U.S. v. Real Property Known and Number as 429 South Main Street, New Lexington, Ohio

• Decision Date: 25 July 1995
• Docket Number: No. 94-3048,94-3048
• Citation: 52 F.3d 1416
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. REAL PROPERTY KNOWN AND NUMBERED AS 429 SOUTH MAIN STREET, NEW LEXINGTON, OHIO, Defendant, William G. Swallow, Claimant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1416

52 F.3d 1416

UNITED STATES of America, Plaintiff-Appellee, v. REAL PROPERTY KNOWN AND NUMBERED AS 429 SOUTH MAIN STREET, NEW LEXINGTON, OHIO, Defendant, William G. Swallow, Claimant-Appellant.

No. 94-3048.

United States Court of Appeals, Sixth Circuit.

Submitted Feb. 2, 1995.

Decided May 9, 1995.

Rehearing and Suggestion for Rehearing En Banc Denied July 25, 1995.

Marcia J. Harris, Office of the U.S. Atty., Columbus, OH (briefed), for the United States.

Randy L. Happeney (briefed), Dagger, Johnston, Miller, Ogilvie & Hampson, Lancaster, OH, for William G. Swallow.

Before: GUY, BOGGS, and SILER, Circuit Judges.

BOGGS, J., delivered the opinion of the court, in which SILER, J., joined. GUY, J. (pp. 1422-1424), delivered a separate opinion concurring in part and dissenting in part.

BOGGS, Circuit Judge.

William Swallow appeals the district court's granting of the government's motion for summary judgment on its civil asset forfeiture complaint pursuant to 21 U.S.C. Sec. 881(a)(7). We affirm the district court's decision to grant the government's summary judgment motion as against challenges based on the Excessive Fines Clause of the Constitution and the lack of probable cause. However, we remand the case so the district court can determine whether Swallow should have received predeprivation notice and a hearing.

I

Swallow sold marijuana out of his house to a confidential informant on August 9, August 19, and August 20, 1991. He pled no contest to three counts of trafficking marijuana under Ohio law, and was sentenced to a fine of $2000 and one year in jail for each count, with the jail sentences running concurrently.

On December 23, 1993, the government filed a complaint for forfeiture of Swallow's house under 21 U.S.C. Sec. 881(a)(7), which provides for the forfeiture of:

All real property, including any right, title, and interest (including any leasehold interest) in the whole of any lot or tract of land and any appurtenances or improvements which are used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this subchapter....

That same day, the trial court issued an order finding probable cause to believe that the property was subject to forfeiture, and issued an order for a warrant of arrest in rem. This order was issued without notice to Swallow, and without a hearing. ¹ That same day, the Clerk of the District Court issued the warrant of arrest in rem.

The government then took several actions against Swallow's property. It informs us in its brief that it filed a lis pendens with the Perry County Court of Common Pleas on December 29, 1992. According to the record, the Marshal executed the arrest warrant on January 6, 1993, but it is not clear from the record precisely what this "arrest" involved. The Marshal served Swallow and the Treasurer and Auditor of Perry County with copies of the summons, complaint, and warrant against his property. It published public notice of the forfeiture action in the Perry County Tribune. Both Swallow and the government state in their pleadings before this court that the government also executed an occupancy agreement with Swallow, but that agreement is not included in the record before us.

Appellant filed a pro se "claim" on April 27, 1993, and an answer to the complaint on May 19, 1993. The United States filed a motion for summary judgment on September 24, which the court granted on December 13.

The district court's opinion analyzed the burden of proof according to the standards set forth in 19 U.S.C. Sec. 1615, which provides:

In all suits ... for the forfeiture of [property], the burden of proof shall lie upon [the] claimant ...: Provided, That probable cause shall be first shown for the institution of such action, to be judged by the court....

The burden was initially on the government to show probable cause to believe that criminal activity occurred, and probable cause that there was a nexus between the activity and the property. United States v. $5,000 in United States Currency, 40 F.3d 846, 848 (6th Cir.1994); United States v. $22,287 in United States Currency, 709 F.2d 442 (6th Cir.1983). The district court found that the government established probable cause by submitting an affidavit from an investigating FBI agent that contained detailed information about the drug sales to the confidential informant at Swallow's house, and a copy of Swallow's Perry County, Ohio, judgment entry of conviction.

