In Re Tennessee Walking Horse Forfeiture Litigation ( 2015 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
July 23, 2014 Session
IN RE TENNESSEE WALKING HORSE FORFEITURE LITIGATION
Appeal from the Circuit Court for Fayette County
No. 13CV61 J. Weber McCraw, Judge
No. W2013-02804-COA-R3-CV – Filed April 8, 2015
This case arises out of an appeal by the State of Tennessee, from an Order dismissing a
Complaint for Judicial Forfeiture. The trial court granted Appellees’, the purported
owners of two Tennessee Walking Horses, motion to dismiss for failure to comply with
Tennessee Code Annotated Sections 39-14-210(f) and 39-11-707(c). We vacate and
remand.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated and
Remanded
ROBERT L. CHILDERS, SP.J., delivered the opinion of the Court, in which DAVID R.
FARMER, SP.J., and J. STEVEN STAFFORD, J., joined.
Robert E. Cooper, Jr., Attorney General and Reporter; Joseph F. Whalen, Acting Solicitor
General; Scott C. Sutherland, Assistant Attorney General; and Linda D. Kirklen,
Assistant Attorney General, for the appellant, State of Tennessee.
J. Houston Gordon, Covington, Tennessee, for the appellees, Beverly Sherman and Kelly
Sherman.
W.J. Michael Cody and Shea B. Oliver, Memphis, Tennessee, for the Amicus Curiae,
Animal Legal Defense Fund.
OPINION
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Facts
On March 1, 2012, officials from the Fayette County Sheriff’s Office and the
United States Department of Agriculture seized two Tennessee Walking Horses, named
“Paroled in the Night” and “Mucho Bueno,” incident to the arrests of the horses’ trainers,
employees of Whitter Stables, for animal cruelty. The officials placed the horses into the
custody of the Humane Society of the United States (“HSUS”). HSUS is not chartered
with the State of Tennessee.
On May 16, 2012, Beverly Sherman and Kelly Sherman (“Appellees”), the
purported owners of the horses at issue, filed a Complaint for Possession or in the Nature
of Replevin, seeking to recover the horses. The State of Tennessee (“State”) filed an
answer, denying that the Appellees were entitled to the return of the property.
On May 22, 2012, the horse trainers pleaded guilty in the United States District
Court for the Eastern District of Tennessee to soring1 the horses at issue in violation of
the Federal Horse Protection Act. The trainers also pleaded guilty to State animal cruelty
charges involving the subject horses on July 10, 2013. According to the State, the trainers
admitted, as part of their state-law guilty pleas, to having sored and abused the subject
horses.
The State filed an ex parte application for a forfeiture warrant for the horses on
July 10, 2013. On the same day, the Fayette County Circuit court issued an ex parte
Forfeiture Warrant and Order placing the horses in the custody of the HSUS pending a
final forfeiture determination.
On August 9, 2013, the State filed a forfeiture complaint. The forfeiture complaint
indicated that the State had information to believe that the Appellees were the owners of
two of the horses.2 However, the forfeiture complaint specifically reserved the issue of
the Appellee’s standing to contest the forfeiture. On September 2, 2013, the Appellees
filed a motion to dismiss the forfeiture complaint or in the alternative, to consolidate the
forfeiture litigation with the previously filed Replevin Lawsuit. The motion to dismiss
was based upon the assertion that both the Replevin and the State’s Forfeiture lawsuits
dealt with identical issues, namely, the custody of the horses. The Appellees also argued
that the forfeiture warrant was not properly issued because the State failed to obtain it
within five (5) working days of March 1, 2012, as required by Tennessee Code Annotated
1
To sore, in the context of this case, is defined as “[t]o mutilate the legs or feet of (a horse) to
induce a particular gait in the animal.” American Heritage College Dictionary 1322 (4th ed. 2002).
2
The forfeiture complaint also contained allegations regarding another horse and its purported owner.
That horse and owner are not at issue in this appeal.
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Section 39-11-707(c). On the same day, the Appellees’ filed a motion to dismiss the
forfeiture warrant, arguing generally the same basis as the motion to dismiss the
forfeiture complaint.
On November 4, 2013, the trial court held a hearing on the Appellees’ motions and
determined that the State violated certain procedural requirements contained in the
forfeiture statutory scheme in taking possession of the subject horses. Consequently, the
trial court granted the Appellees’ motions to dismiss on December 11, 2013. The trial
court subsequently granted the State’s motion to stay the return of the subject horses
pending the outcome of this appeal.
