Supreme Court Syllabus & Decision
U.S. v. 92 Buena Vista Ave.
A Civil Forfeiture Case
Feb 24, 1993
Article 83 of courts.usa.federal.supreme: Date: 24 Feb 1993 15:11:18 GMT NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Lumber Co., 200 U. S. 321, 337. SUPREME COURT OF THE UNITED STATES Syllabus UNITED STATES v. A PARCEL OF LAND, BUILDING, APPURTENANCES, AND IMPROVEMENTS, KNOWN AS 92 BUENA VISTA AVENUE, RUMSON, NEW JERSEY, et al. certiorari to the united states court of appeals for the third circuit No. 91-781. Argued October 13, 1992-Decided February 24, 1993 The Government filed an in rem action against the parcel of land on which respondent's home is located, alleging that she had purchased the property with funds given her by Joseph Brenna that were "the proceeds traceable'' to illegal drug trafficking, and that the property was therefore subject to seizure and forfeiture under the Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U. S. C. 881(a)(6). The District Court ruled, among other things, that respondent, who claims that she had no knowledge of the origins of the funds used to buy her house, could not invoke the "innocent owner'' defense in 881(a)(6), which provides that "no property shall be forfeited . . . , to the extent of the interest of an owner, by reason of any act . . . established by that owner to have been committed . . . without the knowledge or consent of that owner.'' The Court of Appeals remanded on interlocutory appeal, rejecting the District Court's reasoning that the innocent owner defense may be invoked only by persons who are bona fide purchasers for value and by those who acquired their property interests before the acts giving rise to the forfeiture took place. Held: The judgment is affirmed. 937 F. 2d 98, affirmed. Justice Stevens, joined by Justice Blackmun, Justice O'Connor, and Justice Souter, concluded that an owner's lack of knowledge of the fact that her home had been purchased with the proceeds of illegal drug transactions constitutes a defense to a forfeiture proceeding under the statute. Pp. 5-18. (a) The task of construing the statute must be approached with caution. Although customs, piracy, and revenue laws have long provided for the official seizure and forfeiture of tangible property used in the commission of criminal activity, the statute marked an important expansion of governmental power by authorizing the forfeiture of proceeds from the sale of illegal goods and by creating an express and novel protection for innocent owners. Pp. 5-10. (b) The statute's use of the unqualified term "owner'' in three places is sufficiently unambiguous to foreclose any contention that the protection afforded to innocent owners is limited to bona fide purchasers. That the funds respondent used to purchase her home were a gift does not, therefore, disqualify her from claiming that she is such an owner. Pp. 10-11. (c) Contrary to the Government's contention, the statute did not vest ownership in the United States at the moment when the proceeds of the illegal drug transaction were used to pay the purchase price of the property at issue, thereby preventing respondent from ever becoming an "owner.'' Neither of the "relation back'' doctrines relied on by the Government-the doctrine embodied in 881(h), which provides that "[a]ll right, title and interest in property described in subsection (a) . . . shall vest in the United States upon commission of the act giving rise to forfeiture under this section,'' or the common-law doctrine, under which a forfeiture decree effectively vests title to the offending res in the Government as of the date of the offending conduct-makes the Government an owner of property before forfeiture has been decreed. Assuming that the common-law doctrine applies, it is clear that the fictional and retroactive vesting of title thereunder is not self-executing, but occurs only when the Government wins a judgment of forfeiture. Until then, someone else owns the property and may invoke any available defense, including the assertion that she is an innocent owner. A reading of 881(h) demonstrates that it did not dispense with, but merely codified, the common-law doctrine and leads to the same result. The legislative history reveals that 881(h) applies only to property that is subject to civil forfeiture under 881(a). Although proceeds traceable to illegal drug transactions are, in 881(h)'s words, "property described in subsection'' (a)(6), the latter subsection exempts from civil forfeiture proceeds owned by one unaware of their criminal source and therefore must allow an assertion of the innocent owner defense before 881(h) applies. Pp. 11-17. (d) This Court need not resolve, inter alia, the parties' dispute as to the point at which guilty knowledge of the tainted character of property will deprive a party of an innocent owner defense, because respondent has assumed the burden of convincing the trier of fact that she had no knowledge of the alleged source of Brenna's gift when she received it. Pp. 17-18. Justice Scalia, joined by Justice Thomas, concluded: 1. While it is true that 881(a)(6)'s "innocent owner'' exception produces the same result as would an "innocent owner'' exception to traditional common-law forfeiture (with its relation-back principle), that conclusion cannot be based upon the plurality's implausible reading of the phrase "property described in subsection (a).'' Rather, the result reached in this case is correct because 881(h) is best read as an expression of the traditional relation-back doctrine, which is a doctrine of retroactive vesting of title that takes effect only upon entry of the judicial order of forfeiture or condemnation. Under the alternative reading-that 881(h) provides for immediate, undecreed, secret vesting of title in the United States at the time of the illegal transaction-either the plain language of 881(a)(6)'s innocent-owner provision must be slighted or the provision must be deprived of all effect. Additionally, the traditional relation-back principle is the only interpretation of 881(h) that makes sense within the structure of the applicable customs forfeiture procedures, under which the Government does not gain title until there is a forfeiture decree, and provides the only explanation for the textual distinction between 881(a)(6)'s innocent "owner'' and 853's innocent "transferee'' provisions. Pp. 1-8. 