U.S. v. Approximately Two Thousand, Five Hundred Thirty-Eight Point Eighty-Five Shares (2,538.85) of Stock Certificates of Ponce Leones Baseball Club, Inc.

• Decision Date: 02 November 1992
• Docket Number: EIGHTY-FIVE,92-1800,THIRTY-EIGHT,Nos. 92-1555,s. 92-1555
• Parties: UNITED STATES of America, Plaintiff, Appellee, v. APPROXIMATELY TWO THOUSAND, FIVE HUNDREDPOINTSHARES (2,538.85) OF STOCK CERTIFICATES OF THE PONCE LEONES BASEBALL CLUB, INC., etc., Defendants, Appellees. Domingo Cotto-Garcia, Claimant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1281

988 F.2d 1281

UNITED STATES of America, Plaintiff, Appellee, v. APPROXIMATELY TWO THOUSAND, FIVE HUNDRED THIRTY-EIGHT POINT

EIGHTY-FIVE SHARES (2,538.85) OF STOCK

CERTIFICATES OF THE PONCE LEONES

BASEBALL CLUB, INC., etc.,

Defendants, Appellees.

Domingo Cotto-Garcia, Claimant, Appellant.

Nos. 92-1555, 92-1800.

United States Court of Appeals, First Circuit.

Heard Nov. 2, 1992.

Decided March 5, 1993.

Rafael F. Castro Lang with whom F. Castro Amy, San Juan, PR, was on brief, for claimant-appellant.

Jose F. Blanco, Asst. U.S. Atty., with whom Daniel F. Lopez-Romo, U.S. Atty., Hato Rey, PR, was on brief, for U.S.

Before TORRUELLA, Circuit Judge, CAMPBELL, Senior Circuit Judge, and SKINNER, ^* Senior District Judge.

LEVIN H. CAMPBELL, Senior Circuit Judge.

At issue in this appeal is whether appellant Cotto-Garcia was tardy in filing his "claim" contesting the government's in rem seizure, under drug laws, of his stock shares. Under relevant rules, infra, appellant had "10 days after process has been executed" to file the required claim. He contends he filed the claim on time (in fact, prematurely), as process was executed, under his theory, only when notice of the government's forfeiture action was published--an event that did not occur until after Cotto-Garcia had filed his claim. The district court rejected this argument. It ruled that "process [had] been executed" much earlier, at the time appellant was personally served with notice of the forfeiture action, causing appellant's later filing to fall outside the ten-day period.

Like the district court, we reject Cotto-Garcia's theory that the date when notice was published is determinative as to him. We agree with the court that the earlier notification to appellant by personal service constituted the relevant notice. But while service of personal notice upon the owner of the res (or other adequate notification) was a necessary element of the execution of process in this proceeding in rem, it was not sufficient by itself to fulfill the triggering requirement in the rules that "process has been executed." "Process" in an in rem action consists fundamentally of the warrant for arrest of the property to be seized. "Execution" of such "process" consists of service of the arrest warrant upon the defendant property, after which the marshal files with the court proof of service. In the present case, we find in the record an issued arrest warrant, but we find no process return form or other proof showing that the arrest warrant was served upon appellant's shares of stock and when this occurred. Without a return or at least some showing that service occurred, it is impossible to say whether and when the arrest warrant was executed. Had the arrest warrant been properly served on the stock on or before January 3, 1992, the day when appellant personally was served, we would agree with the district court that the ten-day period commenced to run on the day of personal service, to wit, January 3. But if the arrest warrant had not by then been served, and was served either later or not at all, the mere giving of personal notice alone would not have constituted the "execution" of "process." And until process had been executed, the ten-day period did not begin to run.

We accordingly vacate and remand, with directions to the district court to determine whether and when the warrant for arrest of the property was served upon appellant's stock shares, and, applying that information in light of the present opinion, to determine if "process [had] been executed" as of January 3, 1992 when notice was served upon appellant. Until this is correctly ascertained, the timeliness of appellant's filing of claim cannot be determined.

We turn now to a detailed discussion of this appeal.

I.

Appellant Domingo Cotto-Garcia was arrested and indicted in June 1991 for federal drug offenses. He pleaded guilty to these in October 1991. After his arrest, the United States government initiated civil forfeiture proceedings against all known properties of Cotto-Garcia. One of the forfeiture actions began on December 18, 1991, when the United States government filed a complaint pursuant to 21 U.S.C. § 881(a)(6) and 18 U.S.C. § 981 in the United States District Court for the District of Puerto Rico. The government sought forfeiture of approximately 2,538.85 shares of stock of the Ponce Leones Baseball Club, Inc. allegedly owned by Cotto-Garcia and purchased with proceeds of drug transactions. A motion for issuance of warrants was filed by the government on the same day.

