US v. Real Property located at 6124
Filing
UNPUBLISHED AUTHORED OPINION filed. Originating case number: 3:03-cv-00580-GCM. Copies to all parties and the district court/agency. [998833761]. Mailed to: James Munson. [08-2065, 08-2159, 08-4326]--[Edited 04/17/2012 by BHR]
Appeal: 08-2065
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Date Filed: 04/17/2012
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-2065
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
JAMES EDGAR MUNSON,
Movant - Appellant,
and
REAL PROPERTY LOCATED AT 6124 MARY LANE DRIVE, SAN DIEGO,
CALIFORNIA,
Defendant,
and
ANN MUNSON,
Claimant.
No. 08-2159
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
ANN MUNSON,
Claimant - Appellant,
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and
REAL PROPERTY LOCATED AT 6124 MARY LANE DRIVE, SAN DIEGO,
CALIFORNIA,
Defendant,
and
JAMES EDGAR MUNSON,
Movant.
-----------------------THOMAS EDWARD VANDERBLOEMEN,
Amicus Supporting Appellant.
No. 08-4326
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
JAMES EDGAR MUNSON,
Movant - Appellant,
and
REAL PROPERTY LOCATED AT 6124 MARY LANE DRIVE, SAN DIEGO,
CALIFORNIA,
Defendant,
and
ANN MUNSON,
Claimant.
2
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Appeals from the United States District Court for the Western
District of North Carolina, at Charlotte.
Graham C. Mullen,
Senior District Judge. (3:03-cv-00580-GCM; 3:03-cv-00580-GCM-1)
Argued:
January 24, 2012
Decided:
April 17, 2012
Before SHEDD, DAVIS, and DIAZ, Circuit Judges.
No. 08-2065 dismissed; Nos. 08-2159 and 08-4326 affirmed by
unpublished opinion. Judge Davis wrote the opinion, in which
Judge Shedd and Judge Diaz joined.
ARGUED: Thomas E. Vanderbloemen, GALLIVAN, WHITE & BOYD, PA,
Greenville, South Carolina, for Appellants and Amicus Supporting
Appellant.
William A. Brafford, OFFICE OF THE UNITED STATES
ATTORNEY, Charlotte, North Carolina, for Appellee.
ON BRIEF:
Anne M. Tompkins, United States Attorney, Charlotte, North
Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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DAVIS, Circuit Judge:
These
consolidated
appeals
arise
out
of
the
civil
forfeiture of real property located at 6124 Mary Lane Drive in
San
Diego,
California
(“the
Property”).
When
the
Government
filed its complaint for forfeiture in rem on December 3, 2003,
Claimant-Appellant
Ann
Munson
(“Ann”)
and
her
son,
Movant-
Appellant James Edgar Munson (“James”), held joint title to the
Property. The Government initiated forfeiture proceedings under
18 U.S.C. § 981 and 21 U.S.C. § 881 on the basis that James had
used the Property in conjunction with drug trafficking and money
laundering crimes. After Ann filed a verified claim asserting an
interest in the Property, she and the Government filed crossmotions for summary judgment as to the forfeitability of her
interest. The district court granted summary judgment to the
Government,
denied
Ann’s
motion
for
summary
judgment,
and
entered a final judgment of forfeiture. The district court also
denied
several
pro
se
motions
that
James
had
filed
while
incarcerated in an attempt to assert a claim to the Property, as
well as his motion for reconsideration of the same.
Ann and James individually noted appeals from the district
court’s order granting summary judgment, which were docketed as
No. 08-2159 and No. 08-2065, respectively. James also noted an
appeal
from
the
reconsideration,
district
which
was
court’s
docketed
4
denial
as
of
No.
his
motion
08-4326.
For
for
the
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reasons that follow, we dismiss No. 08-2065, affirm the district
court’s grant of summary judgment to the Government as to the
forfeiture of Ann’s property interest in No. 08-2159, and affirm
the
district
court’s
denial
of
James’s
motion
for
reconsideration in No. 08-4326.
I.
On
July
17,
1997,
Ann
Munson
purchased
the
Property,
a
house located at 6124 Mary Lane Drive in San Diego, California.
Although she was the sole owner of the Property, Ann allowed her
son, James Edgar Munson, and several other renters to live there
while she lived elsewhere. Ann explains that James had recently
graduated from college and she wanted to provide him with a
place to live that he might one day own. In October 1997, James
and several other individuals began packaging marijuana at the
Property
for
shipment
to
North
Carolina
and
various
other
locations. They also used the landline telephone at the Property
for
calls
relating
to
the
drug
trafficking
operation
and
accepted drug payments there. It is undisputed that all use of
the Property in connection with James’s criminal drug activity
had ceased by September 1999. Shortly thereafter, on October 12,
1999, Ann conveyed the Property to James by quitclaim deed and
gifted the equity to him.
