State v. Morales

222

Argued and submitted September 23; decision of Court of Appeals reversed,

judgment of circuit court reversed, and case remanded to circuit court for

further proceedings November 19, 2020

STATE OF OREGON,

Respondent on Review,

v.

GERARDO MORALES,

Petitioner on Review.

(CC 150034CR) (CA A166240) (SC S067225)

476 P3d 954

Defendant was convicted of various sex offenses following a trial at which

he was represented by a court-appointed attorney. Following his conviction, the

state requested that the defendant be required to pay attorney fees for his court-

appointed counsel. Defendant objected, arguing that the trial court could not find

that he had the ability to pay those fees, as required by ORS 161.665(4). The trial

court imposed attorney fees based on money deposited by defendant’s mother as

security for defendant’s pretrial release. The Court of Appeals affirmed without

opinion. Held: Funds paid by and belonging to a third party cannot be the sole

basis for a finding that a defendant has the ability to pay court-ordered costs such

as attorney fees. Because the trial court determined that defendant here did not

have the ability to pay, it was error to impose fees on the basis of the third party’s

security payment alone.

The decision of the Court of Appeals is reversed. The judgment of the cir-

cuit court is reversed, and the case is remanded to the circuit court for further

proceedings.

En Banc

On review from the Court of Appeals.*

Shawn E. Wiley, Deputy Public Defender, Office of Public

Defense Services, Salem, argued the cause and filed the

briefs for petitioner on review. Also on the briefs was Ernest

G. Lannet, Chief Deputy Defender.

Adam Holbrook, Assistant Attorney General, Salem,

argued the cause and filed the brief for respondent on review.

Also on the brief were Ellen Rosenblum, Attorney General,

and Benjamin Gutman, Solicitor General.

______________

* On appeal from Hood River County Circuit Court, Karen Ostrye, Judge.

299 Or App 521, 449 P3d 593 (2019).

Cite as 367 Or 222 (2020) 223

BALMER, J.

The decision of the Court of Appeals is reversed. The

judgment of the circuit court is reversed, and the case is

remanded to the circuit court for further proceedings.

224 State v. Morales

BALMER, J.

The issue before the court is whether funds depos-

ited by a third party as security for release of a criminal

defendant prior to trial can provide the basis for imposing

attorney fees on the defendant, when the defendant does not

otherwise have the ability to pay those fees. Here, the trial

court found that defendant did not have the ability to pay

fees, but it nevertheless ordered payment of fees from secu-

rity funds deposited by defendant’s mother. For the reasons

set out below, we hold that, because the trial court deter-

mined that defendant did not have the ability to pay, it was

error to impose fees on the basis of the third party’s security

payment alone.

The relevant facts are primarily procedural. Defen-

dant was indicted on various sex crime charges and, after

the trial court set bail, defendant’s mother paid $20,000 as

security for defendant’s release prior to trial.1 The notice

defendant’s mother signed when depositing the security

funds on defendant’s behalf stated that “[t]he Court may

order that the security deposit be applied to any fines, costs,

assessments, restitution, contribution, recoupment, or other

monetary obligations that are imposed on the defendant.”

Defendant was represented by court-appointed counsel at

trial, after which the jury found defendant guilty of several

sex offenses.

Following those convictions, the state requested

that defendant be required to pay attorney fees for his court-

appointed counsel. Defendant objected on the ground that

the court could not find that he had the ability to pay attor-

ney fees. The state argued that when a third party makes

a security deposit on behalf of a criminal defendant—as

defendant’s mother did here—that third party is informed

that fees or fines might be paid out of that deposit. For that

reason, the state argued, those funds are available to pay

court-ordered fees and the defendant therefore has the

1

While we primarily use the term “security” in this opinion, like the trial

court and the parties, we sometimes use the older term “bail” as shorthand to

describe pretrial release or the amount of security deposit required for such

release. See Rico-Villalobos v. Giusto, 339 Or 197, 200 n 2, 118 P3d 246 (2005)

(discussing those terms).

