U.S. v. Property Identified As Lot Numbered 718

• Decision Date: 29 July 1998
• Docket Number: Civil Action No. 96-2100-LFO.
• Parties: UNITED STATES of America, Plaintiff, v. PROPERTY IDENTIFIED AS LOT NUMBERED 718, et al., Defendants.
• Court: U.S. District Court — District of Columbia

20 F.Supp.2d 27

UNITED STATES of America, Plaintiff, v. PROPERTY IDENTIFIED AS LOT NUMBERED 718, et al., Defendants.

Civil Action No. 96-2100-LFO.

United States District Court, District of Columbia.

July 29, 1998.

Robert Edward Lee Eaton, Jr., William Rakestraw Cowden, Linda Otani McKinney, William Barrett Wiegand, III, U.S. Attorney's Office, Washington, DC, for U.S.

Marvin D. Miller, Alexandria, VA, for Defendants.

MEMORANDUM

OBERDORFER, District Judge.

This case poses a novel legal question about the limits of the federal government's power of civil forfeiture when waging its war on drugs. Claimant Kimberly Honesty contends that the United States violated her due process rights when, without notice or an adversarial hearing, it secured an in rem arrest warrant on her home and allegedly used the threat of eviction as leverage in settlement negotiations over its claim on a second parcel of property. The contours of the issue here are provided by the Supreme Court's decision in United States v. James Daniel Good Real Property, 510 U.S. 43, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), which held that a government seizure of real property during a civil forfeiture case implicates the Due Process clause. Because the United States acted outside those constitutional contours in this case, claimant's Motion to Dismiss — treated as a motion for summary judgment pursuant to Fed.R.Civ.P. 12(c) — will be granted.

I.

On September 10, 1996, the United States filed a civil forfeiture complaint against Lot 718 of the Burleigh Manor land development, an unoccupied parcel of property in Howard County, Maryland ("Burleigh Manor"). The deed for the property lists Kimberly Honesty and her husband Kevin as the owners. The United States amended its complaint three days later, adding as defendants two other properties that are deeded to the Honestys but located in Prince George's County. One, identified as 14509 Jones Bridge Road in the town of Bowie, is Kimberly Honesty's residence ("Jones Bridge Road" or "residence"). The other, 7127 Cross Street in Forestville, has not been at issue in this case since May 16, 1997, when an Order granted the government's unopposed motion to strike Kimberly Honesty's claim for it.

The government's forfeiture case derives from its suspicions that Kevin Honesty is a major cocaine distributor with little legitimate income. The nine-count amended complaint alleges that there is probable cause to believe Kevin Honesty purchased the three properties with illegally laundered drug proceeds, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). Attached to the complaint is the affidavit of Special Agent Joseph Gabor of the Drug Enforcement Administration, which discusses an extensive criminal investigation of Honesty's activities. The government asserts that, consistent with the practice of money launderers, Kevin Honesty co-titled the properties in his and his wife's name. The amended complaint seeks civil forfeiture pursuant to 21 U.S.C. § 881(a)(6) and 18 U.S.C. § 981(a)(1)(A), provisions enacted by Congress to assist law enforcement efforts to combat the drug crisis.

A.

The filing of this suit set in motion several events prescribed by the federal procedures that govern civil forfeiture actions. Pursuant to Rule C(3) of the Federal Supplemental Rules for Certain Admiralty and Maritime Claims, the Clerk of this Court issued an in rem arrest warrant for each property at the time it was named a defendant. On the afternoon of September 13 — the same day the amended complaint was filed and the warrants were issued — the U.S. Marshal's Service served copies of each on the three defendant properties. See Pl.'s Mot. for Summ. J., Ex. 1. (Apparently, it accomplished this by "posting [the warrant and complaint] in a conspicuous place on the property." Pl.'s Opp. to Claimant's Mot. Dismiss, at 3; see also Tr. of 10/6/97, at 8.) Also, according to a notice of service in the record, on that same afternoon the Marshal's Service personally served Kimberly Honesty at her place of employment at the General Services Administration. See Pl.'s Mot. for Summ. J., Ex. 1.

In late September 1996, the government took two additional steps to further its forfeiture efforts. As required by Rule C(4) of the Federal Supplemental Rules for Certain Admiralty and Maritime Claims, the government "cause[d] public notice of the action and arrest to be given in a newspaper of general circulation" — specifically, the Washington Law Reporter, the Howard County Times, and the Prince George Journal. See Pl.'s Mot. for Summ. J., Exs. 3-5. At around the same time — the precise moment is not evident — the government filed notices of lis pendens in the Maryland land records for the three properties. Under both federal and state law, see 28 U.S.C. § 1964; Md. St. Spec. P., subtit. BD, these notices place all prospective transferees on constructive notice that a lawsuit is pending against them. See generally DeShields v. Broadwater, 338 Md. 422, 659 A.2d 300, 305-07 (Md.1995).

