Opinion ID: 712236
Heading Depth: 2
Heading Rank: 1

Heading: Frances May's Claims to the Property

Text: 14 We turn first to Ms. May's contention that she was an innocent owner. 2 In opposition to the government's motion for summary judgment and in support of her own motion, she first argued that she had a property interest in the following: her home, Units 9 and 10, the $13,050 Mr. May was carrying when arrested, and the $2,800 the police found in their house. She asserted an interest in the home and Unit 10 based on her joint ownership of those properties. She asserted a half interest in Unit 9 as marital property, alleging that it was purchased with marital funds and had been erroneously titled in Mr. May's name only. She also claimed half of the $13,050 as marital property, arguing that it was derived from funds originally deposited in their joint account. Finally, she asserted sole ownership of the $2,800, arguing that it had been her share of the proceeds from the sale of a jointly owned vehicle. 15 She accompanied her motion with various documents, including an affidavit asserting that her husband's cocaine trafficking developed in connection with an extramarital affair he was having with Lisa Tarasiuk, and that she had knowledge of neither the affair nor her husband's involvement in drug trafficking. Aplt.App. vol. II, at 286-88. In addition to her claim of innocent ownership, she also asserted that Unit 10 was not forfeitable at all because no contraband was found there. 16 The district court denied entirely Ms. May's motion for summary judgment, holding that she had no interest in the marital property and that she had failed to establish her innocent owner defense by a preponderance of the evidence. By the same order, the court granted summary judgment for the government as to all items of defendant property. 17 The court dealt with Ms. May's innocent owner defense in its discussion of Units 9 and 10: 18 Claimant Frances May asserts an innocent owner's defense in the properties that she has an ownership interest in. Further, she asserts that she owns 50% of Lot 10 [sic] based on her marriage to Mr. May. While the Court is sympathetic to this argument, based on Colorado's marital property law, claimant Frances May is unable to claim an ownership interest in property where title is held only in her husband's name. 19 An unvested or inchoate interest in marital property is insufficient to constitute ownership under 21 U.S.C. § 881. Under Colorado law, a spouse's right to the other spouse's property does not vest until death or divorce. In Re Questions Submitted by United States District Court, [184 Colo. 1] 517 P.2d 1331, 1333 (Colo.1974) (en banc). 20 .... 21 A spouse under Colorado law is free to dispose of his or her property in any manner as no interest in the other spouse vests until divorce. Thus, she cannot maintain a claim for any interest the properties [sic]. Claimant Frances May is not entitled to summary judgment on her innocent-owner defenses as they have not been established by a preponderance of the evidence. 22 Order Regarding Cross Motions for Summary Judgment at 11-12 (citation omitted). The court made no explicit finding on Ms. May's interest in her home, although it acknowledged that the property was jointly titled. Id. at 12. The district court concluded that the home was entirely subject to forfeiture because of its role in illegal activities and because Ms. May had failed to show innocent ownership by a preponderance of the evidence. The court also held that Ms. May had no interest in the $13,050. As to the $2,800 she claimed as her sole property, the court found that the money was drug-connected--as either proceeds, purchase money, or a form of facilitation--and that Mr. May was the money's sole owner. Id. at 13-14. 23 On appeal, we review the grant or denial of summary judgment de novo, applying the same legal standard used by the district court pursuant to Fed.R.Civ.P. 56(c). Universal Money Ctrs., Inc. v. AT & T, 22 F.3d 1527, 1529 (10th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 655, 130 L.Ed.2d 558 (1994); Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990). 24 In a § 881 forfeiture proceeding, the government bears the initial burden of showing probable cause that the property to be forfeited was used illegally. United States v. $149,442.43 in United States Currency, 965 F.2d 868, 876 (10th Cir.1992). Once probable cause is established, the burden shifts to a claimant asserting an innocent owner defense to prove, by a preponderance of the evidence, see id. at 877, that she was unaware of the illegal activity giving rise to the forfeiture, 21 U.S.C. § 881(a)(6), (7). 25 Ms. May contends on appeal that the court erred in several respects when it ruled on her innocent owner defense. First, she argues that she had a real, legally enforceable interest in the marital property (the $13,050, which she traced to funds withdrawn from their joint bank account, and Unit 9, which was allegedly purchased with marital funds). Second, she argues that the court erroneously rejected her innocent owner defense as to her interest in the jointly titled property (her home and Unit 10). 3 Third, she argues that a real controversy existed, precluding summary judgment, as to the ownership of the $2,800, or alternately that the money was Mr. May's but was also marital property.
