U.S. v. $95,945.18, U.S. Currency, 90-7003

• Decision Date: 12 October 1990
• Docket Number: No. 90-7003,90-7003
• Citation: 913 F.2d 1106
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. $95,945.18, UNITED STATES CURRENCY, Defendant-Appellant. Appeal of Carlton Lee BAXTER, Claimant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1106

913 F.2d 1106

UNITED STATES of America, Plaintiff-Appellee, v. $95,945.18, UNITED STATES CURRENCY, Defendant-Appellant.

Appeal of Carlton Lee BAXTER, Claimant.

No. 90-7003.

United States Court of Appeals, Fourth Circuit.

Argued July 16, 1990.

Decided Sept. 13, 1990.

As Amended Oct. 12, 1990.

George Vernon Laughrun, II, Goodman, Carr, Nixon & Laughrun, Charlotte, N.C., for defendant-appellant.

B. Frederic Williams, Jr., Asst. U.S. Atty., argued (Thomas J. Ashcraft, U.S. Atty., Charlotte, N.C., on brief), for plaintiff-appellee.

Before ERVIN, Chief Judge, and PHILLIPS and MURNAGHAN, Circuit Judges.

MURNAGHAN, Circuit Judge:

Claimant Carlton Lee Baxter challenges the grant of summary judgment entered by the district court permitting the forfeiture of $95,945.18 to the United States. 727 F.Supp. 242. Finding that the government had probable cause to believe that the seized cash was being used to finance a cocaine transaction, and that the claimant has not come forward with an innocent explanation for the money's use, we affirm.

I.

On April 27, 1988, the Charlotte, North Carolina, police department received a tip from a confidential informant that Andre King was going to meet with Andrea Jackson to exchange six kilograms of cocaine for $100,000. The police staked out the parking lot where the meeting was to take place and saw King drive into the lot and pull up next to another car. The police observed King talk briefly with the occupants of the other vehicle (who turned out to be Jackson and claimant Baxter), and then drive away. Thinking that the parked car was waiting for the drugs, undercover agent Kearney approached the vehicle and decided to initiate a drug transaction. According to Kearney, after arranging a deal for six kilograms of cocaine, Baxter gave Jackson a bowling bag containing the $95,945.18, and Jackson handed that bag to Kearney. The Charlotte police then arrested Jackson and Baxter.

The state never prosecuted either Jackson or Baxter. Instead, the Drug Enforcement Agency (DEA) instituted administrative forfeiture proceedings for the currency and served Jackson, from whom the cash was seized, and not Baxter, who had not admitted ownership during the seizure. Baxter filed a collateral attack on the forfeiture action, at which point the government filed (by mutual stipulation) a complaint for forfeiture in rem in the district court.

Although not denying any of the government's factual allegations, Baxter maintained that the money "was not used, or attempted to be used to facilitate any illegal activities." After discovery by both sides, the government filed a motion for summary judgment with supporting affidavits from Officer Kearney. Baxter replied only with a request for a jury trial and a generalized denial of any wrongdoing. The district court found that Baxter had not met his Rule 56(e) obligations to come forward with specific factual disputes, and so concluded that "no genuine issue of material fact exists regarding whether the Defendant currency was used in violation of the law or was intended to be used unlawfully." Because no stay of execution was obtained and Baxter did not file a supersedeas bond, the government has deposited the money into the United States Marshals Service Asset Forfeiture Fund.

II.

Before addressing the merits of the district court's order granting summary judgment, we must first consider the government's threshold legal argument regarding this court's jurisdiction. To borrow from Judge Friendly, "[n]ot only does logic compel initial consideration of the issue of jurisdiction over the defendant--a court without such jurisdiction lacks power to dismiss a complaint for failure to state a claim--but the functional difference that flows from the ground selected for dismissal likewise compels considering the jurisdiction ... questions first." Arrowsmith v. United Press Int'l, 320 F.2d 219, 221 (2d Cir.1963). See also Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110, 89 S.Ct. 1562, 1569, 23 L.Ed.2d 129 (1969) ("The consistent constitutional rule has been that a court has no power to adjudicate a personal claim or obligation unless it has jurisdiction over the person of the defendant.").

The government maintains that we have lost jurisdiction over the money (and thus the appeal) because the cash has been transferred to the United States Marshals Service Asset Forfeiture Fund and the claimant failed to obtain a stay of execution. The government's action here is in rem, so jurisdiction derives from the court's control over the res, the cash. Because Baxter did not obtain a stay of execution or file a supersedeas bond under Fed.R.Civ.P. 62(d), ¹ and because the money is now with the Asset Forfeiture Fund, the government argues that we have lost control over the res and jurisdiction over the forfeiture proceedings.