On December 31, 1991, the clerk of the court issued and delivered two warrants to the U.S. Attorney, pursuant to a magistrate's order of December 30. One of the warrants was a warrant for arrest in rem. It ordered the U.S. Marshal to seize the defendant (the 2,538.85 shares of stock) and to notify "the owner and/or possessor" to file a claim "ten (10) days after service, ... [and] thereafter a responsive pleading to the Complaint filed within twenty (20) days following such claim or thirty (30) days after the service, whichever is less...." The second warrant was one for "seizure and monition," ordering the marshal to publish a newspaper announcement to notify "all persons claiming the same" to file a claim "no later than ten (10) days after the last publication."

On January 3, 1992, the alleged owner of the stocks, appellant Cotto-Garcia--imprisoned at a state penitentiary at Rio Piedras, Puerto Rico--was personally served by a marshal with copies of the complaint and of both warrants. On January 30, 1992, the government requested the court to enter default judgment against Cotto-Garcia (and the various other persons who had been personally served) because no claim for the property had been filed. The magistrate later denied this request for default.

The next day, January 31, 1992, Cotto-Garcia filed a verified notice of claim, attesting that he was the owner of the property named in the complaint. The government moved to strike the notice of claim on February 4, 1992, on the grounds that it was filed late under Supplemental Rule C(6). A magistrate granted the motion to strike on February 12, 1992. ¹ In the meantime, a copy of the warrant of seizure and monition was published on February 7 in El Nuevo Dia, a newspaper in Puerto Rico; no one filed a claim after publication of the notice.

Cotto-Garcia appealed from the magistrate's order striking his claim to the district court. The district court issued an opinion agreeing with the magistrate that Cotto-Garcia's claim had been filed out of time. Pursuant thereto, the court dismissed Cotto-Garcia's appeal from the magistrate and, finding no other claimants, ordered the property forfeited to the United States of America. Cotto-Garcia's appeals from the final judgment.

II.

We now review the procedures that must be followed in civil forfeiture actions like this. This forfeiture action was brought by the United States pursuant to the Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. § 881(a)(6), and the Money Laundering Act, 18 U.S.C. § 981. 21 U.S.C. § 881(a)(6) provides that, "all moneys, negotiable instruments, securities, or other things of value furnished or intended to be furnished by any person in exchange for a controlled substance in violation of this subchapter [and] all proceeds traceable to such an exchange" are subject to forfeiture to the United States. Similarly, 18 U.S.C. § 981 subjects property related to money laundering to forfeiture.

Both forfeiture statutes provide, with certain exceptions, that the property shall be seized upon process issued pursuant to the Supplemental Rules for Certain Admiralty and Maritime Claims by any district court of the United States having jurisdiction over the property. ² 21 U.S.C. § 881(b); 18 U.S.C. § 981(b)(2). Thus the Supplemental Rules govern the procedures for civil forfeiture actions. See Fed.R.Civ.P., Supp. R. A et seq. The Federal Rules for Civil Procedure also apply except to the extent that they are inconsistent with the Supplemental Rules. See Supp. R. A.

Supplemental Rule C contains special provisions for actions in rem, including civil forfeiture proceedings. The action in rem is brought by the plaintiff (here, the United States) against the defendant property which is allegedly subject to forfeiture (here, the stock certificates). The government must file a verified complaint, in accordance with the requirements of Supplemental Rules C(2) and E(2)(a), with the clerk of the court and request issuance of a warrant for the arrest of the property.

If upon reviewing the complaint and supporting papers the court finds that conditions for an action in rem appear to exist, the court orders the clerk to issue a warrant for arrest of the property. Supp. R. C(3). The clerk delivers the warrant to the marshal or other authorized person, who serves the warrant for arrest of the property either by taking possession of the property or by other means pursuant to Supplemental Rule E(4). See Supp. R. C(3); Supp. R. E(4). Rule E(4), which governs execution of the warrant for arrest of the property, provides, in part:

(a) In General. Upon issuance and delivery of the process ... the marshal or other person or organization having a warrant shall forthwith execute the process in accordance with this subdivision (4), making due and prompt return. [Emphasis supplied.]

Service, or execution, of process on tangible property is generally done by taking it into possession; service of the warrant on intangible property is generally accomplished by leaving a copy of the complaint and process with the garnishee or other obligor. See Supp. R. E(4)(b), (c); James Wm. Moore & Alfred S. Palaez, 7A Moore's Federal Practice pp E.08-E.09 (2d ed. 1988 & Supp.1992-93). ³ A process return and receipt form, or other proof of service indicating when the warrant was served upon the property, is filed with the court by the...