United States v. Veon

• Decision Date: 12 October 1982
• Docket Number: No. Crim. S-81-172A-LKK.,Crim. S-81-172A-LKK.
• Citation: 549 F. Supp. 274
• Parties: UNITED STATES of America, Plaintiff, v. Daniel VEON, Defendant.
• Court: U.S. District Court — Eastern District of California

549 F. Supp. 274

UNITED STATES of America, Plaintiff, v. Daniel VEON, Defendant.

No. Crim. S-81-172A-LKK.

United States District Court, E. D. California.

October 12, 1982.

Kenneth G. Peterson, Asst. U.S. Atty., E.D. California, Chief, Crim. Div., Sacramento, Cal., for plaintiff.

Barry Tarlow, Los Angeles, Cal., for defendant.

OPINION AND ORDER

KARLTON, District Judge.

For the second time, this court must address the Government's efforts effectively to restrain the transfer of several pieces of valuable real property which, it appears, are owned by defendant Daniel Veon. The indictment alleges that these properties represent profits derived from the defendant's criminal activities in connection with the importation and sale of cocaine. For reasons discussed below, the Government has recorded a notice of lis pendens as to the property and the defendant now seeks an order of expungement.

Insofar as I can determine, no court has ever published an opinion addressing the issue of whether a lis pendens may properly be filed concerning an action of this sort. Accordingly, I once again "set out on an uncharted course." United States v. Veon, 538 F.Supp. 237, 242 (E.D.Cal.1982).¹ The problem as posed is novel to say the least; however, another, more important issue is implicit in this initial esoteric inquiry. In order to decide the propriety of the lis pendens, the court must first determine the extent, if any, of the Government's cognizable interest in property that it claims will be subject to criminal forfeiture, pending adjudication of the defendant's criminal liability vel non. While this underlying question is certainly of broader interest in the emerging area of criminal forfeiture law, it also has received scant attention.

As I shall explain, unless and until the guilt of the accused is established, the Government has no legal or equitable interest in the subject property sufficient to affect the rights of heirs or assigns pendente lite. It follows, therefore, that although the forfeiture of certain real property may result, a criminal forfeiture action is nonetheless not within the category of proceedings which are proper subjects for the filing of a notice of lis pendens. Thus the lis pendens notice filed in the instant case must be expunged.

I PROCEDURAL POSTURE

Most of the facts and procedural history pertinent to this motion are discussed at length in the court's earlier opinion and order. United States v. Veon, 538 F.Supp. 237 (E.D.Cal.1982). For present purposes the following summary will suffice: The Grand Jury in this district indicated defendant Veon, inter alios. The indictment in effect alleges that Veon was the "kingpin" of a "continuing criminal enterprise" in violation of 21 U.S.C. § 848. The indictment also charges that certain real and personal properties allegedly owned by Mr. Veon represent "profits obtained by him in such enterprise," and thus are subject to the criminal forfeiture provisions of the statute. 21 U.S.C. § 848(a)(2).

Soon after the original indictment was handed down, the Government sought ex parte and obtained an order from this court pursuant to § 848(d)² restraining Mr. Veon from transferring any interests in the subject real property. The court subsequently determined that although the original ex parte order had properly been issued, "such a restraining order must be of brief duration and must be followed by an adversary hearing concerning the propriety of continuing the restraining order until trial." United States v. Veon, 538 F.Supp. at 243.³ Furthermore, the court held that the prescribed hearing must be conducted in accordance with the Federal Rules of Evidence; the hearsay evidence upon which the Government hoped to rely, therefore, would not be admissible at the hearing.⁴ In accordance with that opinion, the matter was set for hearing. The Government declined to put on any admissible evidence that would support the continuing restraint of the property and the court dissolved the temporary restraining order.⁵

The Government thus found itself in a quandary. It was unwilling or unable to follow the appropriate procedure for restraining conveyance of the subject real property; nonetheless, it apparently feared that if the alleged "profits" were transmuted from real property to a more liquid form, they would be dissipated before it could win judgment against the defendant and thus assert its forfeiture rights under § 848(a)(2). The attorney for the Government resolved this dilemma with the simple but creative maneuver of filing a notice of lis pendens pursuant to the provisions of 28 U.S.C. § 1964 and California Code of Civil Procedure § 409 et seq.⁶ In this manner the Government warned all the world — including prospective purchasers — that the real property in question was subject "to forfeiture to the United States." As the affidavits of the defendant filed in connection with this motion demonstrate, the Government indirectly restrained the sale of the property almost as effectively as it would by obtaining an order pursuant to § 848(d). Accordingly, the defendant has now moved to expunge the lis pendens.