Cite as 367 Or 222 (2020) 225

“ability to pay” such fees out of the security amount. The

court imposed $5,000 in attorney fees and ordered it to be

paid out of the money deposited by defendant’s mother as

security for his pretrial release. The court described its find-

ings as follows:

“THE COURT: * * * I didn’t find that [defendant] had the

ability to pay [attorney fees]. I found that there was bail

sufficient to cover them. And that’s the only finding I could

reasonably make, and so that’s the finding I did make.”

Defendant appealed, arguing, inter alia, that the

trial court erred in applying the security funds paid by his

mother to the attorney fees without determining defendant’s

ability to pay, as required by statute. The Court of Appeals

affirmed without opinion. State v. Morales, 299 Or App 521,

449 P3d 593 (2019). We allowed review to examine whether

evidence that a third party paid a security deposit on behalf

of a criminal defendant is sufficient on its own to find that

that defendant had the ability to pay court-imposed attor-

ney fees.

This question requires us to construe two statutes

together—ORS 135.265 and ORS 161.665. When a criminal

defendant is not conditionally released or released on per-

sonal recognizance, the judge “shall set a security amount

that will reasonably assure the defendant’s appearance” at

future court proceedings in the case. ORS 135.265(1). The

next section of the statute reads as follows:

“The defendant shall execute a release agreement and

deposit with the clerk of the court before which the pro-

ceeding is pending a sum of money equal to 10 percent of

the security amount[.] * * * When conditions of the release

agreement have been performed and the defendant has

been discharged from all obligations in the cause, the clerk

of the court shall return to the person shown by the receipt

to have made the deposit, unless the court orders other-

wise, 85 percent of the sum which has been deposited * * *.”

ORS 135.265(2). ORS 135.265(2) thus provides that, upon

payment of 10 percent of the security amount and the exe-

cution of a release agreement, the defendant is released.

After the conditions of the release agreement have been

performed and the defendant has been discharged from all

226 State v. Morales

obligations in the case, the remainder of the security amount

is returned to the person who made the deposit “unless the

court orders otherwise.” ORS 135.265(2). Practically speak-

ing, then, if the court is authorized to impose fees or costs on

a defendant, ORS 135.265(2) allows the court to order that

those fees or costs be paid out of the security amount.

The question in this case involves the circumstances

in which a court may “order[ ] otherwise,” and not return

the remaining security funds to the person who made the

deposit. As relevant here, following the conviction of a crim-

inal defendant, the court “may include in its sentence there-

under a money award for all costs specially incurred by the

state in prosecuting the defendant * * * includ[ing] a reason-

able attorney fee for counsel appointed” by the court. ORS

161.665(1). ORS 161.665(4) imposes certain requirements

before a defendant may be ordered to pay costs:

“The court may not sentence a defendant to pay costs

under this section unless the defendant is or may be able to

pay them. In determining the amount and method of pay-

ment of costs, the court shall take account of the financial

resources of the defendant and the nature of the burden

that payment of costs will impose.”

(Emphases added.)

The Court of Appeals has held that “a trial court

errs as a matter of law if it orders a defendant to pay court-

appointed attorney fees without making [the] required find-

ing” of the defendant’s ability to pay. State v. Mickow, 277

Or App 497, 500, 371 P3d 1275 (2016). The imposition of fees

cannot be “based on pure speculation that a defendant has

funds to pay the fees or may acquire them in the future,”

but rather the record must contain “some information from

which the court can find the statutorily required factual

predicate to imposition of the fees: that the defendant ‘is or

may be able to pay’ them.” State v. Pendergrapht, 251 Or App

630, 634, 284 P3d 573 (2012).

Thus, before imposing fees, the trial court must

complete a two-step process: first, the court must determine

if the defendant “is or may be able to pay” the fees, and,

second, the court must determine the amount of costs to be

repaid. It appears to follow necessarily from the text of the

Cite as 367 Or 222 (2020) 227

statute that, if a trial court is unable to find that the defen-

dant “is or may be able to pay” the fees—or, to phrase it in

the affirmative, if the trial court finds that the defendant

does not have the ability to pay—the inquiry ends, and the

court may not impose fees in any amount.

