US v. One 1982 Oldsmobile Cutlass, CIV 87-2297-R.

• Citation: 709 F. Supp. 1542
• Decision Date: 04 April 1989
• Docket Number: No. CIV 87-2297-R.,CIV 87-2297-R.
• Parties: UNITED STATES of America, Plaintiff, v. ONE 1982 OLDSMOBILE CUTLASS VD # 1GAM47A4CM453310, Defendant.
• Court: United States District Courts. 10th Circuit. Western District of Oklahoma

709 F. Supp. 1542

UNITED STATES of America, Plaintiff, v. ONE 1982 OLDSMOBILE CUTLASS VD # 1GAM47A4CM453310, Defendant.

No. CIV 87-2297-R.

United States District Court, W.D. Oklahoma.

April 4, 1989.

William S. Price, U.S. Atty., and Mary M. Smith, Asst. U.S. Atty., Oklahoma City, Okl., for plaintiff.

Carole J. Brown, Lawton, Okl., for defendant.

ORDER

DAVID L. RUSSELL, District Judge.

Before the Court are cross motions for summary judgment in this in rem action for forfeiture brought pursuant to 21 U.S. C. § 881(a)(4). The parties have stipulated to all of the material facts. See Stipulation of Facts filed February 1, 1989. The motions raise only issues of law based on the undisputed facts stipulated by the parties.

Plaintiff asserts that Claimant has failed to carry its burden of establishing a defense to forfeiture and, moreover, that Claimant lacks standing to even contest the forfeiture action because Claimant had no possessory interest in the automobile prior to its seizure by Plaintiff and could not acquire a possessory interest after seizure. Integral to Plaintiff's latter argument are its assertions that a lien against property does not entitle the lienholder to possession; that once property is seized, a recognizable possessory interest in property cannot be obtained; and that Claimant's state court foreclosure action after the property had been seized by the Government and after Claimant had notice of the seizure and forfeiture proceeding is void. Alternatively, Plaintiff asserts that the Claimant's interest in the vehicle is limited to $700.74 because the certificate of title provision of Oklahoma's Motor Vehicle License and Registration Act, Okla. Stat. tit. 47, § 23.2b (Supp.1982), and not Okla. Stat. tit. 12A, § 9-312(7), controls perfection of a security interest in a motor vehicle and under such provision Claimant's interest was perfected only to that extent. In any event, Plaintiff posits, it is clear that Claimant did not intend for its subsequent promissory notes to be secured by the Defendant vehicle. As a back-stop to this argument, Plaintiff urges that Claimant's assertion of rights to foreclose on its secured and unsecured debts, utilizing state law and state courts, is in direct conflict with 21 U.S.C. § 881 and is therefore pre-empted by federal law pursuant to the Supremacy Clause of the United States Constitution. Finally, Plaintiff asserts that because Claimant has failed to follow the remission procedure the Court is without jurisdiction to order return of property under 19 U.S.C. § 1618 and has no authority to grant the declaratory relief sought by the Claimant in a manner which is binding on the Attorney General.

In support of its cross motion, Claimant first argues that it has standing to assert an "innocent owner's defense" to forfeiture. This "defense" is founded on the suggestion that the forfeiture statute as applied to the property of an owner who is "innocent of crime and who had done all that reasonably could be expected of him to prevent misuse of his property," United States v. One 1976 Lincoln Mark IV, 462 F.Supp. 1383, 1390 (W.D.Pa.1979), would be unconstitutional as a deprivation of property without due process. Thus, an innocent owner is constitutionally exempt from the operation of the forfeiture statutes. Claimant asserts that since there is no evidence showing that it was ever aware of what Mr. Patel was doing or of suspicious circumstances which would trigger an affirmative duty on Claimant's part to prevent its property from being used illegally, it is entitled to assert the innocent owner's defense, provided that it has an ownership interest. Claimant asserts that as a holder of a lien on the Defendant vehicle it is an "owner" within the meaning of 21 U.S.C. § 881(a)(4), citing United States v. All That Tract and Parcel of Land: 2306 North Eiffel Court, 602 F.Supp. 307, 312 (N.D.Ga.1985) (interpreting "owner" as used in Section 881(a)(6) based upon legislative history); United States v. A Parcel of Real Property, 650 F.Supp. 1534, 1541 (E.D.La.1987) (citing United States v. $47,875.00 in U.S. Currency, 746 F.2d 291 (5th Cir.1984)); United States v. One Parcel of Real Estate Property, 660 F.Supp. 483 (S.D.Miss.1987); and United States v. Miscellaneous Jewelry, 667 F.Supp. 232 (D.Md.1987). Claimant also notes that the term "owner" as used in another forfeiture statute, 21 U.S.C. § 853, has been interpreted by one court to include unsecured creditors, citing United States v. Reckmeyer, 628 F.Supp. 616 (E.D.Va.1986).

