People v. Medina , 287 Ill. App. 3d 690 ( 1997 )

                             No. 2--96--0239

_________________________________________________________________

                                 IN THE

                       APPELLATE COURT OF ILLINOIS

                             SECOND DISTRICT

_________________________________________________________________

THE PEOPLE OF THE STATE OF           )  Appeal from the Circuit Court

ILLINOIS,                            )  of Kane County.

                                    )

    Plaintiff-Appellant,            )  No. 91--CF--333)    

v.                                   )

                                    )

LUIS A. MEDINA,                      )  Honorable

                                    )  Barry E. Puklin,

    Defendant-Appellee.             )  Judge, Presiding.

_________________________________________________________________

    JUSTICE THOMAS delivered the opinion of the court:

    The State timely appeals from the circuit court's order

granting the post-conviction petition of defendant, Luis A. Medina,

and effectively vacating defendant's criminal conviction on the

basis of double jeopardy.  He asserted in the petition that he had

previously been punished where the Department of Revenue issued a

"jeopardy" tax assessment against him and a lien on his property

pursuant to the Cannabis and Controlled Substances Tax Act (Tax

Act) (Ill. Rev. Stat. 1991, ch. 120, par. 2151 et seq.).  We vacate

the judgment.

    Following a bench trial, which began on January 13, 1992,

defendant was convicted of the unlawful possession of a controlled

substance (cocaine) with intent to deliver (Ill. Rev. Stat. 1991,

ch. 56½, par. 1401).  He was sentenced to 20 years'  imprisonment.

The charge arose from the discovery early in March 1991 of

approximately nine kilograms of cocaine in a garage on defendant's

property.  The judgment was affirmed on direct appeal in People v.

Medina, 239 Ill. App. 3d 871 (1993).  No further appeal in that

case was taken, and that judgment became final.

    On January 17, 1995, with the aid of counsel, defendant filed

a post-conviction petition (725 ILCS 5/122--1 et seq. (West 1992)),

arguing that the drug tax, assessed on March 7, 1991, on the

cocaine taken from his possession in the criminal case, together

with the subsequent lien on his property, amounted to a final

judgment and was a punishment; therefore, defendant argued, his

subsequent criminal prosecution was a second punishment barred by

the constitutional prohibition against double jeopardy.  U.S.

Const., amend. V; Ill. Const. 1970, art. I, §10.  Defendant relied

principally on Department of Revenue v. Kurth Ranch, 511 U.S. 767,

128 L. Ed. 2d 767, 114 S. Ct. 1937 (1994) (finding Montana drug tax

was punitive and violated prohibition against double jeopardy; tax

proceeding  to impose tax was equivalent of successive criminal

prosecution).  See Wilson v. Department of Revenue, 169 Ill. 2d 306

(1996) (applying Kurth Ranch to find drug tax punitive and

unconstitutional on basis of double jeopardy where tax was imposed

under Tax Act following defendant's criminal prosecution and was

functional equivalent of successive criminal prosecution placing

defendant in jeopardy for second time for same offense).  

    Defendant also argued that Kurth Ranch must be retroactively

applied to him because the rule against double jeopardy was well

established but was simply applied to a new factual context.  See

United States v. McCaslin, 863 F. Supp. l299, 1306 (W.D. Wash.

1994).  The State argued that Kurth Ranch was a new ruling of

constitutional law and was nonretroactive under Caspari v. Bohlen,

510 U.S. 383, 127 L. Ed. 2d 236, 114 S. Ct. 948 (1994), and Teague

v. Lane, 489 U.S. 288, 103 L. Ed. 2d 334, 109 S. Ct. 1060 (1989).

Alternatively, the State argued defendant's claim was waived or res

judicata for his failing to assert it in the original criminal

proceedings.  