The parties here do not dispute that the require-

ment in ORS 135.265(2) that the security deposit be returned

“unless the court orders otherwise” gives a trial court

authority to exercise its discretion, subject to other statu-

tory requirements, to apply the funds deposited as security

to financial obligations imposed in the judgment—including

attorney fees imposed under ORS 161.665. The parties also

do not dispute that, prior to the imposition of attorney fees

under that section, the trial court is required to determine

the defendant’s “ability to pay” using the criteria set out

in ORS 161.665(4). What the parties do dispute, however,

is whether funds deposited by a third party as security for

release of a criminal defendant prior to trial can provide the

basis for imposing attorney fees on a defendant who does not

otherwise have the ability to pay those fees. For assistance

answering that question, we turn to the text and history of

the relevant statutes.

Both of the statutes at issue here—ORS 135.265 and

ORS 161.665—were based on the work of the 1971 Criminal

Law Revision Commission. Oregon law, however, has always

permitted courts to require a defendant to deposit security

funds and then later to apply the money deposited to costs

and fines imposed as part of the judgment:

“When money has been deposited in lieu of bail, if it remain

on deposit at the time of a judgment for the payment of

money, the clerk must, under the direction of the court,

apply the money in satisfaction thereof, and after sat-

isfying the same, must refund the surplus, if any, to the

defendant.”

General Laws of Oregon, Crim Code, ch XXV, § 283, p 489

(Deady 1845-1864).

Both defendant and the state discuss two cases

from the 1920s, where this court interpreted a later version

of the statute in the Deady Code and stated that, under the

statute, “money deposited by a third person in lieu of bail for

228 State v. Morales

one charged with a criminal offense is presumed to belong

to the defendant[.]” Rosentreter v. Clackamas County, 127 Or

531, 534, 273 P 326 (1928) (citing Erickson v. Marshfield, 94

Or 705, 710, 186 P 556 (1920)). In Erickson, the plaintiff—

Erickson—sued the city of Marshfield to recover the $100

bail he had paid on behalf of a criminal defendant, Foote,

on a nuisance charge. Id. at 706. That nuisance charge was

dismissed, but Foote ultimately was convicted of a different

charge, for which a $100 fine was imposed. Id. at 705-06. The

court noted that, in some states, there is a presumption that

money deposited as security belongs to a criminal defendant

on whose behalf the money was deposited, and determined

that the statute it interpreted—which required that surplus

funds be returned “to the defendant”—also contained such

a presumption. Id. at 708-10 (“Under the provisions of the

statute above quoted the defendant in the charge, with the

approval of the court, may furnish cash bail, and it appears

that when so furnished by a third party it shall be deemed

and treated as the money of the defendant on the charge.”).

However, in that case, the court concluded that, because

the testimony and evidence was conclusive that the money

deposited instead belonged to Erickson—rather than Foote,

the defendant—and was deposited on a charge other than

the one for which the fine was imposed, the presumption had

been overcome. Id. at 710-11.

In the 1970s, the legislature began to reconsider the

structure of the criminal justice system in Oregon, includ-

ing bail. Following the recommendations of the Criminal

Law Revision Commission, the legislature in 1974 revised

the existing statute regarding the return of money depos-

ited in lieu of bail (and introduced the term “security” in

place of “bail”):

“When conditions of the release agreement have been per-

formed and the defendant has been discharged from all obli-

gations in the cause, the clerk of the court shall return to

the accused, unless the court orders otherwise, 90 percent

of the sum which has been deposited and shall retain as

security release costs 10 percent of the amount deposited.”

ORS 135.265(2) (1974). Although the 1974 statute and the

Deady Code provision contain minor differences in wording,

Cite as 367 Or 222 (2020) 229

both statutes, notably, provided that funds in excess of costs

be returned to the defendant.

Oregon courts continued to apply the presumption

recognized in Erickson to later versions of ORS 135.265.