Despite the posting of her residence, personal service at her workplace, and three public announcements, Kimberly Honesty contends that she only learned of the lawsuit after the notices of lis pendens were filed. At the time this lawsuit commenced, the Jones Bridge Road residence and Burleigh Manor lot were both on the market for sale. During a routine title search, prospective buyers of Burleigh Manor discovered the lis pendens and notified the Honestys of it in late September. At approximately the same time, Chuck Ottley, the real estate agent listing Jones Bridge Road, received a telephone call from someone identifying him or herself as a federal agent. The individual told him, "Well, you might as well forget about that commission because it's — you know, that's probably never going to sell. We are involved in that. It's not going to sell." Tr. of 12/8/97, at 30. Kimberly Honesty responded a few days later by telling Ottley to "take it [Jones Bridge Road] off the market. Nothing else I can do with it." Id.

On October 1, 1996, Kimberly Honesty filed a verified claim on all three properties. On October 21, she answered the amended complaint. Meanwhile, her lawyers negotiated with the government to facilitate the transfer of Burleigh Manor. The sale went forward on December 30, 1996, but only after an agreement was reached. The government withdrew its lis pendens on Burleigh Manor, allowing the transfer of marketable title, in exchange for Honesty's consent to substitute the $56,907.42 in net proceeds as the defendant-res. The Marshal's Service continues to hold this money in escrow, pending the outcome of this suit.

B.

The series of events that transpired in the summer of 1997 frame the central issue in Honesty's motion to dismiss. The following facts are undisputed. Unable to draw upon the proceeds from the Burleigh Manor sale, Honesty soon fell steadily behind in her monthly payments to the First National Bank Association, the mortgagee for Jones Bridge Road. Sometime during the mid-summer, the bank decided to foreclose on the residence and scheduled a foreclosure sale for September 24, 1997. An attorney from Covahey & Boozer, a law firm in Towson, Maryland that represents the bank, contacted Assistant U.S. Attorney William Cowden to inquire, in Cowden's words, "whether the lis pendens was going to get in the way of their foreclosure." Tr. of 12/8/97, at 8. (At the time and until recently, Cowden was lead counsel for the United States in this case.) The telephone call concluded after the Covahey & Boozer attorney told Cowden that "they were intent on foreclosing ...." Id. at 9.

Following this conversation, Cowden placed a call to Marvin Miller, Honesty's attorney. According to Cowden, he told Miller that "he might want to know that [First National Bank Association] were intent on foreclosing because [Honesty] had not paid the mortgage for some significant period of time." Id. at 10. Thus, Honesty's residence "was about to disappear from this picture because the equity was disappearing ...." Id. at 10-11. Miller expressed disappointment with the news — apparently the first he had heard of the foreclosure. He volunteered that Honesty believed she could sell Jones Bridge Road herself for a higher price than the bank. At this point, Cowden made a proposal:

I told Mr. Miller that if that were the case I might consider the following settlement proposal, and that settlement proposal was that she walk away from the equity in the Burleigh Manor property, which is on deposit with the court, and I would contact — recontact the mortgagee and ask the mortgagee if the mortgagee would let Kim Honesty try to sell the [Jones Bridge Road] property without foreclosing.

Id. at 11. Cowden insinuated to Miller that he had some leverage to prevent the foreclosure: "I told Mr. Miller ... [t]hat I believed that the mortgagee would allow that to happen if I made that call ... [,] knowing that the mortgagee is going to be fully satisfied and protected ...." Id. at 11-12. In contrast, "the mortgagee might not do it with Kim Honesty because she hadn't paid anything in a year ...." Id. Miller's recollection confirms this account. See Tr. of 10/29/97, at 12-13.¹

It is also undisputed that Miller, once he learned of the impending foreclosure on the Jones Bridge Road residence, contacted Covahey & Boozer in early September in an attempt to prevent the sale. He communicated "with counsel for the mortgage company, about the existence of the forfeiture suit, that the lis had been filed, that they could not pass clear title." Id. at 10. In a September 16 letter to Miller, Thomas Dore of Covahey & Boozer responded that "your assertions that we are unable to foreclose at this time are incorrect." Claimant's Supp. Mem. Mot. Dismiss, Attach. D. Dore explained, "Regarding your assertions with respect to the forfeiture case, please be advised that we have been in contact with the U.S. Attorney's Office,...