2. There is no proper basis for the plurality's conclusion that respondent has assumed the burden of proving that she had no knowledge of the alleged source of Brenna's gift when she received it, as opposed to when the illegal acts giving rise to forfeiture occurred. The issue of what is the relevant time for purposes of determining lack of knowledge is not fairly included in the question on which the Court granted certiorari, and the Court need not resolve it. Pp. 8-10. Stevens, J., announced the judgment of the Court and delivered an opinion, in which Blackmun, O'Connor, and Souter, JJ., joined. Scalia, J., filed an opinion concurring in the judgment, in which Thomas, J., joined. Kennedy, J., filed a dissenting opinion, in which Rehnquist, C. J., and White, J., joined. Article 84 of courts.usa.federal.supreme: Date: 24 Feb 1993 15:11:55 GMT NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash- ington, D.C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press. SUPREME COURT OF THE UNITED STATES -------- No. 91-781 -------- UNITED STATES, PETITIONER v. A PARCEL OF LAND, BUILDINGS, APPURTENANCES and IM- PROVEMENTS, known as 92 BUENA VISTA AVENUE, RUMSON, NEW JERSEY, et al. on writ of certiorari to the united states court of appeals for the third circuit [February 24, 1993] Justice Stevens announced the judgment of the Court and delivered an opinion, in which Justice Blackmun, Justice O'Connor, and Justice Souter join. The question presented is whether an owner's lack of knowledge of the fact that her home had been purchased with the proceeds of illegal drug transactions constitutes a defense to a forfeiture proceeding under The Compre- hensive Drug Abuse Prevention and Control Act of 1970, 511(a), 84 Stat. 1276, as amended, 21 U. S. C. 881(a)(6). I On April 3, 1989, the Government filed an in rem action against the parcel of land in Rumson, New Jersey, on which respondent's home is located. The verified com- plaint alleged that the property had been purchased in 1982 by respondent with funds provided by Joseph Brenna that were -the proceeds traceable to an [unlawful] ex- change for a controlled substance,- App. 13, and that the property was therefore subject to seizure and forfeiture under 881(a)(6). Id., at 15. On April 12, 1989, in an ex parte proceeding, the District Court determined that there was probable cause to believe the premises were subject to forfeiture, and issued a summons and warrant for arrest authorizing the United States Marshal to take possession of the premises. Respondent thereafter asserted a claim to the property, was granted the right to defend the action, and filed a motion for summary judgment. During pretrial proceedings, the following facts were established. In 1982, Joseph Brenna gave respondent approximately $240,000 to purchase the home that she and her three children have occupied ever since. Respon- dent is the sole owner of the property. From 1981 until their separation in 1987, she maintained an intimate personal relationship with Brenna. There is probable cause to believe that the funds used to buy the house were proceeds of illegal drug trafficking, but respondent swears that she had no knowledge of its origins. Among the grounds advanced in support of her motion for summary judgment was the claim that she was an -innocent owner- within the meaning of 881(a)(6). The District Court rejected this defense for two reasons: First it ruled that -the innocent owner defense may only be invoked by those who can demonstrate that they are bona fide purchasers for value- (emphasis in original). Second, the court read the statute to offer the innocent owner defense only to persons who acquired an interest in the property before the acts giving rise to the forfeiture took place. Respondent was allowed to take an interlocutory appeal pursuant to 28 U. S. C. 1292(b). One of the controlling questions of law presented to the Court of Appeals was: -Whether an innocent owner defense may be assert- ed by a person who is not a bona fide purchaser for value concerning a parcel of land where the govern- ment has established probable cause to believe that the parcel of land was purchased with monies trace- able to drug proceeds.- 742 F. Supp. 189, 192 (NJ 1990). Answering that question in the affirmative, the Court of Appeals remanded the case to the District Court to determine whether respondent was, in fact, an innocent owner. The Court of Appeals refused to limit the innocent owner defense to bona fide purchasers for value because the plain language of the statute contains no such limita- tion, because it read the legislative history as indicating that the term -owner- should be broadly construed, and because the difference between the text of 881(a)(6) and the text of the criminal forfeiture statute evidenced congressional intent not to restrict the civil section in the same way. The Court of Appeals also rejected the argument that respondent could not be an innocent owner unless she acquired the property before the drug transaction occurred. In advancing that argument the Government had relied on the -relation back- doctrine embodied in 881(h), which provides that -[a]ll right, title and interest in property described in subsection (a) of this section shall vest in the United States upon commission of the act giving rise to forfeiture under this section.- The court held that the relation back doctrine applied only to -property described in subsection (a)- and that the property at issue would not fit that description if respondent could establish her innocent owner defense. The court concluded that the Government's interpretation of 881(h) -would essentially serve to emasculate the innocent owner defense provided for in section 881(a)(6). No one obtaining property after the occurrence of the drug transaction--including a bona fide purchaser for value--would be eligible to offer an innocent owner defense on his behalf.- 937 F. 2d 98, 102 (CA3 1991) at 9a. The conflict between the decision of the Court of Ap- peals and decisions of the Fourth and Tenth Circuits, see In re One 1985 Nissan, 889 F. 2d 1317 (CA4 1989); Eggleston v. Colorado, 873 F. 2d 242, 245-248 (CA10 1989), led us to grant certiorari, 503 U. S. ___ (1992). We now affirm. II Laws providing for the official seizure and forfeiture of tangible property used in criminal activity have played an important role in the history of our country. Colonial courts regularly exercised jurisdiction to enforce English and local statutes authorizing the seizure of ships and goods used in violation of customs and revenue laws. Indeed, the misuse of the hated general warrant is often cited as an important cause of the American Revolu- tion. The First Congress enacted legislation authorizing the seizure and forfeiture of ships and cargos involved in customs offenses. Other statutes authorized the seizure of ships engaged in piracy. When a ship was engaged in acts of -piratical aggression,- it was subject to confisca- tion notwithstanding the innocence of the owner of the vessel. Later statutes involved the seizure and forfeit- ure of distilleries and other property used to defraud the United States of tax revenues from the sale of alcoholic beverages. See, e.g., United States v. Stowell, 133 U. S. 1, 11-12 (1890). In these cases, as in the piracy cases, the innocence of the owner of premises leased to a distill- er would not defeat a decree of condemnation based on the fraudulent conduct of the lessee. In all of these early cases the Government's right to take possession of property stemmed from the misuse of the property itself. Indeed, until our decision in Warden v. Hayden, 387 U. S. 294 (1967), the Government had power to seize only property that -`the private citizen was not permitted to possess.'