5
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Thereafter, in consequence of an ongoing investigation of
the drug trafficking operation, James was arrested on May 15,
2001, and subsequently indicted in Charlotte, North Carolina.
Ann contends, and the Government does not dispute, that she was
unaware of any criminal activity at the Property until the time
of James’s arrest. On January 16, 2002, during the pendency of
the criminal charges against him, James executed and recorded a
grant deed conveying the Property to him and Ann. In addition,
they executed a deed of trust in favor of IndyMac bank securing
a $240,000 indebtedness. Ann contends that she became co-owner
of the Property at this point in order to refinance the mortgage
to protect her financial interest following James’s arrest and
ensuing unemployment.
James was convicted in May 2003 and sentenced in December
2003. 1 After James’s conviction but prior to his sentencing, the
Government
filed
a
civil
forfeiture
complaint
in
the
U.S.
District Court for the Western District of North Carolina under
the Civil Asset Forfeiture Reform Act of 2000, Pub. L. No. 106-
1
James was prosecuted in the Western District of North
Carolina, No. 3:01-cr-66-2-V, and was initially sentenced to 121
months’ imprisonment. On appeal, a panel of this court remanded
for resentencing. United States v. Munson, 181 F. App’x 368 (4th
Cir. 2006). The district court resentenced James to eighty-seven
months’ imprisonment and we affirmed. United States v. Munson,
299 F. App’x 297 (4th Cir. 2008). James was released from prison
on September 16, 2009.
6
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185,
Document: 85
114
Stat.
Date Filed: 04/17/2012
202
(2000)
Page: 7 of 27
(“CAFRA”).
The
complaint
sought
forfeiture of all rights, title, and interest in the Property
under 18 U.S.C. § 981(a)(1)(A) on the basis that the Property
was involved in James’s money laundering conspiracy, a violation
of 18 U.S.C. § 1956(h), and under 21 U.S.C. § 881(a)(7) on the
basis that the Property was used to commit, or to facilitate the
commission of, James’s drug conspiracy, a violation of 21 U.S.C.
§ 846. The complaint listed Ann and James, the Property owners
of record at the time of the filing of the complaint, as those
with
potential
Government
claims
posted
of
notice
interest
of
the
in
the
forfeiture
Property.
action
at
The
the
Property, served Ann, published notice in The Mecklenburg Times
and The San Diego Commerce newspapers, and attempted to serve
James
by
through
certified
his
mail
attorney
in
at
his
the
place
related
of
incarceration
criminal
case.
and
The
Government also filed a notice of lis pendens in California.
Ann, acting through counsel, filed a claim to the Property,
asserting that she was “a co-owner of the defendant property
pursuant to a Grant Deed filed on 16 January 2002” and attached
a copy of the deed. 2 J.A. 115. In her answer, Ann asserted a
2
Ann initially filed her notice of claim on January 20,
2004 and her answer on February 8, 2004. Approximately eight
months later, the Government filed a motion to strike Ann’s
claim on the basis that it failed to comply with procedural
requirements in the Supplemental Rules for Certain Admiralty and
(Continued)
7
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defense alleging that she originally purchased the Property in
1997; that she conveyed it to James in 1999 but continued to
provide funds toward mortgage payments; that James conveyed the
Property to her and himself on January 16, 2002; and that she
had no knowledge of any illegal activities at the property and
was therefore an innocent owner.
James
ostensibly
did
not
because
timely
the
file
a
Government’s
claim
to
attempts
the
at
Property,
service
of
notice of the forfeiture action through prison officials at the
Mecklenburg County Jail and James’s criminal attorney had been
unsuccessful. Although James eventually learned of the pending
forfeiture through his mother, who had power of attorney over
his
affairs
erroneously
while
believed
he
was
her
incarcerated,
attorney
was
he
also
avers
that
representing
he
his
interests.
Maritime Claims (“Supplemental Rules”) because it was not
verified by her and did not identify her interest in the
defendant Property. Ann did not respond to this motion and the
court struck her claim. Ann subsequently filed a motion for
relief explaining that she had never received the Government’s
motion to strike. The court found that Ann’s failure to respond
was justified and granted the motion. Ann subsequently filed a
response to the Government’s motion to strike, as well as a
motion for leave to file a verified claim. The district court
permitted Ann to file a claim, reasoning that no prejudice to
the Government would result. Ann filed the operable verified
claim on September 22, 2005.