Issues Presented
The State raises three issues, which are taken, and slightly restated, from its brief:
1. Whether the trial court erred in concluding that the State’s
seizure of the subject horses was illegal because the State
placed the victimized animals in the custody of a humane
society that was not chartered by the State as required by
Tennessee Code Annotated Section 39-14-210(f).
2. Whether the trial court was correct in concluding that the
State failed to obtain a forfeiture warrant within the time
prescribed by Tennessee Code Annotated Section 39-11-
707(c).
3. Whether the trial court erred in failing to require the
Appellees to establish standing to contest the forfeiture
warrant and complaint.
In the posture of appellee, the Appellees raise one additional issue, which is taken, and
slightly restated from their brief: “Whether the trial court erred by failing to find that the
State’s separate Complaint for Judicial Forfeiture was barred by a prior suit pending or
finding that the two cases should be consolidated.”
Standard of Review
In considering an appeal from a trial court’s grant of a motion to dismiss, we take
all allegations of fact in the complaint as true, and review the lower courts’ legal
conclusions de novo with no presumption of correctness. Tenn R. App. P. 13(d); Mid-
South Industries, Inc. v. Martin Mach. & Tool, Inc., 342 S.W.3d 19, (Tenn. Ct. App.
2010) (citing Owens v. Truckstops of America, 915 S.W.2d 420, 424 (Tenn. 1996)).
Discussion
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I
Because the issue of standing is a threshold matter, it is incumbent upon the
Appellees to prove their ownership and show standing pursuant to Tennessee Code
Annotated Section 39-11-709(d). See Connell v. Scullark, No. W2014-00587-COA-R3-
CV, 2014 WL 6882298, at *2 (Tenn. Ct. App. Dec. 8, 2014) (noting that standing is “a
threshold matter”). While the animals at issue in this case were seized pursuant to
Tennessee Code Annotated Section 39-14-202(e), the statute is clear that victimized
animals could be subject to forfeiture. Tenn. Code Ann. § 39-14-202(e) (stating “the
court shall order the person convicted to surrender custody and forfeit the animal or
animals whose treatment was the basis of the conviction”). Because the statue is silent
regarding the disposition of property belonging to innocent owners and other interested
third parties, the forfeiture action is governed by Tennessee Code Annotated Section 39-
11-701 et seq. This Court in State v. Siliski, No. M2004-02790-CCA-R3-CO, 2006 WL
1931814 (Tenn. Crim. App. July 10, 2006), specifically held that the general forfeiture
scheme contained in Tennessee Code Annotated Section 39-11-701, et. seq., applies to
forfeitures pursuant to Tennessee Code Annotated Section 39-11-202(e). Id. at *3.
Specifically, the Siliski Court recognized that while animals “are not property acquired or
received as a result of the offense,” as contemplated in the forfeiture statutes, “absent any
forfeiture procedures within Part 2 on Animals, we look to the general provisions of this
title for the proper procedure.” Id. Thus, the general forfeiture procedures outlined in
Tennessee Code Annotated Sections 39-11-707 and -709 apply to this case. See also
Tenn. Code Ann. § 39-11-717 (noting that the forfeiture scheme “may be used in
conjunction with” other forfeiture laws and should “be liberally construed to effect its
purpose”).
In Tennessee, a forfeiture procedure is considered a civil, in rem proceeding.
According to the Tennessee Supreme Court:
[F]orfeiture under Tennessee law is an action in rem. This
Court has regarded forfeiture under the Tennessee statutes as
an action in rem for a considerable length of time. . . . [I]t is
the property itself which is targeted, not the owner of the
property. In contrast to the in personam nature of criminal
actions, in rem actions are traditionally viewed as civil
proceedings, with jurisdiction dependent on the seizure of a
physical object.
Stuart v. State Department of Safety, 963 S.W.2d 28, 33 (Tenn. 1998); see also State v.
Blackmon, 984 S.W.2d 589 (Tenn. 1998) (noting that “forfeiture under Tennessee law is
an action in rem, which is traditionally viewed as a civil proceeding,” and that “the
legislature intended forfeiture to be a civil, in rem proceeding”). Thus, the defendant in a
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civil forfeiture action is the subject property, rather than any owners or interest holders in
the property.
