U.S. v. Borromeo

• Decision Date: 17 September 1991
• Docket Number: No. 90-6423,90-6423
• Citation: 945 F.2d 750
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Lily BORROMEO, Claimant-Appellant, and Seven (7) Parcels of Real Property; Two (2) Automobiles; Undetermined Amount of United States Currency Contained in Several Bank Accounts, Stocks, Bonds, Securities and Other Negotiable Instruments and Various Items of Personal Property, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 750

945 F.2d 750

21 Fed.R.Serv.3d 1379

UNITED STATES of America, Plaintiff-Appellee, v. Lily BORROMEO, Claimant-Appellant, and Seven (7) Parcels of Real Property; Two (2) Automobiles;

Undetermined Amount of United States Currency Contained in

Several Bank Accounts, Stocks, Bonds, Securities and Other

Negotiable Instruments and Various Items of Personal

Property, Defendants.

No. 90-6423.

United States Court of Appeals, Fourth Circuit.

Argued May 9, 1991.

Decided Sept. 17, 1991.

John G. Hackney, Jr., Charleston, W.Va., argued, for claimant-appellant.

Stephen Michael Horn, Asst. U.S. Atty., Charleston, W.Va., argued (Michael W. Carey, U.S. Atty. and Thomas L. Stanley, Asst. U.S. Atty., on brief), for plaintiff-appellee.

Before HALL and WILKINSON, Circuit Judges, and KELLAM, Senior District Judge for the Eastern District of Virginia, sitting by designation.

OPINION

K.K. HALL, Circuit Judge:

Lily Borromeo appeals the district court's order denying her motion to file a verified claim out of time, in this action brought by the United States for civil forfeiture of assets tainted by the drug distribution crimes of her estranged husband, Dr. Abel Borromeo. We reverse and remand.

I.

Appellant Lily Borromeo is the former wife of Dr. Abel Borromeo. The two were married in the Philippines in 1952, and Lily bore ten children from the marriage. At some point not disclosed by the record, the two separated. Abel came to Charleston, West Virginia, to practice medicine, while Lily stayed behind in Seattle, Washington. Abel took a mistress in Charleston and fathered two more children. Lily has never lived in West Virginia.

In 1989, Dr. Borromeo got into trouble. On November 15, 1989, a 57-count indictment was returned against him (55 counts of illegal prescriptions of controlled substances, one of obstruction of justice, and one of racketeering). He was convicted of 53 counts on September 19, 1990.

This forfeiture action was filed November 20, 1989. The government did not serve the complaint and warrant of arrest in rem on appellant because it believed that she was no longer married to Abel. The government reached this conclusion from Abel's tax returns, on which he had listed himself as "single" and his $30,000/year payments to Lily as "alimony." Notwithstanding this initial misapprehension, the government was aware that appellant was still married to Abel by no later than January 3, 1990, as is revealed in the record by the affidavit of an Assistant United States Attorney. At this time, the government was still engaged in serving process; its affidavit of service by publication was not filed until January 29, 1990. Nonetheless, the government did not mail notice to appellant.

Contemporaneously with these events, a divorce action was being resolved between Lily and Abel in the state of Washington. On February 9, 1990, a property settlement agreement was reached, in which Lily was given 60% of two accounts, worth about $264,000, at One Valley Bank in Charleston. ^* In order to prepare the property settlement agreement, Lily and her divorce counsel needed a description of Abel's property. Abel sent them a copy of part of the government's forfeiture complaint. Descriptions of property were copied verbatim.

On May 1, 1990, a Washington state court entered a divorce decree. A Qualified Domestic Relations Order was entered June 7, 1990, which entitled Lily to the funds from One Valley Bank. On June 21, 1990, Lily's Washington divorce counsel, Katherine Ross, called the bank, and spoke to the administrator of the funds. The administrator informed Ross that the government had put a "freeze" on the assets, but that the administrator had spoken to Tom Stanley, an Assistant United States Attorney, who had indicated that he would release the money to Lily. Lending more credibility to this statement, the administrator reported that the government had actually allowed the release of money to some of Dr. Borromeo's employees.

The administrator also gave Stanley's telephone number to Ross. Ross left a message for Stanley on June 21, detailing that she represented Lily and wished to inquire as to how to segregate Lily's funds from the frozen assets. Stanley did not return the call. Still, from her conversation with the administrator, Ross was not worried.

