State v. One 1983 Chevrolet Van Serial No. 1GCCG15D8D 104615

³²⁹ CHARLES E. ORTH, Jr., Judge, Specially Assigned. I A During the early part of the 1984 session of the General Assembly of Maryland a member of the Senate requested the Department of Legislative Reference to draft legislation to the effect that when a motor vehicle is confiscated by police re drugs, car should go to any lienholder to satisfy lien if they agree not to sell it back to (or give back to) pusher. (Request Form, Bill File (1984) SB 589.) He designated the “Short Title” as “Confiscation of Motor Vehicles,” and the “Subject” as “Art. 27, § 297” of the Maryland Code. Pursuant to the request, Senate Bill 589 was launched into the legislative stream.

Steered by the Senate Judicial Proceedings Committee, it began its journey through the legislative processes. It sailed by committee hearings, survived fiscal notes, and, with amendments, passed the required readings. In due time, as Acts 1984, ch. 549, it was approved by the Legislature and enacted into law effective 1 July 1984. B With the enactment of the “Comprehensive Drug Abuse Prevention and Control Act of 1970” by the Congress of the United States it became necessary that the states update and revise their criminal drug laws so that uniformity would be achieved between the laws of the several states and those of the federal government.

Virtually all of the states, including Maryland, did so. See 9 Uniform Laws Annotated 187-194 (Master Ed.) and 1986 Supplementary Pamphlet thereto 123-124. By Acts 1970, ch. 403, Maryland repealed its Uniform Narcotic Drug Act and enacted in lieu thereof the Maryland Controlled Dangerous Substances Act, Md.Code (1957,1982 Repl.Vol.) Art. 27, §§ 276-302 (the ³³⁰ Act). The Act contained provisions for seizures and forfeitures.

Section 297. Property subject to forfeiture included “[a]ll conveyances ... which are used ... to transport, or in any manner to facilitate the transportation, sale, receipt, possession, or concealment [of dangerous substances] ...” with the exception, under certain circumstances, with respect to common carriers and stolen conveyances. Section 297(a)(4). Any property subject to forfeiture could be seized as set out in subsection (b), and it was not repleviable, subsection (c).

Subsection (d) gave the political subdivision in which the property was seized, or the State, if it seized the property, the authority, among other methods of disposition, to “[s]ell any forfeited property which is not required to be destroyed by law and which is not harmful to the public, provided that the proceeds be disposed of for payment of all proper expenses of the proceedings for forfeiture and sale, including expenses of seizure, maintenance of custody, advertising and court costs.” The statute did not designate how the property was to be sold. The Act was amended by Acts 1972, ch. 659 by adding to § 297 subsections (f)-(w) which specifically concerned motor vehicles. Subsection (f) established the standards to be followed in exercising the authority to seize a motor vehicle. Generally speaking, it could be seized and its forfeiture recommended to the State’s Attorney when it was connected with controlled dangerous substances, subsection (f)(1), with three narrow exceptions, subsection (f)(2)(i)-(iii).

Subsection (g) provided that the Administrator of Motor Vehicles, upon due notice, certify to the State’s Attorney the name and address of the owner of the seized vehicle and declared that the term “owner” shall include lienholder. Subsections (h)-(p) established procedures to be followed for a judicial determination of forfeiture. Subsection (q) commanded that “[i]f after a full hearing the court decides that the vehicle was used in violation of [the Act], or that the owner knew or should have known that the motor vehicle was being, or was to be so used, the court shall ³³¹ order that the motor vehicle be forfeited to the State.” However, [i]f the court shall determine that the forfeited motor vehicle be subject to a bona fide recorded security interest created without the knowledge that the motor vehicle was being, or was to be, used in violation of [the Act], the court shall order that the motor vehicle be sold by the State. Subsection (r).

Subsection (t) required that the sale be at public auction held pursuant to certain specifications. The disposition of the proceeds of the sale was provided in subsection (u). The payment of all expenses as set out in the 1970 Act still had priority, but after those expenses had been satisfied the proceeds were to be applied next “to payment of the balance due on a lien (if any),” and “[t]he balance (if any) shall be deposited in the general funds of the State.” Subsection (w) prescribed that the sale “shall be made for cash and vest in the purchaser a clear and absolute title to the motor vehicle sold.” For the first time in the Maryland Controlled Dangerous Substances Act, the Legislature recognized the interest of an innocent party with a security interest in a motor vehicle seized and forfeited under the Act. C Automobile dealers were not happy with the 1972 law, and they made their dissatisfaction known.

They experienced problems in receiving payments for outstanding amounts on installment agreements when a vehicle had been seized by law enforcement authorities due to its use in connection with controlled dangerous substances crimes. They testified in the committee hearing that the current law provided inadequate notice so that they frequently did not learn of the seizure until months after its occurrence. They asserted that sometimes the State was authorized to hold the vehicle for over a year in police lots where it was damaged by thieves and vandals. They complained that the current law provided that proceeds from forfeited vehicles go to pay government costs for seizure and forfeiture ³³² before secured interest debts, and this frequently left insufficient money to pay off the secured interest.

