U.S. v. Real Property Located at 1184 Drycreek Road, Granville, Ohio 43023, s. 97-4158

• Decision Date: 23 April 1999
• Docket Number: Nos. 97-4158,97-4160,s. 97-4158
• Citation: 174 F.3d 720
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. REAL PROPERTY LOCATED AT 1184 DRYCREEK ROAD, GRANVILLE, OHIO 43023, Defendant, Charles William O'Brien, Claimant-Appellant (97-4158), Winterhaven Trust; R.J. Adams, Trustee, Claimant-Appellant (97-4160).
• Court: U.S. Court of Appeals — Sixth Circuit

Page 720

174 F.3d 720

UNITED STATES of America, Plaintiff-Appellee, v. REAL PROPERTY LOCATED AT 1184 DRYCREEK ROAD, GRANVILLE, OHIO

43023, Defendant,

Charles William O'Brien, Claimant-Appellant (97-4158),

Winterhaven Trust; R.J. Adams, Trustee, Claimant-Appellant (97-4160).

Nos. 97-4158, 97-4160.

United States Court of Appeals, Sixth Circuit.

Argued Jan. 29, 1999.

Decided April 23, 1999.

Marcia J. Harris (argued and briefed), Office of the U.S. Attorney, Columbus, OH, for Plaintiff-Appellee in No. 97-4158.

James D. Owen (argued and briefed), Columbus, OH, for Defendant, Claimant-Appellant in No. 97-4158.

Marcia J. Harris (briefed), Office of the U.S. Attorney, Columbus, OH, for Plaintiff-Appellee in No. 97-4160.

James D. Owen (argued), Columbus, OH; Gina M. Dougherty (briefed), Columbus, OH, for Defendant, Claimant-Appellant in No. 97-4160.

Before: KENNEDY, DAUGHTREY, and CLAY, Circuit Judges.

KENNEDY, J., delivered the opinion of the court, in which CLAY, J., joined. DAUGHTREY, J. (pp. 732-733), delivered a separate opinion concurring in part and dissenting in part.

KENNEDY, Circuit Judge.

Claimants Charles W. O'Brien and Winterhaven Trust appeal the district court's decision to grant civil forfeiture under 18 U.S.C. § 981 of real property located at 1184 Drycreek Road, Granville, Ohio, 43023. In its complaint for civil forfeiture in rem, the government alleged that the property was forfeitable to the United States because it was property obtained by bank fraud, and was proceeds of or was used to facilitate bank fraud and related money laundering in violation of 18 U.S.C. §§ 1956, 1957, and 1344. Claimants Winterhaven Trust ("the Trust") and Charles O'Brien ("O'Brien") contend that the district court erred in granting the government's motion for in rem forfeiture in the absence of pre-seizure notice and hearing, and that the district court erred by failing to suppress the seizure of the property as a remedy for the government's warrantless search, seizure and confiscation of the property and its contents. The Trust alone also contends that the district court erred by granting the government's motion for summary judgment on the forfeiture, by forfeiting the real property in violation of the Eighth Amendment's prohibition against excessiveness and disproportionality, and by failing to grant a stay of the forfeiture proceedings while criminal charges related to the same or similar conduct were pending against one of the claimants. For the reasons set forth in the following opinion, we shall affirm.

I. BACKGROUND

Claimant Charles W. O'Brien ("O'Brien") is a Columbus, Ohio area businessman with multiple real estate holdings. He had been a customer of Bank One since at least 1971. The instant action arises from a series of transactions between O'Brien and Bank One, as well as other Ohio financial institutions, in which O'Brien sought loans using the defendant property as collateral.

A. Ownership of the defendant property

On January 28, 1980, Bank One made a demand loan of $85,000 to O'Brien for the purpose of purchasing the defendant residential property, located at 1184 Drycreek Road, Granville, Ohio. The property had been damaged in a fire prior to O'Brien's acquisition and O'Brien told the bank that he intended to use the loan to make repairs. O'Brien told the bank that he would repay the loan by means of permanent financing from another bank.

Over the next several years, Bank One made numerous other demand loans to O'Brien. In May and September 1980, the bank loaned O'Brien a total of $45,000 to cover the costs of renovating the defendant property. As Bank One was confident that he would repay, the bank made another loan to O'Brien in November 1980 for $268,000 secured by a mortgage on the defendant property and other collateral. In June 1981, O'Brien obtained another loan from Bank One for $290,000, which he indicated was primarily for renovation of other rental properties, and the remainder of which would finance renovation of the defendant property. This loan was secured by mortgages on properties other than the defendant property.