Because owners or interest holders are not the true defendants in civil forfeiture
cases, and as such are not required to be issued a summons under the Tennessee Rules of
Civil Procedure, see Tenn. R. Civ. P. 4.01 (governing the issuance and service of a
summons on the defendants to an action), the forfeiture statutes contain specific
requirements regarding notice to purported owners and interest holders in the property
subject to forfeiture. Specifically, Tennessee Code Annotated Section 39-11-707
provides that:
(b) Upon seizure of property for forfeiture under this part, the
seizing agency or official shall cause to be delivered a written
receipt and notice of seizure to the possessor, owner and
interest holder as determined from public records. The notice
shall list and describe generally the property seized, the
agency or official responsible for the seizure and shall state
the procedure for obtaining return of the property. The seizing
agency shall deliver a copy of the notice to the district
attorney general of the judicial district where the seizing
agency is located or of the judicial district where the seizure
occurred.
(c) Upon the seizure of personal property for forfeiture, the
seizing agency shall within five (5) working days, apply ex
parte for a forfeiture warrant from a judge authorized to issue
a search warrant. Upon a finding that probable cause for
forfeiture exists, a forfeiture warrant shall issue. The warrant
shall be based upon proof by affidavit that there is probable
cause that the owner’s interest in the seized property is
subject to forfeiture. In the event a forfeiture warrant is not
issued, then the property shall immediately be returned unless
the property is to be retained for evidence in a criminal
proceeding. No forfeiture action for personal property may be
filed without the issuance of a forfeiture warrant.
If the seizing agency fails to serve a complaint for forfeiture on an interest holder, the
interest holder’s interest in the property may not be forfeited, notwithstanding their
failure to timely challenge the forfeiture. Tenn. Code Ann. § 39-11-707(d).
Simply receiving notice of a forfeiture action via the above procedures does not,
however, confer standing on the purported owners or interest holders. Instead, the
forfeiture statute specifically provides that if a purported property owner or interest
holder intends to contest the forfeiture, he or she must follow the procedures outlined in
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Tennessee Code Annotated Section 39-11-709(d), including establishing his or her
standing to contest the forfeiture. Section 709(d) specifically provides:
After the filing of a forfeiture action under this part, a
claimant may file a motion with the court in which the action
is pending for the state to show cause why the property, or
any portion of the property, should not be returned or the lien
released. The court shall conduct a hearing on the motion
within twenty-one (21) days from the date such motion is
filed. The claimant must first establish by a
preponderance of the evidence that the claimant is an
owner in the property seized before other evidence is
taken. The claimant has the burden of establishing
standing to assert the claim.
(Emphasis added). Thus, the forfeiture statutes contain specific procedures for
challenging a forfeiture complaint. First, the purported owner or interest holder, or
claimant, must file a show cause order in the trial court seeking return of the property.
Within twenty-one days of this motion, the trial court must conduct a hearing. The first
issue to be litigated must be the claimant’s standing to contest the forfeiture, which must
be proven by a preponderance of the evidence. If the claimant cannot prove standing,
then he or she cannot contest the forfeiture proceeding. If, however, the claimant can
prove standing, the court then proceeds to consider the State’s entitlement to the seized
property. Accordingly, the claimant’s standing is a statutory prerequisite to contesting the
forfeiture of the property. Tenn. Code Ann. § 39-11-709(d).
While not specifically framed in these terms by the parties, the issue in this case
concerns the Appellees’ statutory, non-constitutional standing to contest the forfeiture
action. Tennessee Code Annotated Section 39-11-709(a) mandates that “[o]nly an owner
or interest holder may make a claim for return of property seized for forfeiture or
otherwise contest the forfeiture under this part.” Tennessee Code Annotated Section 39-
11-702(3) defines an “owner” as “a person, other than an interest holder, who has an
interest in the property.” An interest holder is defined as “a secured party within the
meaning of § 47-9-102(a), a mortgagee, lien creditor, one granted a possessory lien under
law, or the beneficiary of a security interest or encumbrance pertaining to an interest in
property, whose interest would be perfected against a good faith purchaser for value.”
Tenn. Code Ann. § 39-11-702(2). Thus, only owners or interest holders have standing to
contest forfeiture proceedings.