Once the government showed probable cause, the burden shifted to Swallow to prove by a preponderance of the evidence that the property was not used to commit or facilitate an offense under Title 21. United States v. 566 Hendrickson Blvd., 986 F.2d 990 (6th Cir.1993); United States v. $50,000 in United States Currency, 757 F.2d 103 (6th Cir.1985). The court noted that Swallow did not produce evidence to establish that the offenses were not committed at his house or to refute any of the information in the affidavit. The court found that the government was entitled to a judgment of forfeiture upon an unrebutted showing of probable cause, citing 566 Hendrickson Blvd., 986 F.2d at 995.

The district court rejected Swallow's claim that, under Austin v. United States, --- U.S. ----, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993), the court was required to fix the value of the house and conduct an Excessive Fines analysis. ² The court held that it was Swallow's burden to produce evidence to support his defense, and found that he did not make any representations to the court about the value of the property, nor did he allege that forfeiture violated the Excessive Fines Clause. ³

The court granted the government's motion for summary judgment, which Swallow now appeals. Swallow raises two major issues; whether the Supreme Court's decision in United States v. James Daniel Good Real Property, --- U.S. ----, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), required the district court to provide Swallow with notice and a hearing before issuing a judgment of forfeiture, and whether the forfeiture was an excessive fine under the Eighth Amendment.

II

We review the granting of summary judgment de novo. Summary judgment is appropriate only when there is no genuine issue of material fact and the moving party is entitled to summary judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

Swallow first claims that the court violated his due process rights under the Fifth Amendment by not providing a hearing, as required in Good, ---- U.S. at ----, 114 S.Ct. at 505.

The Supreme Court issued the Good decision the same day that the trial court ruled for the government on its summary judgment motion in this case. Although Swallow did not raise this issue below, we address it on appeal, because the question presents a purely legal issue not available to Swallow below, and failure to consider it could result in a miscarriage of justice. Foster v. Barilow, 6 F.3d 405 (6th Cir.1993) (citing Pinney Dock & Transport Co. v. Penn Central Corp., 838 F.2d 1445, 1461 (6th Cir.), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988)). In addition, both parties have briefed the issue.

First, we must determine in what circumstances Good requires predeprivation notice and a hearing, and in what situations the government can act without this process. Then, we need to determine whether Swallow's forfeiture fits under the first category or the second. If we determine that he was entitled to notice and a hearing before forfeiture, we then must decide what remedy he should receive for this violation of his due process rights.

A. When is a hearing required under Good?

The general rule is that an individual should receive predeprivation notice and a hearing. Good, --- U.S. at ---- - ----, 114 S.Ct. at 500-01. "The purpose of this requirement is not only to ensure abstract fair play to the individual. Its purpose, more particularly, is to protect his use and possession of property from arbitrary encroachment--to minimize substantively unfair or mistaken deprivations of property...." Fuentes v. Shevin, 407 U.S. 67, 80-81, 92 S.Ct. 1983, 1994, 32 L.Ed.2d 556 (1972), quoted in Good, --- U.S. at ----, 114 S.Ct. at 501. Civil asset forfeiture has become an important law enforcement tool, not simply to remove from criminals the spoils of crime, but to supplement law enforcement budgets. See United States v. All Funds on Deposit in Any Accounts, Merrill Lynch, 801 F.Supp. 984, 989 (E.D.N.Y.1992) ("As the 'drug war' has escalated, the number of forfeiture cases in the United States has burgeoned. Taking away the profits of drug crimes through forfeiture is a powerful weapon to cripple drug-trading enterprises. Unfairly wielded it can place commercial enterprises at a terrible disadvantage."), aff'd, 6 F.3d 37 (2d Cir.1993); David Heilbroner, The Law Goes on a Treasure Hunt, N.Y. Times, Dec. 11, 1994, Sec. 6 (Magazine) at 70 (reporting that since 1984 federal agencies executed over 200,000 forfeitures, netting $3.6 billion in assets). Justice Thomas suggested that it was the Court's "implicitly expressed distrust of the Government's aggressive use of broad civil forfeiture statutes" that motivated the Court's due process ruling in Good. Good, --- U.S. at ----, 114 S.Ct. at 515 (Thomas, J., concurring in part and dissenting in part).

Nevertheless, the Good Court recognized that not all forfeitures require a hearing. The Court noted that the forfeiture of a yacht could proceed without predeprivation notice and a hearing, because the "ease with which an owner could frustrate the Government's interests in the forfeitable property created a ' "special need for very prompt action" ' that justified the postponement of notice and a hearing until after the seizure." Id. at ----, 114 S.Ct. at 500 (quoting Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d...