Torres v. $36,256.80 U.S. Currency

• Decision Date: 10 June 1994
• Docket Number: D,No. 871,871
• Citation: 25 F.3d 1154
• Parties: Clara TORRES, Plaintiff-Appellant, v. $36,256.80 U.S. CURRENCY, Defendant-Appellee. ocket 93-6202.
• Court: U.S. Court of Appeals — Second Circuit

Page 1154

25 F.3d 1154

Clara TORRES, Plaintiff-Appellant, v. $36,256.80 U.S. CURRENCY, Defendant-Appellee.

No. 871, Docket 93-6202.

United States Court of Appeals, Second Circuit.

Argued Feb. 28, 1994.

Decided June 10, 1994.

CLARA TORRES, pro se.

Treby McL. Williams and Gabriel W. Gorenstein, Asst. U.S. Attys. (Mary Jo White, U.S. Atty. for the S.D.N.Y.), on the brief, for defendant-appellee.

Before: KEARSE and LEVAL, Circuit Judges and POLLACK, Senior District Judge. ^*

LEVAL, Circuit Judge:

Plaintiff Clara Torres appeals from an order of the district court (Leisure, J.) granting the Government's motion for summary judgment dismissing her complaint, 827 F.Supp. 197. The complaint seeks to set aside a declaration of forfeiture issued by the Drug Enforcement Administration on October 31, 1988, against a $30,000 certificate of deposit (hereinafter "C.D.") in the name of Rafael Torres. Clara, who is the wife of Rafael Torres, claims that she, not Rafael, is the beneficial owner of the C.D., and that the C.D., furthermore, represents the proceeds of a legitimate bank loan, not illegal drug transactions. The district court found that Clara Torres lacked standing to challenge the forfeiture. We disagree.

Background

21 U.S.C. Sec. 881 authorizes the civil forfeiture of funds that are the proceeds of drug transactions. Following the conviction of Clara Torres's husband, Rafael Torres, on a narcotics offense in the Eastern District of Pennsylvania, the government sought a warrant authorizing the Drug Enforcement Administration to seize, preliminary to forfeiture, a $30,000 Certificate of Deposit registered to Rafael Torres at Chase Manhattan Bank in Manhattan. Based on an affidavit made before her by a DEA agent, United States Magistrate Judge Sharon E. Grubin found probable cause to believe the C.D. was subject to forfeiture under 21 U.S.C. Sec. 881(a)(6) as "proceeds traceable to ... an exchange [for a controlled substance]," and issued the warrant. ¹

As provided by 21 U.S.C. Sec. 881(d), the notice provisions for seizures under the customs laws are applied to seizures under Sec. 881. The applicable customs statute requires that "[w]ritten notice of seizure ... be sent to each party who appears to have an interest in the seized article," and that notice of seizure also be published for at least three successive weeks. 19 U.S.C.A. Sec. 1607(a) (West Supp.1993).

The Government sent notice of seizure letters by certified mail to Rafael Torres at his last known home address and at the Chester County Prison in Westchester, Pennsylvania, and published notice of the seizure for three successive weeks in the newspaper USA Today. Both certified letters were returned to the Government undelivered; the letter to the Chester County Prison was stamped "Not at Chester County Prison." No further notices of forfeiture were mailed. The DEA naturally received no claims. On October 31, 1988, the DEA declared the C.D. forfeited pursuant to the summary forfeiture provision of 19 U.S.C.A. Sec. 1609 (West Supp.1993), which permits the forfeiture to be concluded without further judicial intervention if no claim is filed after issuance of the seizure warrant.

According to sworn statements filed in the district court by Clara Torres, she first became aware of the DEA's action in June 1989, eight months after the forfeiture, and first learned in November 1990 that she could contest the forfeiture. In December 1990, and again in January and February 1991, Torres wrote to the DEA claiming that the C.D. belonged to her, not her husband, and asking that the seizure warrant be lifted from the C.D. After receiving notification from the DEA on February 14, 1991, that it considered her claim untimely (because it was made after conclusion of the forfeiture), she filed this suit on April 8, 1991, for return of the funds.

Clara Torres claims that the C.D. is her property. She seeks the benefit of the portion of the civil forfeiture law that protects "innocent owners" from forfeiture of their property based on illegal acts of others beyond the owner's control:

[N]o property shall be forfeited under this paragraph, to the extent of the interest of an owner, by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner.