On July 9, 1990, Ross received written notice of the freeze from the bank. A month passed. Ross again left messages for Stanley on August 6 and August 7; she again received no response. On August 8 and 10, she spoke to Pat Donahue, a bank employee who had drafted the accounts' documents. On the second occasion, Donahue suggested that she contact a Charleston criminal attorney for assistance. Ross has no experience with federal forfeiture cases. Donahue referred Ross to a Charleston attorney, John Hackney, and Lily soon retained him. On September 4, 1990, Lily filed a motion for enlargement of time to file her verified claim, along with the verified claim itself. The government opposed her motion, arguing that she had knowledge of the action in January (from the complaint excerpts she received from Dr. Borromeo) and at the latest in July, and her failure to act could not be deemed "excusable neglect." See Fed.R.Civ.P. 6(b)(2). The government made no allegation that it would be prejudiced by Lily's intervention.

Lily then submitted the affidavit of Ross, which details her failed attempts to contact Stanley and her initial understanding that the government was not interested in keeping Lily's money. She characterized the documents she saw in January as "some portion of a complaint," though not the entire complaint. In an unverified pleading, Lily asserted that she did not know of the forfeiture action until July and had no idea that time limitations existed to file her claim until she conferred with her current counsel in late August.

On September 28, 1990, Lily moved for a hearing on her motion for enlargement of time. She intended to travel to West Virginia to offer her live testimony about what she knew and when. The district court summarily denied this motion during a telephone conversation with the opposing attorneys. On October 12, the district court denied the motion for enlargement of time. After two motions to reconsider were denied, Lily appealed. On April 10, 1991, the district court entered summary judgment forfeiting the assets described in the complaint.

Lily moved to stay transfer of the assets to the government pending appeal. We denied the motion. Such a stay was not necessary because this circuit has held that it does not lose jurisdiction over the government in personam though the forfeited res has been deposited in the government's coffers. United States v. $95,945.18, 913 F.2d 1106 (4th Cir.1990).

II.

A.

The Supplemental Rules for Certain Admiralty and Maritime Claims apply to civil forfeiture proceedings brought pursuant to 21 U.S.C. § 881. Rule C(6) requires a verified claim within ten days "after process has been executed." Lily's obvious first argument follows from the rule's plain language. She was never served with process, and service by publication is constitutionally insufficient where actual notice by mail is feasible. Mennonite Board of Mission v. Adams, 462 U.S. 791, 800, 103 S.Ct. 2706, 2712, 77 L.Ed.2d 180 (1983); Robinson v. Hanrahan, 409 U.S. 38, 40, 93 S.Ct. 30, 31, 34 L.Ed.2d 47 (1972); Cepulonis v. United States, 543 F.Supp. 451, 453 (E.D.N.Y.1982). Due process protections ought to be diligently enforced, and by no means relaxed, where a party seeks the traditionally-disfavored remedy of forfeiture. E.g., United States v. $39,000 in Canadian Currency, 801 F.2d 1210, 1216-1217 (10th Cir.1986); see Supp.Rule E(2)(a) (complaint shall state claim "with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and frame a responsive pleading"). The Eleventh Circuit put it best in United States v. $38,000, 816 F.2d 1538, 1547 (11th Cir.1987):

Courts consistently have required claimants to follow the language of the Supplemental Rules to the letter. We see no reason to apply a less stringent standard to the government when it seeks forfeiture. If anything, the burden on the government to adhere to the procedural rules should be heavier than on claimants. Forfeitures are not favored in the law; strict compliance with the letter of the law by those seeking forfeiture must be required.

Accord, United States v. Estevez, 845 F.2d 1409 (7th Cir.1988). Therefore, in general, proper service of process is a prerequisite to any objection from the government to the timeliness of a claim.

B.

However, the government cites two forfeiture cases in which courts have held, in some circumstances, that a claimant cannot rely on defects in service where he has actual notice of the action. E.g., United States v. $3,817.49, 826 F.2d 785, 787 (8th Cir.1987); United States v. One (1) 1979 Mercedes, 651 F.Supp. 351 (S.D.Fla.1987). The parties jump from these holdings directly into a dispute over pinpointing the "actual notice" date. The government asserts that Lily knew of the action in January; she says July, and further that she did not understand the ramifications of the action until late August.

We think that the "actual notice" exception to proper service is narrower than the government suggests. In $3,817.49, the claimants, though not personally served, filed a timely claim. However, they failed to verify the claim or file an answer. In One (1) 1979 Mercedes, the claimant filed a timely answer but no verified claim. The courts in both cases concluded that the insufficiency of service was simply irrelevant to the claimant's failure to perfect his claim. In short, where a claimant has actual notice, enters the case in a timely fashion, and then makes a later default of some sort, he may not then complain of defects in process. Cf. Fed.R.Civ.P. 12(h)(1) (defense...