26 Ms. May bases her claim to Unit 9 and the $13,050 on allegations that both, although not titled in her name, were derived from marital funds. She does not dispute the axiom that under Colorado law a spouse has only an inchoate interest in marital property titled in the other spouse. However, she contends that her inchoate interest is one that Congress meant to protect. She also contends that Colorado law allows a spouse's interest in marital property to vest at the commencement of a civil forfeiture action. Neither argument is persuasive. 27
28 Ms. May's argument from congressional intent is based on the legislative history of the 1984 amendment to § 881(a)(6) that established the innocent owner defense. See Joint Explanatory Statement of Titles II and III, Pub.L. No. 95-633, 95th Cong., 2d Sess., reprinted in 1978 U.S.C.C.A.N. 9518, 9522 (stating that [t]he term 'owner' should be broadly interpreted to include any person with a recognizable legal or equitable interest in the property seized). However, this appeal to legislative history incorrectly presupposes that Congress, not the state, defines which legal or equitable interests are recognizable. On the contrary, federal courts must look to state law in determining what property interests a claimant may assert. United States v. 1980 Lear Jet, 38 F.3d 398, 402 (9th Cir.1994); United States v. 1977 Porsche Carrera 911, 946 F.2d 30, 34 (5th Cir.1991). However broadly ownership may be construed in light of § 881's legislative history, it does not encompass interests that state law recognizes neither at law nor in equity. 4 29
30 As the district court noted, a Colorado spouse has only an inchoate interest in marital property titled in the other spouse's name. In re Questions, 517 P.2d at 1335. An inchoate interest is neither a present nor a vested interest, but may ripen into a vested estate, if it is not barred, extinguished, or divested. Galleria Towers, Inc. v. Crump Warren & Sommer, Inc., 831 P.2d 908, 911 (Colo.Ct.App.1991). As the district court recognized, the In re Questions rule generally prevents a spouse without title from asserting an interest, either legal or equitable, in marital property. 31 Ms. May nonetheless argues that her inchoate interest is legally protected as an exception to Colorado's general rule on marital property, citing the following: During the marriage, and absent any divorce action, the parties have their separate property and, possibly subject to an exception or two, can dispose of it as he or she desires.... That right, prior to the dissolution action and possibly subject to an exception or two, is completely inchoate. In re Questions, 517 P.2d at 1335 (emphasis added). She contends that the institution of a civil forfeiture proceeding must count as an exception. We disagree. 32 In re Questions is concerned with characterizing for tax purposes a court-ordered transfer of property from husband to wife following divorce, and provides no explicit guidance on whether Colorado would countenance civil forfeiture among the exception or two to the rule stated above. However, the In re Questions court stated earlier in its opinion that it was following the philosophy of two Oklahoma cases, Collins v. Okla. Tax Comm'n, 446 P.2d 290 (Okla.1968), and Sanditen v. Sanditen, 496 P.2d 365 (Okla.1972). In re Questions, 517 P.2d at 1334. Sanditen does provide guidance on the issue. In that case, a wife sought to recover one-half of eight million dollars which her husband had given away. The Oklahoma Supreme Court concluded that the wife had no vested interest in the money, but that she nonetheless had a contingent interest which the law protects. 496 P.2d at 367 (emphasis added), quoted in In re Questions, 517 P.2d at 1334. The Sanditen court went on to conclude that a wife's contingent interest would be protected in a number of circumstances: an incomplete gift depriving the wife of her inheritance rights, a pre-divorce gift intended to defeat property division, the transfer of funds so great that the husband could no longer support the wife, or the disposition of the homestead. Sanditen, 496 P.2d at 367. In all of these instances the principle criteria [sic] is the fraudulent intent of the husband to deprive the wife of her marital rights as provided by statute. Id. at 368. 33 We conclude that the exceptions referred to in In re Questions were founded on the court's reading of Sanditen and encompass only situations evincing one spouse's fraudulent attempt to deprive the other of a legal right. Cf. Love v. Olson, 645 P.2d 861, 863 (Colo.Ct.App.1982) (holding that a spouse's interest vests only in the event of a statutorily enacted contingency). Civil forfeiture is not such a contingency, and there is no reason to suppose that Colorado intends to include civil forfeiture per se as an exception under some other theory. 5 We therefore affirm the district court's conclusion that Ms. May had no legally enforceable interest in Unit 9 or in the $13,050.