8
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Ann
and
judgment.
the
After
Date Filed: 04/17/2012
Government
Ann
and
filed
the
Page: 9 of 27
cross-motions
Government
moved
for
summary
for
summary
judgment, but before the district court ruled on the motions,
James
filed
several
pro
se
pleadings
in
the
district
court
asserting procedural arguments relating to alleged deficiencies
in the Government’s service of notice. 3 The district court denied
James’s motions, finding that he had failed to timely file a
claim and could not credibly assert that he was an innocent
owner of the Property. James sought reconsideration, which the
district
court
also
denied.
James’s
timely
appeal
from
the
district court’s denial of his motion for reconsideration is now
before us. 4
Ruling
on
the
cross-motions
for
summary
judgment,
the
district court first determined that the Property was subject to
forfeiture because it had undisputedly been used to facilitate a
criminal drug conspiracy. The court then found that, in order to
3
James filed motions to stay, to set aside default
judgment, and for miscellaneous relief. The district court did
not rule on James’s motion to set aside default judgment;
however, no default judgment was entered, so the issue is moot.
4
Even if the district court’s order denying James’s motion
for reconsideration was an interlocutory order from which no
appeal lies, James’s appeal of that order is merged into the
final judgment and is open to review on his appeal from that
judgment. See Hellerstein v. Mr. Steak, Inc., 531 F.2d 470, 474
(10th Cir. 1976) (“The general rule is that an interlocutory
order from which no appeal lies is merged into the final
judgment and open to review on appeal from that judgment.”).
9
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establish that her current ownership interest in the Property is
not subject to forfeiture as a matter of law, Ann had to prove
that she had been an innocent owner under 18 U.S.C. § 983(d)(3)
when she acquired a partial ownership interest by way of the
2002 grant deed. The district court found that Ann could not
establish innocent ownership under § 983(d)(3) as a matter of
law because, given that James had gifted an interest in the
Property to her after his arrest, she was neither a bona fide
purchaser for value nor was she without knowledge and reasonably
without
cause
forfeiture.
granting
to
believe
Accordingly,
the
that
the
Government’s
the
Property
was
subject
court
entered
an
district
motion
for
summary
to
order
judgment
and
denying Ann’s motion for summary judgment. James timely appealed
the order.
Meanwhile, Ann moved to alter and amend the order on the
basis
that
the
district
court
had
erroneously
stated
that
James’s role in the drug conspiracy ended in 2000, while the
Government
later
than
conceded
September
that
he
1999.
withdrew
The
from
district
the
court
conspiracy
granted
no
Ann’s
motion in part, amended its order to reflect that James had
participated in the conspiracy “from October 1997 [through] at
least September 1999,” and entered the amended order granting
summary
judgment
to
the
Government.
J.A.
385.
Ann
timely
appealed from the amended order. The district court entered the
10
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final judgment of forfeiture in rem on October 22, 2008. 5 Neither
James nor Ann appealed the final forfeiture order. The Property
was sold on August 1, 2009, for $332,000. Approximately $264,304
was applied to pay off the mortgage and other costs. The balance
of
$67,696
is
being
held
pending
resolution
of
these
consolidated appeals.
II.
A.
We begin by addressing James’s contention that the district
court erred in denying his motion for reconsideration. He argues
that, due to deficiencies in service, the Government failed to
provide him with adequate notice of the forfeiture proceedings.
James
argues
in
the
alternative
that,
even
if
he
had
been
properly served, the district court should have permitted him to
file an out-of-time claim on the basis of excusable neglect.
Legal questions concerning insufficient service of process are
reviewed
de
novo,
while
any
related
factual
findings
are
reviewed for clear error. See United States v. Elmes, 532 F.3d
5
Once this judgment was entered, the earlier notices of
appeal by James and Ann, even though premature, are deemed
timely appeals of a final order for purposes of appellate
jurisdiction. See In re Bryson, 406 F.3d 284, 287-89 (4th Cir.
2005). The district court had jurisdiction over the forfeiture
action under 28 U.S.C. §§ 1331 and 1335. We have jurisdiction
under 28 U.S.C. §§ 1291 and 1294.
11
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1138, 1141 (11th Cir. 2008). A district court’s decision to deny
permission
to
file
a
claim
“out
of
time”
in
forfeiture
proceedings is reviewed for abuse of discretion. United States
v. Borromeo, 945 F.2d 750, 754 (4th Cir. 1991).