- The holding in that case that the Fourth Amendment did not prohibit the seizure of -mere evidence- marked an important expansion of governmental power. See Zurcher v. Stanford Daily, 436 U. S. 547, 577-580 (1978) (Stevens, J., dissenting). The decision by Congress in 1978 to amend the Compre- hensive Drug Abuse Prevention and Control Act of 1970, 84 Stat. 1236, to authorize the seizure and forfeiture of proceeds of illegal drug transactions, see 92 Stat. 3777, also marked an important expansion of governmental power. Before that amendment, the statute had autho- rized forfeiture of only the illegal substances themselves and the instruments by which they were manufactured and distributed. The original forfeiture provisions of the 1970 statute had closely paralleled the early statutes used to enforce the customs laws, the piracy laws, and the revenue laws: They generally authorized the forfeiture of property used in the commission of criminal activity, and they contained no innocent owner defense. They applied to stolen goods, but they did not apply to proceeds from the sale of stolen goods. Because the statute, after its 1978 amendment, does authorize the forfeiture of such proceeds and also contains an express and novel protection for innocent owners, we approach the task of construing it with caution. III The Court of Appeals correctly concluded that the protection afforded to innocent owners is not limited to bona fide purchasers. The text of the statute is the strongest support for this conclusion. The statute autho- rizes the forfeiture of moneys exchanged for a controlled substance, and -all proceeds traceable to such an ex- change,- with one unequivocal exception: -[N]o 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 or omitted without the knowl- edge or consent of that owner.- 21 U. S. C. 881(a)(6). The term -owner- is used three times and each time it is unqualified. Such language is sufficiently unambiguous to foreclose any contention that it applies only to bona fide purchasers. Presumably that explains why the Government does not now challenge this aspect of the Court of Appeals' ruling. That the funds respondent used to purchase her home were a gift does not, therefore, disqualify respondent from claiming that she is an owner who had no knowledge of the alleged fact that those funds were -proceeds traceable- to illegal sales of controlled substances. Under the terms of the statute, her status would be precisely the same if, instead of having received a gift of $240,000 from Brenna, she had sold him a house for that price and used the proceeds to buy the property at issue. IV Although the Government does not challenge our interpretation of the statutory term -owner-, it insists that respondent is not the -owner- of a house she bought in 1982 and has lived in ever since. Indeed, it contends that she never has been the owner of this parcel of land because the statute vested ownership in the United States at the moment when the proceeds of an illegal drug transaction were used to pay the purchase price. In support of its position, the Government relies on both the text of the 1984 amendment to the statute and the common-law relation back doctrine. We conclude, howev- er, that neither the amendment nor the common-law rule makes the Government an owner of property before forfeiture has been decreed. In analyzing the Government's relation back argument, it is important to remember that respondent invokes the innocent owner defense against a claim that proceeds traceable to an illegal transaction are forfeitable. The Government contends that the money that Brenna re- ceived in exchange for narcotics became Government property at the moment Brenna received it and that respondent's house became Government property when that tainted money was used in its purchase. Because neither the money nor the house could have constituted forfeitable proceeds until after an illegal transaction occurred, the Government's submission would effectively eliminate the innocent owner defense in almost every imaginable case in which proceeds could be forfeited. It seems unlikely that Congress would create a meaningless defense. Moreover, considering that a logical application of the Government's submission would result in the forfeiture of property innocently acquired by persons who had been paid with illegal proceeds for providing goods or services to drug traffickers, the burden of persuading us that Congress intended such an inequitable result is especially heavy. The Government recognizes that the 1984 amendment did not go into effect until two years after respondent acquired the property at issue in this case. It therefore relies heavily on the common-law relation back doctrine applied to in rem forfeitures. That doctrine applied the fiction that property used in violation of law was itself the wrongdoer that must be held to account for the harms it had caused. Because the property, or -res-, was treated as the wrongdoer, it was appropriate to regard it as the actual party to the in rem forfeiture proceeding. Under the relation back doctrine, a decree of forfeiture had the effect of vesting title to the offending res in the Govern- ment as of the date of its offending conduct. Because we are not aware of any common-law precedent for treating proceeds traceable to an unlawful exchange as a fictional wrongdoer subject to forfeiture, it is not entirely clear that the common-law relation back doctrine is applicable. Assuming that the doctrine does apply, however, it is nevertheless clear that under the common-law rule the fictional and retroactive vesting was not self-executing. Chief Justice Marshall explained that forfeiture does not automatically vest title to property in the Government: -It has been proved, that in all forfeitures accruing at common law, nothing vests in the government until some legal step shall be taken for the assertion of its right, after which, for many purposes, the doctrine of relation carries back the title to the commission of the offence.- United States v. Grundy, 3 Cranch 337, 350-351 (1806). The same rule applied when a statute (a statute that contained no specific relation back provision) authorized the forfeiture. In a passage to which the Government has referred us, we stated our understanding of how the Government's title to forfeited property relates back to the moment of forfeitability: -By the settled doctrine of this court, whenever a statute enacts that upon the commission of a certain act specific property used in or connected with that act shall be forfeited, the forfeiture takes effect immediately upon the commission of the act; the right to the property then vests in the United States, although their title is not perfected until judicial condemnation; the forfeiture constitutes a statutory transfer of the right to the United States at the time the offence is committed; and the condemnation, when obtained, relates back to that time, and avoids all intermediate sales and alienations, even to purchasers in good faith.