PEOPLE v. Commercial Credit Corporation, a corporation, Claimant and Respondent.* (1961)

The state's right to a forfeiture of a car under section 11620 of the Health and Safety Code must be determined as of the date the duties of the lienholder and the rights of the state arose, rather than as of the date of the trial of the action when the statute had been amended. We believe that the relevant decisions hold that the amendments cannot bear a retroactive effect and that, as a consequence, the judgment in favor of the lienholder cannot stand.

We set forth the stipulated facts. On July 31, 1959, respondent became the legal owner of a certain 1953 Buick automobile by the purchase of a conditional sales contract. On September 7, 1959, appellant seized the vehicle pursuant to section 11611 of the Health and Safety Code because it had been used unlawfully to transport a narcotic. On October 9, 1959, appellant filed a notice of seizure and intended forfeiture proceedings against the automobile. Subsequent to respondent's answer on October 29, 1959, and upon trial, the court on May 24, 1960, rendered judgment that the vehicle be forfeited to the state subject to a lien in favor of respondent.

After the date of the seizure of the automobile the Legislature, on September 18, 1959, adopted certain amendments to the Health and Satety Code. (Health & Saf. Code, §§ 11610–11622, and Stats.1959, ch. 2085, p. 4816.) Prior to the amendments, the Code required the holder of a bona fide legal interest in a vehicle, in order to protect himself against the possibility of forfeiture, to show, not only that he lacked actual knowledge that the vehicle was to be used to transport narcotics, but also that he had made ‘a reasonable investigation of the moral responsibility, character, and reputation of the purchaser * * *.’ (Former § 11620.) The amended code provisions dispense with the requirement that the holder of the interest demonstrate his reasonable investigation; he need show only that he acquired it without actual knowledge that the vehicle was to be used to transport narcotics. (Health & Saf. Code, § 11619.)

In the instant case the court found that respondent's ‘investigation of the moral responsibility, character and reputation of the purchaser was inadequate under the law as it stood prior to September 18, 1959.’ Respondent did demonstrate that it acquired the legal title without actual knowledge of the intended illegal use of the vehicle; it failed to adduce the reasonable investigation required by section 11620.

The single question thus presented is whether the former or the amended code sections apply. We shall point out that the decisions uniformly hold that under the present circumstances the former sections govern.

The identical issue, arising from a factual situation parallel to the instant one in every material respect save the make and model of the car and the names of the parties involved, was adjudicated in a careful decision of Justice Lillie in People v. One 1959 MG Sport Coupe, 1960, 182 Cal.App.2d 448, 6 Cal.Rptr. 112. The seizure in that case took place on June 3, 1959, and the trial on September 29, 1959. The state, as appellant, contended there as here, ‘that the claims of all legal owners of vehicles seized prior to September 18, 1959, are governed by [former] section 11620, Health & Safety Code.’ 182 Cal.App.2d at page 449, 6 Cal.Rptr. at page 114. In that case, as in the instant one, the state advanced ‘the position that the repeal of section 11620 and the several amendments of other sections of the Code effected a substantive, not a procedural, change in the law, thus requiring the court to give it a prospective operation; and that for a legal owner to protect his lien a reasonable investigation must have been made on automobiles seized before September 18, 1959.’ 182 Cal.App.2d at page 449, 6 Cal.Rptr. at page 114. After reviewing the code provisions as they stood both at the date of seizure and at the date of trial, the court found the state's position to be a valid one and reversed the judgment.

The MG case relied upon our decision in People v. One 1953 Mercury Four Door Sedan, 1959, 174 Cal.App.2d 435, 344 P.2d 637, which upheld a forfeiture claimed by the state for failure of ‘a reasonable investigation within the meaning of section 11620 of the Health and Safety Code.’ 174 Cal.App.2d at page 436, 344 P.2d at page 639. Although the Legislature repealed the section and amended section 11619 prior to the date of our ruling, we stated that ‘we apply and construe the section as it was formulated at the time the instant case arose.’ 174 Cal.App.2d at page 436, footnote 1, 344 P.2d at page 638.

