US v. A Single Story Double Wide Trailer, Civ. A. No. 89-127-JLL.

• Decision Date: 08 December 1989
• Docket Number: Civ. A. No. 89-127-JLL.
• Citation: 727 F. Supp. 149
• Parties: UNITED STATES of America, Plaintiff, v. A SINGLE STORY DOUBLE WIDE TRAILER, gray in color with black bars on the windows, located at R.D. 4, Box 382E, Seaford, Delaware, Serial No. 100165ABX; etc., and Charles Peterson, Defendants.
• Court: U.S. District Court — District of Delaware

727 F. Supp. 149

UNITED STATES of America, Plaintiff, v. A SINGLE STORY DOUBLE WIDE TRAILER, gray in color with black bars on the windows, located at R.D. 4, Box 382E, Seaford, Delaware, Serial No. 100165ABX; etc., and Charles Peterson, Defendants.

Civ. A. No. 89-127-JLL.

United States District Court, D. Delaware.

December 8, 1989.

William C. Carpenter, Jr., U.S. Atty., and Carolyn T. Greene, Asst. U.S. Atty., Wilmington, Del., for plaintiff.

John A. Sergovic, Jr., Georgetown, Del., for defendant Charles Peterson.

MEMORANDUM OPINION

LATCHUM, Senior District Judge.

I. BACKGROUND

The United States filed a complaint for forfeiture in rem, and a warrant for the arrest, of a single story double wide trailer, gray in color with black bars on the windows, located at R.D. 4 Box 382E, Seaford, Delaware (Docket Item "D.I." 1) and other personal property on March 16, 1989.¹ The complaint alleged that the defendant property either constituted proceeds traceable to or was intended to facilitate illegal drug transactions conducted by Eric Batson ("Batson"). The warrant provided for a ten day period during which claims could be filed, and a twenty day period after filing a claim to file an answer. Accordingly, the last day a claim could be filed was March 26; the last day for an answer, Saturday, April 15.

Batson claimed ownership to all items listed in the complaint, except for the double wide trailer and a Chevy Blazer (D.I. 7). Batson stated that the trailer was owned by Charles Peterson ("Peterson"). An amended complaint (D.I. 8) was filed on April 12, followed shortly by a supplemental amended complaint filed on April 14 (D.I. 9). Batson's answer to the supplemental amended complaint again denied ownership of the trailer. See D.I. 11 (filed April 19).

Peterson accepted service of a summons and complaint concerning the trailer pursuant to Federal Rule of Civil Procedure 4(c)(2)(C)(ii) on April 26 (D.I. 17). Two days later the United States served Peterson with a request for documents. See D.I. 32 at Exhibit ("Ex.") 2. Peterson never responded to this request. The United States Attorney entered default and moved for default judgment on May 5 (D.I. 19). This motion alleged that notice giving claimants twenty days to file claims for the property of concern in the complaint was published, pursuant to court order, on April 12. The motion further alleged that May 2 was the twentieth day after publication and that no claim for the trailer had been filed. This Court entered an Order of Default Judgment and a Decree of Forfeiture on May 9 (D.I. 19).

Peterson first telephoned the United States Attorney's office on or about May 31, 1989. Peterson was not heard from again until September 21, when his attorney entered an appearance (D.I. 24). On the same date a motion "for stay in proceedings to enforce a judgment and to open judgment" was filed pursuant to Federal Rules of Civil Procedure 60 and 62 (D.I. 25).²

II. DISCUSSION

Federal Rule of Civil Procedure 60(b) permits a district court to set aside a default judgment if the moving party can show "(1) mistake, inadvertence, surprise, or excusable neglect ... (3) fraud ... misrepresentation, or other misconduct of an adverse party ... (6) any other reason justifying relief from the operation of the judgment." Default judgments are not favored in the Third Circuit; any doubts must be resolved in favor of the moving party so that the case may be heard on the merits. See United States v. $55,518.05 in United States Currency, 728 F.2d 192, 194-95 (3d Cir.1984); see also United States v. One Parcel of Real Property, 763 F.2d 181, 183 (5th Cir.1985) ("because modern federal procedure favors trials on the merits, `an abuse of discretion need not be glaring in order to justify reversal.'" (citation omitted)).

The decision to set aside a default judgment is within the discretion of the district court. See One Parcel of Real Property, 763 F.2d at 183; $55,518.05 in United States Currency, 728 F.2d at 194. The court must, however, apply three factors in order to properly exercise its discretion: "(1) whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; (3) whether the default was the result of the defendant's culpable conduct." $55,518.05 in United States Currency, 728 F.2d at 195; see One Parcel of Real Property, 763 F.2d at 183; United States v. United States Currency in the Amount of Seven Thousand Five Hundred Thirty-One Dollars ($7,531), 716 F.Supp. 92, 93 (E.D.N.Y.1989); United States v. Real Property Located in Sevier County, 703 F.Supp. 1306, 1310 (E.D.Tenn. 1988).