- United States v. Stowell, 133 U. S., at 16-17 (emphases added). If the Government wins a judgment of forfeiture under the common-law rule-which applied to common-law forfei- tures and to forfeitures under statutes without specific relation back provisions-the vesting of its title in the property relates back to the moment when the property became forfeitable. Until the Government does win such a judgment, however, someone else owns the property. That person may therefore invoke any defense available to the owner of the property before the forfeiture is decreed. In this case a statute allows respondent to prove that she is an innocent owner. And, as the Chief Justice further explained in Grundy, if a forfeiture is authorized by statute, -the rules of the common law may be dis- pensed with,- 7 U. S., at 351. Congress had the opportu- nity to dispense with the common-law doctrine when it enacted 881(h); as we read that subsection, however, Congress merely codified the common-law rule. Because that rule was never applied to the forfeiture of proceeds, and because the statute now contains an innocent owner defense, it may not be immediately clear that they lead to the same result. The 1984 amendment provides: -All right, title, and interest in property described in subsection (a) of this section shall vest in the United States upon commission of the act giving rise to forfeiture under this section.- 21 U. S. C. 881(h). Because proceeds traceable to illegal drug transactions are a species of -property described in subsection (a),- the Government argues that this provision has the effect of preventing such proceeds from becoming the property of anyone other than the United States. The argument fails. Although proceeds subject to 881(h) are -described- in the first part of subsection (a)(6), the last clause of that subsection exempts certain proceeds-proceeds owned by one unaware of their criminal source-from forfeiture. As the Senate Report on the 1984 amendment correctly observed, the amendment applies only to -property which is subject to civil forfeiture under section 881(a).- Under 881(a)(6), the property of one who can satisfy the innocent owner defense is not subject to civil forfeiture. Because the success of any defense available under 881(a) will necessarily determine whether 881(h) applies, 881(a)(6) must allow an assertion of the defense before 881(h) applies. Therefore, when Congress enacted this innocent owner defense, and then specifically inserted this relation back provision into the statute, it did not disturb the common- law rights of either owners of forfeitable property or the Government. The common-law rule had always allowed owners to invoke defenses made available to them before the Government's title vested, and after title did vest, the common-law rule had always related that title back to the date of the commission of the act that made the specific property forfeitable. Our decision denies the Government no benefits of the relation back doctrine. The Government cannot profit from the common-law doctrine of relation back until it has obtained a judgment of forfeiture. And it cannot profit from the statutory version of that doctrine in 881(h) until respondent has had the chance to invoke and offer evidence to support the innocent owner defense under 881(a)(6). V As a postscript we identify two issues that the parties have addressed, but that need not be decided. The Government has argued that the Court of Appeals' construction of the statute is highly implausible because it would enable a transferee of the proceeds of an illegal exchange to qualify as an innocent owner if she was unaware of the illegal transaction when it occurred but learned about it before she accepted the forfeitable pro- ceeds. Respondent disputes this reading of the statute and argues that both legislative history and common sense suggest that the transferee's lack of knowledge must be established as of the time the proceeds at issue are transferred. Moreover, whether or not the text of the statute is sufficiently ambiguous to justify resort to the legislative history, equitable doctrines may foreclose the assertion of an innocent owner defense by a party with guilty knowledge of the tainted character of the property. In all events, we need not resolve this issue in this case; respondent has assumed the burden of convincing the trier of fact that she had no knowledge of the alleged source of Brenna's gift in 1982, when she received it. In its order denying respondent's motion for summary judgment, the District Court assumed that respondent could prove what she had alleged, as did the Court of Appeals in allowing the interlocutory appeal from that order. We merely decide, as did both of those courts, whether her asserted defense was insufficient as a matter of law. At oral argument, the Government also suggested that the statutory reference to -all proceeds traceable to such an exchange- is subject to a narrowing construction that might avoid some of the harsh consequences suggested in the various amici briefs expressing concerns about the impact of the statute on real estate titles. See Tr. of Oral Arg. 5-10, 19-25. If a house were received in exchange for a quantity of illegal substances and that house were in turn exchanged for another house, would the traceable proceeds consist of the first house, the second house, or both, with the Government having an election between the two? Questions of this character are not embraced within the issues that we granted certiorari to resolve, however, and for that reason, see Yee v. Escondido, 503 U. S. ___, (1992) (slip op., at 13-16), we express no opinion concern- ing the proper construction of that statutory term. The judgment of the Court of Appeals is affirmed. It is so ordered. Article 85 of courts.usa.federal.supreme: Date: 24 Feb 1993 15:12:18 GMT SUPREME COURT OF THE UNITED STATES -------- No. 91-781 -------- UNITED STATES, PETITIONER v. A PARCEL OF LAND, BUILDINGS, APPURTENANCES and IM- PROVEMENTS, known as 92 BUENA VISTA AVENUE, RUMSON, NEW JERSEY, et al. on writ of certiorari to the united states court of appeals for the third circuit [February 24, 1993] Justice Scalia, with whom Justice Thomas joins, concurring in the judgment. I am in accord with much of the plurality's reasoning, but cannot join its opinion for two reasons. First, while I agree that the -innocent owner- exception in this case produces the same result as would an -innocent owner- exception to traditional common-law forfeiture (with its relation-back principle), I do not reach that conclusion through the plurality's reading of the phrase -property described in subsection (a),- see ante, at 14-16, which seems to me implausible. Secondly, I see no proper basis for the plurality's concluding that -respondent has assumed the burden of convincing the trier of fact that she had no knowledge of the alleged source of Brenna's gift in 1982, when she received it,- ante, at 18. I The Government's argument in this case has rested on the fundamental misconception that, under the common- law relation-back doctrine, all rights and legal title to the property pass to the United States -at the moment of illegal use.