In 3607 Tampico Dr. v. State, the government brought a forfeiture proceeding under Texas Code of Criminal Procedure Article 59.02(a) for a house owned by a trust. No. 11-13-00306-CV, 2015 Tex. App. LEXIS 13056 (Tex. App.—Eastland December 31, 2015, no pet. history). The house was held in a spendthrift trust for a son, and the mother was the trustee. The trustee allowed the beneficiary to live in the house while the trust paid for the house and all expenses related to it. The beneficiary operated a heroin operation out of the house, and was charged and sentenced to federal prison for that crime. The state authorities then filed a notice of seizure and intent to forfeit the house. The trial court forfeited the property after a bench trial.
Chapter 59 of the Texas Code of Criminal Procedure governs proceedings to forfeit contraband. Property that is contraband is subject to forfeiture and seizure by the State. “Contraband” is property of any nature, including real property that is used in the commission of the crimes referenced in Article 59.01(2). Possession of a controlled substance with intent to deliver is one of those crimes. The court of appeals held that the state had the burden to prove that the property was used in the commission of a crime referenced in Article 59.01(2) and that probable cause existed for seizing the property. After reviewing the evidence, the court held that it supported a reasonable belief that there was a substantial connection between the property and delivery of heroin and that probable cause existed for seizing the property.
The court rejected an argument that the state could not seize the property because the perpetrator did not own the property. Rather, the court held that ownership was not an element of the claim. Further, the court held that “a beneficiary of a valid trust is the owner of the equitable or beneficial title to the trust property and is considered the ‘real’ owner of trust property.”
Finally, the court reviewed the trustee’s “innocent owner” defense under Chapter 59. The trustee’s burden was to prove that the trust acquired an ownership interest in the real property before a lis pendens was filed and that the trust did not know or should not reasonably have known, at or before the time of acquiring the ownership interest, of the acts giving rise to the forfeiture or that the acts were likely to occur. The trustee testified that she did not know that the beneficiary was distributing heroin at the property. The court of appeals, however, affirmed the trial court’s judgment citing that, at the time the trust purchased the property, the trustee knew that the beneficiary had previously pleaded guilty to possession with intent to distribute nine pounds of marijuana. The court also cited to the following facts: the trust paid all expenses of the house, the beneficiary had a roommate at times, the beneficiary had brittle diabetes, and that the beneficiary never had any employment. The court concluded: “The trust acquired an ownership interest in the Tampico Drive property before a lis pendens was filed. However, we believe that the evidence fails to conclusively show that Ruth, as trustee, did not know or should not reasonably have known, prior to the time that the trust acquired the property, that it was likely that the property would be used for illegal purposes.”
Interesting Note: This is a very concerning case for trustees. A trustee may risk trust assets by allowing a beneficiary to live in or otherwise use trust assets when the trustee knows that the beneficiary once committed a crime. But a basic function of a trust is to care for beneficiaries and provide them maintenance (a place to live). Also, beneficiaries can sometimes be bad people or people who make serious mistakes. When this scenario exists, a trustee may have to be extra vigilant to ensure that the beneficiary is not using trust property while committing a crime. Otherwise, the trustee may breach duties to maintain trust assets.