II STANDING

In its opposition brief the Government challenged Daniel Veon's standing to contest the filing of the lis pendens. In this regard, the Government pointed out that defendant Veon had never admitted to having any legal or equitable interest in the subject real property; in fact, the defendant's moving papers state that "the record owner of these disputed parcels is William Veon." (Emphasis added).

At the time the argument was made, it raised a serious question as to whether the court even had jurisdiction to consider this motion. The Supreme Court has informed us that "at an irreducible minimum, Article III requires the party who invokes the court's authority to `show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the opposing party.'" Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982), quoting Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 99, 99 S.Ct. 1601, 1607, 60 L.Ed.2d 66 (1979). At oral argument, however, counsel for the defendant resolved this threshold problem by making it quite clear that Daniel Veon asserts an ownership interest in the subject property sufficient to provide him with standing to litigate this question.<sup>7</sup> For example, counsel argued that "... the existence of that lis pendens is dissuading potential buyers from purchasing the properties, and in effect taking away a property right from Mr. Veon: his right to either mortgage or sell that property." Any doubt as to whether counsel was referring to Daniel Veon was dispelled by the following remarks made towards the end of the hearing: "... I would like to sort of close with a comment made to me by one other legal scholar, my client, who has listened to all of this which has gone on, and his position seems to be: Well, the judge said at the time of the restraining order, I'm not going to let them freeze my assets sic.... Now we are back here. I have the property, I've got to pay taxes, I've got to pay for that roof. I'm still going broke. And how can it be said that they're not preventing me from exercising rights that I have under this property? And like all of us he says: `I don't understand this. It seems to me that they're taking something away from me.'" The court is satisfied that defendant Veon has standing for purposes of this motion.⁸

III THE PROPRIETY OF THE LIS PENDENS

A. The Lis Pendens Statutes

The gist of the defendant's argument is that the lis pendens procedure is itself unconstitutional, for it results in the deprivation of a cognizable property interest without the protections mandated by the due process clause of the fifth amendment. It is a fundamental principle of federal jurisprudence, however, that "prior to reaching any constitutional questions, federal courts must consider nonconstitutional grounds for decision." Gulf Oil Co. v. Bernard, 452 U.S. 89, 99, 101 S.Ct. 2193, 2199, 68 L.Ed.2d 693 (1981), citing Ashwander v. TVA, 297 U.S. 288, 347, 56 S.Ct. 466, 483, 80 L.Ed. 688 (1936) (Brandeis, J., concurring); accord, Rosenberg v. Fleuti, 374 U.S. 449, 451, 83 S.Ct. 1804, 1806, 10 L.Ed.2d 1000 (1963); see also United States v. Veon, 538 F.Supp. at 244-45. Because I conclude that the California statute requires the court to order the notice expunged, I need not — and indeed cannot — reach the constitutional issue tendered by the defendant.

The procedure for expunging a lis pendens is found in California Code of Civil Procedure section 409.1 which provides in pertinent part:

At any time after notice of pendency of an action has been recorded pursuant to Section 409 or other law, the court in which the action is pending shall, upon motion of a party to the action supported by affidavit, order that the notice be expunged, unless the party filing the notice shows to the satisfaction of the court, by a preponderance of the evidence, that:

(a) The action does affect title to or right of possession of the real property described in the notice; and (b) Insofar as the action affects title to or right of possession of the real property described in the notice, the party recording the notice has commenced or prosecuted the action for a proper purpose and in good faith.

The first substantive question which must be addressed is whether the instant criminal prosecution, with its attendant criminal forfeiture sanction, is an action "concerning real property or affecting title to or right of possession of real property" within the meaning of the statute.⁹

At first glance, it would appear that the instant case is within the category of actions recognized by the statute. If the Government succeeds in proving that Daniel Veon took part in a "continuing criminal enterprise," and that...