- Brief for United States 16. Because the Government believes that the doctrine operates at the time of the illegal act, it finds the term -relation back- to be -something of a misnomer.- Ibid. But the name of the doctrine is not wrong; the Government's understanding of it is. It is a doctrine of retroactive vesting of title that operates only upon entry of the judicial order of forfeiture or condemnation: -[T]he decree of condemnation when entered relates back to the time of the commission of the wrongful acts, and takes date from the wrongful acts and not from the date of the sentence or decree.- Henderson's Distilled Spirits, 14 Wall. 44, 56 (1871). -While, under the statute in question, a judgment of forfeiture relates back to the date of the offense as proved, that result follows only from an effective judgment of condemnation.- Motlow v. State ex rel. Koeln, 295 U. S. 97, 99 (1935). The relation-back rule applies only -in cases where the [Government's] title ha[s] been consummated by seizure, suit, and judgment, or decree of condemnation,- Confisca- tion Cases, 7 Wall. 454, 460 (1869), whereupon -the doctrine of relation carries back the title to the commis- sion of the offense,- United States v. Grundy, 3 Cranch 337, 350-351 (1806) (Marshall, C. J.) (emphasis added). See also United States v. Stowell, 133 U. S. 1, 16-17 (1890), quoted ante, at 13-14. Though I disagree with the Government as to the meaning of the common-law doctrine, I agree with the Government that the doctrine is embodied in the statute at issue here. The plurality, if I understand it correctly, does not say that, but merely asserts that in the present case the consequence of applying the statutory language is to produce the same result that an -innocent owner- exception under the common-law rule would produce. Title 21 U. S. C. 881(h) provides: -All right, title, and interest in property described in subsection (a) of this section shall vest in the United States upon commission of the act giving rise to forfeiture under this section.- The plurality would read the phrase -property described in subsection (a)- as not encompassing any property that is protected from forfeiture by the -innocent owner- provision of 881(a)(6). It proceeds to reason that since, therefore, the application of (a)(6) must be determined before (h) can be fully applied, respondent must be considered an -owner- under that provision-just as she would have been considered an -owner- (prior to decree of forfeiture) at common law. I would not agree with the plurality's conclusion, even if I agreed with the premises upon which it is based. The fact that application of (a)(6) must be determined before (h) can be fully applied simply does not establish that the word -owner- in (a)(6) must be deemed to include (as it would at common law) anyone who held title prior to the actual decree of forfeiture. To assume that is simply to beg the question. Besides the fact that its conclusion is a non sequitur, the plurality's premises are mistaken. To begin with, the innocent-owner provision in (a)(6) does not insulate any -property described- in (a)(6) from forfeiture; it protects only the -interest- of certain owners in any of the described property. But even if it could be regarded as insulating some -property described- from forfeiture, that property would still be covered by subsection (h), which refers to -property described,- not -property forfeited.- In sum, I do not see how the plurality can, solely by focusing on the phrase -property described in subsection (a),- establish that the word -owner- in subsection (a) includes persons holding title after the forfeiture-producing offense. The Government agrees with me that 881(h) -covers all `property described in subsection (a),' including property so described that is nonetheless exempted from forfeiture because of the innocent owner defense.- Brief for United States 29. That position is quite incompatible, however, with the Government's contention that 881(h) operates at the time of the wrongful act, since if both were true no one would be protected under the plain language of the innocent-owner provision. In the Govern- ment's view, the term -owner- in 881(a)(6) refers to individuals -who owned the seized assets before those assets were ever tainted by involvement in drug transac- tions.- Id., at 21. But if 881(h) operates immediately to vest in the Government legal title to all property described in 881(a), even that class of -owners- would be immediately divested of their property interests and would be at most -former owners- at the time of forfeiture proceedings. Because of this difficulty, the Government is forced to argue that the word -owner- in 881(a)(6) should be interpreted to mean -former owner.- Reply Brief for United States 5. Thus, if 881(h) operates at the time of the illegal transaction as the Government contends, either the plain language of the innocent-owner provision must be slighted or the provision must be deprived of all effect. This problem does not exist if 881(h) is read to be, not an unheard-of provision for immediate, undecreed, secret vesting of title in the United States, but rather an expression of the traditional relation-back doctrine-stating when title shall vest if forfeiture is decreed. On that hypothesis, the person holding legal title is genuinely the -owner- at the time (prior to the decree of forfeiture) that the court applies 881(a)(6)'s innocent-owner provision. I acknowledge that there is some textual difficulty with the interpretation I propose as well: 881(h) says that title -shall vest in the United States upon commission of the act giving rise to forfeiture,- and I am reading it to say that title -shall vest in the United States upon forfeiture, effective as of commission of the act giving rise to forfeiture.- The former is certainly an imprecise way of saying the latter. But it is, I think, an imprecision one might expect in a legal culture familiar with retroactive forfeiture, and less of an imprecision than any of the other suggested interpretations require. Moreover, this interpretation locates the imprecision within a phrase where clear evidence of imprecision exists, since 881(h)'s statement that -all right . . . shall vest in the United States- flatly contradicts the statement in 881(a) that -[t]he following shall be subject to forfeiture to the United States.