Nothing in the trial court’s written order entered December 11, 2013 indicates that
it found that Appellees had met their burden to prove standing, despite the fact that the
issue of standing was raised at the November 4, 2013 hearing. Without proving standing,
Appellees had no right to contest the forfeiture due to the alleged procedural irregularities
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that occurred contemporaneously with the seizure. Appellees argue in their appellate
brief, however, that “ownership of the horses is unquestioned” based on the fact that the
Appellees were named in the forfeiture complaint as the owners of the horses. A close
reading of the forfeiture complaint does not support Appellees’ assertion. Instead, the
forfeiture complaint states that:
The State has reason to believe that the horses known as
“Paroled in the Night” and “Mucho Bueno” may be owned
by Floyd Sherman, Beverly Sherman, 2536 Oak Manor Dr.,
Dallas TX, 75230, and/or Kelly Sherman, 8631 Cherry Hill
Drive, Dallas TX, 75243-7027. The State does not waive the
requirement that any claimant to the seized horses must
show standing pursuant to Tenn. Code Ann. § 39-11-
708(c).
(Emphasis added). Thus, the State clearly reserved the issue of the Appellees’ standing to
contest the forfeiture. Consequently, the burden remained on the Appellees to establish
their standing to contest the forfeiture action.
A review of the record on appeal reveals that the Appellees have failed to meet
that burden at this time. First, we note that Appellees never filed a show cause motion
pursuant to Tennessee Code Annotated Section 39-11-709(d), which would have required
the trial court to schedule a hearing on the issue of standing. Instead, the Appellees filed a
motion to dismiss the forfeiture complaint due to several alleged procedural irregularities
with the seizure. While the Tennessee Rules of Civil Procedure certainly authorize the
Appellees to file a motion to dismiss, that filing does not relieve Appellees of their
burden to prove standing to contest the forfeiture. Indeed, as previously discussed, this is
not the typical case wherein an action is filed against an individual who would possess
the right to seek dismissal. Instead, here, the defendant is the property and the only
avenue for the claimant to obtain dismissal of the action is to first establish the standing
to contest the action. By seeking to dismiss the complaint without first establishing the
right to do so, the Appellees “put[] the proverbial cart before the proverbial horse.” In re
Estate of Martin, No. M2011-00901-COA-R3-CV, 2013 WL 2325864, at *4 (Tenn. Ct.
App. 2013).
Appellees suggest in their brief, however, that the trial court converted their
motions to dismiss into motions for summary judgment by considering matters outside
the pleadings, see Moore v. State, 436 S.W.3d 775, 783 (Tenn. Ct. App. 2014), and that
this Court can likewise consider matters outside the pleadings to hold that Appellees are
the owners of the subject horses as a matter of law. We note that the record contains
sworn affidavits from Appellees asserting that they are the owners of the subject horses,
as well as documents tending to establish that ownership. Accordingly, as we perceive it,
Appellees urge this Court to find that the issue of standing was undisputed and to proceed
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to consider the substantive arguments in this case. We respectfully decline Appellees’
invitation. First, there is no indication in the record that the trial court considered any
outside documents in granting the motions to dismiss. Thus, we cannot conclude that the
motions to dismiss were converted to motions for summary judgment. Second, as
previously discussed, nothing in the trial court’s order indicates that it resolved the issue
of standing in either parties’ favor, despite the fact that standing was raised and argued by
the State at the November 4, 2013 hearing. This Court has often stated that it will not
consider matters not first adjudicated by the trial court. See, e.g., Shaffer v. Memphis
Airport Authority, Service Management Systems, Inc., No. W2012-00237-COA-R9-CV,
2013 WL 209309, at *4 (Tenn. Ct. App. Jan.18, 2013) (“In an interlocutory appeal, as
well as in an appeal as of right, the appellate court considers only questions that were
actually adjudicated by the trial court.”); Farmers Mut. of Tennessee v. Atkins, No.
E2011-01903-COA-R9-CV, 2012 WL 982998, at *4 (Tenn. Ct. App. March 21, 2012)
(declining to consider a matter when no initial determination was made by the trial court).
Finally, we note that these affidavits were never referenced in a properly supported
motion for summary judgment pursuant to Rule 56 of the Tennessee Rules of Civil
Procedure or a show cause motion pursuant to Tennessee Code Annotated Section 39-11-
709(d). Instead, the Appellees chose to proceed with their motion to dismiss the forfeiture
complaint without first establishing the threshold issue of their standing. While the
November 4, 2013 hearing clearly included argument on whether the Appellees were
required to show standing as a threshold matter, it cannot be fairly interpreted as an
evidentiary hearing regarding Appellees’ standing. Instead, it appears that the State
merely insisted that the substantive merits of the motion could not be considered without
first having established the requisite standing of the Appellees. As previously discussed,
the State was correct to insist that Appellees’ standing was a threshold matter that was
required to be established prior to any consideration of the merits of Appellees’ motion.
