Eggleston v. State of Colo.

• Decision Date: 30 May 1986
• Docket Number: Civ. A. No. 82-K-2144,82-K-2228 and 83-K-403.
• Citation: 636 F. Supp. 1312
• Parties: Peter M. EGGLESTON, et al., Plaintiffs, v. The STATE OF COLORADO, et al., Defendants. UNITED STATES of America, Plaintiff, v. $1,508,440.00 IN UNITED STATES CURRENCY, Defendant. UNITED STATES of America, Plaintiff, v. TWELVE GOLD BARS, Defendants.
• Court: U.S. District Court — District of Colorado

636 F. Supp. 1312

Peter M. EGGLESTON, et al., Plaintiffs, v. The STATE OF COLORADO, et al., Defendants.

UNITED STATES of America, Plaintiff, v. $1,508,440.00 IN UNITED STATES CURRENCY, Defendant.

UNITED STATES of America, Plaintiff, v. TWELVE GOLD BARS, Defendants.

Civ. A. No. 82-K-2144, 82-K-2228 and 83-K-403.

United States District Court, D. Colorado.

May 30, 1986.

COPYRIGHT MATERIAL OMITTED

Michael Abramovitz, and Nina Iwashko, Michael Canges, Denver, Colo., for Eggleston and the Albert C. Levy Irrevocable Trust.

Joseph Saint-Veltri, Denver, Colo., for Albert Levy.

Larry Williams, Asst. Atty. Gen., Denver, Colo., for State of Colo. Dept. of Revenue.

James Peters, James Sell, Dist. Attys., Littleton, Colo., for State of Colo.

F. Joseph Mackey, Asst. U.S. Atty., Denver, Colo., for U.S.A.

Jan Michael Zavislan, Rothgerber, Appel, Powers & Johnson, Denver, Colo., for Jefferson Bank & Trust.

E. Hil Margolin, Denver, Colo., for City of Lakewood.

Rod W. Snow, Dixon & Snow, Denver, Colo., for claimant Victoria Levy.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

This in rem proceeding is comprised of three separate cases which have been consolidated. The parties in this action are: Peter Eggleston, trustee for the Albert C. Levy Irrevocable Trust; Victoria Levy; Albert Levy; the State of Colorado, by and through the Arapahoe County District Attorney; the City of Lakewood; the Colorado State Department of Revenue; Jefferson Bank & Trust; the United States, Drug Enforcement Administration (DEA); and the Internal Revenue Service (IRS). Each of these parties claims an interest in, and entitlement to, all or part of the res in this case. The res, which was seized by Lakewood police from Albert and Victoria Levy's home, consists of 12 one ounce gold bars and approximately $1.5 million plus accrued interest. The parties seek an adjudication of their respective priorities to this property.

In the last few years a discernible shift in the methodology of law enforcement has taken place. Federal, state and local agencies have placed a new emphasis on depriving criminal activity of its largesse. The means used include forfeiture, levy, revocation of licenses, declaration of public nuisances and civil proceedings for injunctions and recoupment. Some of these means have existed for a considerable time; others are innovative. While the law of forfeiture is ancient, it has been substantially changed by both federal and state legislation. Most notable among the spate of legislative enactments has been the Comprehensive Crime Control Act of 1984, which includes the Comprehensive Forfeiture Act of 1984. It is generally recognized and admitted that this Act was passed so hastily that the use of the term "comprehensive" in its title is more aspirational than descriptive.

What has yet to be addressed at all by legislation and only fleetingly by case decisions is the horripilating confusion occasioned by different law enforcement agencies pouncing upon the same assets with each claiming the right to drag the spoils of this war on crime to its own lair. Simply stated, there is no legislation which sets priorities for these conflicting claims. The case before me requires that I determine such priorities in the absence of guidance or controlling precedent. I make no pretense of presenting a definitive solution to the problem. I suggest only that this opinion is an effort to fill this lacuna in the structure of the law. I am certain, however, that legislation alone will provide a satisfactory solution to future cases which are certain to follow.

The parties have stipulated to the relevant facts and trial has been waived. Briefs have been submitted and read. Oral arguments were heard on May 12, 1986. Before I consider the parties' arguments and the applicable law, I shall set forth the facts necessary for decision in this case.

I. FACTUAL BACKGROUND

The stipulated facts, which are contained in the third amended pre-trial order, are as follows:

On November 25, 1981, Lakewood Police Officer Worsham stopped a Porsche on West Colfax Avenue for a traffic violation. The occupants, Douglas Keiser and Carlos Smith, were arrested for possession of cocaine found in the car. While processing Keiser and Smith at the police station, Lakewood Police Officer Shupe copied the contents of an address book and certain other papers found in the men's possession because they contained notations and telephone numbers which aroused suspicion. The copies were given to Agent LaBelle who ran checks on the names listed. Agent LaBelle discovered that several of the persons listed had been arrested or convicted of drug-related offenses.