                          I. FACTUAL BACKGROUND

    The parties stipulated to certain limited facts concerning the

proceedings.  The salient facts were that defendant was convicted

of the drug offense on January 17, 1992, and was sentenced on March

20, 1992.  Pursuant to the Tax Act, on March 7, 1991, the

Department of Revenue (Department) had assessed a tax on the

cocaine of $2,415,000, a penalty of $9,660,000, and interest of

$362,234.03, all of which totalled $12,437,234.03.  (The amount of

interest appears to derive from the final assessment of February 5,

1992, rather than that of March 7, 1991.) The tax was assessed on

the same cocaine involved in the offense of which defendant was

convicted.  Defendant was now liable to pay the tax, and there was

a lien on all property which defendant owned or would thereafter

acquire until the tax was paid.  He was subsequently tried and

convicted before the court and filed his direct appeal.  

    The stipulation states that defendant also "appealed" the

Department's assessment and this "appeal" was denied on January 17,

1992.  The parties stipulated to the accuracy of the documents in

the record from the tax proceeding.  The trial court granted

defendant's post-conviction petition on February 23, 1996, and

later released defendant pursuant to a bail bond.

    The record also reveals that, at the criminal trial, the first

witness was sworn and the trial judge began to hear evidence on

January 13, 1992.  The documents from the tax proceeding show that

the initial notice of a statutory "jeopardy" assessment was issued

on March 7, 1991, stating defendant's total tax liability was

$12,105,187.50, including penalties and interest.   The notice was

entitled "Notice of Tax Liability For Cannabis & Controlled

Substance Tax Jeopardy Assessment."  The use of the term "jeopardy"

in the context of the Tax Act shows that the tax is immediately due

and payable because, for example, the Department finds that the

taxpayer will depart the state or will conceal his property, or

there will be some other difficulty in collecting the tax.  In

other words, the collection of the tax may be somehow jeopardized.

See Ill. Rev. Stat. 1991, ch. 120, pars. 11--1102, 2166.  In

issuing a jeopardy notice, the Department may then also file a

jeopardy assessment lien in the county recorder's office.  Ill.

Rev. Stat. 1991, ch. 120, par. 2166(b).  The notice of tax

liability issued to defendant states that a jeopardy assessment

lien was filed and that defendant has 20 days to request a hearing.

See People v. Provenzano, 265 Ill. App. 3d 33, 36-37 (1994)

(describing procedure generally).   

    On March 7, 1991, the Department also filed a notice of intent

to seize assets and a demand for payment within 10 days.  A "Notice

Of Levy Upon Bank Accounts Or Other Assets Of A Taxpayer Held By A

Financial Institution" was issued on March 25, 1991, to various

financial institutions.  The notice of levy states that the assets

are to be held for 20 days and then will be levied upon for payment

of the taxes owed. "Levy" under the Tax Act means "the power of

distraint and seizure by any means."  Ill. Rev. Stat. 1991, ch.

120, par. 2173.  If the tax remains unpaid during the specified

time and no protest has been lodged, the Department may issue a

warrant directing any sheriff or other person to levy on the

property; enforcement of the tax levy "proceeds in the same manner

as *** against property upon judgments by a court."  Ill. Rev.

Stat. 1991, ch. 120, par. 2173.  The notice of levy here demanded

that the institution not disburse funds or assets from the account,

and, after the 20-day period expired, if the institution does not

receive a release, the notice becomes a demand by the Department

for any sums due to be applied to the tax liability.

    The "Notice of Decision" issued on February 5, 1992, states

that a recommended decision of the Administrative Hearings Division

has been accepted by the Director of the Department and is now a

final administrative decision; it advises defendant of his right to

administrative review in the circuit court within 35 days of the

date of mailing of the notice.  The final assessment recommended on

the same date is $12,437,234.03, with interest computed through

February 29, 1992.  In accordance with the Tax Act provisions for

a protest hearing, a "Final Assessment" in that amount was issued

on February 25, 1992.  See Ill. Rev. Stat. 1991, ch. 120, par.

