Court Opinion

ID: 9348674
Source: CourtListenerOpinion
Date Created: 2022-12-20 14:11:11.555638+00
Date Added: 2024-06-11T16:43:37.556807
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   2022-NCCOA-417

                                    No. COA21-358

                                   Filed 21 June 2022

Iredell County, No. 20 CR 055180

STATE OF NORTH CAROLINA

               v.

JERMAINE LYDELL SANDERS, Defendant.

         Appeal by Town of Mooresville and Mooresville Police Department from

orders entered 24 November 2020 by Judge Deborah Brown and 26 January 2021,

and 11 February 2021 by Judge Christine Underwood in Iredell County District

Court.     Appeal dismissed by order entered 20 April 2021 by Judge Christine

Underwood. We allowed a petition for writ of certiorari by the Town of Mooresville

and the Mooresville Police Department to review orders entered 24 November 2020

by Judge Deborah Brown and 26 January 2021, 11 February 2021, and 20 April 2021

by Judge Christine Underwood in Iredell County District Court. Heard in the Court

of Appeals 26 January 2022.

         Perry Legal Services, PLLC, by Maria T. Perry, for defendant-appellee.

         Cranfill Sumner LLP, by Steven A. Bader and Patrick H. Flanagan, for
         appellants.

         Acting United States Attorney William T. Stetzer, by Assistant United States
         Attorney J. Seth Johnson, amicus curiae.
                                        STATE V. SANDERS

                                         2022-NCCOA-417

                                        Opinion of the Court

           Kristi L. Graunke and Leah J. Kang for American Civil Liberties Union of
           North Carolina Legal Foundation, Inc.; Dawn N. Blagrove and Elizabeth G.
           Simpson for Emancipate NC, Inc.; Daryl Atkinson and Whitley Carpenter for
           Forward Justice; and Laura Holland for North Carolina Justice Center, amici
           curiae.

           MURPHY, Judge.

¶1         Judicial proceedings pertaining to criminal seizures of personal property in

     North Carolina are based on in personam, not in rem, jurisdiction. These proceedings

     differ from federal civil forfeiture proceedings, which are based on in rem jurisdiction

     over the property at issue. For this reason, where a federal court adopts a seizure of

     property by North Carolina law enforcement, federal courts assume exclusive, in rem

     jurisdiction over the seizure, as no state-level in rem jurisdiction exists to take

     priority over the federal exercise of in rem jurisdiction; the ordinary rule prioritizing

     the in rem jurisdiction of the first in time to exercise it does not apply unless in rem

     jurisdiction exists in the first place.   Here, where the trial court issued orders

     purporting to exercise in rem jurisdiction, it erred. Accordingly, we must vacate the

     trial court’s orders and remand for further proceedings consistent with this opinion.

                                        BACKGROUND

¶2          This appeal arises out of a seizure of property belonging to Defendant

     Jermaine Lydell Sanders by the Mooresville Police Department (“MPD”). On or about

     15 November 2020, MPD officers discovered a vehicle in a hotel parking lot matching
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                                      Opinion of the Court

     the description of a vehicle provided by night shift officers. The vehicle, which

     Defendant was renting, contained $16,761.00 in cash in a plastic bag in the center

     console.   Defendant, who was inside the hotel, fled upon seeing the officers.

     Meanwhile, the MPD seized the cash.

¶3         On 19 November 2020, Defendant appeared through counsel before the Iredell

     County District Court and filed a Motion for Personal Property to be Released to

     Defendant (“November Motion”) arguing the currency’s seizure was unlawful.

     However, the following day, while the November Motion was under consideration, an

     officer of the United States Department of Homeland Security (“DHS”) informed the

     MPD that, because Defendant was being investigated for money laundering under 18

     U.S.C. § 1956, the DHS was “adopting the case.” On 23 November 2020, the MPD

     relinquished the currency to the DHS, and a DHS officer converted the funds into a

     check payable to United States Customs and Border Protection.

