United States of America v. Real Property Located at 1308 Selby Lane, Knoxville, Tennessee 37922
Filing
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MEMORANDUM AND OPINION as set forth in following order. Signed by District Judge R Leon Jordan on 4/16/15. (ABF)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
UNITED STATES OF AMERICA,
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Plaintiff,
v.
REAL PROPERTY LOCATED AT
1308 SELBY LANE,
KNOXVILLE, TENNESSEE, 37922
Defendant.
No. 3:10-CV-423
MEMORANDUM OPINION
This civil forfeiture action in rem is before the court on the United States’
“Motion to Determine Validity and Extent of Lien” [doc. 23] and “Knox County’s
Motion for Relief from Judgment and to Determine the Validity and Extent of Knox
County’s Tax Lien” [doc. 25]. The motions have been fully briefed and are ripe for the
court’s determination. For the reasons that follow, the United States’ motion will be
granted and Knox County’s motion will be denied.
I.
Background
On October 5, 2010, Leslie Janous was indicted in this court on 13 counts
of wire fraud. The indictment contained a forfeiture allegation as to real property located
at 1308 Selby Lane in Knoxville, Tennessee. Janous subsequently pled guilty and was
sentenced to a term of imprisonment of 110 months. On November 4, 2011, the court
entered an agreed preliminary order of forfeiture in the criminal case. [3:10-CR-124,
doc. 56]. Therein, Janous agreed in material part to forfeit her interest in the Selby Lane
property and what appears to be an adjacent “tract two” located at 1525 Wembley Hill
Road (collectively, “the real property”).
On October 1, 2010, the United States filed the instant civil action, a
verified complaint in rem against the two tracts of the Selby Lane property.
On
September 27, 2012, the court entered an “Agreed Consent Order and Entry of Forfeiture
for Property Located at 1308 Selby Lane, Knoxville, Tennessee and 1525 Wembley Hill
Road, Knoxville, Tennessee” (“final order of forfeiture”) which addressed the rights of
claimants Regions Bank, The Painted Room, and Scancarbon. [Doc. 19].
The final order of forfeiture states that “the United States sent Notice of
Complaint for Forfeiture directly to all individuals and entities known by the Government
to have interest in the Defendant Property.” [Doc. 19, p. 2]. That was, however, not the
case. Admittedly,
Pursuant to the pattern of practice in this district, the United States did not
directly notice Knox County; instead it recognized the valid [property tax]
lien without requiring Knox County to file a claim in the judicial
proceeding. The United States seldom sends direct notice to the local and
state governments regarding its real property forfeiture; rather the United
States recognizes those liens in full and pays the accrued taxes and interest
of those liens in full from the sale proceeds.
[Doc. 24, p. 2-3].
The United States sold the real property in late 2014 but a disagreement
arose between the United States and Knox County as to the extent of the latter’s tax lien.
Those parties entered into an “Agreed Order Holding Proceeds of Sale in Escrow” which
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allowed the sale to go forward with a portion of the proceeds to be held until this court
determined “the validity and extent of Knox County’s lien.” [Doc. 22; doc. 21, p. 1].
The United States filed its “Motion to Determine Validity and Extent of
Lien” on November 14, 2014. It is the United States’ position that Knox County has a
valid lien for taxes and interest only up to the date of entry of the final order of forfeiture,
September 27, 2012, because on that date the real property transferred to the United
States and was thus exempt from state taxation. See, e.g., M’Culloch v. Maryland, 17
U.S. 316 (1819). Acknowledging that it did not provide direct notice to Knox County,
the United States argues that it provided “constructive and actual” notice by internet
publication and by the October 5, 2010 filing of a notice of lis pendens with the Knox
County Register of Deeds. The United States also contends that it was entitled to rely on
its above-cited “pattern of practice.” Lastly, the United States argues that Knox County
cannot show that it was prejudiced by any lack of notice.
“Knox County’s Motion for Relief from Judgment and to Determine the
Validity and Extent of Knox County’s Tax Lien” was filed on December 12, 2014. Knox
County seeks relief under Federal Rule of Civil Procedure 60(b)(4), stressing that its
motion is not brought under any other provision of Rule 60. [Doc. 25, p. 1; doc. 27, p.