Interpreting the 1974 version of ORS 135.265—which, as

noted, provided that excess security be returned “to the

accused”—the Court of Appeals held that security paid by a

defendant’s friends and family could be used to pay the costs

of the defendant’s court-appointed counsel:

“Defendant informed the trial court that only $150 of the

deposit was his own, that his mother had borrowed $500

and that friends had provided the remainder. He argues

that the effect of the forfeiture is to penalize his mother

and friends. They had raised money for him to obtain his

temporary freedom, but not for him to obtain a lawyer. We

hold that because it was lawful for the court to regard the

deposit as defendant’s and available to satisfy defendant’s

obligations under the judgment, it was within the court’s

discretion to withhold its return for payment of defendant’s

obligations under the judgment.”

State v. Grant, 44 Or App 671, 674, 606 P2d 1166 (1980)

(internal citations omitted).

In 1979, however, the legislature responded to argu-

ments similar to those made by the defendant in Grant as

to the use of security deposits by third parties to pay finan-

cial obligations of defendants. It amended ORS 135.265 that

year to require that “[w]hen conditions of the release agree-

ment have been performed * * * the clerk of the court shall

return to the person shown by the receipt to have made [the]

deposit * * * 90 percent of the sum which has been deposited

* * *.” ORS 135.265(2) (1979) (emphasis added). This change

to the statute was intended

“to allow return of the security deposit in a criminal case

to the person who in fact deposits the security, whether it

be the defendant on his own behalf or a relative or friend

or possibly an attorney. Under the current security system

* * * [i]n a case where a defendant’s friend or attorney paid

the amount, it can only be returned to the defendant, even

though the defendant was not the person who put up the

money, and that has caused some problems.”

230 State v. Morales

Minutes, Senate Committee on the Judiciary, HB 3020,

June 25, 1979, 3 (statement of Diana Godwin, Legal Counsel

to the Senate Committee on the Judiciary). The legisla-

ture, then, seems to have considered whether the automatic

repayment of surplus security deposits to a defendant is

always the preferable choice, determined that it was not,

and therefore changed the statute to require that the money

be returned to the person who paid it. That change to ORS

135.265(2) reflects an intentional departure from the pre-

sumption read into the statute by this court in Erickson and

applied in Rosentreter and later cases.

The Court of Appeals, however, has continued to

apply the presumption adopted in Erickson and Rosentreter

that security funds belong to the defendant whose release

those funds secured. Over 20 years after the statutory basis

for those cases changed, the Court of Appeals still cited

Grant—which interpreted the earlier 1974 version of ORS

135.265—for that proposition:

“According to appellants, * * * the security deposit was the

property of defendant’s mother and Hoevet. Appellants

neglect to consider that, as we held in Grant, money depos-

ited with the court as security under ORS 135.265(2) ‘is

to be regarded as belonging to the defendant.’ Moreover,

before she assigned her interest in the security to Hoevet,

defendant’s mother deposited the funds with the court on

the express condition that the funds would be used to sat-

isfy defendant’s obligations ‘in this or any other case.’ In

other words, defendant’s mother voluntarily offered the

security to be used to satisfy defendant’s obligations.”

State v. Baker, 165 Or App 565, 571-72, 998 P2d 700, rev den,

330 Or 375 (2000) (internal citations omitted). The Court of

Appeals’ cases applying the presumption seem to assume,

without much discussion, that the 1979 amendments had

no effect on the presumption, stating that, “both before and

after the 1979 amendment to ORS 135.265(2), Oregon courts

have recognized a legal presumption that cash bail posted

on behalf of a defendant belongs to the defendant.” State v.

Laune, 303 Or App 541, 544, 464 P3d 459 (2020). Further,

the Court of Appeals has noted that it is “not aware of any

requirement that money deposited as security by a third

party be treated any differently than if it were deposited by

Cite as 367 Or 222 (2020) 231

the defendant.” State v. Davis, 116 Or App 607, 610, 843 P2d

460 (1992).