- What the United States already owns cannot be forfeited to it. This interpretation of 881(h) is the only one that makes sense within the structure of the statutory forfei- ture procedures. Subsection 881(d) provides that forfei- tures under 881 are governed by the procedures applica- ble to -summary and judicial forfeiture, and condemnation of property for violation of the customs laws,- set forth in 19 U. S. C. 1602 et seq. It is clear from these proce- dures that the Government does not gain title to the property until there is a decree of forfeiture. Section 1604, for example, requires the Attorney General to commence proceedings in district court where such pro- ceedings are -necessary- -for the recovery- of a forfeiture. See United States v. $8,850, 461 U. S. 555, 557-558, and n. 2 (1983) (detailing circumstances requiring judicial forfeiture proceedings). If, however, legal title to the property actually vested in the United States at the time of the illegal act, judicial forfeiture proceedings would never be -necessary.- Under the customs forfeiture procedures the United States can, in certain limited circumstances, obtain title to property by an executive declaration of forfeiture. The statute provides that such an executive -declaration of forfeiture . . . shall have the same force and effect as a final decree and order of forfeiture in a judicial forfeiture proceeding in a district court of the United States,- and then specifies what that effect is: -Title shall be deemed to vest in the United States . . . from the date of the act for which the forfei- ture was incurred.- 19 U. S. C. 1609(b) (emphasis added). Finally, if the Government's construction of 881(h) were correct, the statute-of-limitations provision, 19 U. S. C. 1621, would need to state that title reverts to the former owners of the property, rather than (as it does) simply limit the right of the United States to institute an -action to recover- a forfeiture. The traditional operation of the relation-back doctrine also explains the textual difference between 881(a)(6)'s innocent--owner- and 853's innocent--transferee- provi- sions-a difference on which the Government relies heavily. See Brief for United States 31-35; Reply Brief for United States 10-11. Section 853, which provides for forfeiture of drug-related assets in connection with crimi- nal convictions, uses the term -transferee--not -owner--to protect the interests of persons who acquire property after the illegal act has occurred. The Govern- ment contends that the reason for this variance is that the term -owner- simply does not cover persons acquiring interests after the illegal act. That explanation arrives under a cloud of suspicion, since it is impossible to imagine (and the Government was unable to suggest) why Congress would provide greater protection for postoffense owners (or -transferees-) in the context of criminal forfei- tures. The real explanation, I think, is that the term -owner- could not accurately be used in the context of 853 because third parties can assert their property rights under that section only -[f]ollowing the entry of an order of forfeiture.- 21 U. S. C. 853(n). See also 853(k) (prohibiting third parties from intervening to vindicate their property interests except as provided in subsection (n)). Thus, at the time the third-party interests are being adjudicated, the relation-back doctrine has already operated to carry back the title of the United States to the time of the act giving rise to the forfeiture, and the third parties have been divested of their property interests. See 853(c) (codifying the relation-back principle for criminal forfeiture). Indeed, if the court finds that the transferee has a valid claim under the statute, it must -amend the order of forfeiture.- 853(n)(6). The owner/transferee distinction is found in other provisions throughout the United States Code, and the traditional relation-back doctrine provides the only expla- nation for it. While Congress has provided for the protection of -owners- in many other forfeiture statutes, see, e.g., 15 U. S. C. 715f(a) (allowing court to order the return of oil subject to forfeiture -to the owner thereof-); 16 U. S. C. 2409(c) (permitting the -owner- of property seized for forfeiture to recover it, pendente lite, by posting bond); 2439(c) (same); 18 U. S. C. 512(a) (permitting the -owner- of motor vehicle with altered identification number to avoid forfeiture by proving lack of knowledge), it consistently protects -transferees- in criminal forfeiture statutes that follow the procedure set forth in 853: forfeiture first, claims of third parties second. See 18 U. S. C. 1467 (criminal forfeitures for obscenity); 18 U. S. C. 1963 (1988 ed. and Supp. III) (criminal RICO forfeitures); 18 U. S. C. 2253 (1988 ed. and Supp. III) (criminal forfeitures for sexual exploitation of children). I think the result reached today is correct because the relation-back principle recited in 881(h) is the familiar, traditional one, and the term -owner- in 881(a)(6) bears its ordinary meaning. II I cannot join the plurality's conclusion that respondent has assumed the burden of proving that -she had no knowledge of the alleged source of Brenna's gift in 1982, when she received it.- Ante, at 18. To support this, the plurality cites a passage from respondent's brief taking the position that the owner's lack of knowledge of the criminal activity should be tested -at the time of the transfer,- Brief for Respondent 37-38. The fact of the matter is that both parties took positions before this Court that may be against their interests on remand. The Government may find inconvenient its contention that -the statutory test for innocence . . . looks to the claimant's awareness of the illegal acts giving rise to forfeiture at the time they occur.- Reply Brief for United States 8. Which, if either, party will be estopped from changing position is an issue that we should not address for two simple reasons: (1) Neither party has yet attempted to change position. (2) The issue is not fairly included within the question on which the Court granted certiorari. (That question was, -Whether a person who receives a gift of money derived from drug trafficking and uses that money to purchase real property is entitled to assert an `innocent owner' defense in an action seeking civil forfeiture of the real property.