U.S. v. 51 Pieces of Real Property Roswell, N.M., 92-1346

• Decision Date: 28 February 1994
• Docket Number: No. 92-1346,92-1346
• Citation: 17 F.3d 1306
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. 51 PIECES OF REAL PROPERTY, ROSWELL, NEW MEXICO, including all fixtures, appliances, and appurtenances therein and all rents, profits, other income and proceeds therefrom; All Deposits, Rents, Proceeds and Records Maintained by the Rent Shoppe for all Properties Managed for James Grandgeorge, Nitsua Management, Brookes, Ltd., the Oversoul Foundation, and Donald Austin, Defendants, Nitsua Management, Claimant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1306

17 F.3d 1306

UNITED STATES of America, Plaintiff-Appellee, v. 51 PIECES OF REAL PROPERTY, ROSWELL, NEW MEXICO, including all fixtures, appliances, and appurtenances therein and all rents, profits, other income and proceeds therefrom; All Deposits, Rents, Proceeds and Records Maintained by the Rent Shoppe for all Properties Managed for James Grandgeorge Nitsua Management, Brookes, Ltd., the Oversoul Foundation and Donald Austin, Defendants Nitsua Management, Claimant-Appellant.

No. 92-1346.

United States Court of Appeals Tenth Circuit.

Feb. 28, 1994.

James R. Allison, Interim United States Attorney, James S. Russell, Assistant U.S. Attorney, Denver, Colorado, for Plaintiff-Appellee.

Christopher C. Jeffers of Geil, Jeffers, Woodrum and Waitkus, P.C., Boulder, Colorado, for Claimant-Appellant.

Before, SETH, BARRETT, and McKAY, Circuit Judges.

McKAY, Senior Circuit Judge.

Appellant Nitsua Management appeals the district court's order of October 22, 1992, granting the government's motion for default judgment and final order of forfeiture of certain real property located in New Mexico, and denying Nitsua's various motions, including a motion to dismiss for lack of jurisdiction. ¹

The government sought to forfeit the New Mexico property pursuant to 18 U.S.C. Secs. 981, 1341, 1343, and 1956 because it allegedly was purchased in furtherance of a money laundering scheme engaged in by Donald Austin, who was indicted with others by a federal grand jury in the District of Colorado in 1991. Nitsua, which is a business trust organization organized under the laws of Nevada, held legal title to the real property at issue. The government contended that Austin was the alter ego of Nitsua.

On July 10, 1991, the government filed its verified complaint for forfeiture in rem in the United States District Court for the District of Colorado, and the court issued a warrant for arrest of the property in rem, pursuant to Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims (Supplemental Rules). ² The government subsequently amended its complaint to add a party on July 31, and the court issued another warrant for arrest of the property in rem.

The government sent notice of the seizure and forfeiture proceedings to Nitsua at an address in La Jolla, California, and sent notice to Austin through his criminal defense attorney. The government also published notice in the Rocky Mountain News for three consecutive weeks, pursuant to Supplemental Rule C(4) and the district court's order.

By January 1992, no one had come forward to file a claim to the property, so the government moved for a default judgment. ³ Before the court ruled on the default motion, counsel entered an appearance on behalf of Nitsua on April 22 and moved for additional time in which to file a claim and answer. Shortly before the October hearing on the parties' respective motions, new counsel entered an appearance for Nitsua and moved to continue the hearing. Counsel subsequently filed an amended motion for additional time in which to file a claim and answer, a claim, and a motion to dismiss the complaint and return the property to Nitsua. In the latter motion, Nitsua asserted that the court lacked in rem jurisdiction over the property and personal jurisdiction over Nitsua and that the seizure was illegal because it occurred without any prior notice or opportunity for a hearing.

The district court denied the motion to continue the hearing and proceeded to hear the merits of the parties' respective motions. The court concluded that it had in rem jurisdiction over the property, as well as personal jurisdiction over Austin, whom the court found to be the alter ego of Nitsua. The court denied Nitsua's request for additional time in which to file a claim and answer and, after determining that probable cause existed to forfeit the property, entered judgment in favor of the government.

On appeal, Nitsua contends that the district court abused its discretion in two respects: first by refusing to continue the hearing; and then by refusing to permit Nitsua to file a late claim and answer. Nitsua also argues that the seizure of the New Mexico property without prior notice and a hearing violated Nitsua's due process rights. Further, Nitsua contends that the notice the government ultimately sent Nitsua regarding the forfeiture proceedings was insufficient. Finally, Nitsua maintains that the district court had neither in rem jurisdiction over the property, nor personal jurisdiction over Nitsua. Nitsua seeks to have the forfeiture set aside, to have its property returned, including the rents collected after the seizure, and to have the government start new proceedings in a proper fashion.