On August 21, 1981, without the knowledge or consent of Bank One, O'Brien and his wife, Karen O'Brien, deeded the defendant property to an entity called the Heidi Development Corporation ("HDC"), which O'Brien controlled. O'Brien nevertheless continued to seek loans from Bank One using the defendant property as collateral. Bank One loaned O'Brien $920,000 in September 1981, secured in part by the defendant property (which Bank One estimated at the time to be worth $160,000). The bank loaned O'Brien $421,000 in February 1982, secured in part by a third mortgage on the defendant property. On June 21, 1982, O'Brien promised Bank One a payment of $120,000 in exchange for a release of the mortgages on the defendant property. O'Brien also promised to sell the defendant property and other real estate in order to reduce his indebtedness to Bank One below one million dollars. The bank was never paid and no such sale occurred.

When Bank One learned in August 1984 that Franklin County, Ohio had initiated an action against O'Brien for delinquent taxes, it identified O'Brien as a risk and rated his account as a "problem loan." By January 1987, the bank's relationship with O'Brien had significantly deteriorated due to the bank's inability to collect on his delinquent accounts. At this point O'Brien owed the bank approximately $1.5 million.

Also in 1987, O'Brien's legal secretary, Tammy Cordell, went to one of Bank One's branches to attempt to secure three satisfactions of mortgage. Apparently she did not involve either Philip Parker or David Pearce, who had handled O'Brien's prior transactions with the bank, in this particular transaction. The mortgage satisfactions that she obtained showed the signatures of Dean Lucas, a branch manager, and Patrick Hughes, another branch employee who ostensibly signed as a witness. The satisfactions reflected that they were executed on March 30, 1987. They were not recorded, however, until three months later, on June 2, 1987. When the releases were finally recorded, they reflected satisfactions of the three notes on the defendant property, for $920,000, $421,500, and $268,000, respectively. Hughes later testified at the probable cause hearing that he could not remember signing any mortgage releases for these sums. He testified that Lucas was not authorized to release any mortgage exceeding $30,000, and that he would have remembered if Lucas had released any mortgages in excess of that amount.

In between the execution and recording dates of the releases, and unbeknownst to Bank One, the defendant property was deeded from HDC to Drycreek Corporation, which O'Brien also controlled. In November 1987, O'Brien led Parker and Pearce to believe that he had arranged an arms' length sale of the defendant property to an entity called Hicks Development Corporation for $125,000. Neither knew at the time that O'Brien had already transferred title to the property some six years earlier. Based on O'Brien's representations, Bank One took $125,000 to be the market value of the property and accepted $112,500 in cash and a one-year $12,500 note, later changed to a $6,250 note, from O'Brien in exchange for releases of the mortgages on the defendant property. Those mortgage releases were never recorded and no sale of the property to Hicks Development Corporation ever transpired. O'Brien simply funneled hundreds of thousands of dollars of funds from other sources through Ohio bank accounts that he controlled, eventually converting them into cashier's checks with the remitter listed as "Hicks Development Corporation" to resemble proceeds of an arms' length sale.

On November 30, 1990, Drycreek Corporation, then the record owner, deeded the defendant property to Charles A.P. Guillaume ("Guillaume"), who at one time had been the boyfriend of O'Brien's daughter, Kelly. The signature "Pamela Mahaffey," the name of O'Brien's former secretary, appeared on the deed with a notary stamp. Mahaffey testified that she never notarized the deed. A second deed, which appeared to be a photocopy of the first, but which added the word "Trust" after "Guillaume," was filed. Guillaume himself had no knowledge of this "trust." He testified that he neither owned the defendant property, nor served as trustee of the property, nor had any dealings with Winterhaven Trust, to whom the property was later transferred. He was completely unaware that the defendant property had been transferred to him by the Drycreek Corporation, and never saw the deed transferring the property to him until it was shown to him at his deposition. Guillaume also testified that both Kelly and her father told him that the Drycreek Road property belonged to O'Brien. On January 21, 1993, Tammy Cordell, acting as trustee for the Charles A.P. Guillaume Trust, deeded the defendant property to the Winterhaven Trust, R.J. Adams/Trustee.

Between the dates of the transfers of the defendant property from Drycreek Corporation to Charles A.P. Guillaume Trust, and then to Winterhaven Trust, a woman by the name of Joyce Farley worked for and lived with O'Brien. Farley testified that O'Brien forged names and created and used signature stamps in other persons' names, and that he had admitted to her that he filed fraudulent mortgage releases. She testified that he told her that it was "easy" to file the fraudulent releases because "[b]anks, basically, were stupid."

O'Brien's own daughter, Holly, corroborated Farley's testimony regarding his unauthorized use of signature stamps. From 1983 to 1988, Holly worked for her father and signed checks at his direction on a number of different accounts. She testified that she believed O'Brien had forged her name to legal documents without her consent by using her signature stamp without her knowledge.

Russell J. Adams, the Trustee of Winterhaven Trust, indicated that he first learned...