The
district
court
stated
in
its
Order
denying
James’s
motion for reconsideration that:
Mr. Munson alleges that his substantive and
procedural due process rights have been violated. But
Mr. Munson neither filed a timely claim in this
matter, nor can he claim to be an innocent owner of
the property, therefore, he is not a party to this
case. Further, since he is not a party to this case,
he has no due process rights in this matter.
Mr. Munson has filed numerous petitions before
this Court, all of which have been denied for lack of
standing. Similar to these previous motions, Mr.
Munson fails to assert any basis of standing in his
most
recent
motion,
therefore
his
motion
for
reconsideration is DENIED.
J.A. 330. It appears from the district court’s admonition that
James “neither filed a timely claim, nor can he claim to be an
innocent owner of the property,” and its references to James’s
“fail[ure]
to
assert
any
basis
of
standing,”
that
the
court
collapsed Article III standing requirements with the procedural
requirements for statutory standing under CAFRA and the merits
of
the
“innocent
owner”
affirmative
defense
to
forfeiture
codified at 18 U.S.C. § 983(d). 6
6
In other words, James had a due process right to notice of
the forfeiture action by virtue of his facially colorable
(Continued)
12
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In
order
to
Date Filed: 04/17/2012
contest
a
Page: 13 of 27
government
forfeiture
action,
a
claimant must have the Article III standing required for any
action brought in federal court. United States v. $515,060.42 in
United States Currency, 152 F.3d 491, 497 (6th Cir. 1998). In
order to establish Article III standing, a claimant must have a
colorable ownership, possessory or security interest in at least
a portion of the defendant property. See, e.g., United States v.
16510 Ashton, 47 F.3d 1465, 1470 (6th Cir. 1995); United States
v. $321,470.00 in United States Currency, 874 F.2d 298, 302 (5th
Cir. 1989) (explaining that a claimant need not prove the merits
of his underlying claim to achieve standing, but he must claim a
facially
colorable
interest
in
the
seized
property);
United
States v. $122,043.00 in United States Currency, 792 F.2d 1470,
1473
(9th
Cir.
1986).
Both
Ann
and
James
have
Article
III
standing in this case given that they were the owners of record
when the Government filed its forfeiture complaint and during
the pendency of the subsequent forfeiture proceedings until the
ownership interest in the Property arising from the 2002 deed.
The question whether James filed a timely claim (a prerequisite
to statutory standing) is not properly determined without
reference to whether the Government provided adequate notice,
thereby triggering the statutory requirement that James file a
verified claim within fourteen days after execution of process,
as required under Supplemental Rule C(6)(A)(i)(A).
13
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sale of the Property. Accordingly, James was entitled to notice
of the forfeiture proceedings against the Property.
The Government contends that it satisfied all statutory and
constitutional
notice
requirements
in
this
case
by
sending
copies of the complaint and related papers by certified mail
addressed to James at the Mecklenburg County Jail and to Claire
Rauscher, Esq., James’s attorney in the related criminal case,
at
her
office.
James
avers
that
neither
attempt
at
notice
actually reached him. The Government does not assert that James
actually
received
either
mailing,
but
rather
emphasizes
that
actual notice is not required. For the reasons that follow, we
find
that
James
received
adequate
notice
of
the
forfeiture
action and that his attempt to assert a claim by filing a motion
to stay on April 11, 2007, and each of his subsequent attempts,
were untimely.
CAFRA
provisions
governing
civil
forfeiture
of
real
property provide that “[t]he Government shall initiate a civil
forfeiture
action
against
real
property
by,”
inter
alia,
“serving notice on the property owner, along with a copy of the
complaint.” 18 U.S.C. § 985(c)(1)(C); see also Fed. R. Civ. P.,
Supp. R. G(3)(a) (providing that “[i]f the defendant is real
property, the government must proceed under 18 U.S.C. § 985”).
In
order
requirements,
to
comport
the
with
Government’s
14
constitutional
service
of
due
notice
process
must
be
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“reasonably calculated, under all the circumstances, to apprise
the petitioner of the action.” Dusenberry v. United States, 534
U.S. 161, 173 (2002) (citing Mullane v. Cent. Hanover Bank &
Trust Co., 339 U.S. 306, 314 (1950)) (quotation marks omitted).
This analytical framework presents a “straightforward test of
reasonableness under the circumstances,” id. at 167, and does
not require actual notice, id. at 170-71.
In Dusenberry, the Supreme Court held that the Government
satisfied this “straightforward test of reasonableness” when it
sent notice of forfeiture proceedings by certified mail to the
property owner’s place of incarceration. 534 U.S. at 172-73. The
Government relies upon Dusenberry for the proposition that its
attempt to serve notice on James by sending the complaint via
certified
mail
to
constitutionally
actually
received
the
Mecklenburg
sufficient,
notice.
