US v. 3 PARCELS IN LA PLATA CTY. COLO.

• Decision Date: 17 November 1995
• Docket Number: No. CV-N-89-396-ECR.,CV-N-89-396-ECR.
• Parties: UNITED STATES of America, Plaintiff, v. 3 PARCELS IN LA PLATA COUNTY, COLORADO, et al., Defendants.
• Court: U.S. District Court — District of Nevada

919 F. Supp. 1449

UNITED STATES of America, Plaintiff, v. 3 PARCELS IN LA PLATA COUNTY, COLORADO, et al., Defendants.

No. CV-N-89-396-ECR.

United States District Court, D. Nevada.

November 17, 1995.

COPYRIGHT MATERIAL OMITTED

Greg Addington, Assistant U.S. Attorney, Reno, NV, for Plaintiff.

Glynn Cartledge, Reno, NV, for claimants Marcus Zybach, Zinaida Zybach and Reza Alexis Zybach.

Mark E. Haines, Carson City, NV, and Earl D. Johnson, Barbara N. Horn, Oakland, CA, for claimant Clive J. Lawrence.

Lawrence J. Semenza, Reno, NV, for claimant Francillia Emmanuel.

ORDER

EDWARD C. REED, Jr., District Judge.

I. Introduction

This is a civil in rem forfeiture action brought by the United States pursuant to 21 U.S.C. § 881 against certain property, both real and personal, owned by Marcus Zybach, Francillia Emmanuel, and Clive Lawrence. The case is before the court on remand from the U.S. Court of Appeals for the Ninth Circuit. United States v. 3 Parcels in La Plata County, Colorado, 53 F.3d 341, 1995 WL 261138 (9th Cir.1995) (reversing grant of summary judgment in favor of the United States).

Marcus Zybach operated a marijuana-smuggling ring during the 1970's and 1980's. In 1991 he pled guilty to federal narcotics charges and, following extensive negotiations with the United States, entered into a stipulation and order forfeiting various assets.¹ The civil forfeiture proceedings, which had been stayed pending disposition of the criminal case, recommenced in 1993.

Presently at issue is the government's claim to the proceeds from the sale of certain real property located in Tiburon, California by Zybach to one Kenneth Tishgart in December 1987. Under the contract of sale, Tishgart paid Zybach approximately $500,000 in cash and signed a promissory note for an additional $320,000. The promissory note was secured by a deed of trust duly recorded in the local office of records.

Zybach has moved for summary judgment on the government's claim to the $320,000 balance still owing on the sale of the Tiburon property. Zybach's Motion for Summary Judgment, Doc. # 164. The motion does not appear to challenge the government's claim to any other property named in the complaint.²

Also at issue is the degree to which Clive Joseph Lawrence, who is Francillia Emmanuel's brother, knew that the property transferred to him by Emmanuel was acquired with the proceeds of Zybach's illegal drug business. Lawrence has moved for summary judgment against the government on the ground that he has adduced evidence of his status as an "innocent owner" sufficient to entitle him to judgment as a matter of law. Lawrence's Motion To Amend Claim etc., Doc. # 165.

II. Disposition of the Jurisdictional Issue on Summary Judgment

Claimant Zybach has contested the existence of jurisdiction over the defendant res via motion for summary judgment. Generally, such contests are more properly resolved by motion to dismiss. Beacon Enterprises v. Menzies, 715 F.2d 757, 762 (2d Cir.1983). The distinction is more than a procedural nicety; the two forms of relief are entirely different in nature and effect.

Lack of jurisdiction over the defendant is a matter in abatement and does not go to the merits of the claim. Studio Elec. Technicians Local 728 v. International Photographers of the Motion Picture Ind. Local 659, 598 F.2d 551 (9th Cir.1979). A dismissal for lack of jurisdiction over the defendant is without prejudice, whereas summary judgment is a ruling upon the merits of a claim which if affirmed is given preclusive effect. EF Operating Corp. v. American Buildings, 993 F.2d 1046, 1048 (3d Cir.1993). Therefore, the court will treat Zybach's motion for summary judgment as a motion to dismiss for the purposes of the dispute over the existence of jurisdiction in rem. Omeluk v. Langsten Slip & Batbyggeri A/S, 52 F.3d 267, 268 (9th Cir.1995).

On a motion to dismiss for lack of jurisdiction over the defendant, the non-moving party's burden is a light one: it must merely present prima facie proof that it has met the statutory requirements for the acquisition of jurisdiction. Stephenson v. Barringer, 758 F.Supp. 657 (D.Kan.1991). The proof, however, must be more than bare allegations of jurisdiction; plaintiff must establish the existence of the requisite jurisdictional facts. Lacovara v. Merrill Lynch, 551 F.Supp. 601 (E.D.Penn.1982). The court must construe plaintiff's allegations of jurisdictional facts in plaintiff's favor. United States v. Arkwright, Inc., 690 F.Supp. 1133 (D.N.H.1988).

