UNITED STATES of America, Plaintiff, Appellant,
v.
ONE PARCEL OF REAL PROPERTY WITH BUILDINGS, APPURTENANCES
AND IMPROVEMENTS KNOWN AS 116 EMERSON STREET,
LOCATED IN the CITY OF PROVIDENCE, RHODE
ISLAND, Defendant, Appellee.
No. 91-1019.
United States Court of Appeals,
First Circuit.
Heard May 8, 1991.
Decided Aug. 21, 1991.
Miсhael P. Iannotti, Asst. U.S. Atty., with whom Lincoln C. Almond, U.S. Atty., Providence, R.I., was on brief for plaintiff, appellant.
Vincent A. Indeglia, with whom Edward Romano, Providence, R.I., was on brief, for defendant, appellee.
Before CAMPBELL and TORRUELLA, Circuit Judges, and BOWNES, Senior Circuit Judge.
TORRUELLA, Circuit Judge.
The government appeals from a civil forfeiture action, instituted against the defendant property pursuant to 21 U.S.C. § 881(a)(7), in which the owner of record's wife was granted a 50% interest in the property. The government contends that the wife's Rule 24(a)(2) motion to intervene was procedurally deficient, Fed.R.Civ.P. 24(a)(2) (intervention as a matter of right); that she did not demonstrate sufficient ownership rights in the property; and that she failed to prove that she was аn "innocent owner." We uphold the district court ruling.
FACTS
The property in question, 116 Emerson Street, Providence, Rhode Island, was deeded to Esteban Colon by its previous owner on December 19, 1979. The price of the property was $16,000. Esteban made an $8,000 down payment from worker's compensation funds and signed an $8,000 mortgage for the remainder. Esteban, his wife Elisa and their four children resided at the property from that date forward. The $8,000 mortgage was paid by Elisa.
In 1988, Esteban became suspect in a Drug Enforcement Agency ("DEA") investigation of heroin trafficking. Esteban delivered 17 browns1 of heroin to DEA Agent Terry Parham on September 9, 1988. After the sale, Agent Lawrence Lepore followed Estеban to the 116 Emerson Street address. On April 5, 1989, DEA agents, accompanied by Providence police officers, executed a federal search warrant at the property. The agents knocked and announced their presence in both English and Spanish. No one responded; however, activity could be heard inside. The agents kicked in the door, entered and discovered Elisa and her daughter Carmen in the living room. The agents searched the house. Seven browns of heroin and $19,325 in cash were discovered in a microwave oven. Elisa was immediately arrested; Esteban surrendered to the police later that same day. After the grand jury returned an indictment against him, Esteban pled guilty on October 26, 1989, to one count of distribution of heroin (the 17 browns delivered to DEA Agent Parham) and one count of possession with intent to distribute heroin (the seven browns found in the microwave). The charges against Elisa were dismissed.
On May 25, 1989, the Emerson Street property was seized under 21 U.S.C. § 881(a)(7) by the DEA pursuant to a finding of probable cause that the property had been used to facilitate the possession of, and the possession with intent to distribute, heroin in violation of 21 U.S.C. § 841(a)(1), a crime punishable by more than one year imprisonment. On June 1, 1989, a complaint for forfeiture in rem was filed by the United States against the property. Additionally, a warrant of arrest and notice in rem was issued by a United States magistrate. Notice of the forfeiture action was published in the Providence Journal Bulletin on June 13, 20 and 27, 1989. Default was originally entered against Esteban pursuant to Federal Rule of Civil Procedure 55, but was later vacated as a result of defective service.
On December 18, 1989, Esteban filed a claim to the property. On April 5, 1990, Elisa moved to intervene. The district court conducted a hearing on June 11, 1990. An order granting Elisa's motion was issued nine days thereafter. The case proceeded to bench trial on September 12, 1990. Defense counsel had earlier conceded that forfeiture was appropriate against Esteban. The only remaining issue was whether Elisa was entitled to any portion of the property. The district court found that Elisa had obtained an equitable interest in the property by virtue of a resulting trust, that she had no prior knowledge of the property's illegal use, and that she was entitled to a 50% share in the property. The remaining 50% was forfeited to the government.
