US v. ONE SINGLE FAMILY RESIDENCE, MIAMI, FLA.

• Decision Date: 11 March 1988
• Docket Number: No. 86-739-Civ.,86-739-Civ.
• Parties: UNITED STATES of America, Plaintiff, v. ONE SINGLE FAMILY RESIDENCE LOCATED AT 2901 S.W. 118TH COURT, MIAMI, FLORIDA, etc., Defendant.
• Court: U.S. District Court — Southern District of Florida

683 F. Supp. 783

UNITED STATES of America, Plaintiff, v. ONE SINGLE FAMILY RESIDENCE LOCATED AT 2901 S.W. 118TH COURT, MIAMI, FLORIDA, etc., Defendant.

No. 86-739-Civ.

United States District Court, S.D. Florida.

March 11, 1988.

COPYRIGHT MATERIAL OMITTED

Guy Harrison, Miami, Fla., for plaintiff.

Alan Ehrlich, Plantation, Fla., Bruce David Green, Ft. Lauderdale, Fla., for Claimant.

ORDER GRANTING U.S.A's MOTION FOR SUMMARY JUDGMENT AND DENYING CLAIMANT'S MOTION FOR SUMMARY JUDGMENT

ARONOVITZ, District Judge.

THIS CAUSE came before the Court upon the parties' cross-motions for summary judgment. The Court has considered the motions, the pertinent portions of the record, and has heard oral argument by counsel after due notice, and being otherwise fully advised in the premises, the Court renders herewith its memorandum opinion GRANTING plaintiff U.S.A.'s motion for summary judgment, and DENYING Claimant's motion for summary judgment.

Undisputed Factual Background

The parties do not dispute the material facts. On October 28, 1985, Miguel Alvarez appeared before United States Magistrate Charlene H. Sorrentino for the setting of bond following his arrest three days before for possession of cocaine with intent to distribute. The Magistrate set a $50,000 corporate surety bond. She also determined that Alvarez had about $50,000 equity in his home, and that a hearing pursuant to United States v. Nebbia, 357 F.2d 303 (2d Cir.1966), was unnecessary. Later that day, Claimant American Bankers Insurance Company issued a $50,000 bail bond in Alvarez' favor, and received a contingent $50,000 promissory note and a $50,000 mortgage on Alvarez' home.

Jerry Miller, an agent of the claimant herein, was present at the bond hearing before Judge Sorrentino. The government notes that at the hearing, the Assistant United States Attorney stated that Alvarez was charged with possession of cocaine found in the closet of his home. Also at the hearing, Judge Sorrentino signed the complaint against Alvarez, which contained the allegation regarding the discovery of the cocaine and Alvarez' alleged statement that if the cocaine was found in his home, it must belong to him.

On April 8, 1986, the United States filed this complaint seeking forfeiture of Alvarez' house. Thereafter, on June 9, 1986 Alvarez failed to appear in Court for a scheduled hearing and has since been a fugitive from justice. The Claimant has already paid $50,000 on the forfeited bond to the United States.

Claimant's Arguments

The claimant advances three arguments in support of its position that its mortgage interest in Alvarez' house is not properly subject to forfeiture. First, that it is an innocent owner of the mortgage interest under 21 U.S.C. sec. 881(a)(6)-(7). Second, that the government is equitably estopped from bringing this forfeiture action. Finally, that Alvarez' constitutional right to bail is undermined by the forfeiture of the bonding company's security.

a. Innocent Owner Exception

While the Supreme Court has acknowledged the broad power of the government to cause title to vest retroactively as of the commission of a crime, the Court has alluded, in dicta, to constitutionally required exceptions to the relation back doctrine. Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974). In Calero-Toledo, the Court upheld a Puerto Rico forfeiture statute which would allow the forfeiture of a yacht leased to an individual who used it to transport marijuana. The Court, in the final paragraph of its opinion, noted that the claimant-owner had made no allegation that it "did all that it reasonably could to avoid having its property put to an unlawful use." Id. at 691, 94 S.Ct. at 2095.

The Court's conclusion in Calero-Toledo that the owner had failed to take adequate precautions was critical, because the Court earlier stated that "it would be difficult to reject the constitutional claim of an owner.... who proved not only that he was uninvolved in and unaware of the wrongful activity, but also that he had done all that reasonably could be expected to prevent the proscribed use of his property...." Id. at 689-90, 94 S.Ct. 2094-95. The Court, however, has not yet held that the Constitution precludes forfeiture of a truly innocent owner along the lines described in the Calero-Toledo dicta.