34 As to the jointly titled property--the home and Unit 10--we reverse the summary judgment for the government and remand for further proceedings. First, we conclude that both properties are potentially forfeitable and reject Ms. May's contention that Unit 10 is not forfeitable simply because no contraband was found there. However, taking the pleadings and supporting documents as a whole, we conclude that there was a genuine issue of fact, precluding summary judgment, as to Ms. May's innocent owner defense.
35 Ms. May first contends that Unit 10 is not forfeitable at all because it is a lot or tract 6 separate from Unit 9, where the only contraband at the business property was found. She argues further that the district court found Unit 10 forfeitable by using a subjective standard that impermissibly considered how the Mays used the property instead of how it was legally divided. 36 Property is forfeitable under § 881(a)(7) whenever there exists a sufficient nexus between the property and the illegal activity. $149,442.43 in United States Currency, 965 F.2d at 877; cf. United States v. Harris, 903 F.2d 770, 777 (10th Cir.1990) (analyzing an analogous forfeiture under 21 U.S.C. § 853(a)(2)). In this instance, whether or not the standard used by the district court was subjective, we consider Unit 10 to have a sufficient independent nexus to the illegal activity to support forfeiture. Once the wall between Unit 9 and Unit 10 had been removed, any contraband kept in Unit 9 depended for its continued concealment at least in part on the walls surrounding Unit 10. As the district court noted, [i]t is sufficient that the property serve to facilitate the illegal activity by concealing its presence. Order Regarding Cross Motions for Summary Judgment at 11 (citing United States v. Smith, 966 F.2d 1045, 1055 (6th Cir.1992)). The presence not only of fifty-five grams of cocaine, but also of a scale and cocaine grinder, suggests that the need for concealment at the business property was considerable.
37 We are left with the factual question of Ms. May's innocence in relation to the illegal activity that would otherwise support forfeiture of her interest in the home and Unit 10. Ms. May contends that the government actually conceded Ms. May's innocence, that even if it did not the district court erred in granting summary judgment for the government, and that the evidence warranted summary judgment for her, not the government. 7 We agree only that the government should not have received summary judgment as to the joint property. 38 First, it is simply untrue that the government conceded Ms. May's innocence. While the government never presented a substantial case against Ms. May, it did not need to. Ms. May bore the burden of establishing her defense. Despite the statement in the pretrial order, under Claims and Defenses of Frances May, that her innocent ownership of the property was undisputed, Aplt.App. vol. II, at 326, there is no such stipulation by the government in the order. Thus, Ms. May retained a claimant's normal burden of establishing innocent ownership by a preponderance of the evidence. 39 The record does, however, provide evidence from which a finder of fact could infer Ms. May's innocence. First, Ms. May's affidavit plausibly characterizes Mr. May's drug trafficking as an outgrowth of his presumably covert infidelity, although the affidavit stops short of altogether denying knowledge of the presence of drugs. Second, Ms. May's innocence is supported by testimony elicited from Mr. May at the criminal trial and proffered by the government itself in its motion for summary judgment: 40 Q: So you didn't tell [Ms. May] the truth about what you were doing? 41 A: No, ma'am, I certainly did not. 42 Q: Did you tell her you were dealing cocaine? 43 A: No, ma'am. 44 Q: Did you tell her you were having an affair with Lisa? 45 A: No, ma'am, I did not. 46 Q: All right. So at least to your wife, you haven't been truthful? 47 A: I would definitely agree with that, yes, ma'am. During this particular time period, yes. 48 Aplt.App. vol. II, at 252. Taking this evidence in the light most favorable to the nonmoving party, we conclude that there was a genuine issue, precluding summary judgment, as to how much Ms. May knew about the illegal activity in her home and business property. Thus, the district court erred in granting summary judgment for the government as to those interests.