County
irrespective
This
argument
Jail
of
fails
was
whether
to
per
se
James
recognize,
however, that the particular details of the correctional mail
system
at
issue
in
Dusenberry
were
critical
to
the
Court’s
analysis. 7 In this case, the Government concedes that officials
7
The correctional facility in Dusenberry had the following
standard mail-delivery practices: A mailroom staff member would
sign for the certified letter at the post office and it would be
entered into a logbook at the prison; a different staff member,
one assigned to the section of the prison in which the inmate
lived, would sign the letter out from the mailroom; and finally
a staff member would deliver the letter to the prisoner during
(Continued)
15
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at
Document: 85
the
Date Filed: 04/17/2012
Mecklenburg
County
Jail
Page: 16 of 27
refused
delivery
of
the
forfeiture complaint in keeping with the institution’s general
policy of refusing letters sent by certified mail. In light of
this
policy,
the
Government’s
attempt
to
serve
James
by
certified mail addressed to him at the jail was not “reasonably
calculated, under all the circumstances” to apprise him of the
forfeiture action. See Nunley v. Dep’t. of Justice, 425 F.3d
1132,
1137
presumption
(8th
that
Cir.
2005)
a
(“[T]here
prison’s
is
internal
no
irrebuttable
mail-distribution
procedures are reasonably calculated to provide notice.”).
We
serve
need
James
not
decide
at
his
whether
place
of
the
Government’s
incarceration
attempt
alone
to
passes
constitutional muster, however, because the Government also sent
notice of the complaint by certified mail to James’s attorney in
the related criminal case 8 and James had actual knowledge of the
“mail call.” See 534 U.S. at 168-69. The Court determined that
the procedures established by the prison were sufficient for due
process purposes, but never stated that such procedures were
constitutionally obligatory. Id. at 172-73.
8
Although we recognize that Supplemental Rule G was not in
effect when the Government attempted to serve notice in this
case, we note that the rule now clearly provides that notice
“may be sent to . . . the attorney representing the potential
claimant with respect to the seizure of the property or in a
related investigation, administrative forfeiture proceeding, or
criminal case.” Fed. R. Civ. P., Supp. R. G(4)(b)(iii)(B)
(effective Dec. 1, 2006).
16
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forfeiture proceedings more than one year prior to filing his
initial
pro
se
motion
Property.
See,
e.g.,
Sailboat,
458
F.3d
actual
knowledge
defeat
subsequent
due
assert
v.
(1st
22
to
States
United
16,
claimant’s
a
seeking
Cir.
of
a
process
an
One
interest
Star
Class
2006)
forfeiture
in
(“A
Sloop
putative
proceeding
challenge,
even
the
if
can
the
government botches its obligation to furnish him with notice.”)
(citations omitted). In a letter from James to Ann’s attorney
dated February 2, 2006, he mentioned “the civil suit on the
house,”
J.A.
279,
indicating
that
he
had
knowledge
of
the
forfeiture case no later than that date. Nevertheless, James did
not
file
his
first
pro
se
motion
asserting
a
claim
to
the
Property until April 11, 2007.
James argues that, even if he received adequate notice, the
district court should have allowed him to file an out-of-time
claim on the basis of excusable neglect. Under Borromeo, “[e]ven
where
a
claimant
is
properly
served,
or
perhaps
has
‘actual
notice,’ a court may allow a claim to be filed out of time on a
showing of excusable neglect. Fed. R. Civ. P. 6(b)(2).” 945 F.2d
at 753. Relevant factors include:
when the claimant became aware of the seizure, whether
the
claimant
was
properly
served,
whether
the
government would be prejudiced, whether the government
encouraged the delay or misguided the plaintiff,
whether the claimant informed the government and the
court of his interest before the deadline, whether the
claimant had expended resources preparing for trial,
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Page: 18 of 27
the claimant’s good faith, the claimant’s health
problems,
whether
the
government
complied
with
procedural rules, and whether the claimant was acting
pro se.