Prejudice, in this context, may be shown by delay that makes discovery more difficult, causes the loss of evidence, or increases the probability of fraud or collusion. See Real Property Located in Sevier County, 703 F.Supp. at 1310. The United States does not argue that it has been prejudiced by Peterson's actions. See D.I. 32 at 12.

In order to meet the burden of showing the existence of a meritorious defense, the claimant need not conclusively prove his case. Peterson must show that his allegations, if proved true at trial, would establish a complete defense to the forfeiture. See $55.518.05 in United States Currency, 728 F.2d at 195. In his Opening Brief, Peterson alleges that he "was guilty of no wrongdoing ... and had no knowledge of any illegal acts committed in or around" the trailer. D.I. 29 at 6; see id. at 16. The Court will consider this an assertion of the "innocent owner defense," as provided for in § 881(a)(4)(C) and § 881(a)(7).³ The Third Circuit has held that a claimant "can show innocent ownership by proving by a preponderance of the evidence that the illegal use of the property occurred either without his knowledge or without his consent." United States v. Parcel of Real Property Known as 6109 Grubb Road, 886 F.2d 618, 626 (3d Cir.1989).⁴

Peterson bears the burden of pleading facts that, if proven at trial, would show that if the trailer were used for illicit purposes, it was without his knowledge or without his consent. In support of his defense, Peterson alleges only that: (1) he is innocent of wrongdoing, see D.I. 29 at 12, 16; (2) that he had no knowledge of illegal activity, see id.; and (3) that he had no duty to monitor the activities going on at the trailer. See id. at 12.⁵ No factual allegations are made in support of the first two allegations. The pleading of conclusory statements or simple denials, without alleging the specific facts supporting the claim, is insufficient to establish a meritorious innocent owner defense. See $55,518.05 in United States Currency, 728 F.2d at 195. Peterson has failed to meet his burden of establishing the existence of a meritorious defense.

Further, a showing of a meritorious defense includes a demonstration that the claimant has the requisite standing to assert his claim. Peterson never filed a verified claim for the trailer, as required by Rule C(6). See Supplemental Rules for Certain Admiralty and Maritime Claims, Rule C(6). Only by filing a verified claim, in accordance with C(6), can a claimant demonstrate that he has a sufficient interest in the seized item to satisfy standing requirements. In United States v. One 1978 Piper Navajo PA-31 Aircraft, 748 F.2d 316 (5th Cir.1984), the court denied a motion to set aside a default judgment because, in part, the claimant failed to file a verified claim. The filing of a verified claim was deemed to be an essential part of demonstrating the existence of a meritorious defense. See id. at 319; see also United States v. Properties Described in Complaints, 612 F.Supp. 465, 467 (D.C.Ga.1984) ("The entire purpose of the claim is to establish the requisite standing to enable the claimant to pray for its return."), aff'd sub. nom., U.S. v. One 1979 Mercedes Benz, 779 F.2d 58 (11th Cir.1985). A failure to file a verified claim will only be excused if an action by the government caused the non-compliance. See United States v. Real Property in Sevier County, 703 F.Supp. 1306, 1311 (E.D.Tenn.1988) (finding no such action by the government and denying a motion to set aside default). There is no such evidence in the present record. Peterson received timely notification of the in rem proceeding, yet did not contact the United States Attorney's Office until after default judgment had been entered.

An entry of appearance and a motion to stay proceedings and to open judgment is insufficient to meet the requirements of Rule C(6). Cf. Properties Described in Complaints, 612 F.Supp. at 466 (holding that a "Claim and Answer" did not meet the requirements of Rule C(6)). Peterson does not have standing to assert his claim.⁶ He has failed to show that he has a meritorious defense or that he has standing to assert such a defense. The second factor, therefore, weighs against his motion.⁷

The final factor to be considered is whether Peterson is culpable for the default. In order for Peterson to prevail on his motion, this Court must find that he acted within a reasonable time of the default judgment. See United States v. 5708 Beacon Drive, 712 F.Supp. 525, 527 (S.D. Miss.1988), aff'd, 875 F.2d 859 (5th Cir. 1989); Fed.R.Civ.P. 60(b). Further, Peterson must have a justifiable reason for failing to interpose a timely claim. See One 1978 Piper Navajo PA-31 Aircraft, 748 F.2d at 319. The Third Circuit uses six factors to analyze whether a plaintiff has shown excusable neglect:

1) whether the inadvertence reflected professional incompetence such as ignorance of rules of procedure, 2) whether an asserted inadvertence reflects an easily manufactured excuse incapable of verification by the court, 3) counsel's failure to provide for a readily foreseeable consequence, 4) a complete lack of diligence or 5) whether the inadvertence resulted despite counsel's substantial good efforts towards compliance. Moreover, we also consider whether the enlargement of time will prejudice the opposing part

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