2166(c) (within 20 days of notice of jeopardy assessment lien,

taxpayer may protest that he does not owe some or all of amount of

jeopardy assessment and request a hearing in accordance with

section 908 of the Illinois Income Tax Act (Ill. Rev. Stat. 1991,

ch. 120, par. 9--908); see also  Cook v. Department of Revenue, 281

Ill. App. 3d 171, 178 (1996) (under retailers' occupation tax

provisions, final assessment was judgment or procedural and

substantive equivalent).  

    The "Administrative Findings and Recommendation" recite that

the matter came for hearing on January 17, 1992, pursuant to the

Department's motion for default and for a hearing on the timely

protest of the respondent (defendant) to the issuance of the notice

of tax liability, and that the respondent failed to appear either

in person or through a representative.  Therefore, the default was

granted and the prove up was concluded.  The findings also state

that respondent was given proper notice and, upon the admission

into evidence of the Department's prima facie case, the notice of

tax liability stood unrebutted.  Accordingly, the administrative

law judge concluded that the notice should be finalized in its

entirety.  There is no indication in the record before us that

defendant pursued any further appeal of the final tax assessment.

    On appeal, again relying on Teague and Caspari, the State

argued that the trial court erred in applying Kurth Ranch

retroactively to defendant so as to bar his criminal conviction,

which had become final.  The State again also argued defendant's

claim was waived or res judicata. Because of the fundamental nature

of the double jeopardy claim, we do not deem it waived,

particularly where, as here, defendant could not have been expected

to assert it prior to the Kurth Ranch decision.  See People v.

Valentine, 122 Ill. App. 3d 782, 784 (1984) (claim treated as plain

error).  

    Defendant responded that the prohibition against double

jeopardy applied retroactively because it is a substantive

constitutional right, and not merely a procedural rule.  See, e.g.,

Robinson v. Neil, 409 U.S. 505, 35 L. Ed. 2d 29, 93 S. Ct. 876

(1973).  Therefore, the Teague nonretroactivity analysis did not

apply to his case.

    This court ordered the parties to file supplemental briefs to

address precisely when jeopardy attached in each of the proceedings

because we believe Wilson, 169 Ill. 2d 306, did not conclusively

determine the moment when jeopardy attached in a tax proceeding

implicating multiple punishments.  Further, we requested the

parties to harmonize or explain the significance, if any, of Penry

v. Lynaugh, 492 U.S. 302, 106 L. Ed. 2d 256, 109 S. Ct. 2934

(1989), to the possible application of the Teague and Caspari

principle of nonretroactivity of new rules of constitutional law in

the context of a collateral post-conviction proceeding.

                       II. WHEN JEOPARDY ATTACHED     

    In conclusory fashion and without explaining other supporting

legal authorities, the State interprets Wilson, 169 Ill. 2d 306, to

mean that jeopardy never attached at all in the tax proceeding

because a conviction is a prerequisite to tax liability and the

assessment before the conviction was but a nullity.  Defendant

maintains that, under Kurth Ranch, it was when the tax was

initially assessed on March 7, 1991, that the first jeopardy

attached and that this occurred before his criminal trial began on

January 13, 1992, and the tax assessment was therefore the first

jeopardy to attach.   

         A. Jeopardy  Attached First in the Criminal Proceeding

    As we shall explain below, since defendant protested the tax

assessment and the protest hearing did not occur until January 17,

1992, jeopardy first attached in the criminal trial on January 13,

1992, when the first witness was sworn and the trial judge began to

hear evidence (People ex rel. Daley v. Strayhorn, 121 Ill. 2d 470,

477 (1988).  By analogy to criminal proceedings, we conclude that,

in the tax proceeding, jeopardy could only have attached at the

very earliest at the beginning of the protest hearing when the tax

claim was adjudicated.

         B. Defendant Did not Establish Violation Necessary for

                    Statutory Post-Conviction Remedy

    We hold that, since defendant did not establish, either here

or below, that there was a substantial denial of his constitutional

rights in the proceeding which resulted in his criminal conviction,

he is not entitled to relief under the Post-Conviction Hearing Act

(Hearing Act) (725 ILCS 5/122--1 et seq. (1994)).  In this

collateral proceeding, to be entitled to relief under the statutory

provisions, a defendant must establish a substantial deprivation of

his constitutional rights in the proceeding that produced the

judgment under attack.  People v. Ruiz, 132 Ill. 2d 1, 9 (1989).

