U.S. v. Real Property Located at 20832 Big Rock Drive, Malibu, Cal. 902655, No. 93-55281

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtKOZINSKI
Citation51 F.3d 1402
PartiesUNITED STATES of America, Plaintiff-Appellee, v. REAL PROPERTY LOCATED AT 20832 BIG ROCK DRIVE, MALIBU, CA 90265, Defendant. Hour Holdings, Ltd., Claimant-Appellant.
Docket NumberNo. 93-55281
Decision Date07 April 1995

Page 1402

51 F.3d 1402
UNITED STATES of America, Plaintiff-Appellee,
v.
REAL PROPERTY LOCATED AT 20832 BIG ROCK DRIVE, MALIBU, CA
90265, Defendant.
Hour Holdings, Ltd., Claimant-Appellant.
No. 93-55281.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted Sept. 16, 1994.
Decided April 7, 1995.

Page 1404

Victor Sherman, Sherman & Sherman, Santa Monica, CA, for claimant-appellant Hour Holdings.

Lee S. Arian (argued), Kevin L. James (on the brief), Asst. U.S. Attys., Los Angeles, CA, for plaintiff-appellee U.S.

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

Before: FEINBERG *, SCHROEDER and Alex KOZINSKI, Circuit Judges.

KOZINSKI, Circuit Judge.

Hour Holdings is a limited partnership formed exclusively for the purpose of owning a house on Big Rock Drive in Malibu, California. The partnership ostensibly has several partners, but all the money for the purchase of the house was funneled through one couple, Greg Allen and Lisa Santulli. Allen located the house and arranged to buy it from its previous owner, a known drug-dealer and business associate of Allen's named Charles Goldman. Apparently, Allen was himself a bit of a drug dealer, though none of the partners in Hour Holdings (except perhaps Santulli) seems to have been involved.

Drug dealers who buy houses from drug dealers often use drug money to make the purchase. In this case the circumstances of the sale were particularly suspicious: Each of the limited partners in Hour Holdings was a family member or friend of Allen's and Santulli's; each invested a large sum of money in the property practically sight-unseen; each paid with an untraceable cashier's check or cash. The DEA thus had cause to believe Hour Holdings was a sham, that Allen had received the house as part of a drug deal with Goldman, and that the partners in Hour Holdings either knew this when they invested in the property, or never invested in the property at all, but acted merely as conduits for Allen to launder money.

On November 9, 1990, the Government filed a civil forfeiture complaint against the house on Big Rock Drive under 21 U.S.C. Sec. 881(a)(6), alleging that the entire house was traceable to a narcotics transaction. The DEA then obtained authorization to seize the house in much the same way it might obtain a warrant to arrest a person: It approached a magistrate, established probable cause that the house had been purchased with drug proceeds, and asked for (and received) a writ of entry and a warrant to arrest the house in rem. As was then standard procedure, the owners of the house were not notified in advance of the impending seizure, nor were they given an opportunity to contest the Government's showing of probable cause before the magistrate.

Page 1405

On November 20, 1990, armed with the writ of entry and arrest warrant, DEA agents seized the house. Inside, they found $99,830.00 in musty, brittle U.S. currency lying on a bedroom floor beside a humidifier. Most of the money was in $20 bills. They also discovered a secret compartment in one of the closets, which Goldman later admitted building as a safe storage place for large amounts of cash. Based on this evidence, the Government amended its forfeiture complaint to include a claim that the house had been used to facilitate the commission of drug law violations. See 21 U.S.C. Sec. 881(a)(7).

Hour Holdings filed a claim in the forfeiture action and demanded a jury trial to contest the Government's right to forfeit the house. Before trial, Hour Holdings moved to dismiss the complaint on the ground that seizure of the house violated the owners' right to due process under the Fifth Amendment. The district court denied the motion. Hour Holdings then filed a motion to reconsider, asking the court to amend its ruling in light of United States v. James Daniel Good Property, 971 F.2d 1376 (9th Cir.1992), aff'd in relevant part, --- U.S. ----, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), 1 which held that, absent exigent circumstances, due process requires notice and an opportunity to be heard before the seizure of real property subject to civil forfeiture. The district court denied the motion to reconsider, holding that Good could not be applied retroactively.