At least two circuits have found that argument persuasive. United States v. One Lear Jet Aircraft, 836 F.2d 1571 (11th Cir.) (en banc), cert. denied, 487 U.S. 1204, 108 S.Ct. 2844, 101 L.Ed.2d 881 (1988); United States v. $57,480.05 U.S. Currency And Other Coins, 722 F.2d 1457 (9th Cir.1984). Cf. United States v. One 1979 Rolls Royce Corniche Convertible, 770 F.2d 713, 717 (7th Cir.1985) (appellate court has no jurisdiction over car where district court released automobile for public auction and sale proceeds had already been deposited into U.S. Treasury). In U.S. Currency And Other Coins, the government brought a forfeiture action under 21 U.S.C. Sec. 881 (the same provision at issue here) and, after the judgment of forfeiture was entered, the U.S. Attorney paid the funds into the U.S. Treasury. Because the claimant never executed a stay of the judgment, the court relied on the general rule that "[r]elease or removal of the res from the control of the court ended the jurisdiction of the court...." 722 F.2d at 1458.

A more thorough discussion of the jurisdictional issue was provided by the full Eleventh Circuit in One Lear Jet. There, the district court granted forfeiture of an airplane under 8 U.S.C. Sec. 1324(b), and the claimant did not obtain a stay of judgment. On the claimant's appeal from the forfeiture determination, a sharply divided 6-5 court of appeals found no jurisdiction because the plane had been moved to another state. Writing for the majority, Judge Johnson found that the losing claimant to the res is obligated to "seek a stay of execution of the district court's judgment pending appeal, to file a supersedeas bond, or to take other action to preserve the res." 836 F.2d at 1574. Because the claimant failed to follow those procedures, the court concluded that it lacked in rem jurisdiction because the res was removed from the jurisdiction, and that it lacked in personam jurisdiction because "the action [by the government] was solely in rem." Id. at 1577. Dissenting for five members of the court, the late Judge Vance argued that, by initiating the forfeiture proceedings in federal court, the government subjected itself to in personam jurisdiction over the appeal. Judge Vance called the majority's ruling a "resuscitat[ion]" of an "anachronistic and conceptually flawed rule of admiralty" (i.e., that a ship is a person against whom suits can be filed), which has been "appl[ied] to a modern forfeiture action where it does not belong." 836 F.2d at 1580 (Vance, J., dissenting).

We find the dissent in One Lear Jet persuasive. It is true, as a general, historical matter, that in in rem actions, removal of the res ends the jurisdiction of the court, unless the removal was "accidental or fraudulent or improper." The Rio Grande, 90 U.S. (23 Wall.) 458, 465, 23 L.Ed. 158 (1874). That rule was based on the antediluvian approach that conceived of the ship as "the offending thing," which allowed actions only against the ship. See G. Gilmore & C. Black, The Law of Admiralty 589-94, 616 (2d ed. 1975). Such an approach, reminiscent of deodand, however, has been in decline for years, having been weakened by both the Supreme Court and lower courts. See 7A J. Moore & A. Palaez, Moore's Federal Practice p E.05, at E-203 (1988) ("recent developments have somewhat clouded the conclusion that the presence of the res is a prerequisite to a court's subject matter jurisdiction of an in rem action"). In Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960), for example, the Supreme Court held that an action which had been brought in rem and in personam could be transferred on forum non conveniens grounds to a district where the action could not have been brought in rem. The Court first noted that in rem proceedings are based upon a fictitious personification of a vessel and that the fiction was not without its critics. Although the Court was not willing to consign the doctrine to the judicial scrap heap, it declined to "transplant this ancient, salt-water admiralty fiction into the dry-land context of forum non conveniens, where its usefulness and possibilities for good are questionable at best." 364 U.S. at 23, 80 S.Ct. at 1473. The Court further explained that "the fiction appears to have no relevance whatever in a District Court's determination of where a case can most conveniently be tried." Id. "A fiction," the Court concluded, "born to provide convenient forums should not be transferred into a weapon to defeat that very purpose." Id.

Relying in part on Continental Grain, several courts have departed from the traditional rule requiring the res to be in the jurisdiction. See, e.g., United States v. An Article of Drug Consisting of 4,680 Pails, 725 F.2d 976, 982 (5th Cir.1984); Treasure Salvors, Inc. v. Unidentified Wrecked and Abandoned Sailing Vessel, 569 F.2d 330, 334 (5th Cir.1978) (Continental Grain suggests that "presence of the res within the district is not an absolute prerequisite to the court's jurisdiction"). In An Article of Drug, which concerned a seizure under the forfeiture...