Does a Texas county have to refund pretrial diversion fees it had no authority to collect?

Plain-English summary

A Hopkins County Attorney inherited a problem from her predecessor. The prior county attorney had run a pretrial diversion program that let people charged with misdemeanors avoid prosecution by paying a "fee" into a special "pretrial account." Earlier Attorney General opinions had already concluded that a prosecutor may not condition pretrial diversion on a payment like this. The account held about $26,470, and the new county attorney asked what to do with it: keep it, refund it, or something else, and what to do with the accrued interest and with money she could not trace back to a specific payer.

The Attorney General concluded the money had to be refunded. Because the county attorney had no authority to collect the fees in the first place, the funds never became the property of the county or its attorney's office. Texas courts treat a fee collected without statutory authority as not belonging to the government that took it.

The opinion also addressed the "voluntary payment rule," which sometimes blocks a refund of an unauthorized fee that someone paid by mistake of law. The Attorney General concluded the rule probably did not apply here, and that even if it did, the payers would still win, because they paid under duress: refusing to pay meant criminal prosecution, a penalty the county attorney could impose on his own without going to court. On the interest question, the opinion applied the common-law rule that interest follows principal, so the interest belonged to the people who paid the fees too. Finally, for money that could not be returned because the payer was unknown or could not be found after a reasonable effort, the opinion concluded the funds could become abandoned property that the county must report and deliver to the Comptroller of Public Accounts under chapter 74 of the Property Code.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

A county attorney holding funds from an unauthorized diversion program (what the opinion held): The opinion concluded that the accumulated fees, and the interest they earned, had to be returned to the individuals who paid them, because the office had no authority to collect them and so the money was not county property.

People who paid pretrial diversion fees (what the opinion held for them): The opinion concluded that they were entitled to a refund of both the fees and the interest, and that the voluntary payment rule did not defeat the refund because the payments were made under duress (the alternative was prosecution).

The Hopkins County Attorney, who asked (the scope of the answer): The opinion answered all three questions: refund the fees, refund the interest with them, and, for money whose payer cannot be located after reasonable effort, report and deliver it to the Comptroller as abandoned property under chapter 74 of the Property Code.

Common questions

Can a Texas prosecutor keep fees collected under an unauthorized pretrial diversion program?
No. Under this opinion, because the county attorney had no statutory authority to collect the fees, the money did not belong to the county or the prosecutor and had to be returned to the people who paid it.

Does the "voluntary payment rule" stop these refunds?
The opinion concluded it probably did not apply, and that even if it did, the payers would still be entitled to a refund because they paid under duress. Failure to pay meant criminal prosecution, a penalty the county attorney could impose without resort to the courts.

Who gets the interest that built up in the account?
The people who paid the fees. The opinion applied the common-law rule that interest follows principal, so interest earned on the fees belonged to the same individuals.

What happens to money that cannot be traced back to a payer?
The opinion concluded that, after a reasonable effort to locate the payers, unclaimed funds may become abandoned property the county must report and deliver to the Comptroller of Public Accounts under chapter 74 of the Property Code.

Background and statutory framework

The request followed two earlier opinions. In Attorney General Opinion JC-0042 (1999), the office concluded that a prosecutor may not defer prosecution in exchange for an offender's agreement to contribute money to a public or private organization, and Attorney General Opinion JC-0119 (1999) reiterated that a prosecutor may not, under any circumstances, condition participation in a pretrial diversion program on a contribution to a nonprofit entity. The predecessor county attorney's program nonetheless required misdemeanor defendants to pay a "fee" into a "pretrial account," which by the time of the request held $26,470.

On the refund question, the opinion relied on Camacho v. Samaniego, 954 S.W.2d 811 (Tex. App.-El Paso 1997, pet. denied), in which the El Paso Court of Appeals held that bail bond companies were entitled to a refund of unauthorized bail bond filing fees, reasoning that "[a] tax or fee collected without statutory authority should not be considered the property of the governmental entity." Camacho, 954 S.W.2d at 825. The opinion noted that, by contrast, a statute did authorize a nonrefundable filing fee for the El Paso County pretrial diversion program, to be deposited in the county's general fund. Cf. Tex. Gov't Code Ann. § 54.745 (Vernon 1998).

On the voluntary payment rule, the opinion explained that Texas courts have held that voluntary payment of an illegal tax or fee based on a mistake of law generally will not support repayment, and that a refund is available only on a showing of fraud, mutual mistake of fact, or duress. Camacho, 954 S.W.2d at 826. Applying the two-element duress test from Camacho (the type of detriment from non-payment, and whether the government can impose a penalty without going to court), the opinion concluded both elements were met here: failure to pay meant criminal prosecution, and the county attorney could impose that penalty unilaterally.