If a constitutional violation occurred outside of the criminal

proceeding whose judgment is under attack and did not lead to a

constitutionally flawed conviction and resulting judgment, we

believe the claim is outside the subject matter jurisdiction

prescribed by the Hearing Act.  See People v. Ferree, 40 Ill. 2d

483 (1968) (constitutional claims which were not related to the

proceeding which resulted in defendant's conviction were not

reviewable under the Hearing Act).  

                     C. Kurth Ranch and Its Progeny

    In Kurth Ranch, 511 U.S. 767, 128 L. Ed. 2d 767, 114 S. Ct.

1937, the defendants (Kurths) pleaded guilty to drug offenses

arising from their production of marijuana and were sentenced to

prison on July 18, 1988.  The Montana Department of Revenue had

assessed taxes and penalties of nearly $900,000 on the drugs and

attempted to collect the tax. The Kurths contested the assessments

in administrative proceedings which were stayed in September 1988,

pending the resolution of their petition filed in the bankruptcy

court.  See In re Kurth Ranch, 145 B.R. 61 (Bankr. D. Mont. 1990).

    After examining several factors which persuaded the Supreme

Court that the drug tax was punitive, the Court ultimately

concluded that the Montana tax was a punishment for double jeopardy

purposes and affirmed the judgment of the circuit court of appeals.

In re Kurth Ranch, 986 F.2d 1308 (9th Cir. 1993) (in affirming the

district court judgment, circuit court of appeals held that tax was

unconstitutional as applied to the Kurths and "tax assessment

levied by Revenue constituted an impermissible second punishment"

(emphasis added) in violation of federal double jeopardy clause).

The Supreme Court concluded:

         "This drug tax is not the kind of remedial sanction that

    may follow the first punishment of a criminal offense.

    Instead, it is a second punishment within the contemplation of

    a constitutional protection ***, and therefore must be imposed

    during the first prosecution or not at all.  The proceeding

    Montana initiated to collect a tax on the possession of drugs

    was the functional equivalent of a successive criminal

    prosecution that placed the Kurths in jeopardy a second time

    'for the same offense.' "  (Emphasis added.)  Kurth Ranch, 511

    U.S. at___, 128 L. Ed. 2d at 781-82, 114 S. Ct. at 1948.

         Defendant argues essentially that Kurth Ranch stands for the

proposition that the notice of tax assessment itself (not the

attempt to actually impose the tax) causes jeopardy to attach.

First, the courts in the Kurths' saga were not called upon to

decide the precise moment at which jeopardy attached in the tax

proceeding.  All of the cases assumed that the criminal proceeding

antedated the imposition or enforcement of the tax and treated the

tax as a "second" impermissible punishment or jeopardy.

Notwithstanding the rather loose way in which the courts used the

term "assessment" in their decisions, our close scrutiny of the

facts in the Kurth Ranch line of cases conclusively shows that it

was not the assessment alone that triggered the jeopardy, but

rather it was the state's attempt to actually impose or collect the

tax.  The adjudication of the correctness of that tax took place in

the  bankruptcy court rather than in the administrative proceeding.

    An examination of the precise facts of the Kurth cases shows

that (1) the drug products were seized on October 18, 1987; (2) the

initial "Jeopardy Assessment Tax" on the drugs was issued on

December 7, 1987, and notice was sent to each defendant-taxpayer;

the assessment was subsequently revised on May 7, 1988, from $491,

776.20 to $750,096.68; (3) sometime later, the sum of $30,680.01

was then levied upon and seized pursuant to other state court

proceedings; (4) the Kurths filed a timely administrative protest

of the tax which proceeding was suspended pending the criminal

action; (5) the Kurths pleaded guilty and were sentenced on July

18, 1988; (6) on September 9, 1988, the Kurths filed a bankruptcy

petition, challenging the tax; this action also stayed the

administrative proceeding; and (7) on May 8, 1990, the bankruptcy

court held that the tax assessments were arbitrary and capricious

and further held that the tax assessments, even if imposed in a

procedurally correct manner, also violated the proscription against

double jeopardy; the bankruptcy court ordered the sums collected

returned to the defendants.  See In re Kurth Ranch, No. CV--90--

084--GF (D. Ct. Mont. April 23, 1991) (affirming the bankruptcy

court judgment); Kurth Ranch, 145 B.R. 61.    

