U.S. v. Route 2, Box 472, 136 Acres More or Less, 94-8158
| Decision Date | 11 August 1995 |
| Docket Number | No. 94-8158,94-8158 |
| Citation | 60 F.3d 1523 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. ROUTE 2, BOX 472, 136 ACRES MORE OR LESS, Land Lying And Being In Land Lot 221 Of The 18th District, 1st Section, Towns County, Georgia with mailing address Route 2, Box 472, Hiawassee, Georgia, Defendant, Dyer's Trout Farms, Inc., Claimant-Appellant, North Georgia Farm Credit, ACA Federal Credit Bank of Columbia, Claimants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
John R. Martin, Martin Brothers, P.C., Atlanta, GA, Douglas W. McDonald, Sr., P. Gerald Cody, Jr., McDonald & Cody, P.C., Cornelia, GA, for appellant.
J. Douglas Stewart, Stewart, Melvin & House, Gainesville, GA, for North Georgia Farm Credit.
Kent Alexander, U.S. Atty., Janice Jenkins Treu, Asst. U.S. Atty., Atlanta, GA, for appellee.
Appeal from the United States District Court for the Northern District of Georgia.
Before BIRCH and DUBINA, Circuit Judges, and CLARK, Senior Circuit Judge.
I. Introduction
The issue to be decided in this case is whether an officer and majority shareholder's criminal activity is imputable to a corporation so as to deny the corporation an "innocent owner" defense in a forfeiture action. Today, we hold that where a corporate employee engages in criminal activity outside the scope of his employment, with no benefit accruing to the corporation, and such activity was without the knowledge of the other shareholders, the criminal activity is not imputable to the corporation. We therefore reverse the district court's grant of summary judgment for the United States, and remand the case for entry of summary judgment in favor of the claimant corporation, Dyer's Trout Farms, Inc. Because we find that the innocent owner exception applies, we do not reach the second issue raised by the corporation--whether the forfeiture of the property was disproportionally excessive in violation of the Eighth Amendment. 1
II. Background
The parties agree regarding the facts surrounding this controversy, their dispute rather being focused on the applicability of the innocent owner defense. Therefore, only a brief recitation of the facts regarding ownership and control of the res in question is necessary.
On September 10, 1991, Agents of the Georgia Bureau of Investigation, the National Forest Service, and the Towns County Sheriff's Department discovered a number of marijuana plants growing on a parcel of land in Towns County, Georgia. The defendant real property is a single tract of approximately 136 acres, owned by Dyer's Trout Farms, Inc. (the "Farm"). Government agents discovered approximately 95 marijuana plants growing on a wooded hillside a quarter of a mile from the residence of William Dyer--president and majority shareholder of Dyer's Trout Farms, Inc. An additional five to ten plants were discovered growing adjacent to Dyer's residence. In outbuildings near Dyer's house, the officers found three marijuana cigarettes, potting soil, and "starter" cups that appeared to be connected to the marijuana growing on the wooded hillside.
Dyer admitted that he was aware of the plants growing adjacent to his residence, but denied knowledge of the 95 plants on the wooded hillside. In June 1992, William Dyer was convicted of possession of one ounce of marijuana in a non-jury stipulated trial in Towns County Superior Court. The United States has not indicated any intention to bring federal narcotics charges against Dyer. However, on October 20, 1992, the United States filed a complaint pursuant to 21 U.S.C. Sec. 881(a)(7) for forfeiture in rem against the property, contending that it was used to facilitate illegal drug trafficking.
In 1976, the Farm was incorporated by Paul Dyer, the father of William, Willard, and Willis Dyer. The corporation was formed to engage primarily in the raising and selling of fish and livestock. In 1978, the land was transferred by Paul Dyer to Dyer's Trout Farms, Inc. When Paul Dyer died in 1981, he left his stock in the corporation to William Dyer. The present stock ownership is divided 68 percent to William Dyer, 16 percent to Willard Dyer, and 16 percent to Willis Dyer. The sole officers of the corporation are William Dyer, President, and Willard Dyer, Secretary. All three brothers work full time on the Farm.
The district court found:
In rejecting the Farm's innocent ownership defense, the district court stated:
We think in this case there are "other factors" to consider and that they decrease the relevance of William's 68% stock ownership. Additionally, we do not think the district court gave sufficient weight to certain language in 21 U.S.C. Sec. 881(a)(7):
... except that no property shall be forfeited under this paragraph, to the extent of an interest of an owner, by reason of any act or omission established by that owner to have been committed without the knowledge or consent of that owner.
How the Farm has been operated and the distribution of the benefits from the Farm influence our decision in this case. The Board of Directors of the corporation consists of William, the President, and Willard, the Secretary. The Board seldom has an official meeting. Willard is in charge of the maintenance and growing of rainbow trout. William is in charge of sales and the operation of the processing plant. Willard is paid an annual salary of $10,000, William, the President, $7,800, and Willis $7,800. No dividends have ever been paid, although one year each of the brothers received a $2,000 Christmas bonus. The corporation regularly employs six employees who report to William. The three brothers meet about twice a month to discuss matters pertaining to the Farm.
There are five houses on the property, one of which is unoccupied. Each brother occupies a house and Willard's son, Jason, occupies a house. The brothers' mother, Mrs. Paul Dyer, lives with one of the brothers. Since the formation of the corporation, two of the five houses have been built, William's and Willard's. The brothers built these new houses using lumber cut from the land owned by the corporation. The corporation paid all expenses of building these houses, including the appliances. The corporation pays for the utilities for all four houses and maintains the houses and their appliances. These facts are related to demonstrate that although William owns 68% of the stock, the Farm is operated more like an equal cooperative family venture in which the brothers may have some minor variation in their receipt of the benefits of the operation and there is some variance in their responsibilities. We are impressed with two rather significant facts--William's growth of the marijuana was unknown to his brothers, and did not in any conceivable way benefit the corporation.
After the government and the Farm filed cross-motions for summary judgment, the district court granted the government's motion and denied the Farm's motion. The Farm appeals, arguing that the court improperly rejected its innocent owner defense.
III. Analysis
We review grants of summary judgment under a de novo standard of review, considering the evidence in the light most favorable to the non-moving party. 2 Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions to the file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. 3
Under 21 U.S.C. Sec. 881(a), the government must establish probable cause to believe that a substantial connection exists between the property to be forfeited and an illegal exchange of a controlled substance. 4 In the instant action, the Farm concedes that the United States can show probable cause that a portion of the property was used to grow marijuana, and that William Dyer was at least aware of the marijuana being grown next to his residence. Once probable cause is established, the burden shifts to the claimant to prove by a preponderance of the evidence that the property is not subject to forfeiture. 5 This burden can be met either by rebutting the government's evidence, or by showing that the claimant was an innocent owner. 6
The innocent owner defense is expressly provided for, as stated above, within the four corners of 21 U.S.C. Sec. 881(a)(7): "... no property shall be forfeited under this paragraph, to the extent of an interest of an owner, by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner." 7 The claimant bears the burden of proving by a preponderance of the evidence that it did not have knowledge of the illicit activity taking place on its land. 8 Here, we are confronted with the question of whether an individual shareholder's knowledge of illicit activity is imputable to the corporation.
Knowledge of an illegal activity may be attributed to a corporation only when the knowledge was obtained by an agent acting within...
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