The jury entered a special verdict for the Government, finding that Hour Holdings had failed to prove that the house "was not purchased with proceeds traceable to narcotics transactions." SER 142. On appeal, we consider three questions: (1) whether the seizure of the house in this case violated the Fifth Amendment under Good; (2) whether the special verdict form was improperly worded and deprived Hour Holdings of a fair trial; and (3) whether the court gave a proper instruction on "apportionment" and the innocent owner defense. 2

A. Today, the rule concerning the seizure of forfeitable real property is clear: Unless the Government makes a showing of exigent circumstances, it must provide pre-seizure notice and a meaningful opportunity to be heard. United States v. James Daniel Good Real Property, --- U.S. ----, ----, 114 S.Ct. 492, 505, 126 L.Ed.2d 490 (1993). Thus, the Government ordinarily must wait until after an adversarial hearing and the entry of a forfeiture judgment before seizing a home. Id. at ----, 114 S.Ct. at 504. The rule was not so clear, however, in November of 1990, when DEA agents seized the house on Big Rock Drive; if anything, our cases at that time approved the ex parte procedures employed by the Government in this case. See United States v. Tax Lot 1500, 861 F.2d 232, 236 (9th Cir.1988) (ex parte proceedings before a magistrate "sufficiently cured any possible constitutional defect").

The good news for Hour Holdings, however, is that Good applies retroactively. The rule governing the retroactive application of new rules announced in civil cases was long in the distillation. Compare American Trucking Ass'ns, Inc. v. Smith, 496 U.S. 167, 110 S.Ct. 2323, 110 L.Ed.2d 148 (1990) (O'Connor, J., plurality opinion) (endorsing the factored analysis originally established in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971)) with James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991) (Souter, J., plurality opinion) (endorsing the

Page 1406

rule developed for criminal cases in Griffith v. Kentucky, 479 U.S. 314, 107 S.Ct. 708, 93 L.Ed.2d 649 (1987)). But it is now clear that a new rule of law applies retroactively to civil cases on direct review or those not yet final if it is applied to the parties in the case in which it is announced. Harper v. Virginia Dep't of Taxation, --- U.S. ----, ----, 113 S.Ct. 2510, 2517, 125 L.Ed.2d 74 (1993). Good therefore applies retroactively to the seizure in this case, because the Court in Good remanded for an application of its holding to the parties before it. Good, --- U.S. at ----, 114 S.Ct. at 505; accord United States v. One Parcel of Real Property, Located at 9638 Chicago Heights, 27 F.3d 327, 329 (8th Cir.1994).

The Supreme Court in Good held the following procedures to be illegal: "[A] United States Magistrate Judge found that the Government had established probable cause to believe Good's property was subject to forfeiture ... [and a] warrant of arrest in rem was issued, authorizing seizure of the property.... The Government [then] seized the property ... without prior notice to Good or an adversary hearing." Good, --- U.S. at ---- - ----, 114 S.Ct. at 497-98. Substituting only "Hour Holdings" for "Good," that is precisely what happened here. The seizure in this case therefore violated the Fifth Amendment.

This does not end our inquiry, however, because the question remains what remedy is available. There is a split of authority on this issue. The Eighth Circuit has held that the appropriate remedy for the illegal seizure of forfeitable real property under Good is dismissal of the forfeiture action, with leave to file a new action if the statute of limitations has not run. See One Parcel of Real Property, Located at 9638 Chicago Heights, 27 F.3d at 330. The Second Circuit has followed the general rule that the "illegal seizure of property, standing alone, will not immunize that property from forfeiture," and held that the only remedy for an illegal seizure of forfeitable property under the Fifth Amendment is suppression of any evidence impermissibly obtained as a result of the seizure. United States v. Premises and Real Property at 4492 South Livonia Road, 889 F.2d 1258, 1265-66 (2d Cir.1989).

We have already visited this question, in Good itself, and sided with the Second Circuit. We noted that "the violation of Good's due process rights need not invalidate the forfeiture. The mere fact of the illegal seizure, standing alone, does not immunize the [seized] goods from forfeiture." Good, 971 F.2d at 1384 (internal quotation marks omitted); accord United States v. $191,910.00 in U.S. Currency, 16 F.3d 1051, 1065 (9th Cir.1994) (seized property not immune from forfeiture, but it may not be introduced as evidence). We therefore held that the Fifth Amendment only requires the exclusion of the illegally seized evidence at trial, with one additional twist: The Government is held responsible for any "rents accrued during the illegal seizure." Good, 971 F.2d at 1384. This holding remains good law; the Supreme Court affirmed Good's basic holding--that the seizure violated the Fifth Amendment--without addressing whether this remedy was appropriate, and only remanded the case "for further proceedings consistent with this opinion." Good, --- U.S. at ----, 114 S.Ct. at 507. 3

The district court thus should have suppressed all evidence the DEA found during the illegal seizure of the house on Big Rock Drive. The DEA discovered just two pieces of evidence during the seizure of the house: the $99,000 in stained, musty cash found rehydrating next to a humidifier in the main bedroom, and the secret storage...

