U.S. v. $277,000 U.S. Currency

• Decision Date: 15 November 1995
• Docket Number: No. 93-55448,93-55448
• Parties: , 95 Cal. Daily Op. Serv. 8732, 95 Daily Journal D.A.R. 15,145 UNITED STATES of America, Plaintiff-Appellant, v. $277,000 U.S. CURRENCY, and One 1986 Dodge Ram Charger, Jalisco, Mexico, Lic. # HWY 773, Defendants, and Ramon S. Montes, Claimant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1491

69 F.3d 1491

64 USLW 2326, 95 Cal. Daily Op. Serv. 8732,

95 Daily Journal D.A.R. 15,145

UNITED STATES of America, Plaintiff-Appellant, v. $277,000 U.S. CURRENCY, and One 1986 Dodge Ram Charger, Jalisco, Mexico, Lic. # HWY 773, Defendants, and Ramon S. Montes, Claimant-Appellee.

No. 93-55448.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 5, 1994.

Decided Nov. 15, 1995.

Michele C. Marchand, Assistant United States Attorney, Los Angeles, California, for plaintiff-appellant.

Janet Sherman and Victor Sherman, Sherman and Sherman, Santa Monica, California; Gerson S. Horn, Beverly Hills, California, for claimant-appellee.

Appeal from the United States District Court for the Central District of California.

Before: D.W. NELSON, NORRIS, and BOGGS, ^* Circuit Judges.

BOGGS, Circuit Judge.

This case involves an important issue, one which undoubtedly occurs with some regularity, and yet one that appears to remain a question of first impression, at least so far as a complete examination is concerned. At times, the United States seizes property, especially cash, and is ultimately found to have no proper claim to the property. When the property must be returned to its owner, the question arises as to what extent may the owner recover an amount related to the loss of the use of the property in the interim. We hold that the government is not generally liable for damages or interest prior to judgment, because of sovereign immunity. However, we also hold that to the extent that the government has profited from use of the property, especially where it has (actually or constructively) earned interest on money, it must disgorge those earnings along with the property itself. We therefore reverse and remand for further proceedings consistent with this opinion.

I

The chronology of this case is somewhat tortuous, and is set out in greater detail below. In brief summary, local police seized approximately $277,000 in cash and a truck from Montes on October 13, 1987. This property was turned over to the United States government, which sought its forfeiture. After a long series of proceedings, including an appeal to this circuit and a remand, the district court held, on January 27, 1992, that the evidence supporting the government's claim should be suppressed, and that the money should be returned to Montes, "including interest thereon as provided by law from the date of seizure." The government did not appeal this order and, in fact, on March 31, 1992, the government itself proposed a clerical modification, which the judge adopted on April 1, 1992 (Appellee's S.E.R. 6-8). This modification, and the amended order, also contained the provision for interest. The government then made another effort to prevent the return of the money to Montes by moving, on June 30, 1992, to have the money returned to the Internal Revenue Service in the first instance, because of alleged tax liabilities. This motion was denied on July 30. Again, the government did not appeal this decision. Instead, on November 12, 1992, more than 9 months after the initial ruling ordering the return of Montes's property, the government moved for relief from judgment under Fed.R.Civ.P. 60(b)(1) and 60(b)(4). The motion stated that the government had now returned the property, but that there was no statutory authority for the government to pay prejudgment interest in any case, and especially not in a case of attempted forfeiture. Thus, the government reasoned, the United States has not waived its sovereign immunity to such claims. The district court denied the motion and this appeal followed.

We review a motion for relief from judgment pursuant to Fed.R.Civ.P. 60(b)(1) for an abuse of discretion. Northern Alaska Environmental Center v. Lujan, 961 F.2d 886, 889 (9th Cir.1992); Floyd v. Laws, 929 F.2d 1390, 1400 (9th Cir.1991). We review, de novo, the denial of a motion to set aside a judgment pursuant to Rule 60(b)(4), because the question is a legal one. Retail Clerks Union Joint Pension Trust v. Freedom Food Center, Inc., 938 F.2d 136, 137 (9th Cir.1991). Whether the government enjoys sovereign immunity in a particular application is also a question of law, which we review de novo. McCarthy v. United States, 850 F.2d 558, 560 (9th Cir.1988), cert. denied, 489 U.S. 1052, 109 S.Ct. 1312, 103 L.Ed.2d 581 (1989).