    Our careful review of the facts and holdings of these cases

leads to the inescapable conclusion that the Supreme Court did not

hold that the initial assessment of the taxes constituted the first

jeopardy; rather, the proceeding to impose or enforce the tax was

the equivalent of a second impermissible criminal proceeding

placing the defendants "at risk" for a prohibited (second)

punishment for the same criminal conduct.  All of the cases were

resolved on the basis that the criminal jeopardy had already

attached, despite the fact that the tax assessments were clearly

issued prior to the criminal proceeding.

    In Wilson, 169 Ill. 2d 306, defendant was indicted in January

1991 on three drug charges.  The Department assessed the

defendant's liability as $54,385 in taxes, $217,540 in penalties,

and $2,039.46 in interest.  Notice of the assessment was served on

the defendant on January 24, 1991, along with notice of the intent

to seize his assets if he failed to make payment in 10 days. The

defendant promptly filed a protest with the Department and

requested a hearing.  Then, he pleaded guilty to the criminal

charges and was sentenced and fined.  When the Department proceeded

to levy upon his property (Ill. Rev. Stat. 1989, ch. 120, par.

2173) without affording him a hearing, he brought an action for

declaratory and injunctive relief in the circuit court, claiming

that the Tax Act could not be enforced against him on the basis of

double jeopardy, because he had already been criminally prosecuted

and sentenced.  The circuit court granted him summary judgment

based on the Supreme Court's Kurth Ranch decision, as imposition of

the tax would violate the prohibition of a successive punishment

for the same offense, and ordered the return of the defendant's

assets.   

    The Department appealed.  Following the analysis of Kurth

Ranch, our supreme court held that the drug tax amounted to a form

of punishment for double jeopardy purposes and that the tax imposed

on the defendant following his criminal prosecution was the

functional equivalent of a successive criminal prosecution that

placed the defendant in jeopardy for a second time for the same

offense.  Wilson, 169 Ill. 2d at 317.

    There cannot be a second jeopardy without a former jeopardy.

People v. Kim, 284 Ill. App. 3d 637, 639 (1996).  However, once the

double jeopardy rule comes into play, it is only the second

proceeding that is constitutionally endangered.  Valencia Lucena v.

United States, 933 F. Supp. 129, 137 (D. P.R. 1996).  Thus, it is

the second jeopardy that must yield where the first is established.

It is clear from our review of Wilson (and Kurth Ranch) that the

initial assessment of the tax was not the operative event in

triggering the second jeopardy; rather, the Department's attempt to

enforce or impose the tax was more significant.  See Kim, 284 Ill.

App. 3d at 639-40) (without more, jeopardy did not attach merely

upon the issuance of a tax assessment and 10-day demand notice).

We also believe that, in protesting the tax and not obtaining an

administrative hearing, the attachment of jeopardy in the tax

proceeding was effectively delayed until at least after the

jeopardy attached in his criminal prosecution.  See Ill. Rev. Stat.

1991, ch. 120, par. 2173 (protest delays levy).  

    There is no unanimity among courts concerning when jeopardy

attaches in a civil proceeding where the government seeks to impose

a civil sanction in addition to a criminal punishment in

contravention of the prohibition against multiple punishments.  There

is an unsettled question whether, in a multiple punishments case

involving a civil proceeding, jeopardy attaches at the moment the

defendant is placed "at risk," that is, when the trial or

adjudication begins (successive prosecutions approach), or whether it

attaches when punishment is complete, that is, when the punishment is

actually imposed (for example, the actual forfeiture of assets, or

the payment of the penalty, or the entry of judgment).  See, e.g.,

United States v. Idowu, 74 F.3d 387, 396 (2d Cir. 1996) (and cases

cited therein); United v. Sanchez-Escareno, 950 F.2d 193 (5th Cir.