III. In rem Jurisdiction Over the Defendant Property

A. Rules Governing Jurisdiction in rem

Procedure in civil in rem forfeiture actions is governed by the Federal Rules of Civil Procedure to the extent consistent with the Supplemental Rules for Certain Admiralty and Maritime Claims, and otherwise by the Supplemental Rules themselves. See 18 U.S.C. § 981(b)(2); 21 U.S.C. § 881(b); United States v. One 1978 Piper Cherokee Aircraft, 37 F.3d 489, 493 (9th Cir.1994); United States v. 105,800 Shares of Common Stock of FirstRock Bancorp, Inc., 825 F.Supp. 191 (N.D.Ill.1993); United States v. $5,372.85 United States Coin and Currency, 283 F.Supp. 904 (S.D.N.Y.1968).

In a civil forfeiture proceeding it is the valid seizure of the res which confers in rem jurisdiction; the seizure is prerequisite to the initiation of the action. Republic Nat'l Bank of Miami v. United States, 506 U.S. 80, 83-85, 113 S.Ct. 554, 557, 121 L.Ed.2d 474 (1992); The Brig Ann, 13 U.S. (9 Cranch) 289, 3 L.Ed. 734 (1815). A court must have actual or constructive control of the res when an in rem forfeiture action is commenced. United States v. James Daniel Good Real Property, ___ U.S. ___, ___, 114 S.Ct. 492, 503, 126 L.Ed.2d 490 (1993). The "seizure of the res, and publication of the monition or invitation to appear is regarded as equivalent to the particular service of process in law and equity." Republic Nat'l Bank, 506 U.S. at 83-86, 113 S.Ct. at 557-58 (quoting Taylor v. Carryl, 61 U.S. (20 How.) 583, 589, 15 L.Ed. 1028 (1858)). "The seizure of the property, as thus seen, is made the foundation of the subsequent proceedings. It is essential to give jurisdiction to the court to declare a forfeiture." Pelham v. Rose, 76 U.S. (9 Wall.) 103, 19 L.Ed. 602 (1869).³

In the present case, the asset sought to be forfeit is a debt, namely the balance owing on the sale of the Tiburon realty by Marcus Zybach to Kenneth Tishgart. See Writ of Entry and Seizure Warrant (Doc. # 13, Exhibit G). Mere intangibility of an asset, however, does not preclude its seizure. "A debt may be treated as a res as easily as a ship," United States v. Freights, etc. of S.S. Mount Shasta, 274 U.S. 466, 470, 47 S.Ct. 666, 666, 71 L.Ed. 1156 (1927), at least where the debt is represented by a separated or traceable fund, or is admitted and voluntarily paid into court by the debtor. 7A Moore's Federal Practice ¶ C.13, at 687. Here the debt is represented by the promissory note, secured by a deed of trust executed by the debtor, Tishgart, and duly recorded in the county recorder's office. In theory, therefore, the debt is subject to forfeiture in an action in rem against the debt itself.⁴

The court's power to entertain such an action, however, still depends on the prior occurrence of a valid seizure of the res. Whether styled a proceeding against the intangible debt, or against the deed of trust held by Zybach as security for that debt, some "thing" must first be seized. Dobbins's Distillery v. United States, 96 U.S. (6 Otto) 395, 24 L.Ed. 637 (1877) (requiring seizure of the "property inculpated" before institution of an in rem forfeiture action). Jet aircraft, Krugerrands, and Dalmation puppies are all capable of physical asportation by the marshal, thus establishing the requisite judicial control over the property. A debt, by contrast, has no corporeal existence. The Rules, however, address this problem.

Under the Admiralty Rules, where the government seeks the forfeit of intangible personal property of a creditor, it must serve the summons and complaint upon the debtor. Fed.R.Civ.P. Supp.R. B(3)(a); E(4)(c). Where the subject property consists of proceeds of property sold, the Rules require the issuance of a summons "directing any person having control of the funds to show cause why they should not be paid into the court to abide the judgment." Fed.R.Civ.P. Supp. C(3). Execution of process is accomplished by

leaving with the garnishee or other obligor a copy of the complaint and process requiring the garnishee or other obligor to answer; or the marshal may accept for payment into the registry of the court the amount owed to the extent of the amount claimed by the plaintiff with interest and costs, in which case the garnishee or other obligor shall not be required to answer unless alias process shall be served.

Fed.R.Civ.P. Supp. E(4)(c) (emphasis added).

The phrase "requiring the garnishee or other obligor to answer" clearly refers to the summons to show cause described in Fed. R.Civ.P. Supp. C(3). In United States v. 105,800 Shares of Common Stock of FirstRock Bancorp, Inc., 825 F.Supp. 191 (N.D.Ill.1993), the government sought to forfeit shares of stock which allegedly represented the proceeds of a bank fraud. The court held that service of the forfeiture complaint on the president and CEO of the corporation issuing the shares sufficed to confer in rem jurisdiction. Likewise, in United States v. All Funds On Deposit in Any Accounts Maintained in the Names of Heriberto Castro Meza, 856 F.Supp. 759 (E.D.N.Y. 1994), in rem jurisdiction over money deposited in a foreign bank was acquired via order of the foreign court freezing the bank accounts.

B. Proper Method of Acquiring Jurisdiction in rem Over a Debt

There exist under the Supplemental Rules two distinct methods of acquiring jurisdiction in rem over a debt such as that sought to be forfeit in the present case. Fed.R.Civ.P. Supp.R. E(4)(c) permits arrest of intangible...