¶4         The District Court granted Defendant’s November Motion in an order entered

     24 November 2020 (“November Order”). Defendant’s counsel promptly notified the

     MPD of the November Order and attempted to coordinate the return of Defendant’s

     cash; however, the MPD indicated in response that it could not return the cash due

     to the adoption. Having received this response, Defendant filed a Verified Motion to

     Show Cause on 10 December 2020 briefly describing the foregoing events and

     alleging, inter alia, that the MPD unconstitutionally seized the $16,761.00, “has the
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                                         2022-NCCOA-417

                                        Opinion of the Court

     financial ability to comply with the [trial] [c]ourt’s November [] [O]rder to return

     [Defendant’s] cash[,]” “inexcusably failed to do so[,]” and “is subject to being held in

     contempt until it complies with the order.” In response, the District Court, in an

     order dated 26 January 2021 (“January Order”), “decreed that the [MPD] will be held

     in contempt unless a representative from [the MPD] appears in person on [9

     February] 2021 . . . to show cause why [it] should not be held in contempt for failure

     to return funds to [Defendant] as ordered . . . .”

¶5         A hearing was held on 9 February 2021 in accordance with the January Order,

     shortly after which the District Court entered another order (“February Order”). The

     trial court made the following relevant findings of fact in the February Order:

                  1. On [15 November 2020], the [MPD] seized $16,761.00 in
                  cash as a part of a search of [Defendant’s] rental vehicle, in
                  violation of [his] 4th, 5th and 8th Amendment U.S.
                  constitutional rights, as made applicable to the states by
                  the 14th Amendment.

                  ....

                  7. This [c]ourt acquired in rem jurisdiction over the cash on
                  [19 November 2020—]the date [Defendant] filed the motion
                  for return of property.

                  ....

                  17. The [MPD] is an agency of the Town of Mooresville
                  [(“Mooresville”)], and it operates under the supervision and
                  control of . . . Mooresville. Together or severally, the said
                  town and [the MPD] have the financial means to comply
                  with the [November Order].
                     STATE V. SANDERS

                       2022-NCCOA-417

                     Opinion of the Court

18. Although Counsel for the [MPD] argued, in defense of
not being held in contempt, that . . . Mooresville and the
[MPD] are incapable of returning the seized funds because
a federal agency has them, this argument has previously
been resolved [by the November Order] and is res judicata.

19. Furthermore, this argument is meritless in view of . . .
Mooresville and [the MPD’s] ability to use funds, or to
liquidate assets, at their disposal so as to enable them to
comply with the subject order by releasing $16,761.00 to
[Defendant].

20. Finally, [the November Order] did not premise release
of the amount of $16,761.00 on the [MPD’s] ability to effect
reversal of its wrongful transfer of a different $16,761.00 to
a third party.

21. The [MPD] may never be able to reverse its
unauthorized conduct in attempting to remove from this
court’s jurisdiction rem over which the court had
jurisdiction. However, should said department later be
successful in recovering $16,761.00 from federal
authorities, it will obviously be entitled to keep those funds
to replenish the payment required by [the November
Order].

22. The [c]ourt also takes note that the [MPD] has not filed
an appeal of the November . . . Order, nor a motion to set
aside the [o]rder.

23. By its conduct, the [MPD] has willfully failed to comply
with [the November Order].

24. . . . Mooresville and the [MPD] have had 77 days to
make arrangements to comply with the [November] Order.
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                                         Opinion of the Court

                   25. . . . Mooresville, by and through the [MPD], which town
                   also had notice of the November . . . [O]rder, has willfully
                   failed to comply with [the November Order].

     Based upon these findings of fact, the District Court “conclude[d] as a matter of law[]

     [that it had] jurisdiction over the subject matter and parties[,]” that “[t]he failure of .

     . . Mooresville and the [MPD] to comply with [the November Order was] willful, and

     [that] . . . Mooresville and the [MPD] have the present ability to comply with the

     [November] Order.” Accordingly, it “decreed that the [MPD] and . . . Mooresville are

     held in civil contempt of [c]ourt[] and shall purge themselves by returning $16,761.00

     to [Defendant] within seven business days of entry of [the] [February] Order . . . .”

¶6          On 15 February 2021, Mooresville and the MPD filed a Notice of Appeal from

     the November Order, January Order, and February Order. However, in an order

     entered 20 April 2021 (“April Order”), the District Court dismissed the appeal on the

     basis that it was not timely filed and failed to invoke Rule 3 appellate jurisdiction.

     We allowed Mooresville’s and the MPD’s petition for writ of certiorari on 7 May 2021

     to review the November, January, February, and April Orders.

                                            ANALYSIS

¶7          On appeal, Mooresville and the MPD argue that the trial court lacked in rem

     jurisdiction and, as such, erred in issuing the four challenged orders because it was

     prevented from interfering with the federal courts’ exclusive in rem jurisdiction.

