U.S. v. 392 Lexington Parkway South, St. Paul
| Decision Date | 07 September 2005 |
| Docket Number | No. CIV035818 (RHK/JSM).,CIV035818 (RHK/JSM). |
| Citation | 386 F.Supp.2d 1062 |
| Parties | UNITED STATES of America, Plaintiff, v. 392 LEXINGTON PARKWAY SOUTH, ST. PAUL, MINNESOTA, RAMSEY COUNTY, with all buildings, improvements, fixtures and appurtenances thereto, Defendant, v. Long Beach Mortgage Company, Intervenor Defendant, v. Mortgage Group III, LLC, Claimant, v. Thomas William Gore, Claimant. |
| Court | U.S. District Court — District of Minnesota |
James S. Alexander, Assistant United States Attorney, Minneapolis, MN, for the Government.
Christopher R. Grote, Lindquist & Vennum, Minneapolis, MN, for Long Beach Mortgage Company.
Mark C. Hart, Courey, Kosanda & Zimmer, P.A., Golden Valley, MN, for Mortgage Group III, LLC.
Plaintiff United States of America (the "Government") seeks the civil forfeiture of Defendant real property located at 392 Lexington Parkway South, St. Paul (the "property"). Two mortgage companies have challenged the forfeiture and asserted claims to the property based on mortgage agreements they entered into with Brian Gore (then the owner of the property). Each party has moved for summary judgment; the Government claims that the mortgage companies cannot establish that they are innocent owners of the property, and each of the mortgage companies claims that its interest in the property is superior to the interests of the other. The Government has also moved for default judgment and for a final order of forfeiture. For the reasons that follow, the Court determines that the mortgage companies are not innocent owners of a portion of the property, and that portion of the property is subject to forfeiture.
On October 22, 2003, Brian Gore, then the titled owner of the property, pled guilty in this Court to possession with intent to distribute in excess of 500 grams of cocaine. This civil forfeiture action followed on the ground that the subject property was "used to facilitate the drug trafficking activities of Brian Gore." (Government's Mem. in Supp. at 1.) Gore had obtained two mortgage loans secured by the property prior to October 2003, both of which give rise to competing claims to the property now. Because the time-line of events is critical in determining whose interests in the property are valid and to what extent, the undisputed facts as alleged are set forth in greater detail below.
On October 24, 2002, Gore recorded a contract for deed with the Ramsey County Recorder and Ramsey County Registrar of Titles by which he purchased the property from his father for $100,000. The property is part Torrens and part abstract property.1
On November 13, 2002, Gore obtained a mortgage in the amount of $180,000 from Intervenor/Claimant Long Beach Mortgage Corporation ("Long Beach"). The Long Beach mortgage was not recorded or registered at that time.
On August 14, 2003, after two garbage searches at the property and numerous complaints from neighbors, St. Paul police officers executed a search warrant at the property during which they found illegal drugs. On September 3, 2003, Gore was indicted on drug charges stemming from an investigation and search of the property.
On September 22, 2003, Gore obtained another mortgage on the property from Claimant Mortgage Group III, LLC ("MGIII")2, in the amount of $24,711. The MGIII mortgage was not recorded or registered at that time. Prior to issuing the MGIII mortgage to Gore, Sean Mulcahy, the manager of MGIII, visited the property. Mulcahy did not notice anything unusual or see any evidence of drug trafficking during the visit. (See Mulcahy Dep. Tr. at 79-82.) Nor did Gore inform Mulcahy of his involvement with illegal drug activity. (Id. at 89-90.)
On November 3, 2003, the Government filed a Complaint for Forfeiture In Rem against the property, and on November 7, 2003, it filed a notice of lis pendens with the Ramsey County Recorder and with the Ramsey County Registrar of Titles against the property. The notice of lis pendens stated that "the purpose of this action is for the forfeiture of the defendant real property." (Fedo Aff. Exs. C, D.) On November 22, 2003, the U.S. Marshal posted the property with a Notice of Complaint of Forfeiture and served the parties who appeared on record to have a potential interest in the property with a summons and copy of the Complaint.3 The U.S. Attorney's Office also published notice of the forfeiture action in Finance and Commerce, Minneapolis, Minnesota, on November 25, December 2, and December 9, 2003.
On December 5, 2003, the MGIII mortgage was filed with the Ramsey County Recorder and with the Ramsey County Registrar of Titles. On May 17, 2004, MGIII was served with the Complaint in this action by the U.S. Marshall.