- Pet. for Cert. i. The plurality's reformulation of the question in the first sentence of the opinion is inexplicable.) This question of the relevant time for purposes of determining knowledge was not a separate issue in the case, but arose indirectly, by way of argumentation on the relation-back point. The Government argued that since (as it believed) knowledge had to be measured at the time of the illegal act, 881(h) must be interpreted to vest title in the United States immediately, because otherwise the statute would produce the following -untenable result-: A subsequent owner who knew of the illegal act at the time he acquired the property, but did not know of it at the time the act was committed, would be entitled to the innocent-owner defense. Brief for United States 25. That argument can be rejected by deciding either that the Government's view of the timing of knowledge is wrong, or that, even if it may be right, the problem it creates is not so severe as to compel a ruling for the Government on the relation-back issue. (I take the latter course: I do not find inconceivable the possibility that post-illegal-act transferees with post-illegal-act knowledge of the earlier illegality are provided a defense against forfeiture. The Government would still be entitled to the property held by the drug dealer and by close friends and relatives who are unable to meet their burden of proof as to ignorance of the illegal act when it occurred.) But it entirely escapes me how the Government's argument, an argument in principle, can be answered by simply saying that, in the present case, respondent has committed herself to prove that she had no knowledge of the source of the funds at the time she received them. For the reasons stated, I concur in the judgment. Article 86 of courts.usa.federal.supreme: Path: ucsu!boulder!agate!usenet.ins.cwru.edu!cwrusc!courts From: firstname.lastname@example.org Newsgroups: freenet.govt.hermes.opinions,courts.usa.federal.supreme Subject: 91-781.ZD Dissenting Date: 24 Feb 1993 15:12:43 GMT Organization: Case Western Reserve University, Cleveland, Ohio (USA) Lines: 238 Approved: email@example.com Message-ID: <1 mg39bINNs4t@usenet.INS.CWRU.Edu> NNTP-Posting-Host: cwrusc.ins.cwru.edu SUPREME COURT OF THE UNITED STATES -------- No. 91-781 -------- UNITED STATES, PETITIONER v. A PARCEL OF LAND, BUILDINGS, APPURTENANCES and IM- PROVEMENTS, known as 92 BUENA VISTA AVENUE, RUMSON, NEW JERSEY, et al. on writ of certiorari to the united states court of appeals for the third circuit [February 24, 1993] Justice Kennedy, with whom The Chief Justice and Justice White join, dissenting. Once this case left the District Court, the appellate courts and all counsel began to grapple with the wrong issue, one that need not be addressed. The right ques- tion, I submit, is not whether the donee's ownership meets the statutory test of innocence. 21 U. S. C. 881(a)(6). Instead, the threshold and dispositive inquiry is whether the donee had any ownership rights that required a separate forfeiture, given that her title was defective and subject to the Government's claim from the outset. We must ask whether a wrongdoer holding a forfeitable asset, property in which the United States has an undoubted superior claim, can defeat that claim by a transfer for no value. Under settled principles of property transfers, trusts and commercial transactions, the answer is no. We need not address the donee's position except to acknowl- edge that she has whatever right the donor had, a right which falls before the Government's superior claim. In this case, forfeiture is determined by the title and ownership of the asset in the hands of the donor, not the donee. The position of respondent as the present holder of the asset and her knowledge, or lack of knowledge, regarding any drug offenses are, under these facts, but abstract inquiries, unnecessary to the resolution of the case. I We can begin with the state of affairs when the alleged drug dealer held the funds he was later to transfer to respondent. Those moneys were proceeds of unlawful drug transactions and in the dealer's hands were, without question, subject to forfeiture under 881(a)(6). The dealer did not just know of the illegal acts; he performed them. As the case is presented to us, any defense of his based on lack of knowledge is not a possibility. As long as the dealer held the illegal asset, it was subject to forfeiture and to the claim of the United States, which had a superior interest in the property. Suppose the drug dealer with unlawful proceeds had encountered a swindler who, knowing nothing of the dealer's drug offenses, defrauded him of the forfeitable property. In an action by the Government against the property, it need not seek to forfeit any ownership interest of the swindler. In the in rem proceeding the Government would need to establish only the forfeitable character of the property in the hands of the dealer and then trace the property to the swindler who, having no higher or better title to interpose, must yield to the Government's interest. In this context we would not entertain an argument that the swindler could keep the property because he had no knowledge of the illegal drug transaction. The defect in title arose in the hands of the first holder and was not eliminated by the transfer procured through fraud. Thus the only possible -interest of an owner,- 881(a)(6), that the swindler could hold was one inferior to the interest of the United States. Here, of course, the holder is a donee, not a swindler, but the result is the same. As against a claimant with a superior right enforceable against the donor, a donee has no defense save as might exist, say, under a statute of limitations. The case would be different, of course, if the donee had in turn transferred the property to a bona fide purchaser for full consideration. The voidable title in the asset at that point would become unassailable in the purchaser, subject to any heightened rules of inno- cence the Government might lawfully impose under the forfeiture laws. But there is no bona fide purchaser here. The matter not having been argued before us in these terms, perhaps it is premature to say whether the control- ling law for transferring and tracing property rights of the United States under 881 is federal common law, see Boyle v. United Technologies Corp., 487 U. S. 500 (1988); Clearfield Trust Co. v. United States, 318 U. S. 363 (1943), or the law of the State governing the transfer under normal conflict-of-law rules, which here appears to be New Jersey. That matter could be explored on remand if the parties thought anything turned upon it, though the result likely would be the same under either source of law because the controlling principles are so well settled. The controlling principles are established by the law of voidable title, a centuries-old concept now codified in 49 States as part of their adoption of the Uniform Commer- cial Code. 1 J. White & R. Summers, Uniform Commer- cial Code 1, 186-191 (3d ed. 1988). These principles should control the inquiry into whether property once -subject to forfeiture to the United States,- 881(a), remains so after subsequent transactions. Cf. R. Brown, Personal Property 70, pp. 237-238 (2d ed. 1955); Restate- ment (Second) of Trusts 284, 287, 289, pp. 47-48, 54-56 (1959); Restatement (Second) of Property 34.9, p. 338 (1992). The primary rules of voidable title are manage- able and few in number. The first is that one who purchases property in good faith and for value from the holder of voidable title obtains good title. The second rule, reciprocal to the first, is that one who acquires property from a holder of voidable title other than by a good faith purchase