¶8          Under 21 U.S.C. § 881, “[a]ll moneys, negotiable instruments, securities, or
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                                          2022-NCCOA-417

                                         Opinion of the Court

       other things of value furnished or intended to be furnished by any person in exchange

       for a controlled substance” are “subject to forfeiture to the United States . . . .” 21

       U.S.C. § 881(a)(6) (2021). Moreover, federal courts “shall have original jurisdiction,

       exclusive of the courts of the States, of any action or proceeding for the recovery or

       enforcement of any fine, penalty, or forfeiture, pecuniary or otherwise, incurred under

       any Act of Congress[.]” 28 U.S.C. § 1355 (2021). As such, the determinative question

       in this case is whether, in light of federal law, the District Court actually possessed

       the in rem jurisdiction on which it purported to base its orders.

¶9           In rem jurisdiction is a specialized form of personal jurisdiction. Coastland

       Corp. v. N.C. Wildlife Res. Comm’n, 134 N.C. App. 343, 346, 517 S.E.2d 661, 663

       (1999). “The standard of review of an order determining personal jurisdiction is

       whether the findings of fact by the trial court are supported by competent evidence

       in the record”; however, “[w]e review de novo the issue of whether the trial court’s

       findings of fact support its conclusion of law that [it had] personal jurisdiction over

       [a] defendant.” Bell v. Mozley, 216 N.C. App. 540, 543, 716 S.E.2d 868, 871 (2011),

       disc. rev. denied, 365 N.C. 574, 724 S.E.2d 529 (2012). Here, because Appellants

       challenge only whether the trial court possessed in rem jurisdiction as a matter of

       law, we review de novo.

¶ 10         As an initial matter, we note that the existence or nonexistence of in rem

       jurisdiction at the state level in this case is of great import, as a court assuming in
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                                           2022-NCCOA-417

                                          Opinion of the Court

       rem jurisdiction precludes the subsequent exercise of in rem jurisdiction by all other

       courts:

                    Where the judgment sought is strictly in personam, for the
                    recovery of money or for an injunction compelling or
                    restraining action by the defendant, both a state court and
                    a federal court having concurrent jurisdiction may proceed
                    with the litigation, at least until judgment is obtained in
                    one court which may be set up as res adjudicata in the
                    other. But, if the two suits are in rem or quasi in rem,
                    requiring that the court or its officer have possession or
                    control of the property which is the subject of the suit in
                    order to proceed with the cause and to grant the relief
                    sought, the jurisdiction of one court must of necessity yield
                    to that of the other. To avoid unseemly and disastrous
                    conflicts in the administration of our dual judicial system
                    and to protect the judicial processes of the court first
                    assuming jurisdiction, the principle, applicable to both
                    federal and state courts, is established that the court first
                    assuming jurisdiction over the property may maintain and
                    exercise that jurisdiction to the exclusion of the other.

       Penn General Cas. Co. v. Pennsylvania ex rel. Schnader, 294 U.S. 189, 195, 79 L. Ed.

       850, 855 (1935) (citations omitted) (emphasis added).        However, contrary to its

       assertions in the February Order, the District Court never exercised in rem

       jurisdiction over the seized currency.

¶ 11         Unlike the federal government, North Carolina does not have a general-

       purpose civil forfeiture statute. See generally 19 U.S.C. § 1607 (2021). The statute

       applicable to this case is N.C.G.S. § 90-112, which provides, in relevant part, for the

       criminal forfeiture of “[a]ll money . . . which [is] acquired, used, or intended for use,
                                            STATE V. SANDERS

                                             2022-NCCOA-417

                                            Opinion of the Court

       in selling, purchasing, manufacturing, compounding, processing, delivering,

       importing, or exporting a controlled substance . . . [.]” N.C.G.S. § 90-112(a)(2) (2021).

       As a procedural safeguard, forfeitures under N.C.G.S. § 90-112 require

                     process issued by any [D]istrict or [S]uperior [C]ourt
                     having jurisdiction over the property except that seizure
                     without such process may be made when[] (1) [t]he seizure
                     is incident to an arrest or a search under a search warrant;
                     [or] (2) [t]he property subject to seizure has been the
                     subject of a prior judgment in favor of the State in a
                     criminal injunction or forfeiture proceeding . . . .

       N.C.G.S. § 90-112(b) (2021). While federal civil forfeiture is, quite literally, an action

       against the property itself,1 North Carolina does not employ this conceptual

       framework; instead, our criminal forfeiture proceedings take place under the purview

       of a defendant’s criminal trial. See, e.g., State v. Johnson, 124 N.C. App. 462, 478

       S.E.2d 16 (1996), cert. denied, 345 N.C. 758, 485 S.E.2d 304 (1997).

