U.S. v. 1461 West 42nd Street Hialeah Florida
| Citation | 251 F.3d 1329 |
| Decision Date | 22 May 2001 |
| Docket Number | No. 99-11130,99-11130 |
| Parties | (11th Cir. 2001) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. 1461 WEST 42ND STREET, HIALEAH, FLORIDA, Real property together with all improvements, fixtures and appurtenances thereon and therein, and all rent and profit derived therefrom, et al., Defendants, JOSE ANGEL RIVERA, ARGELIA RIVERA, ARSENIO J. FALCON, MARTA M. FALCON, Claimants-Appellants, M R & F ENTERPRISES, a partnership, RIDGEWOOD DEVELOPMENT CORPORATION, a Florida Corporation, Consolidated Claimants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
Appeals from the United States District Court for the Southern District of Florida D.C. Docket No. 91-1077 CIV
Before ANDERSON, Chief Judge, CARNES and OAKES*, Circuit Judges.
In a quite complicated procedural context, this appeal deals with the considerations that ensue when real property that the government has seized in civil forfeiture proceedings is foreclosed by the property's mortgagee so that when it is time to return the property, after dismissal of the forfeiture action, the property, by virtue of the foreclosure, can no longer be returned. We are presented here with the task of tailoring an appropriate remedy under such circumstances when due process was violated pursuant to United States v. James Daniel Good, Real Property, 510 U.S. 43 (1993).
This appeal arises from an in rem action against two rental apartment buildings identified respectively as Certain Real Property Known as and Located at 1461 West 42nd Street and 8500 N.W. 8th St., Miami, Florida ("Property #2") and Certain Real Property Known as and Located at 8401-8425 N.W. 8th St., Miami, Florida ("Property #4") (together, the "Properties"). Property #2 was titled by way of a warranty deed in the name of Ridgewood Development Corp. ("Ridgewood"), and Property #4 was titled by way of a quitclaim deed in the name of MR&F Enterprises, a partnership ("MR&F") (together, "claimants"). Each of the Properties consisted of 80 rental units, was valued at approximately $3 million, and carried a mortgage of approximately $2.8 million.
On May 16, 1991, the government secured an ex parte warrant and protective order under 21 U.S.C. §§ 853(e) and (f) authorizing the seizure of the Properties in anticipation of criminal forfeiture in connection with the drug-trafficking indictment of Augusto Falcon and Salvadore Magluta, who are relatives of the claimants. The protective order prohibited the encumbrance, sale or destruction of the Properties and required all rents to be paid to the U.S. Marshal as custodian pending final disposition of the criminal case. On February 16, 1996, Augusto Falcon and Salvadore Magluta were acquitted of the criminal charges against them.1
On May 23, 1991, the government also instituted civil forfeiture proceedings in rem against the Properties pursuant to 21 U.S.C. § 881(a)(6) on the allegation that the Properties represented proceeds of the drug-trafficking activities of Falcon and Magluta.2 The government filed notices of lis pendens on the same day and subsequently seized the Properties pursuant to warrants of arrest in rem issued by the district court.
After seizing the Properties, the government installed its own property management firm to run and manage the rental buildings. Despite collecting rents beginning in June 1991, the government allegedly refused to make any mortgage payments on the Properties to the secured lender, Citicorp Savings of Florida ("Citibank").
On June 21, 1991, the loans were declared in default by reason of non-payment, and in September 1991, Citibank accelerated payment and initiated state foreclosure proceedings. On September 24, 1991, Ridgewood and MR&F filed a motion to compel the government to make mortgage payments on the seized Properties. On November 5, 1991, Citibank filed a similar motion to compel the government to pay all rents, profits and revenues from the Properties toward the outstanding mortgages.
Soon thereafter, the United States and Citibank entered into a joint stipulation, approved by the district court on December 18, 1991, which: (1) recognized Citibank's status as an innocent lienholder; (2) agreed to seek a joint interlocutory sale of the Properties; (3) agreed to drop the United States as a defendant in Citibank's foreclosure action; and (4) required the United States to apply all rents and profits collected from the Properties toward the outstanding mortgages, less expenses of seizure, custody and maintenance. Ridgewood's and MR&F's joint motion to vacate the stipulation was denied.