Id. (citations omitted). While certain of these factors arguably
weigh in favor of allowing James to file an out-of-time claim,
the
district
court
did
not
abuse
its
discretion
in
denying
James’s motion for reconsideration where it correctly concluded
that James could not prevail on the merits. See, e.g., United
States v. Indoor Cultivation Equip., 55 F.3d 1311, 1313 (7th
Cir. 1995) (finding that to prevail upon a motion to set aside a
default judgment in a civil forfeiture case, a party must show
“the existence of a meritorious defense to the original action”)
(citations omitted). James first acquired an ownership interest
in
the
Property
in
1999,
after
he
had
himself
used
it
to
facilitate drug trafficking and money laundering. Thus, he does
not have a colorable innocent owner defense to forfeiture under
either 18 U.S.C. § 983(d)(2) or (d)(3). Accordingly, we affirm
the
district
court’s
denial
of
James’s
motion
for
reconsideration in No. 08-4326.
Given that James failed to timely file a verified claim to
the Property and is not entitled to file an out-of-time claim,
he lacks statutory standing to challenge the district court’s
Order granting summary judgment to the Government. See Fed. R.
Civ.
P.,
Supp.
Rule
C(6);
United
18
States
v.
United
States
Appeal: 08-2065
Document: 85
Date Filed: 04/17/2012
Page: 19 of 27
Currency in the Amount of $2,857.00, 754 F.2d 208, 213 (7th Cir.
1985) (“Once the procedural requirements of Rule C(6) are met, a
claimant has standing to defend the forfeiture.”). Accordingly,
in
considering
whether
the
district
court
erred
in
granting
summary judgment to the Government, we need only address whether
the undisputed facts establish that Ann’s property interest is
subject to forfeiture as a matter of law.
B.
Ann contends that she is entitled as a matter of law to the
“innocent owner” defense to forfeiture in 18 U.S.C. § 983(d)(2)
on the basis that she was the sole owner of the Property for the
duration of the illegal drug activity giving rise to forfeiture
and was unaware of this conduct, and that the district court
accordingly
erred
in
granting
summary
judgment
to
the
Government. Ann argues in the alternative that even if she may
rely only upon her current (joint) ownership interest arising
from the 2002 grant deed, she is nonetheless an innocent owner
as a matter of law under § 983(d)(3) because she took as a bona
fide purchaser for value without knowledge or reason to know of
the illegal activity giving rise to forfeiture. The Government
contends that the district court correctly applied § 983(d)(3),
rather
than
§ 983(d)(2),
to
determine
on
the
basis
of
the
undisputed facts that Ann is not innocent owner as a matter of
law.
19
Appeal: 08-2065
Document: 85
Date Filed: 04/17/2012
Page: 20 of 27
We review the district court’s grant of summary judgment in
a civil forfeiture action de novo. See United States v. Kanasco,
Ltd., 123 F.3d 209, 210 (4th Cir. 1997). Summary judgment is
appropriate
if
the
interrogatories,
“pleadings,
and
admissions
depositions,
on
file,
answers
together
to
with
the
affidavits, if any, show that there is no genuine issue as to
any
material
fact
and
that
the
moving
party
is
entitled
to
judgment as a matter of law.” Fed. R. Civ. P. 56(c).
CAFRA governs civil forfeitures to the United States. See
18
U.S.C.
governing
§
981.
civil
Section
983
forfeiture
of
Title
proceedings
18
sets
and
forth
rules
delineates
the
circumstances in which property described in § 981 cannot be
forfeited. See 18 U.S.C. § 983. The initial burden of proof in a
civil forfeiture action “is on the Government to establish, by a
preponderance of the evidence, that the property is subject to
forfeiture.” Id. § 983(c)(1). If the government’s theory is that
the property was used in or facilitated the commission of a
criminal
prove
that
property
sets
offense,
and
forth
interest
in
forfeiture
shall
there
have
the
the
as
was
this
a
basic
statute,”
case,
Id.
shall
burden
not
that
be
further
of
connection
“[a]n
provides
must
under
innocent
the
983(d)(1)
innocent
that
also
between
Section
forfeited
proving
20
government
§ 983(c)(3).
principle
and
the
substantial
offense.
property
the
in
owner’s
any
civil
the
claimant
ownership
by
a
Appeal: 08-2065
Document: 85
preponderance
Date Filed: 04/17/2012
of
the
evidence.
Page: 21 of 27
Id.
§ 983(d)(1).
Thus,
the
Government has the initial burden of proving that the property
is subject to forfeiture and the claimant bears the burden on
the affirmative defense of innocent ownership.
Ann
does
not
dispute
that
the
Property
is
subject
to
forfeiture on the basis that James and others used the house to
package
marijuana
in
connection
with
the
drug
trafficking
conspiracy. 9 See United States v. Herder, 594 F.3d 352, 364 (4th
Cir.