On interest, the opinion applied the common-law rule that interest follows principal, quoting Phillips v. Washington Legal Found., 524 U.S. 156, 165-66 (1998), which in turn quoted Beckford v. Tobin, 1 Ves. Sen. 308, 310, 27 Eng. Rep. 1049, 1051 (Ch. 1749). Texas follows the same rule. Sellers v. Harris County, 483 S.W.2d 242, 243 (Tex. 1972); Lawson v. Baker, 220 S.W. 260, 272 (Tex. Civ. App.-Austin 1920, writ ref'd). As the Texas Supreme Court put it in Sellers, interest is an increment that accrues to the principal fund and, unless lawfully separated, becomes part of it. Sellers, 483 S.W.2d at 243.

On unclaimed funds, the opinion turned to chapter 74 of the Property Code, which governs property presumed abandoned and provides a means for absent owners to reclaim it. Melton v. State, 993 S.W.2d 95 (Tex. 1999); Tex. Prop. Code Ann. §§ 74.001-.710 (Vernon 1995 & Supp. 2002). A holder of presumed-abandoned property must annually report and deliver it to the Comptroller. Tex. Prop. Code Ann. §§ 74.001, .101, .201, .301 (Vernon Supp. 2002). Personal property is generally presumed abandoned if, for longer than three years, the owner's existence and location are unknown to the holder and no claim or act of ownership has been made. Tex. Prop. Code Ann. § 72.101 (Vernon 1995). Once property is presumed abandoned, the Comptroller steps into the absent owner's shoes. Tex. Dep't of Banking v. Mount Olivet Cemetery, 27 S.W.3d 276, 284 (Tex. App.-Austin 2000, pet. denied).

Citations

Statutory provisions:

• Tex. Gov't Code Ann. § 54.745 (Vernon 1998)
• Tex. Prop. Code Ann. §§ 74.001-.710 (Vernon 1995 & Supp. 2002)
• Tex. Prop. Code Ann. §§ 74.001, .101, .201, .301 (Vernon Supp. 2002)
• Tex. Prop. Code Ann. § 72.101 (Vernon 1995)

Cases:

• Camacho v. Samaniego, 954 S.W.2d 811 (Tex. App.-El Paso 1997, pet. denied)
• Phillips v. Washington Legal Found., 524 U.S. 156, 165-66 (1998)
• Beckford v. Tobin, 1 Ves. Sen. 308, 310, 27 Eng. Rep. 1049, 1051 (Ch. 1749)
• Sellers v. Harris County, 483 S.W.2d 242, 243 (Tex. 1972)
• Lawson v. Baker, 220 S.W. 260, 272 (Tex. Civ. App.-Austin 1920, writ ref'd)
• Melton v. State, 993 S.W.2d 95 (Tex. 1999)
• Tex. Dep't of Banking v. Mount Olivet Cemetery, 27 S.W.3d 276, 284 (Tex. App.-Austin 2000, pet. denied)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0463
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2002/jc0463.pdf

Original opinion text

Best-effort transcription from the official scanned PDF. Minor character-level errors from the source OCR have been corrected; the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS

JOHN CORNYN

February 12, 2002

The Honorable Dustanna Rabe
Hopkins County Attorney
110 Main Street
Sulphur Springs, Texas 75482

Opinion No. JC-0463

Re: Disposition of funds previously accumulated under pretrial diversion agreements (RQ-0437-JC)

Dear Ms. Rabe:

You ask about the disposition of funds previously accumulated under unauthorized pretrial diversion agreements.[1] We conclude that the accumulated "pretrial diversion fees" and the interest earned on those fees must be returned to the individuals who paid those fees. We also conclude that unclaimed fees and interest earnings on those fees may become abandoned property that must be reported and delivered to the Comptroller of Public Accounts.

Your request is a follow-up to Attorney General Opinion JC-0042, in which this office concluded that a prosecutor, such as the Hopkins County Attorney, may not enter into an agreement with an offender whereby the prosecutor will defer prosecution in exchange for the offender's agreement to contribute money to a public or private organization. See Tex. Att'y Gen. Op. No. JC-0042 (1999). In Attorney General Opinion JC-0119, this office reiterated the conclusion reached in Attorney General Opinion JC-0042: "[A] prosecutor may not, under any circumstances, condition participation in a pretrial diversion program upon a contribution to a nonprofit entity." Tex. Att'y Gen. Op. No. JC-0119 (1999) at 2. Your predecessor in office implemented a program that allowed certain individuals charged with misdemeanor crimes to enter into a pretrial diversion agreement in lieu of prosecution. See Request Letter, supra note 1, at 1. Under the program, an individual was placed on "probation" and monitored solely by the county attorney's office. See id. The pretrial agreement required the individual to pay a pretrial diversion "fee" that was deposited into a "pretrial account" established by your predecessor. See id. But see Tex. Att'y Gen. Op. No. JC-0042 (1999) at 1 ("The prosecutor requires, as a quid pro quo, the offender to contribute to an organization selected by the prosecutor, which may be governmental . . . or private . . . .") (emphasis added). This account has a balance of $26,470. See Request Letter, supra note 1, at 1. In light of Attorney General Opinion JC-0042, you believe the funds in the "pretrial account" established by the previous county attorney "may have been collected inappropriately," and you are concerned about the disposition of the funds. See id. at 2.