In our view, the impact of the 1979 amendment

requires a closer examination than the Court of Appeals has

given it. As discussed above, Erickson—the case cited as the

origin of the presumption—extrapolated the presumption

from the statutory text that it was interpreting: “Under the

provisions of the statute above quoted the defendant in the

charge, with the approval of the court, may furnish cash

bail, and it appears that when so furnished by a third party

it shall be deemed and treated as the money of the defen-

dant on the charge.” 94 Or at 710 (emphasis added). The

statutory provisions to which the court in Erickson and its

progeny referred required that surplus funds be returned

“to the defendant” (or, later, “to the accused”)—a directive

which, again, is no longer part of ORS 135.265(2). Moreover,

when the legislature amended ORS 135.265 in 1979 to

return excess funds to “the person shown by the receipt to

have made [the] deposit,” it was specifically addressing the

practical problems with assuming that surplus bail money

belonged to the defendant, and it amended the statute

accordingly.

Unlike the Court of Appeals, then, we read that

1979 change to ORS 135.265 as clearly eliminating the pre-

sumption that had been read into the earlier version of the

statute by this court in Erickson and Rosentreter and applied

by the Court of Appeals in Grant and other cases. The stat-

ute applicable here, of course, includes the 1979 amendment

that requires the clerk to return the money paid as security

to the person who made the payment, rather than to the

defendant. Because the statute no longer provides that sur-

plus security funds be returned to the defendant, but rather

to the person who paid them, we conclude that Oregon law

no longer includes a presumption that those funds belong to

the defendant. To the extent that Erickson and Rosentreter

could be read as establishing such a presumption on any

ground other than the now-amended statute, we expressly

disavow those decisions.

The question then becomes whether, without the

benefit of the presumption, funds deposited by a third party

232 State v. Morales

as security can be considered in determining defendant’s

“ability to pay” under ORS 161.665(4). The state argues that,

because the notice signed by the person making the security

deposit provides that “[t]he Court may order that the secu-

rity deposit be applied to * * * monetary obligations that are

imposed on the defendant,” those funds are “available” to

the defendant to pay costs. In the state’s view, even in the

absence of the presumption that the money belongs to the

defendant, the trial court may consider those funds when

assessing a defendant’s ability to pay under ORS 161.665(4),

because the funds constitute a “financial resource” of a

defendant—at least for the purpose of paying court-ordered

costs. Defendant counters that, where the record shows that

the deposit was made by a third party, and there is no evi-

dence that the deposit was intended to be a gift or other

transfer of money to the defendant, the court may not con-

sider those funds as part of a defendant’s financial resources.

The question here is not whether a trial court ever

could apply funds deposited by a third party to satisfy a

defendant’s court-imposed obligations. The issue before

us, rather, is whether the deposit by a third party of secu-

rity funds, by itself, can be the basis for a finding that a

defendant has the ability to pay court-ordered costs. Put

differently, do those third-party funds constitute “financial

resources” of a defendant such that an otherwise indigent

defendant may be deemed to have an “ability to pay” court-

ordered costs?

The Court of Appeals has described what consti-

tutes evidence of a defendant’s ability to pay for purposes of

ORS 161.665(4): “Such evidence may consist of information

about the defendant’s financial resources, educational back-

ground, work history, and anticipated future employment or

educational status, to the extent there is a nonspeculative

basis for assessing that future status.” State v. Mendoza,

286 Or App 548, 550-51, 401 P3d 288 (2017). But, despite

its statement in Davis that there is no “requirement that

money deposited as security by a third party be treated any

differently than if it were deposited by the defendant,” 116

Or App at 610, the Court of Appeals also has noted that “[a]

defendant is not necessarily able to pay attorney fees simply

because he, or a friend or relative on his behalf, has posted

Cite as 367 Or 222 (2020) 233

a security deposit,” State v. Nichols, 68 Or App 922, 923, 683

P2d 565 (1984).

In a recent decision, the Court of Appeals reiterated

its earlier cases on this question, stating that

“a trial court can find that a defendant has the ability to

pay a fee award where, as here, a security deposit has been

made subject to the express condition that it may be used

to pay fees or has been forfeited in a way that makes the

funds available to pay a defendant’s financial obligations.”