We begin our analysis by considering the jurisdictional issues de novo. FDIC v. Oaklawn Apartments, 959 F.2d 170, 173 (10th Cir.1992). Because a judgment is void if the court that enters it lacks jurisdiction over either the subject matter of the action or the parties to the action, we have held that before entering a default judgment, a court has "an affirmative duty to look into its jurisdiction both over the subject matter and the parties." Williams v. Life Sav. & Loan, 802 F.2d 1200, 1202-03 (10th Cir.1986). This affirmative duty exists regardless of whether the parties are people or, in the case of actions in rem, inanimate objects such as pieces of real property.

I. In Rem Jurisdiction.

The exercise of in rem jurisdiction in a civil forfeiture case permits the court to adjudicate the rights of the government to the property as against the whole world. United States v. Certain Real & Personal Property Belonging to Hayes, 943 F.2d 1292, 1295 (11th Cir.1991). Traditionally, a court could obtain in rem jurisdiction only over property situated within its territorial borders. Pennington v. Fourth Nat'l Bank, 243 U.S. 269, 272, 37 S.Ct. 282, 283, 61 L.Ed. 713 (1917). Thus, venue for an in rem civil proceeding to forfeit property lies in the district in which the property is found. ⁴ 28 U.S.C. Sec. 1395(b).

In 1986, as part of the Anti-Drug Abuse Act of 1986, Pub.L. No. 99-570, 100 Stat. 3207, Congress expanded the venue for civil forfeiture actions arising out of money laundering activities as follows:

In addition to the venue provided for in section 1395 of title 28 or any other provision of law, in the case of property of a defendant charged with a violation that is the basis for forfeiture of the property under this section, a proceeding for forfeiture under this section may be brought in the judicial district in which the defendant owning such property is found or in the judicial district in which the criminal prosecution is brought.

18 U.S.C. Sec. 981(h).

The government relies on the provisions of Sec. 981(h) to support its argument that the district court had jurisdiction over the defendant property located in New Mexico because the underlying criminal prosecution was brought in the District of Colorado and, after his arrest, Austin also was brought into the District of Colorado. ⁵ Venue, however, is distinct from jurisdiction. United States v. Contents of Accounts Nos. 3034504504 & 144-07143, 971 F.2d 974, 980 (3d Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1580, 123 L.Ed.2d 148 (1993). Even if a district is the proper venue for a civil forfeiture action, the court cannot proceed unless it has jurisdiction over the defendant property. To obtain jurisdiction over the property, the court must be able to execute service of process on it. Id. at 980-81.

At the time the government filed its complaint and the district court sought to obtain jurisdiction over the property in New Mexico, Supplemental Rule E(3)(a) provided that "[p]rocess in rem and of maritime attachment and garnishment shall be served only within the district." By contrast, Fed.R.Civ.P. 4(f) provided that "[a]ll process other than a subpoena may be served anywhere within the territorial limits of the state in which the district court is held and, when authorized by a statute of the United States or by these rules, beyond the territorial limits of the state." ⁶ Even if the more expansive service provisions of Rule 4(f) applied, the district court could not execute service of process outside Colorado unless some federal statute authorized the court to do so.

The government contends that Sec. 981(h) is such a statute. In support of its position, the government relies on several district court cases holding that either Sec. 981(h) or 21 U.S.C. Sec. 881(j)--the counterpart to Sec. 981(h) in drug cases--authorizes nationwide service of process. United States v. 953 E. Sahara, 807 F.Supp. 581, 581 (D.Ariz.1992) (Sec. 981(h)); ⁷ United States v. Parcel I, Beginning at a Stake, 731 F.Supp. 1348, 1351 (S.D.Ill.1990) (Sec. 881(j)); United States v. 2050 Brickell Ave., 681 F.Supp. 309, 314 (E.D.N.C.1988) (Sec. 881(j)).

In each of these cases, the district court acknowledged that Congress did not expressly provide for nationwide service of process in either Sec. 981(h) or Sec. 881(j), but determined that authority for nationwide service should be implied to give effect to the expanded venue provision. 953 E. Sahara, 807 F.Supp. at 585; Parcel I, 731 F.Supp. at 1351-52; 2050 Brickell Ave., 681 F.Supp. at 313-14.

At least two other courts, however, have declined to imply authority for nationwide service of process in these expanded venue provisions. Accounts Nos. 3034504504 & 144-07143, 971 F.2d at 982-83 (Sec. 981(h)); United States v. 11205 McPherson Lane, 754 F.Supp. 1483, 1487 (D.Nev.1991) (Sec. 881(j)). The following factors informed these courts' respective decisions: (1) the statute, itself, is silent; (2) the relevant legislative history, if any, does not support the implication of nationwide service of process; ⁸ (3) Congress has provided expressly for nationwide service of process in a wide variety of statutes when it has deemed such process necessary; and (4) in Omni...