On January 14, 1993, the United States and Citibank petitioned the court for an order confirming the sale of the Properties. Despite the court's confirmation, the Properties were not immediately sold, and on October 6, 1993, Citibank purchased them at a Sheriff's sale without objection from the government.
On December 13, 1993, the Supreme Court issued its opinion in United Stated v. James Daniel Good Real Property, 510 U.S. 43 (1993), which held that the Fifth Amendment Due Process Clause requires the government to provide notice and a meaningful opportunity to be heard to owners of real property that is seized under civil forfeiture, absent exigent circumstances. Thereafter, the government sought to dismiss the civil forfeiture action and to attain a certificate of reasonable cause pursuant to 28 U.S.C. § 2465.3 On June 10, 1995, the district court granted the dismissal, but conditioned it upon: (1) the government's paying Citibank's expenses; (2) the magistrate judge's determination of whether any other claimants were entitled to fees or costs; and (3) Citibank's continued receipt of the net income from the Properties. The district court granted the government's request for a certificate of reasonable cause on April 7, 1997.
After the government dismissed the civil forfeiture action, claimants filed a motion under Good for damages and reimbursement for the illegal seizure of the Properties. On February 20, 1998, the district court, Brown, Magistrate Judge, issued a memorandum order finding that the United States was responsible for rents and profits, as well as loss of use damages, if any, of which the claimants were deprived during the illegal seizure period, and ordered an evidentiary hearing to determine the amount of damages. See United States v. 1461 West 42nd St., 998 F. Supp. 1438 (S.D. Fla. 1998).
Upon reconsideration, on April 21, 1998, the district court rejected its prior ruling, which had awarded claimants damages for loss of use, as barred by sovereign immunity, and held that only a disgorgement of property via the return of rents and profits was an acceptable remedy under Good. On March 10, 1999, the district court issued a damages order awarding Ridgewood and MR&F damages for rents and profits less operating expenses and mortgage payments, ultimately totaling $265,252.99 and $252,903.93, respectively. This appeal followed.
Generally, civil forfeiture involves the forfeiture of real or personal property to the state when that property is found to be linked to the violation of the state's laws. Criminal forfeiture and civil forfeiture are distinct doctrines. Criminal forfeiture occurs in criminal court and comes into play only after the court has found the defendant guilty, though seizure does occur beforehand under the federal system. In contrast, civil forfeiture is an in rem action, unrelated to the guilt or innocence of the property owners. Criminal forfeiture is understood to be punitive insofar as it is intricately tied to the defendant's criminal proceeding, whereas civil forfeiture is understood to be remedial insofar as it "punishes" only the res itself. See generally United States v. Ursery, 518 U.S. 267, 274-78 (1996) ().
Claimants argue that the government indisputably violated the Fifth Amendment Due Process Clause under Good. They also claim that the government wrongly permitted the Properties to be subject to foreclosure, levy and loss of record title, and that the district court was required to order the return of the buildings and to construct a remedy for the constitutional violation tailored to the injury. They claim damages, including: (1) the loss of more than $4,305,000 of net operating income, which included mortgage payments; (2) the loss of the use and enjoyment of the Properties during the pendency of the trial; and (3) the loss of record title. Moreover, claimants argue that all sums returned should have included interest. The bottom line of claimants' argument is that whether in the form of a return of the value of the Properties or in the form of damages, they are entitled to have their injury redressed by the district court. Independent of that, claimants argue that the return of the Properties, or their money equivalent, is statutorily required under 28 U.S.C. § 2465.
The government argues, on the other hand, that the district court committed no reversible error by subtracting legitimate mortgage and operating expenses from returnable rents and proceeds or by denying loss of use and enjoyment damages pursuant to sovereign immunity. The government additionally maintains that, as an adversary, it had no duty to claimants, who lost title to the Properties on their own doing, and that § 2465 does not permit of claimants' relief.
We note at the outset that we review de novo a district court's fashioning of remedies for violations under Good. See United States v. 47 W. 644 Route 38, 190 F.3d 781, 782 (7th Cir. 1999). Similarly, we review a sovereign's immunity from suit de novo. See Tamiami Partners, Ltd. v. Miccosukee Tribe, 177 F.3d 1212, 1224 (11th Cir. 1999).
A). United States v. James Daniel Good
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