State v. Thomas, 292 Or App 756, 763, 425 P3d 437, rev den,

364 Or 209 (2018). The court, however, declined to address

the defendant’s argument that the earlier cases should be

reconsidered, concluding that the defendant had not objected

to the imposition of fees in the trial court and, therefore,

that the issue was subject only to “plain error” review. In

Thomas, Chief Judge Egan wrote separately, concurring

because of the plain error posture, but noting his concerns

about the unsettled case law and the implications of such

uses of third-party funds:

“In my view, the ability of friends or family to pay security

for a person whom they believe and trust to comply with the

terms of release is completely separate from a defendant’s

indigence and ability to pay for an attorney. The message

that our criminal justice system sends when it confiscates

money intended for security but which is applied to indi-

gent defense is clear: We will punish any faith that friends

and family have in criminal defendants. In more polite

terms, this practice acts as a disincentive to the payment

of security. A disincentive to provide security for a family

member or friend who clearly qualifies for security and who

fully complies with the terms of that security is, by its very

nature, a policy decision to jail people who cannot afford to

pay the price of freedom out of their own pockets.”

Id. at 765 (Egan, C. J., concurring) (emphases in original).

Neither the concurrence nor the majority opinion in Thomas

discussed the presumption that the funds belonged to the

defendant or any of the cases establishing or applying that

presumption.

We share the concerns expressed in the Thomas con-

currence, and note that the fact that there are surplus funds

234 State v. Morales

from a security deposit that could be available to cover costs

under ORS 135.265(2) does not absolve the trial court of its

independent responsibility to consider whether a defendant

has the ability to pay, as required by ORS 161.665(4). An

indisputably indigent defendant, for example, for whom a

nonprofit organization makes a security deposit to permit

the defendant’s release pending trial, certainly would not

have the “ability to pay” costs within the meaning of ORS

161.665(4), regardless of the terms and conditions in the

notice. Perhaps a more searching inquiry would be neces-

sary when a member of a defendant’s immediate household

posts the security, or when there is some indication that the

party who posts the security funds intended to give or other-

wise transfer that money to the defendant. In those cases,

the inquiry is whether the funds—due to the defendant’s

relationship with the third party or the third party’s intent

in posting security—can fairly be considered to belong to

the defendant and thus constitute “financial resources of the

defendant” for purposes of ORS 161.665(4). Where, for exam-

ple, a defendant’s spouse makes a security deposit on behalf

of the defendant, a closer examination of the particular cir-

cumstances may be necessary to determine whether the

money deposited could be considered part of the “financial

resources of the defendant.” But when a non-spouse third

party posts security on behalf of a defendant, with no indi-

cation of a donative intent or other evidence that the money

in fact was the property of the defendant, surplus security

funds are not a part of the defendant’s “financial resources”

such that the trial court may consider those funds in deter-

mining the defendant’s ability to pay court-ordered attorney

fees.

Here, the trial court expressly found that defendant

did not have the ability to pay, but that, because there were

excess security funds available to pay court-ordered costs,

the “ability to pay” requirement had been satisfied. We dis-

agree. As described above, the ability to pay inquiry requires

two steps: the court first determines whether the defendant

“is or may be able to pay” costs under ORS 161.665(4); if

the answer is yes, then the court determines a reasonable

amount to impose. If, however, the answer to the first ques-

tion is “no”—that the defendant does not have the ability

Cite as 367 Or 222 (2020) 235

to pay—the inquiry ends, and the court is not permitted to

impose costs. A trial court may not determine that a defen-

dant has no ability to pay costs under ORS 161.665(4) and

then, despite that finding, impose fees under ORS 161.665(1)

based solely on security deposit funds that do not belong to

the defendant.

As discussed, we need not decide whether funds

deposited by a third party as security never may be used

to satisfy a defendant’s obligations. When funds deposited

by a third party nevertheless belong to a defendant, they

may be used to satisfy the defendant’s financial obligations.

Without the presumption that security funds belong to a

defendant, however, funds paid by and belonging to a third

party cannot be the sole basis for a finding that a defendant

has the “ability to pay” court-ordered costs.

The decision of the Court of Appeals is reversed.

The judgment of the circuit court is reversed, and the case

is remanded to the circuit court for further proceedings.