You ask:

1) [W]hat do you recommend the County Attorney's office do with money that remains in a pre-trial diversion fund set up by the previous county attorney?

2) In the event your response is [that] the money collected shall be returned to those who contributed to the account, what shall be done if we cannot locate complete records indicating who has paid into the account[?]

3) [W]hat shall be done with any interest that has accrued on the account[?]

Request Letter, supra note 1, at 1.

With respect to your first question, we conclude that pretrial diversion fee moneys that remain in the pretrial diversion fund must be returned to the individuals who paid those fees. See Camacho v. Samaniego, 954 S.W.2d 811 (Tex. App.-El Paso 1997, pet. denied) (holding that bail bond companies were entitled to refund of the unauthorized bail bond filing fees collected by sheriff from companies). They do not belong to the county attorney's office nor to the county because the county attorney was not authorized to collect the pretrial diversion fees. See id. at 825 ("A tax or fee collected without statutory authority should not be considered the property of the governmental entity."). We are unaware of any statutory authority, and you do not direct us to any, that would allow or require the county attorney's office or the county to retain these funds. Cf. Tex. Gov't Code Ann. § 54.745 (Vernon 1998) (providing that nonrefundable filing fee collected under pretrial diversion program operated in El Paso County must be deposited in county's general fund).

We do not believe the "voluntary payment rule" precludes the return of the pretrial diversion fees. According to this rule, the fact that a fee is not authorized does not necessarily mean that a person who has paid the fee is entitled to a refund. See Tex. Att'y Gen. Op. No. JC-0286 (2000) at 4. Texas courts have consistently held that voluntary payment of an illegal tax or fee, based on a mistake of law, will not support a claim for repayment. See Camacho, 954 S.W.2d at 825-26 (citing cases); see also Tex. Att'y Gen. Op. No. JC-0286 (2000) at 5 ("If the equipment dealer here acted under the mistaken conclusion that he was legally required to prepay taxes in 1999, that would have been a mistake of law."). A person who has voluntarily paid an illegal tax or fee "can receive a refund only upon a showing that the payment resulted from fraud, mutual mistake of fact, or duress, whether implied or express." Camacho, 954 S.W.2d at 826. We have found no instance in which a Texas court has applied the voluntary payment rule to funds collected by a prosecutor directly from individuals charged with criminal misconduct in lieu of prosecution, as involved here. But even assuming that a court would apply the rule in this context, we believe a court would hold that the individuals who paid the pretrial diversion fees were entitled to repayment because the fees were paid under duress. Failure to pay the pretrial diversion fees would have had a serious detrimental effect—prosecution—on the individuals charged with misdemeanors; and the county attorney could impose this detriment on the individuals without recourse to the courts. See id. at 825.

Similarly, in Camacho, the El Paso Court of Appeals held that bail bond companies were entitled to refund of illegal fees paid to the sheriff on each misdemeanor and surety bond issued by these companies because the fees were paid under duress. See id. at 814, 825-26. The Camacho court, after reviewing the cases that addressed the repayment of illegal taxes or fees, identified two elements that distinguished a fee or tax paid under duress from a voluntary payment: (1) the type of detriment that results to the taxpayer from a failure to pay; and (2) the type of mechanism available to the governmental entity to ensure payment. See id. at 826. The Camacho court noted that the first element is met if failure to pay the tax or fee will foreclose the ability of a business to continue operation, or cause financial loss or closure of the business. See id. With respect to the second element, the court explained that "[i]f the [governmental] entity has to seek payment through the courts, such as a suit to collect back property taxes, then no duress is present," but "[i]f the governmental authority can impose a penalty without recourse to the courts, however, then duress is present." Id. In the case before it, the Camacho court concluded that the first element was met because failure to pay the bail bond fee would have prevented the bail bond companies from issuing surety bonds, i.e., they could not conduct their business. See id. at 827. The second element was also met because failure to pay the fee would have meant that the surety bond would not be processed by the sheriff. See id. In other words, the county could impose the penalty without recourse to the courts. See id.