Claimant next asserts that its contractual security interest in the Defendant vehicle based not only on the security agreement and note dated July 27, 1983 but on the notes executed on April 27, 1984 and December 5, 1984 was valid and existing before the illegal act of Patel on January 6, 1984, relying on Okla. Stat. tit. 12A, § 9-204(3) and Okla. Stat. tit. 12A, § 9-312 to assert that Claimant had a perfected security interest in Defendant's vehicle securing the amount due on all three notes before Patel's illegal act. Claimant reasons therefrom that its security interest has priority over the Plaintiff's claim, which it analogizes to that of a mere intervening lien creditor, citing Okla. Stat. tit. 12A, § 9-301(3) & (4). Claimant contends that pursuant to the terms of its Installment Note, Disclosure Statement & Security Agreement of July 27, 1983, Claimant's perfected security interest has priority over the Government's lien, citing Okla. Stat. tit. 12A, § 9-312(5) & (7) and First National Bank and Trust Co. of Norman, Okla. v. Security National Bank and Trust Co. of Norman, Okla., 676 P.2d 837 (Okla.1984).

In an alternative argument independent of that based on the existence of a perfected security interest, Claimant asserts that it had a valid possessory interest in the Defendant vehicle based on the terms of its contract with Patel, which in relevant part provided:

Events of Default

....

2. Any statement or representation made or furnished to you proves to be false;

3. The property is lost, stolen, receives substantial damage, sold, or any lien or encumbrance is placed on the property, or any seizure or attachment of the property;

....

....

6. The use of the property in an unlawful way;

....

8. You believe.... or feel that the property is in jeopardy.

Installment Note, Disclosure Statement & Security Agreement (Exhibit "A" to Stipulation of Facts)

Claimant says that Mr. Patel's statement on the front of the contract to the effect that the property covered by the Security Agreement was to be used primarily for "Personal, Family or Household purposes" as opposed to for business was a false statement. Moreover, Claimant asserts that the vehicle was used in an unlawful manner and seized and if Claimant had known what Patel was doing, it would have believed that its property was in jeopardy. Thus, Claimant asserts that because of these events of default it had an immediate right to possession of the vehicle pursuant to the terms of its contract with Patel which provided that upon default Claimant could repossess the property. See Installment Note, Disclosure Statement & Security Agreement (Exhibit "A" to Stipulation of Facts) at "Remedies," ¶ 4.

Next Claimant asserts, contrary to Plaintiff's position, that this Court has jurisdiction to award Claimant the vehicle if it concludes that "the subject vehicle does not fall within the forfeiture statute." What Claimant is really suggesting is that the Court can declare that Claimant's interest in the vehicle cannot be forfeited pursuant to the forfeiture statute because application of the forfeiture statute under these circumstances would be an unconstitutional denial of Claimant's interest in the vehicle without due process.

Finally, Claimant asserts for the first time in this motion that the Plaintiff's excessive delay in seizure (five months), notice to Claimant of the seizure (two months), institution of forfeiture proceedings (17 months), and notice to the Claimant of the forfeiture proceeding (3 months), or a total time period of twenty-three months elapsed from the time of the illegal act to the time Claimant received notice of the forfeiture proceeding, was excessive and constitutes a violation of Claimant's due process rights. Claimant contends that the vehicle has depreciated significantly during this period of delay.

The Nature of Claimant's Interest in the Defendant Vehicle

The registered owner of the Defendant vehicle is Parbhubhai Patel. On July 27, 1983, Patel obtained a loan from Claimant bank to purchase the vehicle. On that date, he executed an "Installment Note, Disclosure Statement and Security Agreement" in favor of Claimant bank. See Stipulation of Facts at ¶ 4 and Exhibit "A" thereto. The Security Agreement provided that it would "also secure any other or future debts of mine to you and will include any after-acquired-Property." Exhibit "A" to Stipulation. On September 1, 1983, Claimant filed a lien entry form with the Oklahoma Tax Commission. Stipulation at ¶ 5 & Exhibit "B" thereto. On April 27, 1984 and December 5, 1984, Patel obtained two additional loans from Claimant. Id. at ¶ 6 & Exhibit "J" & "D" thereto. Each of the security agreements signed by Patel in connection with those loans lists the security as "FS." At the time Patel made application for the April 27, 1984 loan, Patel provided Claimant with financial statements for the D & R Motel and a personal financial statement reflecting as assets, among other things, a one-half interest in the D & R Motel and two automobiles. See Exhibit "E" to Stipulation. After the FBI seized the Defendant vehicle on June 28, 1986, Patel's notes to the Claimant bank went into default. Security charged off $700.74 on the July 27, 1983 note (vehicle purchase-money note) $8,160.14 on the April 27, 1984 note, and $4,000 on the December 5, 1984 note. Stipulation at ¶ 8 & Exhibits "F" and "G" thereto.

Claimant was notified...