21 U.S.C. Sec. 881(a)(6). She also contends that the forfeiture is unauthorized by law because the C.D. was purchased with the proceeds of a bank loan she took out, not with the proceeds of illegal drug transactions.

Clara's complaint alleges that the C.D. "is rightfully hers, and not her husband's" (Complaint p 12), and that the C.D. was placed in the name of Mr. Torres solely to help him establish credit, and with a mutual agreement that the property would remain hers, notwithstanding Rafael's nominal ownership, and be returned to her, together with all interest earned, upon maturity of the C.D. (Complaint p 19).

She supports these allegations with affidavits sworn by herself and her husband. Rafael's affidavit, dated March 15, 1991, states the following: In June 1988, Clara took out a consumer loan in the amount of $30,000 from Chemical Bank. Intending to assist her husband in establishing credit, she directed the bank to make the check for the loan proceeds payable to him. Rafael Torres took the check to Chase Manhattan Bank, where he used it to purchase a $30,000 C.D. Rafael states unequivocally, "This money is hers.... [I]t was agreed that I would repay her the full amount of the certificate of deposit upon maturization in June 1991."

Clara's sworn letter to the U.S. Attorney and the DEA, dated January 2, 1991, recites the same series of events as "facts and precise details establishing that the $30,000.00 is the claimant's and it has been 'unlawfully' seized" (emphasis added). She also states that as of that date, she was continuing to make monthly payments on the loan that was used to purchase the C.D.

In addition to affidavits, Ms. Torres submits documentary evidence consisting of an agreement dated June 15, 1988, by which Chemical Bank loaned her $30,000; a sworn letter from Rosa Deliz, a Chemical Bank Sales Representative, dated April 21, 1993, which states that the check disbursing the loan was made payable to Rafael Torres at the request of Clara Torres and was postdated June 30, 1988; a copy of a Chemical Bank check to Rafael Torres for $30,000, dated June 30, 1988; and the Chase document issued when the C.D. was purchased on June 23, 1988, showing the "method of deposit" as "transfer from other bank."

The district court held that the facts asserted by Clara did not show a sufficient interest in the forfeited property to confer standing to contest the forfeiture. In the court's analysis, Clara loaned her husband $30,000, which he used to buy the C.D.; having obtained no security interest in her husband's property as collateral, she was merely his general unsecured creditor with no property interest in the C.D. As such, the court reasoned, Clara lacked standing to challenge the forfeiture. The court therefore granted the Government's motion for summary judgment.

We respectfully disagree with the district court's analysis. We find that Clara Torres asserts an ownership interest sufficient to confer standing to contest the forfeiture. Clara's allegations show more than the status of general creditor. Given some reasonable allowance for the drafting of her affidavits without the help of counsel, we find that Clara Torres has raised a triable issue of fact whether under New York law, she is the beneficial owner of a constructive trust, holding the C.D. as its corpus.

Secondly, because the mailed notices of the forfeiture were not reasonably calculated to notify Rafael, the nominal owner, and therefore did not meet the minimum standards prescribed by the Due Process Clause, Clara's claim has not been foreclosed by the forfeiture proceeding, and her suit is not untimely.

Discussion

A. Standing

When a case has been dismissed for lack of standing, the appellate court's fundamental inquiry is whether "the appellants [have] alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions." Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962). The contours of this inquiry have been fleshed out by cases which hold that to show standing, a litigant must allege a "distinct and palpable injury to himself," Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975), fairly traceable to the "putatively illegal conduct of the defendant," Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99, 99 S.Ct. 1601, 1608, 60 L.Ed.2d 66 (1979), and likely to be redressed by the requested relief, Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 44-45, 96 S.Ct. 1917, 1927-28, 48 L.Ed.2d 450 (1976). See generally Gladstone, Realtors, 441 U.S. at 99, 99 S.Ct. at 1607-08; Schiavone v. United States (In re Appointment of Indep. Counsel), 766 F.2d 70, 73-74 (2d Cir.), cert. denied, 474 U.S. 1020, 106 S.Ct. 569, 88 L.Ed.2d 554 (1985).

The standing inquiry is also informed by "whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Association of Data Processing Serv. Orgs., Inc., v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970). The legislative history of the forfeiture law indicates that a rather expansive "zone of interests" is protected by the innocent owner provision, 21 U.S.C. Sec. 881(a)(6). The Congressional Record indicates that Congress intended this provision to "be broadly interpreted to include any person with a recognizable legal or equitable interest in the property...