INTERVENTION
Elisa Colon's motion to intervene asserted possessory and equitable ownership in the property located at 116 Emerson Street. Thus, in effect, the motion acted as a claim to the property. See 7A Moore's Federal Practice p C.16 at 700.13 (1983) ("A 'claimant' ... is a person who assumes the position of a defеndant and demands the redelivery to [her]self of the [property seized].") (quoting The Two Marys,
First we consider the issue of timeliness. It is a "time-honored admiralty principle that pleadings and procedural practices should be applied liberally." United States v. One Urban Lot Located at 1 Street A-1,
The reason for imposing time restrictions is "to force claimants to come forward as soon as possible after forfeiture proceedings have begun." One Urban Lot,
With respect to the instant case, we find the following factors persuasive: (1) Elisa Colon was neither named in nor served with a copy of the summons and complaint, and while notice of the pending fоrfeiture action appeared on three separate occasions in the Providence Journal Bulletin, Elisa does not have a significant command of the English language, see, e.g., Beechcraft Queen Airplane,
Next we consider Elisa's failure to file a verified claim. While Supplemental Rule C(6) mandates the filing of a verified claim setting forth the basis for the claimant's interest in the property, this court has not exacted strict compliance with that technicality. For example, we have consistently held that a verified answer which asserts all the information necessary to a verified claim may substitute for the verified claim. See One Urban Lot,
In the instant case, the relevant documents included a motion to intervene, its supporting memorandum and an unverified answer. We believe that these documents, when read together, adequately apprised the government of Elisa's claim and the basis upon which that claim rested. There was no abuse of discretion in allowing the case to proceed despite the absence of a verified claim.
Finally we address the issue of whether Elisa's declared interest in the property was sufficient to gain access to the courts. "It is well established that a party seeking to challenge a forfeiture of property must first demonstrate an ownership or possessory interest in the seized property in order to have standing to contest the forfeiture." United States v. Miscellaneous Jewelry,
Elisa originally claimed entitlement to the property through a marital equitable interest as established by Rhode Island General Laws 15-5-16.1. Although this was later held to be an improper basis for her claim,3 at this initial stage it did raise questions about the possibility of an equitable interest in the property acquired through some unwritten marital agreement. See Miscellaneous Jewelry,
OWNERSHIP
In a forfeiture action, once the government has demonstrated probable cause for the forfeiture, the burden shifts to the claimant to prove, by a preponderance of the evidence, an ownership interest in the property and ignorance of the illegal conduct which gave rise to the forfeiture. United States v. $250,000.00 in United States Currency,
The property located at 116 Emerson Street was registered solely under the name of Esteban Colon. At trial, Elisa attempted to prove an ownership interest in the property by way of a resulting trust, i.e., a verbal agreement between Elisa and her husband entered into at the time of purchase in which he agreed to pay the downpayment of $8,000, she agreed to pay the mortgage of $8,000 and they both agreed that the property would be owned jointly. The government contends that Elisa's mission was not accomplished. We disagree.
It was incumbent upon Elisa to prove the existence of the resulting trust by clear and convincing evidence. See Roseman v. Sutter,
After hearing the evidence and making several inquiries of its own, the district court was satisfied that a resulting trust existed. In order for this court to overturn that ruling on appeal, we must find clear error. See Fed.R.Civ.P. 52(a) ("Findings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses"); Brennan v. Carvel Corp.,
INNOCENCE
Having successfully demonstrated an ownership interest in the property, Elisa then needed to prove, by a preponderance of the evidence, $250,000.00 in U.S. Currency,
[N]o 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.
This has commonly come to be known as the "innocent owner" defense. See, e.g., United States v. Certain Real Property & Premises,
The government maintains that Elisa did not adequately prove her ignorance. Its argument runs as follows: Since Elisa was responsible for all of the cooking and cleaning, she must have known that a package of heroin was in the microwave. It is by far more likely that Elisa was the one who hid the drugs during the time the police were attempting to gain entry intо the home.
While the government's rendering presents one possible interpretation of events, there was also evidence supporting Elisa's version of the facts. First, the government's own witness, DEA Agent Philip Hickey, testified that Elisa Colon was never a suspect in her husband's drug activities. Second, Esteban admitted when he entered his guilty plea that the drugs and money were his. Third, Elisa took the stand on her own behalf and testified that she had no knowledge of her husband's drug activity and that she never would have permitted it in her home if she had known. Fourth, Elisa further testified that she had been out all morning on the day of the search and seizure and that she had only just returned when the police arrived. Fifth, the government had the opportunity to cross-examine Elisa extensively on this issue, and still the district court chose to believe Elisa.
We should respect the district court's decision unless clear error was committed below. See Brennan,
CONCLUSION
Elisa was properly permitted to intervene and raise a claim to the property in question. Having done so, she sufficiently proved both an ownership interest in the property and ignorance of her husband's drug activity. The district court ruling is therefore affirmed.