Here, failure to pay the pretrial diversion fees would have resulted in criminal prosecution of individuals charged with misdemeanors. And this penalty—the prosecution itself—could be imposed unilaterally by the county attorney. Therefore, there was "duress." Thus, even if the voluntary payment rule applied here, which is doubtful, individuals who paid the fees would be entitled to a refund.

In answer to your third question regarding the disposition of interest earnings, we conclude that interest earned on the pretrial diversion fees deposited in the pretrial account must also be returned to the individuals who paid those fees. Under the common law, interest follows principal, or, more poetically, "'[I]nterest shall follow the principal, as the shadow the body.'" Phillips v. Washington Legal Found., 524 U.S. 156, 165-66 (1998) (quoting Beckford v. Tobin, 1 Ves. Sen. 308, 310, 27 Eng. Rep. 1049, 1051 (Ch. 1749)). Texas courts follow the common-law rule. See Sellers v. Harris County, 483 S.W.2d 242, 243 (Tex. 1972); Lawson v. Baker, 220 S.W. 260, 272 (Tex. Civ. App.-Austin 1920, writ ref'd); accord Phillips, 524 U.S. at 165-66. As the Texas Supreme Court has stated, "Interest . . . is an increment that accrues" to the principal fund earning it, and, unless lawfully separated from the principal, becomes part of the principal. Sellers, 483 S.W.2d at 243. Thus, the interest accruing to the "pretrial account" accrues to the "principal" of the fees and the individuals who paid them. In the absence of a statutory provision allowing the retention of the interest or any part of it, all the interest must be returned to those who paid the "principal" or the pretrial diversion fees. See Tex. Att'y Gen. Op. No. JC-0195 (2000) at 11 (interest accruing to cash bail bonds accrues to principal of bonds and their owners; county may not retain any interest earned on cash bail bonds).

Finally, you ask about the disposition of the funds in the pretrial account if your office "cannot locate complete records indicating who has paid into the [pretrial] account." Request Letter, supra note 1, at 1. You note that "[w]ithout complete records, the possibility exists there will be unidentifiable funds remaining in the account." Id.

The county attorney's office must, of course, make a reasonable effort to return the pretrial diversion fees and the interest earned on those fees to the individuals who paid the fees. But assuming those individuals cannot be located or are unknown, we conclude that those funds may become abandoned property that must be reported and delivered to the Comptroller of Public Accounts pursuant to chapter 74 of the Property Code. See Tex. Prop. Code Ann. §§ 74.001-.710 (Vernon 1995 & Supp. 2002). Chapter 74 of the Property Code governs property that is presumed abandoned and is "designed to provide a means for absent owners to reclaim their property." Melton v. State, 993 S.W.2d 95 (Tex. 1999). In furtherance of that purpose, chapter 74 sets out a procedure whereby a person holding property that is presumed abandoned pursuant to chapters 72, 73, or 75 of the Property Code must annually report and deliver such property to the Comptroller of Public Accounts. See Tex. Prop. Code Ann. §§ 74.001 (applicability); .101 (holder required to file property report with Comptroller); .201 (Comptroller to give notice after report filed); .301 (delivery of property to Comptroller) (Vernon Supp. 2002). In general, personal property is presumed abandoned if for longer than three years: (1) the existence and location of the owner of the property is unknown to the holder of the property; and (2) according to the knowledge and records of the holder of the property, a claim to the property has not been asserted or an act of ownership of the property has not been exercised. See id. § 72.101 (Vernon 1995). Once property is presumed abandoned, the Comptroller of Public Accounts assumes responsibility for it and, in effect, steps into the absent owner's shoes. See Tex. Dep't of Banking v. Mount Olivet Cemetery, 27 S.W.3d 276, 284 (Tex. App.-Austin 2000, pet. denied). "The purpose of removing abandoned property from the possession of the holder is to relieve that holder of any further liability with regard to such property and place it in the hands of the State, thereby providing a means for the absent owner to reclaim the abandoned property." Mt. Olivet, 27 S.W.3d at 284.

SUMMARY

Unauthorized accumulated "pretrial diversion fees" and the interest earned on the fees must be returned to the individuals who paid those fees. Unclaimed fees and interest earnings may become abandoned property that must be reported and delivered to the Comptroller of Public Accounts pursuant to chapter 74 of the Property Code.

Yours very truly,

JOHN CORNYN
Attorney General of Texas

HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN DENMON GUSKY
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Dustanna Rabe, Hopkins County Attorney, to Honorable John Cornyn, Texas Attorney General (Sept. 18, 2001) (on file with Opinion Committee) [hereinafter Request Letter].