In May, 1982, Smith agreed to become an informant for Agent LaBelle. Based on information provided by Smith regarding a drug distribution organization, pen register devices were installed on the telephone lines at Keiser's residence in Conifer, Colorado. That installation was authorized by a Jefferson County court order entered June 1, 1982.

During the second week of June, 1982, additional county court orders were issued for the installation of pen register devices on telephone numbers at the residence of Lawrence Levy (son of Victoria and Albert Levy) in Conifer. Also, during June, 1982, the DEA served administrative subpoenas on the telephone company and obtained telephone toll records for the Keiser and Levy phones.

On November 16, 1982, listening devices were placed in Albert and Victoria Levy's home in Aurora, Colorado, pursuant to an Arapahoe County district court order. Four days later, based upon information gathered by these devices, Lakewood police obtained a search warrant for the Levy home. On November 21, 1982, Lakewood police executed the warrant, seizing approximately $1.5 million in currency from a safe and a suitcase and 12 one ounce gold bars. This property was the product of an illegal exchange for purchase of cocaine. Albert and Victoria Levy were arrested.

On December 1, 1982, Albert Levy created an irrevocable trust for the purpose of paying federal income taxes. Levy transferred his interest in the monies seized to the trust. The IRS was designated as the principal beneficiary and Peter Eggleston was appointed as trustee.

On December 2, 1982, the State of Colorado, by and through the Arapahoe County district attorney, commenced a nuisance action in the Arapahoe County district court, pursuant to Colo.Rev.Stat. §§ 16-13-303(1)(c), 16-13-303(3)(a)-(c), for forfeiture of the monies.¹

Four days later, Jefferson Bank & Trust brought an action in the state court in Arapahoe County against Albert Levy for an unsecured debt owed by Levy to the bank. The bank obtained and served pre-judgment writs of attachment on the sheriffs of Arapahoe, Jefferson, and Denver counties, seeking to attach the seized monies. The bank also served pre-judgment writs of garnishment upon the Lakewood Department of Public Safety, the sheriffs of Arapahoe and Jefferson counties, and the DEA.

On December 15, 1982, Eggleston and Levy filed an action in this court (No. 82-K-2144) against the State of Colorado, the City of Aurora, the City of Lakewood, and several John Does, seeking declaratory relief, an injunction restraining the state nuisance action, and damages for alleged civil rights violations. The complaint in this action was later amended to include the United States and the IRS as defendants.²

The next day, December 16, 1982, the Arapahoe County district court judge presiding over the state nuisance proceeding ordered the Lakewood Department of Public Safety to relinquish custody of the seized monies to Eileen Manning, clerk of the Arapahoe County district court. The court further ordered, with the parties' express consent, that the monies be deposited in an interest-bearing bank account. Manning received the monies and deposited them in the United Bank of Littleton. A certificate of deposit was issued to Manning.

On December 22, 1982, pursuant to Colo. Rev.Stat. §§ 39-26-118(2)(a) and 39-22-602, the Colorado Department of Revenue prepared sales, income, and RTD tax assessments against Albert Levy. The department issued jeopardy assessments pursuant to Colo.Rev.Stat. § 39-21-111 and warrants for distraint pursuant to Colo. Rev.Stat. § 39-21-114. On December 23, 1982, a notice of lien for state taxes was filed with the Clerk and Recorder of Arapahoe County. A warrant for distraint was filed with the clerk of the Arapahoe County district court, who entered it into the judgment docket. The clerk then issued a transcript of judgment docket which was sent to the Clerk and Recorder of Arapahoe County. The department served notices of tax lien and garnishment under distraint for collection upon the Arapahoe County district court clerk. Judgment in favor of the department was entered on December 23, 1982 as follows: Colorado sales tax — $115,880.12, RTD sales tax — $19,313.39, and income tax — $58,677.00. These assessments remain unpaid.

Also on December 23, 1982, the United States filed a complaint in this court (No. 82-K-2228) for forfeiture of the monies pursuant to 21 U.S.C. § 881(a)(6) and applied to the court clerk for a warrant for arrest of the currency.

On January 3, 1983, Judge Carrigan, who was presiding over this action at the time, ordered: 1) the warrant for arrest of the defendant currency be issued, 2) the United States Marshal arrest the defendant currency, 3) Manning be appointed as substitute custodian of the currency, 4) the marshal transfer custody from himself to Manning as substitute custodian, 5) publication of notice be made by the marshal, and 6) the complaint and warrant of arrest be served on the Arapahoe County district court clerk.

On January 4, 1983, the notice of arrest and seizure by the marshal was issued and the marshal returned the receipt of service of process on Manning. Also, the United Bank of Littleton issued a receipt to the marshal for storage of the currency.

On ...