United States v. Real Property located at 8911 Highway 49 ( 2019 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, No. 2:18-cv-00747-KJM-CKD 12 Plaintiff, 13 v. FINDINGS & RECOMMENDATIONS 14 REAL PROPERTY LOCATED AT 8911 HIGHWAY 49, MOKELUMNE HILL, 15 CALIFORNIA, CALAVERAS COUNTY, APN: 018–019–057–0000, et al., 16 Defendants. 17 18 I. Introduction 19 This case was referred to the undersigned pursuant to Local Rule 302(c)(19) and 28 20 U.S.C. § 636(b)(1). This is a civil forfeiture action against real property located at 6199 Highway 21 26, Valley Springs, California, Calaveras County, APN: 073-013-005-000, including all 22 appurtenances and improvements thereto (hereafter referred to as “defendant real property”).1 23 Plaintiff United States of America (“Government”) seeks default judgment against the interest of 24 Xiulan Yang (“Yang”). Plaintiff seeks entry of a final judgment of forfeiture that vests in the 25 26 1 Defendant real property is more fully described as follows: Lot 3032 of Rancho Calaveras, 27 Units No. 10, 11, 12, 13, and 14, Tract No. 180, as shown on the official map thereof, filed for record December 18, 1967, in Book 3, of Subdivision Maps, at page 12-12J, inclusive, Calaveras 28 County Records. (ECF No. 1 at 24 (Verified Compl. at Ex. I).) 1 Government all right, title, and interest in defendant real property. 2 The Government’s motion for entry of default judgment (ECF No. 90) came on regularly 3 for hearing on October 9, 2019. Assistant United States Attorney Kevin Khasigian appeared at 4 the hearing on behalf of the Government. Michael Gilligan, counsel for defendant Signet 5 Management, LLC, appeared telephonically. Yang did not appear at the hearing. 6 Upon review of the motion, supporting documents, and the oral representations of the 7 Government at the hearing, and good cause appearing, the court now issues the following 8 findings and recommendations. 9 II. Background 10 This case is proceeding on the Verified Complaint for Forfeiture in Rem (“complaint”) 11 filed April 3, 2018. (ECF No. 1.) The complaint makes the following factual allegations: 12 In 2016, law enforcement identified Leonard Yang as a participant in a large-scale 13 residential marijuana operation in Sacramento County that involved seven Sacramento residences. 14 (ECF No. 1 at ¶ 11.) Each residential property connected to the criminal organization consumed 15 an unusually large amount of electricity and the properties were purchased with hard-money 16 financing and thousands of dollars wired to the United States from China. (Id.) In September 17 2016, law enforcement executed federal search warrants at the seven residences and seized more 18 than 5,000 marijuana plants. (Id. at ¶ 12.) In September 2016, Leonard Yang and three co- 19 conspirators were indicted. (Id. at ¶ 13.) 20 In 2017, law enforcement identified Xiu Ping Li and others as participants in a large-scale 21 marijuana cultivation and trafficking organization, and identified nine properties connected to 22 their illegal activities. (Id. at ¶ 14.) Federal search warrants were executed at the nine properties 23 in July 2017. (Id. at ¶ 15.) In September 2017, Xiu Ping Li was indicted along with several other 24 individuals. (Id. at ¶ 17.) 25 Following these federal investigations and indictments, state and local authorities searched 26 a number of additional properties that were identified by the investigations as potentially tied to 27 the organization under federal examination. (Id. at ¶ 18.) Ultimately, in 2017 and 2018, law 28 enforcement executed search warrants at twelve properties in Calaveras County, including the 1 defendant real property, and seized approximately 9,711 marijuana plants and over 100 pounds of 2 processed marijuana. (Id. at ¶¶ 18–21, 30.) Regarding the defendant real property, on January 3 11, 2018, law enforcement executed a state search warrant at the property and found an active 4 marijuana grow that contained 1,346 marijuana plants. (Id. at ¶ 30.) Yang, a resident of 5 Pittsburgh, Pennsylvania, is the listed owner of the defendant real property and purchased the 6 property for $360,000 in June 2017. (Id.) 7 The verified complaint alleges that defendant real property was used or intended to be 8 used, to commit or to facilitate the commission of, a violation of 21 U.S.C. §§ 841, et seq. 9 (prohibiting the manufacture, distribution, dispensing or possessing of a controlled or counterfeit 10 substance), an offense punishable by more than one year’s imprisonment, and therefore subject to 11 forfeiture pursuant to 21 U.S.C. §§ 881(a)(6)–(7). (Id. at ¶¶ 34–35, 37.) 12 Pursuant to order of this court filed April 12, 2018, notice of this action was published on 13 the official internet government forfeiture site and ran for at least thirty 14 consecutive days, as required by Rule G(4)(a)(iv)(C) of the Supplemental Rules of Admiralty or 15 Maritime Claims and Asset Forfeiture Actions. (ECF Nos. 3 (Order) and 19 (Declaration of 16 Publication).) 17 The U.S. Marshals Service posted defendant property with the verified complaint and 18 notice of complaint on April 27, 2018. (ECF No. 90-2 at ¶ 8; id. at 21.) On April 5, 2018, the 19 Government recorded a Lis Pendens (Notice of Pending Action) against defendant real property 20 with the Calaveras County Recorder. (ECF No. 12.) 