Opinion ID: 389313
Heading Depth: 1
Heading Rank: 6

Heading: Return of the Money

Text: 44 Defendant moved the District Court twice before conclusion of the trial to return the money seized from the safe at Klinger. The District Judge postponed decision on this issue. Defendant and his mother filed a third motion several months after his conviction. By this time the DEA had turned the money over to the State of Michigan pursuant to a Warrant of Levy on defendant's property for nonpayment of state taxes. Following an evidentiary hearing the District Court ruled that Mrs. Francis had not established that she was the owner of the money and so denied the motion as to her. He found that defendant was the owner of the money but ruled that since the Government no longer had possession of the money defendant's remedy was to contest the tax lien in the state courts. Fed.R.Crim.P. 41(e) provides that 45 A person aggrieved by an unlawful search and seizure may move the district court for the district in which the property was seized for the return of the property on the ground that he is entitled to lawful possession of the property which was illegally seized. 46 The statute puts the burden on the party claiming the money to show lawful possession. At the hearing held in the District Court both defendant and his mother testified that the money belonged to her. Appellants claim here that there was no evidence to contradict Mrs. Francis' claim to the money and that the District Court was clearly erroneous in finding that she was not entitled to it. 47 The money was seized from a safe in a bedroom which defendant at trial urged belonged to him, for purposes of showing that he had an expectation of privacy at Klinger. In addition to the money the safe contained several receipts addressed to defendant at Klinger. At one point in the evidentiary hearing defendant testified that he kept coins and jewelry in the safe. Also seized from the bedroom were several guns and items used for the street sale of drugs which defendant testified belonged to him. Defendant's mother testified that defendant kept his money in the safe. She was unable to recite its combination although she claimed to use it regularly. An agent testified that defendant had told him that the money belonged to defendant. This evidence tends to establish defendant's interest in the contents of the safe, and rebuts appellants' claim that no evidence indicated that the money belonged to defendant. 48 The District Court found that it simply could not credit Mrs. Francis' story that she owned the money. She testified that she accumulated the cash through a lifetime of saving and from rent on several properties that she owns. In support of her claim she introduced unsigned tax returns. The District Judge found the testimony of both Mrs. Francis and her son incredible. It was for him to assess the credibility of the witnesses. His finding that Mrs. Francis did not meet her burden of showing that she was entitled to possession of the money is not clearly erroneous. 49 Defendant asserts that since the District Court concluded that the money belonged to him it should be returned to him. The general rule is that seized property, other than contraband, should be returned to the rightful owner after the criminal proceedings have terminated. United States v. LaFatch, 565 F.2d 81, 83 (6th Cir. 1977), cert. denied, 435 U.S. 971, 98 S.Ct. 1611, 56 L.Ed.2d 62 (1978). 7 The District Judge found that the money was not contraband. However, the application of the general rule to this case is complicated because the federal government no longer has physical possession of the funds but has surrendered them to the state pursuant to a tax levy. 50 The Government argues that its lack of possession moots defendant's claim to the money in the federal courts. We cannot agree. There still remain the questions whether the DEA lawfully turned the money over to the state, where as here the state has agreed to be bound by the federal court's decision in that regard. Contrary to the Government's argument this remains a live controversy and does not call upon the Court to render an advisory opinion. Cf. DeFunis v. Odegaard, 416 U.S. 312, 317, 319-320, 94 S.Ct. 1704, 1706, 1707, 40 L.Ed.2d 164 (1974). 51 A defendant's motion for return of property will be unavailing where the government has a continuing interest in the property. United States v. Premises Known as 608 Taylor Avenue, 584 F.2d 1297, 1303 (3d Cir. 1978). The courts have uniformly held that the Internal Revenue Service (IRS) may lawfully attach property belonging to a defendant even though the government's initial seizure of the property was illegal, and that the tax lien will frustrate a motion for return of the property. Cancino v. United States, 451 F.2d 1028, 1033 (U.S.Ct.Cl.1971), cert. denied, 408 U.S. 925, 92 S.Ct. 2504, 33 L.Ed.2d 337 (1972); United States v. Freedman, 444 F.2d 1387, 1388 (9th Cir.), cert. denied, 404 U.S. 992, 92 S.Ct. 538, 30 L.Ed.2d 544 (1971); Field v. United States, 263 F.2d 758, 762 (5th Cir. 1959); Welsh v. United States, 220 F.2d 200 (D.C.Cir.1955). 8 As the Court of Claims stated in Cancino, the lien cannot violate any rights that defendant has in the money because even if the money were returned to him, nothing would prevent the government from immediately levying on it at the time of its return. 451 F.2d at 1033. It makes no difference that in this case it is a state rather than the IRS which has asserted an interest in the seized cash. The State of Michigan may validly levy on money owned by defendant that is in the possession of the government. 52 The lien that the State of Michigan attached to defendant's cash is facially valid. It applies to all property monies, credits, and bank deposits in the possession of the Government but owed to defendant, which money the state hereby levie(s) upon and seize(s) for satisfaction of (its tax). There is no doubt that the language of the lien is broad enough to reach the property which the DEA in fact turned over to the state in this case. See Welsh, 220 F.2d at 201, 202. 53 Since the levy is valid the federal government was required to comply with it unless it had some greater interest in keeping the money itself. 9 No such interest is asserted. 54 Nor do the circumstances of the state's acquiring the money aid defendant. The evidence shows that an agent of the state found out about the cash shortly after defendant's arrest through contact with the local DEA offices. The state conducted an investigation into the possibility that defendant had an unsatisfied tax liability as a result of his drug dealings and concluded that he did. Three days after defendant's conviction the DEA was served with the Warrant of Levy. 10 The DEA transferred the money two months later, in June of 1980. 55 There is evidence that at some point during the criminal proceedings a DEA agent may have told defendant, in the form of a threat, that he would not get the money back. We do not approve of threats by government agents. But, assuming that the threat was made, and assuming that it was the DEA who notified the State of Michigan that it might have an interest in the money seized, this does not render invalid the otherwise lawful actions of the State of Michigan in seizing the money and of the DEA in complying with the seizure. There is no prohibition against one governmental agency providing public information to another governmental agency. There was nothing improper in the assistance by the DEA to the State of Michigan in its effort to collect taxes. 56 Defendant also asserts that his money was singled out by the DEA for delivery to the state, implying that he has in some sense been discriminated against. There is absolutely no evidence to support the charge that the DEA acted differently in handling defendant's money than it typically does. All of the evidence shows that the money was released in accord with a valid levy. 57 Defendant has not challenged the validity of the levy or the state's underlying claim for taxes in this proceeding, nor can he. The validity of the lien and of the state's tax claim must be tested by state tax law in a separate proceeding. See Freedman, supra. All other proceedings in this case against the defendant have now been terminated, so there is no reason of judicial economy for those questions to be answered in federal court. Having determined that the DEA did not act unlawfully in turning the money over to the state, no basis remains for the federal court's jurisdiction over any challenge to the underlying claim for taxes. Therefore, we hold that the District Court's determination that any remaining controversy is between the State of Michigan and defendant is correct. 58 Accordingly, the judgment of the District Court is AFFIRMED.