49 Ms. May next argues that the court erred in granting summary judgment for the government as to the $2,800 in cash that the police found in the May's home, either because it was marital property or because a real controversy existed as to the ownership of the money. Having disposed of the marital property issue, we address whether a real controversy existed as to ownership. 50 The government's case against the $2,800 consisted of testimony from the criminal trial and a detective's affidavit presenting circumstantial evidence that Mr. May kept large amounts of cash on hand for cocaine purchases and had furnished cocaine for his former employee to sell. See Aplt.App. vol. I, at 70, 77, 79, 82, 160, 167-182. Although the testimony does not directly refer to the $2,800, it allows the inference that the sum was part of Mr. May's purchase money stockpile. 51 In opposition, Ms. May stated in an affidavit that the $2,800 was her share of the proceeds from the sale of a jointly owned van, and that she alone used the money. Aplt.App. vol. II, at 287-88. The government responded by offering a deposition of Frances May in which she admitted that her husband knew of the money and had access to it. Aplt.App. vol. II, at 319-23. The court found that Mr. May was the sole owner of the money and that it was involved in the trafficking of cocaine as proceeds, as purchase money, or otherwise. 52 Construing the evidence in the light most favorable to Ms. May, we conclude that her affidavit and deposition sufficed to create genuine issues as to the ownership of the $2,800, its connection to illegal activity, and Ms. May's knowledge of any connection that may have existed. It is true that a claimant cannot create such a controversy with an unsubstantiated assertion of an innocent ownership defense. See United States v. One Lot of United States Currency ($68,000), 927 F.2d 30, 32 (1st Cir.1991) (holding that a claimant's answer unaccompanied by an affidavit or other evidence was insufficient to avoid summary judgment for the government); United States v. $55,518.05 in United States Currency, 728 F.2d 192, 195-96 (3d Cir.1984) (holding that an affidavit that simply recited § 881's innocent owner language, without more, was similarly insufficient). However, Ms. May's affidavit and deposition contain not just recitations of innocence, but a facially plausible account to support her claim. If her allegations are taken at face value, she was the true owner of the $2,800, and the money was either never involved in illegal activity or was involved without her knowledge. Under either scenario, the facts admitted by Ms. May--that her husband knew of the money and had access to it--would not alone be enough to defeat her innocent owner defense. We therefore reverse the grant of summary judgment for the government as to the $2,800 in cash and remand for further proceedings. 53
54 In sum, we reach the following conclusions regarding Ms. May's various claims. As to Unit 9 of the business property, Ms. May had no enforceable interest therein under Colorado law. As to the $13,050 Mr. May was carrying when he was arrested, the same is true. As to the Mays' home, Ms. May had an interest arising from her joint tenancy, and neither she nor the government was entitled to summary judgment thereon. As to Unit 10, which was also jointly titled, the same is true. As to the $2,800 found in the Mays' home, there is a genuine dispute as to ownership that precludes summary judgment for either party.