Opinion ID: 1684555
Heading Depth: 2
Heading Rank: 3

Heading: allocation of forfeited funds.

Text: The Circuit Court ordered that, from the $4,674.00 in funds seized from the Appellant, the statutory court costs first be paid, then $1,500.00 be paid to the D.P.A. as reimbursement for Appellant's defense, and then $1,500.00 be paid to the Finance and Administration Cabinet as reimbursement for expenditures ordered for Appellant's defense. The Court then ordered the remainder of the funds to be paid pursuant to KRS 218A.410. The Commonwealth asserts that this allocation was erroneous, arguing that KRS 218A.435(12) provides for the distribution of all of the money forfeited in this case: Other provisions of the law notwithstanding, the first fifty thousand dollars ($50,000) of forfeited coin or currency. . . shall not be paid into the [asset forfeiture trust] fund but ninety percent (90%) shall be paid to the law enforcement agency or agencies which seized the property to be used for direct law enforcement purposes and ten percent (10%) to the office of the Commonwealth's attorney or county attorney who has participated in the forfeiture proceeding. (Emphasis added.) Because one hundred percent of the entire $4,674.00 is earmarked by KRS 218A.435(12), the Commonwealth argues that there is no basis for appropriating any amount of the forfeited money to any agency other than those specified by that statute. We agree. In disbursing the funds in the manner that it did, the Circuit Court relied on KRS 31.211(1), which provides: At arraignment, the court shall conduct a nonadversarial hearing to determine whether a person who has requested a public defender is able to pay a partial fee for legal representation, the other necessary services and facilities of representation, and court costs. . . . This partial fee determination shall be made at each stage of the proceedings. In essence, the court attempted to effectuate a partial fee reimbursement. The D.P.A. argues that the court first made a determination that Appellant Howell had the ability to pay for his legal representation pursuant to KRS 31.211. The court then allotted monies belonging to Howell first to pay for his legal representation and expenses, then to the Commonwealth pursuant KRS 218A.410(1)(j). This argument, however, is premised upon the flawed assumption that illegal drug proceeds are a defendant's property. To the contrary, title to all property forfeited under KRS 218A.410 vests in the Commonwealth at the time of the illegal act. As such, KRS 31.211(1) could not apply. This concept is known as the relation-back doctrine. The seminal case regarding the relation-back doctrine with respect to forfeitures is United States v. Stowell, 133 U.S. 1, 10 S.Ct. 244, 33 L.Ed. 555 (1890), in which the United States Supreme Court addressed when the government's rights would vest under the federal forfeiture statutes then in effect. The Court held that such rights vest on the date of the illegal activity: [T]he 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 intermediate sales and alienations, even to purchasers in good faith. Id. at 17, 10 S.Ct. at 247 (emphasis added). This common-law doctrine has been codified in Kentucky. KRS 218A.410(2) provides: Title to all property, including all interests in the property, forfeit under this section vests in the Commonwealth on the commission of the act or omission giving rise to forfeiture . . . together with the proceeds of the property. . . . The statute protects only subsequent bona fide purchaser[s] for value without actual or constructive notice of the act or omission giving rise to the forfeiture. Id. As such, other creditors, including state agencies, may not claim any part of the funds if the government successfully obtains forfeiture. See United States v. Trotter, 912 F.2d 964, 966 (8th Cir.1990) (criminal fine assessed by the court could not be paid with assets already involved in a civil forfeiture proceeding); Eggleston v. Colorado 873 F.2d 242, 248 (10th Cir.1989) (sales tax liens could not be paid with forfeiture funds); State v. Freeman, 814 P.2d 147, 153 (Okla.1991) (criminal fine and court costs could not be paid with proceeds from civil forfeiture action). The Circuit Court expressly found that the $4,674.00 seized from Appellant Howell's home was the product of his illegal drug activity and was therefore subject to forfeiture pursuant to KRS 218A.410(1)(j). As such, the circuit court then had a duty to order forfeiture of all the proceeds. The fact that KRS 218A.410(1) uses the language, subject to forfeiture, does not imply that an order of forfeiture is discretionary. Compare United States v. Currency Totalling $48,318.08, 609 F.2d 210, 213 (5th Cir.1980) (doctrine of relation back did not apply where the statute was found to provide for only a possibility of subsequent forfeiture). First, the opening sentence of KRS 218.410(2) dictates that a defendant's rights in property subject to forfeiture are divested immediately upon the illegal act or omission, and not at some future time. Second, the use of the term shall in both subsections (2) and (3) of KRS 218A.410 indicates that the legislature intended the statute to be mandatory. KRS 446.010(29). Subsection (2) states, Any property or proceeds subsequently transferred to any person shall be subject to forfeiture and thereafter shall be ordered forfeited  (emphasis added), and subsection (3) states, If any of the property described in this section cannot be located. . . the court shall order the forfeiture of any other property of the defendant up to the value of any property subject to forfeiture under this section. (Emphasis added.) The language subject to forfeiture is used in this statute merely to give notice of the scope of property that shall be forfeited. See Eggleston, 873 F.2d at 246. Because the trial court was required to order forfeit all property that it found subject to forfeiture under KRS 218A.410(1), and because the Commonwealth, not Appellant Howell, had title to the forfeited currency at all relevant times, the court had no option to use any part of that currency to reimburse the costs of Appellant's defense. Accordingly, we affirm Appellant's convictions but reverse and remand this case to the Kenton Circuit Court for a new penalty phase trial, and with direction to distribute the forfeited funds of $4,674.00 in accordance with KRS 218A.435(12). All concur.