LEVIN H. CAMPBELL, Circuit Judge (Dissenting).
While I have sympathy for defendant Elisa Colon, wife of the convicted drug dealer, I believe that the district court and the majority of this panel have not correctly applied Rhode Island law. I, therefore, dissent.
In order to prevail as an innocent owner of half the property, Elisa Colon must establish both that she had no knowledge of her husband's drug activities and that she is a beneficial owner of half the property by way of a resulting trust.1
With some hesitation, I accept this court's holding that the district court did not err in finding that Elisa lacked knowledge of her husband's drug dealing. My hesitancy stems from the existence of strong circumstantial evidence suggesting that she knew of the presence of heroin in the home which she shared with Esteban, her husband. When the officers, armed with a warrant, first arrived at the house and announced their presence in English and Spanish, Elisa did not come to the door or answer. The officers heard movement inside and then broke down the door, finding Elisa and one of her daughters sitting on the living room sofa. The officers found the heroin in a microwave oven in the nearby kitchen; recent use of the oven was indicated by food spatterings on the inside. There was evidence Elisa did all the cooking. Hence it is reasonable to believe she knew of any drugs in the oven, and highly improbable her husband would have placed them in this location if he believed she lacked such knowledge, as she would obviously have soon found them there.
As, from the foregoing, a reasonable factfinder could have determined that Elisa knew of the presence of the drugs notwithstanding her denial, I think the district court was plainly in error when it remarked, as it did, that there was "no evidence" of Elisa's knowledge. My colleagues, however, apparently read this assertion in context as reflecting a judicial determination--after considering all the evidence, including Elisa's own testimony--that Elisa was without knowledge of her husband's drug activities (not merely that there was "no evidence" of her knowledge). If so, the question arises whether that imputed finding was clearly erroneous. I have to say not. The district court heard and saw Elisa and various witnesses. The issue boiled down to a question of credibility peculiarly within the court's competence. Therefore, although I am personally not persuaded, I concur in affirming the district court's determination that she lacked knowledge.
I cannot join, however, in this cоurt's conclusion that the district court properly found Elisa, on this record, to be half owner of the property by way of a resulting trust. The deed to the real estate was solely in her husband Esteban's name. At trial, Elisa presented evidence that she and Esteban had agreed when they bought the property that Esteban would pay the $8,000 down payment and Elisa would pay the $8,000 mortgage. The district court found that "[t]here is evidence that there was an agreement at the time of the purchase of the property ... between the husband and wife as to how they were to handle the obligations as to the down payment and as to the mortgage.... It seems to me quite probable in thе circumstances that the arrangement as described in fact existed." From this the court went on to a non sequitur, namely, that "the Defendant has carried the burden of clear and convincing evidence to the establishment of a resulting trust." The majority now affirms this conclusion, on the grounds that it is a question of fact which can only be overturned on appeal if clearly erroneous. However, the ultimate conclusion that a resulting trust exists is not just one of fact; it is a mixed question of law and fact. Accepting the facts as found by the district court, they are insufficient, by themselves, to impose a resulting trust under Rhode Island law. A resulting trust is not proven in Rhode Island simply by establishing that the party seeking the trust paid for some portion of the property. Rather, the parties, at the time of the purchase, must additionally be shown to have intended that the party seeking the trust would then acquire an ownership interest. The district court here made no such finding as to the parties' intent at the time of purchase,2 and the little evidence there is of such intent in the record is weak and conflicting. I would, therefore, remand to the district court to reopen the record and make a specific finding on the parties' intent as to ownership.
In general, under Rhode Island law,
a resulting trust arises where a person makes or causes to be made a disposition of property under circumstancеs which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest therein.
Roseman v. Sutter,
To sustain the court's ruling below, one can argue that while the district court omitted any finding as to an intent to share ownership, it inferentially made such a finding by its end result and by noting that the parties were not aware of "the niceties of recording of titles." One might go on to contend that this implied finding was supported by a reasonable presumption that, as two spouses generally share their home, if one pays for half of the home but title is placed solely in the other's name, the spouses intend that each will own half. See 5 W. Fratcher, Scott on Trusts § 454 (1989) ("In the case of a purchase of а matrimonial home the usual rules as to a resulting trust are much relaxed."). The trouble with this analysis, however, is that there is no authority in Rhode Island for such a presumption. To the contrary, the Supreme Court of Rhode Island has held that, "[t]o prove a resulting trust by reason of the payment by one person of the whole or part of the purchase price of property conveyed to another person, especially if the relation between them is that of husband and wife, the evidence must be full, clear and convincing." Robinson v. Robinson,
My reading of the Rhode Island cases is that some quantum of evidence of an intent to share ownership beyond the mere fact of a contribution by the other spouse is necessary to create a resulting trust. After all, the placing of the deed in one name only, points in the other direction, suggesting an intended gift. If the latter factor is to be overridden, one would expect additional evidence focusing on the parties' intent.
