Opinion ID: 2681
Heading Depth: 2
Heading Rank: 1

Heading: Application of the Due Process Clause

Text: In adjudicating due process claims, we consider two distinct issues: 1) whether plaintiffs possess a liberty or property interest protected by the Due Process Clause; and, if so, 2) whether existing state procedures are constitutionally adequate. Kapps v. Wing, 404 F.3d 105, 112 (2d Cir.2005). The City relies on several state-court cases to argue that Ford Motor Credit lacks a property interest in a seized vehicle distinct from its interest in ninety percent of the proceeds from its eventual, post-forfeiture sale (supplemented, to be sure, by any deficiency judgment Ford Motor Credit may obtain against the vehicle's owner). See, e.g., Prop. Clerk v. Molomo, 81 N.Y.2d 936, 597 N.Y.S.2d 661, 613 N.E.2d 567, 567 (1993) (Ford ha[s] no present possessory right in the vehicle, and its remedy . . . is to receive the proceeds from the City's forfeiture sale and to seek any deficiency against the debtor.); Prop. Clerk v. Foley, 282 A.D.2d 221, 724 N.Y.S.2d 580 (2001) (same); Prop. Clerk v. Aquino, 800 N.Y.S.2d 355 (2004). [8] We disagree that Ford Motor Credit's only cognizable property interest is in a vehicle's sale proceeds. For the three reasons that follow, we conclude that Ford Motor Credit also has a property interest in the present value of a seized vehicle. First, a security interest is indisputably a property interest protected by the Fourteenth Amendment. See, e.g., Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 798, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983); United States v. 41741 Nat'l Trails Way, 989 F.2d 1089, 1092 (9th Cir. 1993); United States v. 1 St. A-1, 865 F.2d 427, 430 (1st Cir.1989). A secured creditor has two rights: the contractual right to repayment of the debt owed and the property right to the collateral that secures the debt in the event of non-payment. See Armstrong v. United States, 364 U.S. 40, 46, 80 S.Ct. 1563, 4 L.Ed.2d 1554 (1960). Thus, while Ford Motor Credit may (conceivably) protect its contractual right to repayment by seeking ninety percent of the proceeds from a vehicle's sale, the City's delays impair Ford Motor Credit's property right, which is in the collateral itselfthe seized vehicle. Cf. Armstrong, 364 U.S. at 46, 80 S.Ct. 15.63 (holding that a valid Takings Clause claim lay where plaintiffs' liens remained in effect but were unenforceable against the collateral following forfeiture); see also Matagorda County v. Law, 19 F.3d 215, 225 (5th Cir.1994) (Unmitigated delay, coupled with diminishment of distinct investment-backed expectations, may, at some point, infringe on the entire `bundle' of rights. . . . (emphasis omitted)). Just as in Winston v. City of New York, where we held that teachers had a state-created property interest in the present value of their pensions, so too, Ford Motor Credit has a property interest in the present value of a seized vehicle. Cf. 759 F.2d 242, 247-48 (2d Cir.1985). Moreover, at common law, when the government forfeits property, the vesting of its title in the property relates back to the moment when the property became forfeitable. United States v. 92 Buena Vista Ave., 507 U.S. 111, 126, 113 S.Ct. 1126, 122 L.Ed.2d 469 (1993). Under the Takings Clause of the Fifth Amendment, the fair market value of property taken is normally ascertained as of the date of the taking. Yancey v. United States, 915 F.2d 1534, 1543 (Fed.Cir.1990). Thus, were this a Takings Clause case, Ford Motor Credit might well be entitled to the value of its security interest as of the time the City seized the vehicle. It is hard to square this authority with the City's argument that Ford Motor Credit's property interest for due process purposes is limited to the value of the vehicle at the later time of forfeiture. Cf. Shelden v. United States, 7 F.3d 1022, 1031 (Fed.Cir.1993) (holding that the government must compensate mortgage holders for the depreciation in their security interest between the date the collateral became forfeitable and the date the government obtained a final judgment of forfeiture). Our conclusion accords with the Fourth Circuit's decision in In re Metmor Financial, Inc., 819 F.2d 446 (4th Cir.1987). In that case, the court construed the Comprehensive Drug Abuse Prevention and Control Act, 21 U.S.C. § 881 (1978), which provides for forfeiture of certain drug-related property, to require the government to pay interest on an interest-bearing lien during the pendency of a forfeiture proceeding. The Fourth Circuit explained, [E]ven though forfeiture occurred prior to the actual seizure, the government can succeed to no greater interest in the property than that which belonged to the wrongdoer whose actions have justified the seizure. Ackley purchased the property encumbered by Metmor's secured note, with interest accruing. His equity was subject to an obligation to repay the borrowed principal and to pay interest on the unpaid balance until all of the principal was repaid. The government now attempts to transform that note into one that is unsecured and interest free. Such a result would deprive Metmor of its stake in the forfeited property and would constitute a taking without due process. Id. at 448-49 (emphasis added). The City argues that even if Ford Motor Credit has a property interest in the present value of a seized vehicle, delay does not  deprive [] [it] of that interest, Sealed v. Sealed, 332 F.3d 51, 55 (2d Cir.2003) (emphasis added); see also N.Y. State Nat'l Org. for Women v. Pataki, 261 F.3d 156, 165 (2d Cir.2001). Again, we disagree. When the state delays resolution of a claim, the claim holder's Fourteenth Amendment rights may be implicated, at least if the claim holder is not in equal part responsible for the delay. See Canavan, 770 N.Y.S.2d 277, 802 N.E.2d at 624 ([A] hearing [is] required to ensure that . . . innocent owners are not deprived for months or years of cars ultimately proved not to be subject to forfeiture.); cf. Connecticut v. Doehr, 501 U.S. 1, 11, 111 S.Ct. 2105, 115 L.Ed.2d 1 (1991) (holding that cloud[ing] title; impair[ing] the ability to sell or otherwise alienate the property; [and] taint[ing] any credit rating constitute deprivations); British Int'l Ins. Co. v. Seguros La Republica, S.A., 212 F.3d 138, 141 (2d Cir.2000) (per curiam) ([E]ven . . . temporary or partial impairments to property rights . . . are sufficient to merit due process protection. (internal quotation marks and citation omitted)). Here, not only is the present value of the claim diminished by the indeterminacy of its eventual realization, but Ford Motor Credit's property interest in the underlying asset suffers, as the vehicle depreciates over time.