests in the United States, although 

their title is not perfected until judicial 

condemnation; the forfeiture constitutes a statutory 

transfer of the right to the United States at the time 

the offense is committed; and the condemnation, when 

obtained, relates back to that time, and avoids all 

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Appellate Case: 90-6212 Document: 010110097005 Date Filed: 11/19/1991 Page: 7 
intermediate sales and alienations, even to purchasers 

in good faith. 

Id. at 16-17 (emphasis added). The United States argues that even 

if the right to recover attorney's fees can be considered an 

interest in the property, the attorney's fees here were actually 

expended after the acts giving rise to the forfeiture and 

therefore cannot be recovered. We disagree. We do not quarrel 

with using the date of the commission of the wrongful acts as the 

effective date of the forfeiture, nor do we quarrel with the 

conclusion that new rights could not be created in third parties 

after the forfeitable acts which would be superior to the 

government's forfeiture rights. However, these appellants' rights 

to reimbursement of attorney's fees were created at the time the 

Deeds of Trust were formed. These rights predated the commission 

of the bad acts that gave rise to the forfeiture. The right to 

recover attorney's fees thus encumbered the property before the 

commission of the forfeitable acts. To compel innocent 

lienholders to forfeit their pre-existing contractual rights in 

the property "flies in the face of the statute." United States v. 

Real Property Titled in the Name of Shashen Limited, 680 F. Supp. 

332, 336 (D. Hawaii, 1987). Thus, Williams' equity of redemption 

was subject to appellants' right to recover attorney's fees as of 

the date of the acts of forfeiture even though the actual 

expenditure of attorney's fees would not occur until later when 

forfeiture proceedings commenced. 1 

1 For example, the market value of Great Western's and Garner's 

lienholder interests were undoubtedly greater with the attorney's 

fees provisions than they would have been without these 

footnote continued ••. 

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Our conclusion is in accord with the only circuit court cases 

to have considered this issue. In re Metmor Financial, Inc., 819 

F.2d 446 (4th Cir. 1987), ordered the United States to pay 

post-seizure interest to an innocent lienholder in a forfeiture 

proceeding. In addition, that court stated in dicta that, had the 

mortgage agreement provided for attorney's fees, those fees would 

also have been included in the lienholder's property interest. 

Id. at 448 n.3. The court concluded that "the government can 

succeed to no greater interest in the property than that which 

belonged to the wrongdoer whose actions have justified the 

seizure." Id. at 448-49. The Fourth Circuit recently relied on 

its dicta in Metmor and held that contractually required 

attorney's fees are recoverable by lienholders as part of their 

property interest. Federal Nat'l Mortgage Ass'n, No. 91-7012, 

1991 WL 188738. The Eleventh Circuit followed Metmor in Six 

Parcels of Real Property, 920 F.2d at 798, holding that an 

innocent lienholder can recover attorney's fees and costs 

authorized in its deed of trust before the government can claim 

its forfeiture interest. We respectfully disagree with, and 

decline to follow, several district court cases that have reached 

the opposite result: United States v. One Piece of Real Estate, 

571 F. Supp. 723 (W.D. Texas 1983); United States v. Parcel of 

Real Property Known as 708-710 West 9th Street, 715 F. Supp. 1323, 

1326 (W.D. Pa. 1989) • 

. • . footnote continued 

provisions. In other words, the existence of the attorney's fee 

interest had value all along even though the right might not be 

enforced until later. 

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Appellate Case: 90-6212 Document: 010110097005 Date Filed: 11/19/1991 Page: 9 
The district court erred in holding that section 881(a)(7) 

does not protect the appellants' attorney's fee interests. 2 

Therefore, we REVERSE the district court and REMAND for further 

proceedings consistent with this opinion. 

2 The Un~ted States argues that it never disputed the appellants' 

lienholder interests in the property, and that, therefore, any 

expenditure of attorney's fees to protect appellants' interests 

was unreasonable. The government also argues that one or both 

appellants were not given any rights in their Deeds of Trust to 

recover attorney's fees under the facts of this case. Because the 

district court held that no attorney's fees were recoverable as a 

property interest, it did not address these arguments. We hold 

only that§ 881(a)(7) allows the recovery of post-seizure 

attorney's fees provided the right to recover such fees is found 

in a mortgage or deed of trust that preceded the wrong act giving 

rise to the forfeiture. On remand, the district court should 

consider what rights, if any, the deeds of trust gave to these 

appellants to recover attorney's fees. The court should also 

consider what portion, if any, of the attorney's fees expended by 

the appellants' were reasonable and otherwise meet the limitations 

set forth in those deeds of trust. 

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