2010)
established
prohibited
obstruction
marks
(stating
“by
showing
conduct
or
omitted).
that
less
that
use
difficult
hindrance”)
Thus,
substantial
the
of
connection
the
or
more
(citation
and
district
may
made
property
or
court
less
the
free
internal
did
be
not
from
quotation
err
in
concluding that the Property was subject to forfeiture (i.e.,
that the Government established its prima facie case), and the
burden
of
proof
shifted
to
Ann
to
establish
the
affirmative
defense of innocent ownership.
The statutory innocent owner defense in CAFRA is divided
into two parts, so that property interests in existence at the
9
Although the district court did not expressly find that
there was a “substantial connection” between the Property and
the criminal activity giving rise to forfeiture, James admitted
at sentencing that he and others packaged marijuana at the house
and Ann has also conceded that the Property was used in drug
trafficking.
21
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Document: 85
Date Filed: 04/17/2012
Page: 22 of 27
time the illegal conduct giving rise to forfeiture took place
(“pre-existing interests”) are treated differently from property
interests acquired after the illegal conduct giving rise to the
forfeiture took place (“after-acquired interests”). With respect
to
pre-existing
interests,
CAFRA
provides
that
the
term
“innocent owner,” means an owner who
(i) did not know
forfeiture; or
of
the
conduct
giving
rise
to
(ii) upon learning of the conduct giving rise to the
forfeiture, did all that could reasonably be expected
under the circumstances to terminate such use of the
property.
18
U.S.C.
§
983(d)(2)(A).
Regarding
after-acquired
interests,
CAFRA provides that the term “innocent owner” means a person
who,
at
the
time
that
person
acquired
the
interest
in
the
property
(i) was a bona fide purchaser or seller for value
(including a purchaser or seller of goods or services
for value); and
(ii) did not know and was reasonably without cause to
believe that the property was subject to forfeiture.
18 U.S.C. § 983(d)(3)(A).
Ann
asserts
that
983(d)(2)(A)(i)-(ii)
she
because
is
an
she
has
innocent
a
owner
pre-existing
under
§
interest
arising from her sole ownership of the Property from July 1997
until October 1999, the undisputed period of James’s illegal
drug trafficking and money laundering activity, and because it
is undisputed that she had no knowledge of the conspiracy during
22
Appeal: 08-2065
Document: 85
Date Filed: 04/17/2012
Page: 23 of 27
that time. The district court recognized that “[t]he conditions
one must meet to be an innocent owner depend on whether the
claimant’s property interest was acquired before or after the
illegal conduct giving rise to the forfeiture took place,” but
reasoned
that
Ann
“clearly
gave
up
her
legal
interest
in
existence at the time of the initial criminal activity at the
property because she quitclaimed the deed to [James] in 1999.”
United States v. Real Prop. Located at 6124 Mary Lane Dr., San
Diego, Cal., No. 3:03-cv-580, 2008 WL 3925074, at * 2 (W.D.N.C.
Aug. 20, 2008). Accordingly, the court determined that, in order
to establish innocent ownership, Ann must satisfy the conditions
set forth in § 983(d)(3). We agree.
As
a
threshold
requirement
under
§ 983(d),
Ann
must
establish that she is an “owner” of the defendant property. 10
Indeed, “[i]f the claimant cannot establish that she has the
required ownership interest, then her innocence is irrelevant.”
Stefan D. Cassella, The Uniform Innocent Owner Defense to Civil
10
The requirement that a claimant establish an ownership
interest in the defendant property as part of her affirmative
defense to forfeiture is distinct from her duty to establish
that she has standing to contest the forfeiture. As set forth
above, to establish standing, a claimant need only show that she
has a facially colorable interest in the proceedings sufficient
to satisfy the case-or-controversy requirement under Article III
of the United States Constitution. See $515,060.42 in United
States Currency, 189 F.3d at 35. Thus, a claimant may have
standing without being an owner of the property.
23
Appeal: 08-2065
Document: 85
Asset
Forfeiture,
citations
Date Filed: 04/17/2012
89
omitted).
K.Y.
L.
Section
J.
Page: 24 of 27
653,
672
983(d)(6)(A)
(2001)
provides
(internal
that
an
“owner” is “a person with an ownership interest in the specific
property [under state law] sought to be forfeited, including a
leasehold, lien, mortgage, recorded security interest, or valid
assignment of an ownership interest.” 18 U.S.C. § 983(d)(6)(A)
(emphasis
added). 11
It
is
unsurprising,
then,
that
in
her
verified claim filed on September 22, 2005, Ann identified the
deed of January 16, 2002 as the legal basis for her asserted coownership of the Property. As the Government points out, “even
at the foundational level of state property law, neither James
nor Ann has showed a colorable existing ownership interest in
the defendant property based on the 1997 grant deed.” Govt’s Br.
at
32.