In Robinson, a wife sought to establish a resulting trust in her husband's share of property titled in their joint names. In addition to hearing evidence that the wife paid the entire purchase price, the trial court also heard evidence concerning the parties' intent, in the form of testimony as to why the husband had never deeded his share over to the wife. Finding that the evidence as to both was unreliable, the trial court concluded that there was no resulting trust, and the Supreme Court of Rhode Island affirmed.
It can be argued that Rhode Island's requirement of a heightened showing of intent in the marriage context is based on archaic notions about marriage. Rhode Island has, in recent times, modified its divorce law so that a spouse can receive a share in the "estate" of the other spouse, based upon a lesser showing. Upon divorce, either spouse may receive a share of the other's estate based on, amоng other factors, "the contribution of each of the parties in the acquisition ... of their respective estates," without showing that the parties intended joint ownership. 1979 R.I.Pub.Laws Ch. 279 § 2, as amended, codified at R.I.Gen.Laws § 15-5-16.1.
But, while the Supreme Court of Rhode Island may conceivably someday wish to alter its law relative to resulting trusts between spouses in a nondivorce context, it has not done so to date, and it is not the province of a federal court to modify state law. This is especially so where the law, whether or not based on an arguably outdated rationale, serves a valuable policy goal. Here, by making it more difficult to establish a resulting trust, the rule makes the titlе recording system more secure. When a party sees that title to property is in the name of a certain person, he or she can be more confident that that person will be treated as its actual owner. Moreover, the courts of at least one state outside Rhode Island have required, as recently as 1978, proof of intent as well as contribution to the purchase price in order to establish a resulting trust between spouses. Bartula v. Bartula,
In this case the district court made no finding on the parties' intent as to ownership, basing its decision entirely on Elisa's payment of the mortgage, and treating this as a sufficient basis to find a resulting trust. My colleagues perpetuate the error. Yet the record evidence of the parties' intent is both weak and in conflict. On the one hand Elisa answered "yes" to the question "did you purchase the house with your husband at 116 Emerson Street?" In addition, there was evidence of an agreement to share household expenses, which might make more likely an intent to share other items, i.e., ownership of the house. On the other hand, the evidence was that Elisa paid the mortgage by giving money orders to her daughters, who in turn filled them out in the sole name "Esteban Colon." Cf. Robinson,
Notes
"Brown" is a term of art used to describe the method of packaging heroin whereby small quantities оf heroin are bound together and wrapped in brown paper
Although the government had ceased discovery before Elisa's motion to intervene was granted, the court allotted time for discovery had not yet run. Three weeks remained in which the government could have resumed discovery efforts
Rhode Island General Laws 15-5-16.1 applies only to the assignment of property interests between husband and wife during divorce proceedings
Elisa held two jobs during the life of the mortgage. The first was with a box company, the second with a caterer
I agree with the majority that Elisa's defense requires her to prove "an ownership interest in the property" as well as "ignorance of the illegal conduct which gave rise to the forfeiture." (court's opinion at 79). The forfeiture statute does not provide for any equitable defense simply on the grounds that it would be unfair to seize property in which an innocent spouse has invested money. The only lack of knowledge defense to a forfeiture of real property which the statute provides is 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 or omitted without the knowledge of that owner." 21 U.S.C. § 881(a)(7) (emphasis added). See United States v. Certain Real Property,
Counsel for Elisa stated to the court that a resulting trust requires "an agreement that one would take property in the name and that the other would in effect invest money into that property ... and that the person investing the money was to take some share of equity in the property." However, the court found only an agreement concerning the former, not the latter. Although the court did state that, "[w]e're not dealing herе with people who have been to law school and are aware of all the niceties of recording of titles and that sort of thing," it is not clear whether this statement was addressed to the resulting trust issue or to a related government argument based on a Rhode Island statute requiring the recording of titles. Even if addressed to the resulting trust issue, this statement cannot be taken as a specific finding of intent
The government argues that Rhode Island law presumes that a contribution to the purchase price of a home by one spouse is a gift to the other spouse. The case cited by the government for this proposition, Luchetti v. Luchetti,