Our decision, in turn, relied upon cases (People v. One 1952 Ford Sedan, 1956, 146 Cal.App.2d 183, 303 P.2d 832; People v. One 1955 Chevrolet Bel Air, 1958, 157 Cal.App.2d 851, 321 P.2d 870), which respondent urges do not apply. These decisions, according to respondent, pertain to the 1955 amendments (Stats.1955, ch. 1209, p. 2223, § 5), which defined the nature of a reasonable investigation, specifying certain factual situations that fulfilled the standard. The 1959 amendments, says respondent, abolished the requirement for the investigation itself. It is true that the 1955 amendments reduced in part the burden of relief from forfeiture, and that the 1959 amendments alleviated that burden to a far greater extent. But the statute still imposes upon the lienholder the obligation of showing that he acquired his interest ‘without actual knowledge that the vehicle was to be used’ for the illicit purposes. The vehicle will still be forfeited if the lienholder fails to make that showing. That the Legislature has reduced the extent of the required showing does not mean that, without a further showing of its intent, the Legislature intended the amendments to be retroactive. The retroactivity of the amendments cannot depend upon the weight of the lienholder's burden. See Krause v. Rarity, 1930, 210 Cal. 644, 293 P. 62, 77 A.L.R. 1327; Aetna Cas. & Surety Co. v. Ind. Acc. Comm. 1947, 30 Cal.2d 388, 182 P.2d 159.

The MG case has recently been followed in People v. One 1955 Buick 2-Door Coupe, 1960, 187 Cal.App.2d 684, at page 688, 10 Cal.Rptr. 79, at page 81, the court saying, ‘Section 11620 of the Health and Safety Code provides for a defense to holders of bona fide liens, mortgages or conditional sales contracts in an action for the forfeiture of a vehicle. This section was amended in 1959 (by eliminating the requirements of a reasonable investigation but not changing the class of persons entitled to assert a defense as lienholders); however, the amendment did not become effective until after the date of the seizure of the defendant vehicle in this case and therefore does not apply in this matter. People v. One 1959 M.G. Sport Coupe, 182 Cal.App.2d 448, 6 Cal.Rptr. 112.’

Contending that ‘the MG decision was wrong and that this Court should be persuaded to the contrary,’ and seeking to avoid the impact of all the foregoing decisions, respondent urges, first, that the alleged legislative repeal of the forfeiture provision extinguishes any such right as to a case which must be carried to judgment after an amendment, and, second, that since the only law in effect at the date of the commencement of the present action did not provide for forfeiture, none can be effected.

In support of its first argument, respondent relies upon the language of Department of Social Welfare v. Wingo, 1946, 77 Cal.App.2d 316, at page 320, 175 P.2d 262, at page 264 to the effect that, ‘where a cause of action unknown at the common law has been created by statute and no vested or contractual rights have arisen under it the repeal of the statute without a saving clause before a judgment becomes final destroys the right of action.’

That the situation differed in Wingo from the instant one becomes clear from Board of Social Welfare v. County of L.A., 1945, 27 Cal.2d 90, 162 P.2d 635. Section 2223 of the Welfare and Institutions Code had provided that if a recipient of aid had been ‘possessed of property or income in excess of the amount’ allowed and that he had not disclosed this fact to the board of supervisors, the department could recover from his estate double the amount paid him. The Legislature thereafter amended the section to provide that if the recipient had received the aid in good faith, the penalty would be reduced to repayment of aid ‘received during such period of ineligibility.’ (Welf. & Inst. Code, § 2223.5.) The Supreme Court held that the latter section merely clarified ‘the uncertain language of section 2222’ and gave definition to the legislative terminology of the statute. 27 Cal.2d at page 97, 162 P.2d at page 639. The subsequent legislation did not give “a retroactive effect to a statute, because the meaning of the statute to be interpreted has always been the same.” 27 Cal.2d at page 97, 162 P.2d at page 639.

While it is true that Wingo talks in terms of section 2223.5 as an amendment to section 2223, and County of L.A. discusses the effect of section 2223.5 upon section 2222, an examination of the statutes demonstrates the applicability of the latter case. Section 2222 creates the duty of repayment upon the part of the recipient if he receives property in excess of that allowable under the statutory scheme. Section 2223 provides a means for enforcing the government's right of recovery in the event of the recipient's noncompliance with that section. A statutory change which interprets section 2222 thus equally affects section 2223. The two sections compose parts of the single design of the Legislature for the repayment by a claimant of aid improperly received. An interpretation of one section is necessarily an interpretation of the other.