Given these procedural deficiencies, we decline to hold that the affidavits and other
documents in the record establish standing at this time, as the issue of whether Appellees
can show standing by a preponderance of the evidence should be decided first by the trial
court.
Without first establishing standing, any consideration of the merits of Appellees’
motion to dismiss is premature. As the Tennessee Court of Criminal Appeals explained,
procedural irregularities in the seizure of unowned or unclaimed property are not
sufficient to dismiss a forfeiture complaint because “[f]orfeiture of unowned or
abandoned property punishes no one.” State v. Nelms, No. 03C01-9511-CC-00342, 1996
WL 692506, at *1 (Tenn. Crim. App. Dec. 4, 1996). Accordingly, without first
establishing that they are owners of the property, Appellees have no standing to raise the
alleged procedural irregularities that occurred contemporaneous to the seizure as a bar to
the forfeiture of the property.
Appellees make three final arguments in support of their assertion that they are
entitled to judgment in their favor notwithstanding their failure to properly establish
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standing. First, Appellees argue that because they were never charged with any crime
with regard to the subject horses, there is no dispute that they constitute innocent owners.
We agree that Appellees are innocent until proven guilty; however, mere innocence is
insufficient to show ownership.
Next, Appellees argue that the forfeiture proceedings ignore the purpose of Title
39, Chapter 11, Part 7, to provide a “means of deterring criminal acts committed for
financial gain through the forfeiture of profits and proceeds acquired and accumulated as
a result of such criminal activities.” Tenn. Code Ann. § 39-11-701(a). Appellees’
argument appears to contend that the forfeiture statutes cannot apply because the
forfeiture in this case does not serve this purpose. This argument is somewhat
disingenuous, however, as this is the very statutory framework that Appellees assert was
violated by the State when it seized the property. Moreover, as previously discussed, this
Court has previously held that the procedures contained in Title 39, Chapter 11, Part 7
apply to seizures of animals pursuant to Tennessee Code Annotated Section 39-11-
202(e). See Siliski, 2006 WL 1931814, at *3. Accordingly, this argument lacks merit.
Finally, Appellees argue that the horses at issue were acquired prior to the criminal
acts at issue in this case, and therefore, are exempt from forfeiture under Tennessee Code
Annotated Section 39-11-704(a), which provides:
(a) No interest in any property described in § 39-11-703(a)
shall be subject to forfeiture when one (1) of the following
conditions is established:
(1) If the owner or interest holder acquired the property
before the conduct alleged to give rise to its forfeiture; . . . .
We respectfully disagree that this allegation is sufficient to affirm the trial court’s
decision to grant the motion to dismiss. First, Appellees’ argument presupposes that they
have standing to challenge the forfeiture on the basis of their ownership of the subject
horses. Furthermore, the State contends that the exemption provided in Section 704(a) is
inapplicable to the case at bar because the property is not subject to forfeiture under
Section 703(a),3 as required by the express terms of the statute, but instead under
Tennessee Code Annotated Section 39-11-202(e). Again, this dispute was not resolved by
the trial court, despite the fact that it was raised at the November 4, 2013 hearing. As
such, we decline to resolve it for the first time on appeal. See Shaffer, 2013 WL 209309,
at *4; Atkins, 2012 WL 982998, at *4.
3
Tennessee Code Annotated Section 39-11-703(a) applies to the forfeiture of “[a]ny property, real or
personal, directly or indirectly acquired by or received in violation of any statute or as an inducement to
violate any statute, or any property traceable to the proceeds from the violation[.]”
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The trial court erred in granting the Appellees’ motion to dismiss without first
requiring the Appellees to establish standing by a preponderance of evidence. Because
this is a threshold matter, it must be resolved prior to any consideration of the substantive
issues in this appeal. Consequently, all other issues are pretermitted.
Conclusion
The judgment of the Circuit Court of Fayette County is vacated and this cause is
remanded to the trial court for all further proceedings as may be necessary and are
consistent with this Opinion. Costs of this appeal are taxed to Appellees Beverly Sherman
and Kelly Sherman, for which execution may issue if necessary.
___________________________________
ROBERT L. CHILDERS, SPECIAL JUDGE
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