In late 2003, Gore defaulted on his Long Beach mortgage payments and, in December 2003, Long Beach began preparing to foreclose on its mortgage. In conjunction with that preparation, Long Beach discovered that its mortgage had not been recorded. In April 2004, the Long Beach mortgage was filed with the Ramsey County Recorder and with the Ramsey County Registrar of Titles. On June 9, 2004, Long Beach moved to intervene in this action (Doc. No. 16), and that Motion was granted on July 9, 2004 (Doc. No. 28). Long Beach asserts that it "did not know of the conduct of Brian Todd Gore giving rise to [the Government's] Complaint for Forfeiture in Rem." (Long Beach Verified Statement ¶ 6.)
Summary judgment is proper if, drawing all reasonable inferences favorable to the nonmoving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed. See Celotex, 477 U.S. at 322, 106 S.Ct. 2548; Mems v. City of St. Paul. Dep't of Fire & Safety Servs., 224 F.3d 735, 738 (8th Cir.2000). The court must view the evidence, and the inferences that may be reasonably drawn from it, in the light most favorable to the nonmoving party. See Graves v. Arkansas Dep't of Fin. & Admin., 229 F.3d 721, 723 (8th Cir.2000); Calvit v. Minneapolis Pub. Schs., 122 F.3d 1112, 1116 (8th Cir.1997). The nonmoving party may not rest on mere allegations or denials, but must show through the presentation of admissible evidence that specific facts exist creating a genuine issue for trial. See Anderson, 477 U.S. at 256, 106 S.Ct. 2505; Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir.1995).
The civil forfeiture statute, 21 U.S.C. § 881(a)(7), authorizes the Government to institute forfeiture proceedings against real property that is used to commit and/or to facilitate the commission of a drug felony.4 Section 881 is subject to the standards set forth in the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA"), 18 U.S.C. § 983.5 See U.S. v. Dodge Caravan SE/Sport Van, 387 F.3d 758, 761 (8th Cir.2004). Under § 983(c), the Government has the initial burden of proving by a preponderance of the evidence that the property is subject to forfeiture. Id. Where the Government's theory of forfeiture is that the property was used to facilitate the commission of a crime, "the Government shall establish that there was a substantial connection between the property and the offense." Id.; 18 U.S.C. § 983(c)(3).
There is no dispute that the Government has met its burden of establishing a substantial connection between the property and Gore's drug felony. (See, e.g., Chung Aff. ¶¶ 2-5; Barber Aff. ¶¶ 2-6; see also Gov't Mem. in Supp. at 11-15 ().) This shifts the burden to Claimants to refute the Government's case. Under CAFRA, Claimants may do this by proving that they are innocent owners of the property and, in that case, the property is not subject to forfeiture. 18 U.S.C. § 983(d). Claimants assert that they are innocent owners of the property under CAFRA, and Long Beach asserts that its interest in the property is superior to MGIII's interest. The Government responds that Claimants do not satisfy the requirements of the innocent owner exception as to the Torrens portion of the property.6 The Court will first consider whether Claimants fall under the innocent owner exception to the forfeiture, and then consider the priority of Claimants' interests as between each other.
In the context of civil forfeiture actions, the ownership interests of those parties contesting the forfeiture are often considered on two levels. First, a claimant must have Article III standing, as this "is a threshold question in every federal court case." United States v. One Lincoln Navigator, 328 F.3d 1011, 1013 (8th Cir.2003). "In a forfeiture case, a claimant's Article III standing turns on whether the claimant has a sufficient ownership interest in the property to create a case or controversy." Id. Eighth Circuit law is clear that, in the context of the Article III standing inquiry, "ownership interests are defined by state law." U.S. v. Premises Known as 7725 Unity Ave., N., 294 F.3d 954, 956 (8th Cir.2002). Here, there is no dispute that the Claimants have Article III standing to oppose the forfeiture of the property. See also id.
The merits of Claimants' claims, however, turn on the separate question of whether, under CAFRA, each has "an `innocent owner's interest' in the property that `shall not be forfeited.' "One Lincoln Navigator, 328 F.3d at 1014 (quoting 18 U.S.C. § 983(d)(1)). The interpretation of the innocent owner defense is at the heart of the instant dispute.7 Thus, the Court will lay out the pertinent provisions of the statute in detail below:
(d) Innocent owner defense.
(1) An...
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