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42 practice notes
  • Madrigal v. Allstate Ins. Co., Case No. CV 14–4242 SS
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • May 19, 2016
    ...to address all factual issues essential to judgment.United States v. Real Prop. Located at 20832 Big Rock Drive, Malibu, Cal. 902655 , 51 F.3d 1402, 1408 (9th Cir. 1995) ; see also McCord v. Maguire , 885 F.2d 650, 650 (9th Cir. 1989) (" Federal Rule of Civil Procedure 49(a) gives district ......
  • U.S. v. Real Property Located at Incline Village, No. CV-N-90-0130-ECR.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Nevada
    • April 28, 1997
    ...retroactively to all federal forfeiture cases not yet final on the date of the Court's decision. United States v. 20832 Big Rock Drive, 51 F.3d 1402, 1405-06 (9th Cir.1995). Accord United States v. 9638 Chicago Heights, 27 F.3d 327, 329 (8th Second, Claimant Degen could argue, with some jus......
  • U.S. v. All Assets and Equipment of West Side Bldg. Corp., No. 94-1377
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • June 29, 1995
    ...to provide notice and hearing before seizure. As Judge Kozinski noted in United States v. Real Property Located at 20832 Big Rock Drive, 51 F.3d 1402 (9th Cir.1995), the cases reflect some difference in approach on this issue. The Eighth Circuit is of the view that Good requires dismissal o......
  • Digital Equipment Corp. v. State, Dept. of Revenue, No. 62414-3
    • United States
    • United States State Supreme Court of Washington
    • May 23, 1996
    ...is now the controlling rule) cert. denied, --- U.S. ----, 115 S.Ct. 2613, 132 L.Ed.2d 856 (1995). United States v. 20832 Big Rock Drive, 51 F.3d 1402, 1405-06 (9th Cir.1995) 55 The Court in Beam cited American Trucking Ass'n, Inc. v. Scheiner, 483 U.S. 266, 107 S.Ct. 2829, 97 L.Ed.2d 266 (1......
  • Request a trial to view additional results
42 cases
  • Madrigal v. Allstate Ins. Co., Case No. CV 14–4242 SS
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • May 19, 2016
    ...to address all factual issues essential to judgment.United States v. Real Prop. Located at 20832 Big Rock Drive, Malibu, Cal. 902655 , 51 F.3d 1402, 1408 (9th Cir. 1995) ; see also McCord v. Maguire , 885 F.2d 650, 650 (9th Cir. 1989) (" Federal Rule of Civil Procedure 49(a) gives district ......
  • U.S. v. Real Property Located at Incline Village, No. CV-N-90-0130-ECR.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Nevada
    • April 28, 1997
    ...retroactively to all federal forfeiture cases not yet final on the date of the Court's decision. United States v. 20832 Big Rock Drive, 51 F.3d 1402, 1405-06 (9th Cir.1995). Accord United States v. 9638 Chicago Heights, 27 F.3d 327, 329 (8th Second, Claimant Degen could argue, with some jus......
  • U.S. v. All Assets and Equipment of West Side Bldg. Corp., No. 94-1377
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • June 29, 1995
    ...to provide notice and hearing before seizure. As Judge Kozinski noted in United States v. Real Property Located at 20832 Big Rock Drive, 51 F.3d 1402 (9th Cir.1995), the cases reflect some difference in approach on this issue. The Eighth Circuit is of the view that Good requires dismissal o......
  • Digital Equipment Corp. v. State, Dept. of Revenue, No. 62414-3
    • United States
    • United States State Supreme Court of Washington
    • May 23, 1996
    ...is now the controlling rule) cert. denied, --- U.S. ----, 115 S.Ct. 2613, 132 L.Ed.2d 856 (1995). United States v. 20832 Big Rock Drive, 51 F.3d 1402, 1405-06 (9th Cir.1995) 55 The Court in Beam cited American Trucking Ass'n, Inc. v. Scheiner, 483 U.S. 266, 107 S.Ct. 2829, 97 L.Ed.2d 266 (1......
  • Request a trial to view additional results

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