The clarifying amendment as to the meaning of a statute, such as occurred in Wingo, suggests a different situation than the instant one, which represents a legislative change of substance in the requirements imposed upon a lienholder to avoid a forfeiture. The instant amendments do more than tell us the content of the original legislative intent; they change the legal consequences that attend the acts of the lienholder; they alter the lienholder's obligations.

As the court in MG holds, the statutory changes, articulating the rights and obligations of the parties rather than the adjective rules of court, affect substance, not procedure, and operate prospectively. The elimination of the requirement of a reasonable investigation ‘operated on the lienholder's defense to the State's cause of action affecting a substantive right—not on the rules of the court—and as such, it constituted a substantive change and not a procedural one which would affect the remedies, methods of enforcement or rules of evidence [citation]; and following the rule that amendatory acts, no less than original enactments, will not be given retrospective operation on substantive rights in the absence of a declared intention to make them such [citations], we deem application of the present law to the bank's interest in the vehicle seized on June 3, 1959, to be in error.’ 182 Cal.App.2d at page 452, 6 Cal.Rptr. at page 115.

The opinion in the MG case, indeed, discusses the very cases upon which respondent relies; these cases (Anderson v. Ott, 1932, 127 Cal.App. 122, 15 P.2d 526; Sharp v. Blankenship, 1881, 59 Cal. 288; Booker v. Castillo, 1908, 154 Cal. 672, 98 P. 1067), differentiate the procedural from the substantive type of amendment; they do not even intimate, as respondent urges in this case, that a substantive amendment as to the conditions precedent to a forfeiture carries a retroactive effect.

Finally, respondent argues ‘that the test is not whether an amendment is ‘substantive’ or ‘procedural’, but rather whether, in the case of the partial repeal of a statutory forfeiture procedure, the change affects ‘vested’ or ‘inchoate’ rights.' It contends that the state's ‘inchoate’ right of forfeiture ‘fell with the amendment removing bona fide liens from the effect of the statutory procedure without regard to any police-type investigation.’ We need not discuss whether the right of the state was vested or inchoate, although it was, in fact, inchoate, because the involved amendments did not repeal the penalty of forfeiture; they changed the terms and conditions producing it. The same interests are subject to forfeiture under both prior statute and present amendment; the amendments only relieve the lienholder from the burden of showing that he has made a reasonable investigation of the moral responsibility, character, and reputation of the purchaser. The state's right to forfeiture pre-existed the amendments and survived them.

Respondent states its second proposition in these terms: ‘Whatever the effect of the amendment upon cases in which the forfeiture proceedings had been instituted prior to the effective date of the amendment to the law, on the day on which this forfeiture proceeding was commenced the only statute in force and effect was the amended one under which no proof of investigation was a condition of preserving a legal owner's interest.’ Respondent apparently contends that, unlike the trial court in MG, the only statutory authority upon which the court in the instant case could have proceeded did not contain a requirement for an investigation. Does not respondent, however, confuse the court's power to proceed, which remained unchanged by the 1959 amendments, with the court's determination of the law applicable to the issue? That the amended statutes were on the books at the time the proceedings began does not alter the basic rule that, in determining the substantive rights and duties of the parties, the court must decide which statute applied when those rights and duties arose.

Respondent warns that if we do not reject the prior holdings on this issue and decide the case upon ‘established rules' we may ‘create a precedent of unfortunate application for the future.’ Our case, however, devolves from special facts: a situation in which the state seized a car used for illegal purposes and proceeded under a statute which thereafter, and before judgment, changed the nature of the showing required of the lienholder to avoid the forfeiture. The case carries no great future overtones; in view of the amendment of the statute, it involves a nonrecurrent situation; it does not impel the overturning of the specific precedents.

We reverse the judgment with directions that a judgment be entered vesting all right, title and interest in appellant.

TOBRINER, Justice.

BRAY, P. J., and SULLIVAN, J., concur.