¶ 12          In State v. Hill, we held that criminal forfeiture proceedings are categorically

       predicated upon in personam jurisdiction—one of the many distinguishing factors

       between North Carolina’s criminal forfeiture proceedings and the in rem proceedings

       associated with civil forfeiture. State v. Hill, 153 N.C. App. 716, 718, 570 S.E.2d 768,

       769 (2002) (“It is important to note that our forfeiture provisions operate in personam

              1 In federal civil forfeiture proceedings, the “party” opposite the government is—in an
       exercise of legal fiction—the very item seized. See, e.g. United States v. $119,000 in U.S.
       Currency, 793 F. Supp. 246 (D. Haw. 1992); United States v. One Black 1999 Ford Crown
       Victoria LX, 118 F. Supp. 2d 115 (D. Mass. 2000).
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                                           2022-NCCOA-417

                                          Opinion of the Court

       and that forfeiture normally follows conviction.”). Moreover, we previously held that

       law enforcement may—and, indeed, must—cooperate with federal authorities and

       permit adoption by the federal government where applicable:

                    State and local agencies are allowed to cooperate and assist
                    each other in enforcing the drug laws. [N.C.G.S.] § 90-95.2
                    (2001). Cooperation by state and local officers with federal
                    agencies is mandated by [N.C.G.S.] § 90-113.5 which
                    provides:

                           It is hereby made the duty of . . . all peace
                           officers within the State, including agents of
                           the North Carolina Department of Justice,
                           and all State’s attorneys, to enforce all
                           provisions of this Article [Controlled
                           Substances Act] . . . and to cooperate with all
                           agencies charged with the enforcement of the
                           laws of the United States, of this State, and all
                           other    States,   relating     to    controlled
                           substances.

                    [N.C.G.S.] § 90-113.5 (2001) (emphasis added).

       Id. at 721, 570 S.E.2d at 771. Here, where Defendant’s currency was taken from the

       vehicle pursuant to N.C.G.S. § 90-112, we are bound by our decision in Hill to hold

       that any challenge to that forfeiture would have necessarily been predicated on in

       personam jurisdiction, not in rem jurisdiction.

¶ 13         As the trial court never exercised in rem jurisdiction, the trial court erred in

       any legal conclusion in the challenged orders premised on the exercise of in rem

       jurisdiction. In Hill, we held that “[o]nce a federal agency has adopted a local seizure,
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                                     Opinion of the Court

a party may not attempt to thwart the forfeiture by collateral attack in our courts,

for at that point exclusive original jurisdiction is vested in the federal court.” Id. at

722, 570 S.E.2d at 772. The proposition that in rem jurisdiction attaches due to the

actions of law enforcement stands in clear opposition to Penn General, in which the

United States Supreme Court held that “the court first assuming jurisdiction over the

property”—not the executive agents—“may maintain and exercise [in rem]

jurisdiction to the exclusion of the other”; however, as we are without power to

override our prior holdings, Hill remains in effect until such time as it may be

corrected by our Supreme Court. Penn General, 294 U.S. at 195, 79 L. Ed. 2d at 855

(emphasis added); see also In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37

(1989) (“Where a panel of the Court of Appeals has decided the same issue, albeit in

a different case, a subsequent panel of the same court is bound by that precedent,

unless it has been overturned by a higher court.”). Accordingly, under Hill, the

November Order was issued by a court without in rem jurisdiction; and, as the three

subsequent orders were premised on the validity of the November Order, those orders

are void.2

       2  With certiorari having been allowed and the underlying orders having been entered
in error, any further issues arising from the April Order are moot. See McVicker v. Bogue
Sound Yacht Club, Inc., 257 N.C. App. 69, 73, 809 S.E.2d 136, 139–40 (2017) (“A case is ‘moot’
when a determination is sought on a matter which, when rendered, cannot have any practical
effect on the existing controversy.”).
                                        STATE V. SANDERS

                                         2022-NCCOA-417

                                        Opinion of the Court

                                         CONCLUSION

¶ 14         We are hamstrung by Hill; we must therefore hold that Defendant’s sole

       avenue for retrieving the currency unlawfully seized from him by the MPD is to seek

       redress from federal authorities. Accordingly, we vacate the trial court’s orders and

       remand for further proceedings consistent with this opinion.

             VACATED AND REMANDED.

             Judges DILLON and ZACHARY concur.