21 On May 31, 2018, the U.S. Marshals Service attempted unsuccessfully to personally serve 22 the complaint and related documents upon Yang at his last known address. (ECF No. 90-2 at ¶ 6, 23 Ex. B.) Personal service upon Yang was again attempted on June 8 and June 18, 2018; the 24 documents were left at the residence on June 18, 2018. (Id.; see also ECF No. 63.) On April 23, 25 2018, copies of the complaint and related documents were sent by certified mail to Yang to his 26 last known address in Pittsburgh. (ECF No. 90-2 at ¶ 3, Ex. A.) The certified mail envelope was 27 signed for on April 27, 2019. (Id.) 28 To date, no claim or answer has been filed by, or on behalf of, Yang, as required by Rule 1 G(5) of the Supplemental Rules of Admiralty or Maritime Claims and Asset Forfeiture Actions, 2 to contest this action. (ECF No. 90-2 at ¶ 7.) 3 On July 24, 2018, at the Government’s request, the Clerk of Court entered default as to 4 Yang, pursuant to Fed. R. Civ. P. 55(a). (ECF No. 67.) 5 III. Legal Standard 6 “The Due Process Clause of the Fifth Amendment guarantees that ‘[n]o person 7 shall . . . be deprived of life, liberty, or property, without due process of law.’ Our precedents 8 establish the general rule that individuals must receive notice and an opportunity to be heard 9 before the Government deprives them of property.” United States v. James Daniel Good Real 10 Prop., 510 U.S. 43, 48 (1993) (citations omitted). Due process is satisfied when the Government 11 complies with the notice requirements set forth by statute and in the federal and local rules of 12 procedure. 13 Civil forfeitures of real property are governed generally by 18 U.S.C. § 985. Forfeiture 14 actions in rem arising from a federal statute are governed by the Federal Rules of Civil Procedure, 15 Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions 16 (“Supplemental Rule” or “Supp. Rule”). United States v. Real Prop., 135 F.3d 1312, 1315 (9th 17 Cir. 1998); see also Supp. Rule A(1)(B), and Supp. Rule G (setting forth specific procedural and 18 notice requirements). These rules are reflected in the Local Admiralty and In Rem Rules for the 19 U.S. District Court for the Eastern District of California (“Local Rule”), which govern all in rem 20 proceedings filed in this court. See Local Rule 500. Local Rule 540 sets forth the procedures for 21 obtaining default judgment in an action in rem. 22 IV. Analysis 23 Local Rule 540(d) provides for an ex parte hearing and entry of default judgment, without 24 further notice, at any time after the time for answer has expired, provided due notice of the action 25 has been given and no one has appeared to claim the property and give security thereof. The 26 Government has demonstrated compliance with these requirements, subject to the rights of the 27 lienholder in defendant property. 28 /// 1 A. Notice 2 1. Posted Notice on Defendant Property 3 Local Rule 540(a) sets forth the requirements for achieving due notice of an action in rem 4 commencing upon the “arrest” of the property. The Government may initiate a civil forfeiture 5 action against real property by filing a verified complaint, posting notice of the complaint on the 6 property, and serving notice on the property owner. 18 U.S.C. § 985(c)(1)(B) (“The Government 7 shall initiate a civil forfeiture action against real property by . . . (B) posting a notice of the 8 complaint on the property”); see also Supp. Rule G(2) (requirements of the complaint). 9 The Government posted notice of the instant complaint on defendant real property on April 27, 10 2018. (ECF No. 90-2 at ¶ 8; id. at 21.) 11 2. Published Notice 12 Supplemental Rule G(4)(a)(iv)(C) provides that the requisite notice of the forfeiture action 13 may be met by timely notifying potential claimants of the action by posting a notice on an official 14 internet government forfeiture site for at least 30 consecutive days. 15 Pursuant to order of this court filed April 12, 2018 (ECF No. 3), the Government 16 published notice of this action on the official internet government forfeiture site 17 for 30 consecutive days. (ECF No. 19.) 18 3. Actual Notice 19 Congress has specified that in civil forfeiture actions against real property, the 20 Government shall “serv[e] notice on the property owner, along with a copy of the complaint.” 18 21 U.S.C. § 985(c)(1) (C); see also Local Rule 540(a)(2) (personal service on individual having 22 custody of the property), and (4) (personal service or by certified mail, return receipt requested, to 23 all individuals known to have an actual interest in the property). Supplemental Rule G provides 24 that “[t]he notice must be sent by means reasonably calculated to reach the potential claimant.” 25 Supp. Rule G(4)(b)(iii)(A). 26 The Government provided actual notice to all potential claimants in this action, including 27 Yang. 28 /// 1 B. Time for Filing a Claim and Answer Has Expired 2 An individual asserting an interest in defendant real property may contest the forfeiture 3 action by filing a claim not later than 35 days after notice, or not later than 30 days after the final 4 publication. Supp. Rule G(a)(ii)(A) and (B). The claimant must file an answer to the complaint 5 within 21 days after filing the claim. Supp. Rule G(b). See Real Prop., 135 F.3d at 1317 6 (explaining that standing to contest in rem civil forfeiture action is dependent upon compliance 7 with filing requirements). 