for value obtains nothing beyond what the transferor held. The third rule is that a transferee who acquires property from a good faith purchaser for value or one of his lawful successors obtains good title, even if the transferee did not pay value or act in good faith. See Ames, Purchase for Value Without Notice, 1 Harv. L. Rev. 1 (1887); Uniform Commercial Code 2-403- (1) (Official Draft 1978); Uniform Commercial Code 2-403(1) (Official Draft 1957); Uniform Commercial Code 2-403(1) (Official Draft 1952). See also 4 A. Scott & W. Fratcher, Law of Trusts 284-289, pp. 35-70 (4th ed. 1989); Searey, Purchase for Value Without Notice, 23 Yale L. J. 447 (1914). Applying these rules to a transferee of proceeds from a drug sale, it follows that the transferee must be, or take from, a bona fide purchaser for value to assert an inno- cent owner defense under 881(a)(6). Bona fide purchas- ers for value or their lawful successors, having engaged in or benefited from a transaction that the law accepts as capable of creating property rights instead of merely transferring possession, are entitled to test their claim of ownership under 881(a)(6) against what the Government alleges to be its own superior right. The outcome, that one who had defective title can create good title in the new holder by transfer for value, is not to be condemned as some bizarre surprise. This is not alchemy. It is the common law. See Independent Coal & Coke Co. v. United States, 274 U. S. 640, 647 (1927); United States v. Chase National Bank, 252 U. S. 485, 494 (1920); Wright-Blodgett Co. v. United States, 236 U. S. 397, 403 (1915). By con- trast, the donee of drug trafficking proceeds has no valid claim to the proceeds, not because she has done anything wrong but because she stands in the shoes of one who has. It is the nature of the donor's interest, which the donee has assumed, that renders the property subject to forfeiture. Cf. Otis v. Otis, 167 Mass. 245, 246 (1897) (Holmes, J.) (-A person to whose hands a trust fund comes by conveyance from the original trustee is charge- able as a trustee in his turn, if he takes it without consideration, whether he has notice of the trust or not. This has been settled for three hundred years, since the time of uses-). When the Government seeks forfeiture of an asset in the hands of a donee, its forfeiture claim rests on defects in the title of the asset in the hands of the donor. The transferee has no ownership superior to the transferor's which must be forfeited, so her knowledge of the drug transaction, or lack thereof, is quite irrelevant, as are the arcane questions concerning the textual application of 881(a) to someone in a donee's position. The so-called innocent owner provisions of 881(a)(6) have ample scope in other instances, say where a holder who once had valid ownership in property is alleged to have consented to its use to facilitate a drug transaction. Furthermore, whether respondent's marital rights were present value or an ante- cedent debt and whether either could provide the neces- sary consideration for a bona fide purchase are questions that could be explored on remand, were my theory of the case to control. II As my opening premise is so different from the one the plurality adopts, I do not address the difficult, and quite unnecessary, puzzles encountered in its opinion and in the concurring opinion of Justice Scalia. It is my obligation to say, however, that the plurality's opinion leaves the for- feiture scheme that is the centerpiece of the Nation's drug enforcement laws in quite a mess. The practical difficulties created by the plurality's inter- pretation of 881 are immense, and we should not assume Congress intended such results when it enacted 881(a)(6). To start, the plurality's interpretation of 881(a)(6) con- flicts with the principal purpose we have identified for forfeiture under the Continuing Criminal Enterprise Act, which is -the desire to lessen the economic power of . . . drug enterprises.- Caplin & Drysdale v. United States, 491 U. S. 617, 630 (1989). When a criminal transfers drug transaction proceeds to a good faith purchaser for value, one would presume he does so because he considers what he receives from the purchaser to be of equal or greater value than what he gives to the purchaser, or because he is attempting to launder the proceeds by exchanging them for other property of near equal value. In either case, the criminal's economic power is diminished by seizing from him whatever he received in the exchange with the good faith purchaser. On the other hand, when a criminal transfers drug transaction proceeds to another without receiving value in return, he does so, it is safe to assume, either to use his new-found, albeit illegal, wealth to benefit an associate or to shelter the proceeds from forfeiture, to be reacquired once he is clear from law enforcement authorities. In these cases, the criminal's economic power cannot be diminished by seizing what he received in the donative exchange, for he received no tangible value. If the Government is to drain the criminal's economic power, it must be able to pierce donative transfers and recapture the property given in the exchange. It is serious and surprising that the plurality today denies the Government the right to pursue the same ownership claims that under traditional and well-settled principles any other claimant or trust beneficiary or right- ful owner could assert against a possessor who took for no value and who has no title or interest greater than that of the transferor. Another oddity now given to us by the plurality's inter- pretation is that a gratuitous transferee must forfeit the proceeds of a drug deal if she knew of the drug deal before she received the proceeds but not if she discovered it a moment after. Yet in the latter instance, the donee, having given no value, is in no different position from the donee who had knowledge all along, save perhaps that she might have had a brief expectation the gift was clean. By contrast, the good faith purchaser for value who, after an exchange of assets, finds out about his trading partner's illegal conduct has undergone a significant change in cir- cumstances: He has paid fair value for those proceeds in a transaction which, as a practical matter in most cases, he cannot reverse. III The statutory puzzle the plurality and concurrence find so engaging is created because of a false premise, the premise that the possessor of an asset subject to forfeiture does not stand in the position of the transferor but must be charged with some guilty knowledge of her own. Forfeiture proceedings, though, are directed at an asset, and a donee in general has no more than the ownership rights of the donor. By denying this simple principle, the plurality rips out the most effective enforcement provisions in all of the drug forfeiture laws. I would reverse the judgment of the Court of Appeals, and with all due respect, I dissent from the judgment of the Court.