1991) (defendants' executing promise to pay fine was not punishment

for double jeopardy purposes; court examined successive prosecutions

approach; if government attempted to collect on notes, jeopardy would

attach when trier of fact begins to hear evidence); see also

Valencia Lucena,  933 F. Supp. at 137-38;  United States v. Tamez,

881 F. Supp. 460, 462-66 (E.D. Wash. 1995).  

    We think that a tax proceeding of this type is analogous to a

criminal prosecution.  Thus, where, as here, the State issues a drug

tax assessment, we believe that no jeopardy attached merely upon the

issuance of the assessment and lien.  The taxpayer stands in a

position similar to that of a criminal defendant who has been

charged.  Defendant here filed a timely protest.  The disputed tax

was not adjudicated until January 17, 1992, four days after his

criminal trial began on January 13, 1992.  In the criminal trial,

jeopardy attached when the first witness was sworn and the trial

judge began to hear evidence.  In the tax proceeding, where the tax

is directed against a person and he has protested the tax (unlike the

situation in an in rem forfeiture proceeding in which no person need

appear), we conclude that jeopardy could not have attached until the

tax hearing began and the trier of fact began to consider evidence.

    We find some support for our conclusion in People v. Litchfield,

902 P.2d 921 (Colo. App. 1995).  There, the defendants were arrested

when marijuana was discovered in their rental car.  The state

assessed a civil (drug) tax and penalty against the defendants as a

result of the arrest, and the defendants filed a timely objection and

requested a hearing.  The defendants moved to dismiss the criminal

charges on the basis of double jeopardy because of the drug tax

"punishment," but the trial court found that jeopardy had not yet

attached as there was no final administrative determination of their

obligation to pay the tax.  The Colorado appellate court agreed.

Citing Sanchez-Escareno, 950 F.2d 193, the court held that, since

there was no hearing and no final determination of the tax liability,

the defendants had not yet paid any money to the state, and the state

had not taken any steps to collect the money, no jeopardy had

attached.  Contra Bryant v. State, 660 N.E.2d 290 (Ind. 1995) (under

Indiana procedure, jeopardy attached at the moment defendant was

served with record of jeopardy findings and jeopardy assessment

notice and demand).

                             III. CONCLUSION

    In sum, since defendant did not make the requisite showing of a

substantial constitutional violation in the criminal proceeding which

led to his conviction, he cannot obtain relief under the Hearing Act.

The record before us shows that the first jeopardy attached in the

criminal proceeding when the first witness was sworn and the trial

court began to hear evidence.  The jeopardy in the tax proceeding

occurred thereafter and was the second jeopardy.  However, if the tax

was unconstitutionally applied to defendant, it appears to have

occurred in a proceeding outside the jurisdictional reach of the

Post-Conviction Hearing Act.  The defendant's remedy, if any, must

lie elsewhere.  See, e.g., Provenzano, 265 Ill. App. 3d 33

(discussing limits of special statutory jurisdiction in tax case);

State v. Sproles, 672 N.E.2d 1353 (Ind. 1996) (challenge to drug tax

premised on double jeopardy claim must be made in administrative

proceeding or in tax court).       

    We do not decide here when jeopardy attaches in a similar tax

proceeding where the defendant has not protested the tax assessment.

We leave that determination for another day.  Because defendant has

not demonstrated either here or below that his claim warrants relief

under the Hearing Act, we must vacate the judgment of the circuit

court which granted his petition.  As a result of our disposition, we

do not reach the question whether the double jeopardy ruling in Kurth

Ranch must be applied retroactively.  

    The judgment of the circuit court of Kane County is vacated.

    Judgment vacated.

    GEIGER, P.J., and RATHJE, J., concur.