Rather,
as
the
district
court
found,
this
ownership
interest was extinguished when Ann quitclaimed the Property to
James on September 21, 1999, well before the Government filed
its
forfeiture
complaint.
Accordingly,
in
asserting
the
affirmative defense of innocent ownership, Ann must rely on the
11
Conversely, an “owner” does not include “(i) a person
with only a general unsecured interest in, or claim against, the
property estate of another; (ii) a bailee unless the bailor is
identified and the bailee shows a colorable legitimate interest
in the property seized; or (iii) a nominee who exercises no
dominion
or
control
over
the
property.”
18
U.S.C.
§
983(d)(6)(B).
24
Appeal: 08-2065
Document: 85
Date Filed: 04/17/2012
Page: 25 of 27
partial ownership interest James conveyed to her by way of the
2002 grant deed.
Given that the 2002 deed gave rise to “a property interest
acquired after the conduct giving rise to the forfeiture has
taken place,” Ann must establish innocent ownership under 18
U.S.C. § 983(d)(3). As set forth above, § 983(d)(3)(A) requires
that Ann establish (i) she was a bona fide purchaser for value
(“BFP”) and (ii) she did not know and was reasonably without
cause to believe that the property was subject to forfeiture
when she acquired a partial ownership interest in 2002. “Bona
fide purchaser for value” is not defined in CAFRA. Accordingly,
courts often turn to the definition in the criminal forfeiture
statute, which “includes all persons who give value . . . in an
arm’s length transaction with the expectation that they would
receive equivalent value in return.” 18 U.S.C. § 853(n)(6)(b).
Based
upon
the
undisputed
facts
in
the
record,
Ann
cannot
satisfy this standard.
The record indicates that Ann did not give value for her
partial ownership interest in the Property. Tellingly, the 2002
deed of trust states that it was a “GIFT-NO CONSIDERATION.” 12 In
12
The word “GIFT” was handwritten, while “NO CONSIDERATION”
was typed. The deed also contains boilerplate language stating
“FOR A VALUABLE CONSIDERATION,” but the handwritten “GIFT”
notation clearly indicates the true nature of the transaction.
25
Appeal: 08-2065
Document: 85
addition,
remember
Ann
Date Filed: 04/17/2012
testified
discussing
at
her
payment
Page: 26 of 27
deposition
with
James
at
that
she
did
not
the
time
of
the
transaction. Although she apparently often gave or loaned her
son money, there is no evidence that any of these gifts or loans
were part of a bargained-for exchange related to the conveyance
of an interest in the Property in 2002. Ann concedes that a BFP
must part with something of value in exchange for the property,
but argues that she satisfied this requirement by co-signing as
a
borrower
on
the
Deed
of
Trust
for
$240,000,
and
thereby
becoming jointly liable for that amount. The Government argues
that Ann’s undertaking of this legal obligation does nothing to
demonstrate that the conveyance was an arm’s length transaction
and, in fact, supports an opposite conclusion. See Govt’s Br. at
42 (“Ann’s liability on the IndyMac loan confirms that there was
no arm’s length bargain with her son, since she became jointly
liable
for
a
$240,000
debt
without
receiving
any
of
the
additional funds that were taken out of the equity in the house;
all the money went to him”). We agree with the district court
that Ann’s assumption of joint liability for the outstanding
mortgage debt does not establish that she gave value in an arm’s
length transaction. Rather, the ineluctable inference from the
undisputed facts is that like most any loving parent, she was
doing her level best to help her offspring, who faced felony
prosecution
in
federal
court.
Accordingly,
26
Ann
is
unable
to
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Date Filed: 04/17/2012
Page: 27 of 27
establish that she is a BFP and cannot prevail on the innocent
owner defense as a matter of law.
Having concluded that the district court correctly found
that Ann was not a BFP when she acquired her current ownership
interest in the Property by way of the 2002 grant deed, we need
not decide whether she “did not know and was reasonably without
cause to believe that the property was subject to forfeiture,”
as required under 18 U.S.C. § 983(d)(3)(A)(ii).
III.
For the reasons set forth herein, James’s appeal from the
district court’s grant of summary judgment, docketed as No. 082065, is dismissed. Ann’s appeal from the district court’s grant
of summary judgment, docketed as No. 08-2159, and the district
court’s denial of James’s motion for reconsideration, docketed
as No. 08-4326, are affirmed.
No. 08-2065 DISMISSED
Nos. 08-2159 and 08-4326 AFFIRMED
27
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