In any event, Congress has substantially reduced the Court's opportunity to reach this issue, because the federal forfeiture statutes contain innocent owner exceptions. By legislatively enacting an innocent owner exception, Congress has apparently reacted to the same fairness concerns which prompted the Court's discussion in Calero-Toledo. The government brought this forfeiture action under sections 881(a)(6)-(7), which each contain exceptions to the forfeitability of the property interest of innocent owners. The government's claim for forfeiture under section 881(a)(6) apparently is that Alvarez' equity interest in the house was the traceable proceeds of an exchange for a controlled substance. Under section 881(a)(7), the government would argue that Alvarez' house is forfeitable because it was used to facilitate an illegal transaction in controlled substances.

Both of these forfeiture sections contain an exception to forfeiture which states "except that no property shall be forfeited under this paragraph, to the extent of the 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." The somewhat obtuse wording of the innocent owner exception under section 881 is made clearer by considering a common factual setting.

The exception is most commonly claimed by someone who allows a third party to use their automobile, boat, aircraft or real property, only to "discover" that the third party has used their property to facilitate an illegal drug transaction. The claimant then asserts that the third party's use of his property in the drug transaction was without his "knowledge or consent," and seeks to be exempt from forfeiture as an innocent owner.

While such a defense is entirely appropriate under the law, it is very difficult to establish in practice and the courts routinely uphold the forfeiture of this type of claimant's property under the particular facts and circumstances presented. See, e.g., One Blue 1977 AMC Jeep CJ-5, VIN J783EA076436 v. U.S., 783 F.2d 759 (8th Cir.1986) (mother lends son her car); U.S. v. 1966 Beechcraft Aircraft Model King, 777 F.2d 947 (4th Cir.1985) (aircraft owner allows pilot to borrow plane); U.S. v. One (1) 1984 No. 1 Boat, 617 F.Supp. 672 (S.D. Fla.1985) (boat owner lends boat to friend); U.S. v. One (1) 1980 Stapelton Pleasure Vessel, 575 F.Supp. 473 (S.D.Fla.1983) (ship charterer rents boat).

The government concisely summarizes its position as follows: "Claimant, a purchaser after the act giving rise to forfeiture, is not entitled to assert the `innocent owner' defense." Although the courts in the above cited cases rejected the claimant's assertion of innocent ownership, there is no disputing that their claims of innocence were properly asserted under section 881 because their property interest arose before the illegal act giving rise to forfeiture. By contrast, the government correctly points out that in the present case, the claimant's property interest did not arise until after Alvarez allegedly used his house to facilitate a drug transaction.

The government's argument squarely sets forth the issue of whether a claimant may seek shelter under the innocent owner exception to section 881 even though his purported property interest did not arise until after that property was used in or derived from an illegal drug transaction.¹ The starting point for this analysis must be, of course, Congress' own words in enacting section 881. In attempting to fit its claim within the innocent owner exception, the claimant herein would have to argue that Alvarez' illegal "act" of using the house to facilitate a drug transaction or purchasing it with the traceable proceeds from those transactions was "committed" without its "knowledge or consent."

b. The Relation Back Doctrine

In essence, in order for the claimant to be an innocent owner, section 881 must at least allow bona fide transferees of otherwise forfeitable property to avoid forfeiture. Congress has clearly chosen to protect bona fide transferees after the illegal act from the criminal forfeiture statute, 21 U.S.C. sec. 853. Under section 853(c), the relation back doctrine is codified so as to vest title in the United States "upon commission of the act giving rise to forfeiture." But importantly, the section goes on to exempt bona fide purchasers from the relation back doctrine's harsh results. Any otherwise forfeitable property which is transferred to a person other than the defendant shall not be forfeited if "he is a bona fide purchaser for value of such property who at the time of purchase was reasonably without cause to believe that the property was subject to forfeiture under this section."

The Court makes reference to section 853 simply to demonstrate that Congress certainly has not per se precluded bona fide purchasers from avoiding the relation back doctrine. The issue in the present case, of course, is whether the civil forfeiture statute under section 881 similarly allows for a bona fide purchaser to avoid relation back.

Consideration of this issue is complicated somewhat by a 1984 amendment to section 881 which added section 881(h). Section 881(h) codifies the relation back doctrine by indicating that the United States' interest in the property vests "upon commission of the act giving rise to forfeiture." The government argues that the claimant cannot attain the status of an innocent owner because the United States' property interest vested before the claimant's. Thus, the claimant is not an owner of property which can claim innocent owner...