They called for legislation to rectify these hardships. See Summary of Committee Report, Senate Judicial Proceedings Committee, prepared by the Department of Legislative Reference, SB 589, 1984, at 3. Senate Bill 589 was in answer to their call. The legislative intent was to provide expedited forfeiture procedures for motor vehicles seized in connection with drug arrests and to provide that the holder of a recorded secured interest in the vehicle shall receive payment before any money goes to pay governmental units for the seizure and forfeiture costs.

Summary of Committee Report at 4. The purpose of the bill was to alleviate the hardship worked on dealerships with a secured interest in a motor vehicle which has been seized and forfeited in connection with drug arrests. Id. 1 The Legislature fulfilled its intent and purpose by creating an entirely new scheme for the disposition of a motor vehicle forfeited by reason of its connection with drug crimes. It established this scheme by major changes in Md.Code (1957, 1982 Repl.Vol. 1986 Cum.Supp.) Art. 27, § 297, by significant additions to Md.Code (1975, 1983 Repl.

Vol., 1986 Cum.Supp.) §§ 12-624, 12-625, and 12-626 of the Commercial Law Article, and by borrowing the term “commercially reasonable” from the Maryland Uniform Commercial Code, Md.Code (1975, 1986 Cum.Supp.) §§ 1-101 to 10-104 of the Commercial Law Article (UCC). As stated in the Summary of Committee Report: This bill repeals most of the current forfeiture procedures and establishes new petition and answer requirements, new notice requirements, new deadlines for all procedures, new methods for sale and release of the vehicle ³³³ and a new priority of distribution of the proceeds from the sale of the vehicle. Id. at 2. Acts 1984, ch. 549 announced that it was for the purpose of altering the kinds of property subject to forfeiture with no property right remaining in them; requiring the chief law enforcement officer to determine the owner and any secured party of a motor vehicle before recommending forfeiture of a motor vehicle; requiring that the recommendation for forfeiture of a motor vehicle be made within a certain time; requiring copies of the recommendation for forfeiture of a motor vehicle to be sent to owners and secured parties; repealing certain requirements for forfeiture proceedings for motor vehicles; requiring the State’s Attorney to surrender a motor vehicle that has been seized to the owner under certain circumstances; providing procedures for the State’s Attorney when petitioning the court for forfeiture of a motor vehicle; providing procedures by which the owner may obtain possession of the vehicle by posting a certain bond; and generally relating to such bonds; requiring the court to release a motor vehicle when the court determines the motor vehicle should not be forfeited; requiring certain procedures when the court determines a motor vehicle should be forfeited; providing for the release of a motor vehicle to the holder of a security interest in certain circumstances; altering the grounds on which a holder may repossess certain goods sold under an agreement; altering the conditions under which a buyer loses the right of redemption of repossessed goods; altering provisions for application of proceeds of repossessed goods that are resold____ The act accomplished these purposes.

The question is what is its impact on the case before us? II This appeal stems from a petition filed by the State in the Circuit Court for Baltimore City for the forfeiture of a motor vehicle as authorized by the new scheme. Md.Code, ³³⁴ Art. 27, § 297(h). The vehicle, a customized van, was seized by the police during the course of the arrest of the driver when controlled dangerous substances and paraphernalia were found on her person and in the van.

The then registered owner of the van, Thomas Dean Goodson, was not present. As the petition gave rise to an in rem civil action, the State proceeded against the van and included the owner, a secured party, “and any other person claiming an interest in the vehicle.” The action culminated in the circuit court by an order which the court refused to revise or amend. The order provided that the van be forfeited, that it be released to the secured party, and that it be sold by the secured party in a commercially reasonable manner, but not to the person, or persons, who was the registered owner prior to this hearing, or to any agent of the registered owner, or owners, or to any other person to whom such sale would defeat the purposes of this statute. This limitation was apparently at the suggestion of the State.

The order spelled out how the proceeds of the sale were to be applied, required that the sale be in cash and vest in the purchaser a clear and absolute title to the van, and called for accountings. All of this purported to be in accordance with certain provisions of Md.Code, Art. 27, § 297. Goodson was not happy with the order and sought relief by way of direct appeal to the Court of Special Appeals. He contended that there was not sufficient evidence to support the forfeiture and that the proviso in the order prohibiting the sale of the van to him was unlawful.

He lost on the first issue and won on the second. The Court of Special Appeals affirmed the order with respect to the forfeiture and reversed that part of the order limiting who may purchase the vehicle. 1983 Chevrolet Van v. State, 67 Md.App. 485 , 508 A.2d 508 (1986). The State took umbrage at the wiping out of its victory below with respect to the sale, and after its motion for reconsideration was denied, looked to this Court. It asked us to issue a writ of certiorari to decide the sole question ³³⁵ [w]hether the trial court erred in placing a restriction in its Order of forfeiture that the secured party could sell the automobile in a commercially reasonable manner but not to the person who was the registered owner prior to the hearing.