8 The Return Receipt for notice served on Yang was signed and returned on April 27, 2018. 9 (ECF No. 90-2 at 8.) Final notice by publication was May 19, 2018. The most extended deadline 10 for filing a claim was 30 days after final notice by publication, or Monday, June 18, 2018. To 11 date—October 2019—Yang has not filed a claim or answer in this action, and the time for doing 12 so is long expired. 13 Accordingly, the Clerk’s entry of default upon Yang, the titled property owner, on July 14 24, 2018, was proper, and this motion for default judgment properly proceeds. 15 C. Entry of Default Judgment is Proper 16 Pursuant to Federal Rule of Civil Procedure 55(a), the Clerk is required to enter default 17 when the fact of default is established by affidavit or otherwise. Fed. R. Civ. P. 55(a). The 18 Clerk’s entry of default against Yang effects his admission of the factual allegations of the 19 complaint, except those relating to the amount of damages. Fed. R. Civ. P. 8(b)(6) (“An 20 allegation—other than one relating to the amount of damages—is admitted if a responsive 21 pleading is required and the allegation is not denied”); Geddes v. United Fin. Group, 559 F.2d 22 557, 560 (9th Cir. 1977). 23 The court finds that the well pleaded allegations of the verified complaint state a claim for 24 which relief can be granted. Specifically, accepting as true the factual allegations of the verified 25 complaint, the Government has demonstrated that defendant property was used or intended to be 26 used, in any manner or part, to commit, or to facilitate the commission of, a violation of 21 U.S.C. 27 §§ 841, et seq. (prohibiting the manufacturing, distributing, dispensing or possessing of a 28 controlled or counterfeit substance), an offense punishable by more than one year’s 1 imprisonment, and therefore subject to forfeiture to the United States pursuant to 21 U.S.C. § 2 881(a)(7). 3 It remains within the sound discretion of the district court to grant a default judgment 4 pursuant to Federal Rule of Civil Procedure 55(b). Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th 5 Cir. 1980). In making this determination, the court must consider the following factors set forth 6 in Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986): 7 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, 8 (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning the material facts, (6) whether the default was 9 due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 10 11 The Government seeks a final judgment of forfeiture against Yang as the listed owner of the 12 defendant real property. This is consistent with the nature of forfeiture in rem proceedings. See 13 Hanson v. Denckla, 357 U.S. 235, 246 n.12 (1958) (explaining that “[a] judgment in rem affects 14 the interests of all persons in designated property”). 15 Application of the Eitel factors supports entry of default judgment. First, the Government 16 would be prejudiced by the denial of its motion, spending additional time and effort litigating an 17 action in which the claimant has abandoned his claim to the defendant real property. Second, the 18 Government’s claims appear to have merit. Third, as set forth above, the Government has 19 adhered to the procedural requirements of a forfeiture action in rem, including the filing of a 20 sufficient verified complaint. Fourth, the defendant real property that was seized and subject to 21 forfeiture is not of such substantial value as to warrant denial of the Government’s motion. Fifth, 22 there are no genuine disputed issues of material fact. Sixth, there is no evidence that Yang’s 23 abandonment is due to excusable neglect. Finally, although merits-based decisions are always 24 preferred, it is not practical, as here, where Yang has abandoned his claims. Accordingly, there is 25 no impediment to default judgment sought by the Government and the court will recommend that 26 the motion be granted. 27 //// 28 //// 1 | VI. Conclusion 2 In accordance with the foregoing findings, IT IS HEREBY RECOMMENDED that the 3 | Government’s motion for default judgment (ECF No. 90) be GRANTED, thus extinguishing any 4 | right, title, or interest in defendant real property of potential claimant Xiulan Yang. 5 These findings and recommendations are submitted to the United States District Judge 6 | assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(). Within fourteen days 7 | after being served with these findings and recommendations, the parties may file written 8 | objections with the court and serve a copy on all parties. Such a document should be captioned 9 | “Objections to Magistrate Judge’s Findings and Recommendations.” The parties are advised that 10 | failure to file objections within the specified time may waive the right to appeal the District 11 Court’s order. Martinez v. Y1st, 951 F.2d 1153 (9th Cir. 1991). 12 | Dated: November 15, 2019 CA rd ht / {o— 13 CAROLYN K DELANEY 14 UNITED STATES MAGISTRATE JUDGE 15 16 17 | 15 USA747.defaule 18 19 20 21 22 23 24 25 26 27 28