10]. Knox County argues that it was given insufficient notice of the forfeiture, thereby
rendering the final order of forfeiture “void.” Although the motion and briefing are not
entirely clear, it is presumably Knox County’s position that it is due taxes and interest up
to the date of the real property’s sale. Knox County seeks an order “declaring all prior
proceedings, orders, and judgments in the above captioned forfeiture action void and of
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no effect and reopening the action for further hearing to allow Knox County, as an
innocent owner, to assert its interest in the Defendant Property.” [Doc. 27, p.12].
II.
Analysis
For purposes of this opinion, the court will presume that the United States
did not provide Knox County with the direct notice required by Rule G(4)(b) of the
federal Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture
Actions. Despite that presumption, Knox County has not shown that it is entitled to the
requested relief.
As noted, Knox County stresses that its motion is brought solely under Rule
60(b)(4). That rule provides, “On motion and just terms, the court may relieve a party or
its legal representative from a final judgment, order, or proceeding [if] the judgment is
void[.]” In arguing that that the final order of forfeiture in this case is “void,” Knox
County directs the court’s attention to caselaw from the First, Third, Fifth, Eighth, Ninth,
Tenth, and Eleventh Circuits while downplaying authority from the Sixth Circuit. [Doc.
27, p. 8]. However, the Sixth Circuit, in which this court sits, has ruled that forfeitures
without adequate notice are “voidable, not void.” See United States v. Dusenbery, 201
F.3d 763, 768 (6th Cir. 2000) (emphasis added). This court is bound to follow Sixth
Circuit authority rather than potentially conflicting cases from other circuits. Under
Dusenbery, the final order of forfeiture in this case is not void. Knox County’s motion –
expressly based solely on the Rule 60(b)(4) theory that the final order of forfeiture is void
– therefore fails.
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Additionally, Knox County’s motion is untimely. A Rule 60(b)(4) motion
“must be made within a reasonable time.” Fed. R. Civ. P. 60(c)(1). Rule G(4)(b) notice
issues aside, the United States Marshals Service sent a letter to the Knox County Tax
Assessor on April 2, 2013, notifying that the United States now had title to the real
property pursuant to the September 27, 2012 final order of forfeiture.
That letter
“invoke[d] the doctrine of sovereign immunity which precludes the payment of state and
local taxes on property which has been forfeited.”
[Doc. 24, ex. B].
Without
explanation, Knox County did not file the instant motion until more than 20 months later.
Knox County’s Rule 60(b)(4) motion, even if it had merit, was not made within a
reasonable time.
Lastly, Knox County has not demonstrated prejudice resulting from the
lack of direct notice. The United States concedes that Knox County is due property taxes
and interest up to the date of the final order of forfeiture. Knox County has not shown
what more it would or could have received if direct notice of the forfeiture had been
provided.
Citing Dusenbery (which it had previously encouraged this court to
disregard), Knox County argues that it “is entitled to reopen the proceeding and ‘put the
Government to its proofs under a probable cause standard.’” Dusenbery, 201 F.3d at 768.
Dusenbery, however, involved a motion for return of forfeited property brought by a
criminal defendant pursuant to Federal Rule of Criminal Procedure 41(e) [now 41(g)].
See id. at 764, 768. On the facts of that case, the Sixth Circuit did not grant Dusenbery
the opportunity to reopen his forfeiture proceeding. The Court explained, “We fail to see
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the equity in allowing the claimant more than he would have been accorded in the first
place; namely the fortuitous benefit of avoiding the forfeiture process altogether.” Id. at
768.
Similarly, in civil cases, Rule 61 of the Federal Rules of Civil Procedure
provides that “[u]nless justice requires otherwise, no error . . . by the court or a party . . .
is ground for . . . vacating, modifying, or otherwise disturbing a judgment or order. At
every stage of the proceeding, the court must disregard all errors and defects that do not
affect any party’s substantive rights.” The court notes Knox County’s complaint that it
lost tax revenue during the almost two years that it took the United States to sell the real
property. That is, however, a dissatisfaction with what happened after entry of the final
order of forfeiture. Knox County has in no way explained how an issue of post-forfeiture
revenue is related to the issue of inadequate notice of the forfeiture proceeding itself. For
this additional reason, Knox County’s motion must be denied pursuant to Federal Rule of
Civil Procedure 61.
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III.
Conclusion
“Knox County’s Motion for Relief from Judgment and to Determine the
Validity and Extent of Knox County’s Tax Lien” [doc. 25] will be denied and the United
States’ “Motion to Determine Validity and Extent of Lien” [doc. 23] will be granted. An
order consistent with this opinion will be entered.
IT IS SO ORDERED.
ENTER:
s/ Leon Jordan
United States District Judge
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