II

In broad principle, we agree with the government. The United States may be sued for damages under the Federal Tort Claims Act, but that is not the avenue the claimant pursued. A specific statute, 28 U.S.C. Sec. 1961, provides for post-judgment interest, and the government has indicated that it has complied with the judge's order to the extent of paying the post-judgment interest. The question that remains is whether, in any action concerning the government, a person receiving a judgment may receive pre-judgment interest as well. The cases that discuss this issue have generally held to the contrary.

Library of Congress v. Shaw, 478 U.S. 310, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986), is a very strong statement of the rule that "interest cannot be recovered in a suit against the government in the absence of an express waiver of sovereign immunity from an award of interest." Id. at 311, 106 S.Ct. at 2959. See also id. at 315, 106 S.Ct. at 2962 ("interest cannot be recovered unless the award of interest was affirmatively and separately contemplated by Congress"); Bernardi v. Yeutter, 951 F.2d 971, 976 (9th Cir.1991).

Montes attempts to distinguish those cases by saying that here he was not originally a plaintiff. The government seized his truck and money, and he was summoned into court, rather than him trying to summon the government.

This argument is not persuasive. When sovereign immunity is at issue, the government is immune from a suit, whether couched as an original claim or as a counter claim, unless it has waived its immunity. United States v. Lockheed L-188 Aircraft, 656 F.2d 390 (9th Cir.1979), also clearly stands for the proposition that a claimant "must demonstrate that the government has waived its immunity to the kind of claim it asserts. This is true of a counterclaim as well as an original suit." Id. at 393, citing United States v. Finn, 239 F.2d 679, 682 (9th Cir.1956).

Thus Montes does not have a general claim to receive interest (or damages). In fact, were we to support this claim by Montes, then he should also receive damages for the loss of use of the truck, even if it were simply sitting in a government pound during this time, and interest on the money, even if the government was retaining the physical cash as evidence.

However, not every payment of money by the government related to something it has seized can be characterized as a forbidden award of pre-judgment interest. For example, in United States v. 1980 Lear Jet, 25 F.3d 793 (9th Cir.1994), the government seized property subject to a mechanic's lien. The innocent lien holder was allowed to recover not only the basic amount of his lien, but also the costs normally allowed by state law, including statutory interest. We held that the government, in seizing the property, stood in the shoes of the former property holder and was subject to his liabilities under state law. We particularly noted that there was also no issue of sovereign immunity "because the government is not being required to pay interest," only to disgorge some of its share of the proceeds of seized property. Id. at 797. See also United States v. Real Property Located at 41741 National Trails Way, 989 F.2d 1089 (9th Cir.1993). Thus, while sovereign immunity will prevent a simple claim for pre-judgment interest, the government is not always free to profit from wrongly seized property without recourse by the owner.

III

The tale of the particular cash in this case, and the treatment of cash in the Central District of California generally, is considerably more complicated. In this case, the judge specifically directed, by order of June 28, 1988 (again prepared by the government), that the government "may negotiate ... and deposit [the money] in an interest-bearing account...." Apparently there is no dispute that at the time all parties thought that this was exactly what would happen. Apparently it was, from time to time, the practice before 1987 for this to be done, and apparently it is again the practice, after 1992, for this to be done. Where a disputed res is capable of being put to use for someone, it makes no sense whatsoever that a pile of dollar bills should be left doing no good for anyone. Certainly in any normal commercial dispute over property, the disputed property would, as soon as practical, be placed in an escrow account to earn interest that would go to whoever was the ultimate winner. In fact, the judge's order specifically contemplated this peculiar type of prejudgment "interest" by noting that an account that "represents the defendant monetary instruments together with any interest accrued thereon shall be substituted as the res in this action." Order of June 28, 1988, at 3.

We have seen examples in the record and can also take judicial notice of the judicial practice in the Central District of California of ordering interest paid from the date of seizure on various assets.

However, events did not develop as all the parties contemplated. First, apparently the cash had already been "deposited into a Treasury Account" on December 2, 1987, more than six months before the judge's order. The exact nature and status of this account appear somewhat disputed. The only material in the record referring to it is an affidavit filed in November 1992 by the District Customs Director, which speaks in rather vague terms of "a Treasury account," that "I have been informed that interest does not accrue on amounts deposited in the Treasury," that "[i]t is my understanding that" matters were handled differently prior to 1987, and other hearsay material (Appellant's E.R. 9-10). In...