We issued the writ. As the case stands before us the only issue is the propriety of that part of the order of the circuit court which forbids the former registered owner to buy the van. Good-son did not file a cross-petition for a writ of certiorari and has apparently become reconciled to the forfeiture and sale of the vehicle. This acceptance of the validity of the forfeiture carries with it that Goodson knew or should have known that the van was used or was to be used in violation of the Controlled Dangerous Substances Act.

Art. 27, § 297(a)(4)(iii). The acceptance of the propriety of a sale by the secured party establishes that the van was “subject to a bona fide recorded security interest created without the knowledge that the motor vehicle was being, or was to be used in violation of [the Controlled Dangerous Substances Act].” Art. 27, § 297(j)(2)(ii). The question is whether the restriction on the sale of the forfeited vehicle imposed by the circuit court is authorized by law. Ill Under the present scheme for the disposition of a motor vehicle forfeited by reason of its use in violations of the drug laws, [i]f ... the court determines that the forfeited motor vehicle is subject to a bona fide recorded security interest created without the knowledge that the motor vehicle was being, or was to be used in violation of [the Controlled Dangerous Substances Act], the court shall order that the motor vehicle be released within 5 days to the secured party of record.

Art. 27, § 297(j)(2)(ii). Whereupon, “[t]he secured party shall sell the motor vehicle in a commercially reasonable manner.” Art. 27, § 297(j)(2)(iii). ³³⁶ The circuit court did not address the propriety of its restriction on the sale in the frame of reference of “commercially reasonable.” It thought that the statute was ambiguous on the matter, but decided that to preserve the legislative intent the former owner must necessarily be precluded from purchasing the vehicle. Otherwise, it explained, “All that would happen is that the owner of the vehicle would have had his lien paid off. It’s sort of a debt clearing process, rather than a forfeiture,” or, in other words, “just a revolving door.” The court saw “no purpose served by the statute by just a technical forfeiture which has no real meaning in the commercial sense.” It believed that the forfeiture law was “designed to say to those whose vehicles are used, with their knowledge ..., illegally in drug trafficking that here is the price you are going to pay,” that is, the car is lost as far as the former owner is concerned.

On the other hand, the Court of Special Appeals found that the requirement that the sale be in a commercially reasonable manner did not proscribe a sale to the former owner. 1983 Chevrolet Van v. State, 67 Md. at 490-491, 508 A.2d 503 . It called on the UCC to support its view. Id. We look at the term “commercially reasonable” to see if it casts light on the issue whether the forfeited vehicles may be sold by the secured party to the former owner.

It is plain that the Legislature attempted to achieve its intent in enacting Acts 1984, ch. 549 by harmonizing the motor vehicle forfeiture provisions of Art. 27, § 297 and the default, repossession and redemption provisions regarding Retail Installment Sales in the Commercial Law Article. As we shall see, it effectively meshed the statutes to that end by its various amendments to the then current law. It is a reasonable assumption, therefore, that when it looked for a manner for the sale of a forfeited motor vehicle subject to a security interest, it adopted a method which had been tested by its use in the sale of collateral when a debtor is in default under a security agreement pursuant to the Uniform Commercial Code sections of the Commercial Law ³³⁷ Article, namely the sale must be in a commercially reasonable manner. Acts 1984, ch. 549 did not define the term, but ample clues to its meaning are provided in the UCC.

Like the sale of a forfeited motor vehicle, the default sale under the UCC is by the secured party. Section 9-504(1). “Disposition of the collateral may be by public or private proceedings ... but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable.” Section 9-504(3) (emphasis supplied). Comment 1 to § 9-504 states: Although public sale is recognized, it is hoped that private sale will be encouraged where, as is frequently the case, private sale through commercial channels will result in higher realization on collateral for the benefit of all parties. The only restriction placed on the secured party’s method of disposition is that it must be commercially reasonable.

Comment 6 emphasizes that the policy adopted is “to encourage disposition by private sale through regular commercial channels.” It warns, however, that under § 9-504(3) “every aspect of the sale or other disposition of the collateral must be commercially reasonable; this specifically includes method, manner, time, place and terms.” Comment 1 notes that § 9-507(2) “states some tests as to what is ‘commercially reasonable.’ ” 2 The tests referred to in the Comment are these: The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the secured party is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. If the secured party either ³³⁸ sells the collateral in the usual manner in any recognized market therefor or if he sells at the price current in such market at the time of his sale or if he has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold he has sold in a commercially reasonable manner____ A disposition which has been approved in any judicial proceeding- or by any bona fide creditors’ committee or representative of creditors shall conclusively be deemed to be commercially reasonable, but this sentence does not indicate that any such approval must be obtained in any case nor does it indicate that any disposition not so approved is not commercially reasonable. Section 9-507 (2). Comment 2 to § 9-507