United States v. 2687 S. Deframe

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
FEB 24 2000
TENTH CIRCUIT
PATRICK FISHER
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee, No. 98-1390
v. D. Colo.
2687 S. DEFRAME CIRCLE,
LAKEWOOD, COLORADO, with all (D.C. No. 92-D-1869)
improvements, appurtenances,
fixtures, and attachments thereon, and
all rents, profits, and proceeds
therefrom,
Defendant,
DONALD F. BIRKHOLZ, JR.,
Claimant-Appellant,
and
DOLORES A. BIRKHOLZ;
SHEARSON LEHMAN MORTGAGE
CORPORATION, as servicing agent
for Security Pacific National Bank,
Claimants.
ORDER AND JUDGMENT *
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
(continued...)
Before HENRY , LUCERO , and MURPHY , Circuit Judges.
This appeal arises out of the civil in rem forfeiture of 2687 South Deframe
Circle, Lakewood, Colorado. The district court granted the government’s motion
for Entry of Judgment and Final Order of Forfeiture as to the appellant, Donald
Birkholz, Jr., on the grounds that Mr. Birkholz’s Answer and Affirmative
Defenses to the forfeiture previously had been stricken for failing to comply with
the procedural requirements of Rule C(6) of the Supplemental Rules Regarding
Certain Admiralty and Maritime Claims. Mr. Birkholz argues on appeal that his
failure to comply with Rule C(6) constitutes excusable neglect and that, therefore,
the judgment against him should be set aside. For the reasons discussed below,
we affirm the district court’s decision to enter a final order of forfeiture as to Mr.
Birkholz’s interest in the defendant property.
I. BACKGROUND
On February 21, 1992, Mr. Birkholz pleaded guilty to engaging in a mail
fraud scheme, in violation of 18 U.S.C. § 1345. He was sentenced to twenty-
*
(...continued)
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
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seven months imprisonment and ordered to pay restitution to the victims of his
scheme in the amount of $60, 869.89.
On September 22, 1992, the government filed a Verified Complaint for
Forfeiture In Rem against 2687 South Deframe Circle, Lakewood, Colorado (“the
defendant property”), alleging that the property had been used to facilitate money
laundering and mail fraud, and represented the proceeds of those activities. On
the same day Magistrate Judge Borchers signed an Order for Arrest of Property In
Rem. Mr. Birkholz was served with the warrant on October 22, 1992.
On October 30, 1992, Mr. Birkholz and Delores Birkholz (Mr. Birkholz’s
mother), proceeding pro se, filed an unverified “Claim by Property Owner.” On
December 4, 1992, the owners filed an untimely “Notice of Appearance,” and on
December 29, 1992, Mr. Birkholz filed an “Answer and Affirmative Defenses”
(the Answer). The government then filed a motion to strike the Answer, arguing
that the initial claim was unverified and the Answer had not been filed within the
time constraints of Rule C(6) of the Supplemental Rules Regarding Certain
Admiralty and Maritime Claims (“Supplemental Rule C(6)”). In reply, Mr.
Birkholz filed a pro se motion in opposition to the government’s motion.
On August 31, 1994, Judge Nottingham conducted a hearing on these
outstanding motions, as well as others. The court allowed Mr. Birkholz, still
proceeding pro se, to present the merits of his defense to the forfeiture. Mr.
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Birkholz’s sole defense was that he purchased the defendant property with
legitimate funds and not with proceeds from any illegal activities. 1
He further
explained that he could prove this defense with receipts of legitimate sales
transactions which were contained in five boxes of records that remained in the
government’s possession after being subpoenaed during Mr. Birkholz’s criminal
case. Judge Nottingham, having presided over Mr. Birkholz’s criminal case,
stated that Mr. Birkholz had “made various claims as to what those records
contained” when challenging “how much restitution was owed, and those claims
proved to be false.” Aplt’s App., Tr. of Aug. 31, 1994 Motions Hr’g, at 18.
Having found Mr. Birkholz presented no meritorious defense to the forfeiture, the
court issued an oral ruling granting the government’s motion to strike the Answer
for failing to comply with the procedural requirements of Supplemental Rule
C(6). Judge Nottingham agreed with Ms. Birkholz’s attorney’s characterization
of his ruling that Mr. Birkholz was now “out of the case in asserting any claim
whatsoever.” Aplt’s App., Tr. of Aug. 31, 1994 Motions Hr’g, at 19. However,
1
Mr. Birkholz raises a variety of alternative defenses to the forfeiture
action in his appellate brief that were not presented to the district court when it
struck Mr. Birkholz’s Answer. Accordingly, we do not consider these arguments
here. See Green v. Dorrell, 969 F.2d 915, 917 (10th Cir. 1992) (stating that pro
se litigants must follow the same rules of procedure that govern other litigants);
see also Ferris v. Santa Clara County, 891 F.2d 715, 719 (9th Cir. 1989).
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Judge Nottingham did not issue a final written judgment of forfeiture as to Mr.
Birkholz.
On September 8, 1994, the United States filed a Motion for Entry of
Judgment and Final Order of Forfeiture as to Certain Parties and Interest pursuant
to Federal Rule of Civil Procedure 54(b). It requested the court to enter a final
order of forfeiture as to Mr. Birkholz. On February 2, 1995, Mr. Birkholz filed a
pro se Motion to Dismiss the In Rem Action.
The district court referred these motions to a magistrate judge. The
magistrate judge recommended that Mr. Birkholz’s motion to dismiss be denied
on grounds that Judge Nottingham had stricken Mr. Birkholz’s Answer at the
August 31, 1994 hearing and that, as a result, Mr. Birkholz had no standing to
assert any further claims in this case. Finding no reason for delay in entering
final judgment as to Mr. Birkholz’s claims, the magistrate judge also
recommended that the court grant the government’s Motion for Entry of Judgment
and Final Order of Forfeiture as to Mr. Birkholz.
On August 21, 1998, Judge Wiley Y. Daniel issued an Order Affirming and
Adopting the Magistrate Judge’s Recommendation. He agreed that, pursuant to
Judge Nottingham’s in court ruling striking Mr. Birkholz’s Answer and
Affirmative Defenses as untimely, Mr. Birkholz had no right to assert any further
claims. Judge Daniel also noted that, even if the court were to review the merits
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of Mr. Birkholz’s claim, it would still fail. He found that Mr. Birkholz’s primary
claim, as asserted in his Motion to Dismiss the In Rem Action, was that the civil
forfeiture constituted punishment and, therefore, violated the Double Jeopardy
Clause of the Fifth Amendment. He rejected this claim, reasoning that it was
precluded by United States v. Ursery , 518 U.S. 267, 291-92 (1996). Judge
Daniel, therefore, granted the government’s Motion for Entry of Judgment and
Final Order of Forfeiture as to Mr. Birkholz. 2
II. DISCUSSION
Supplemental Rule C(6) provides that a claimant “shall file a claim within
10 days after process has been executed, or within such additional time as may be
allowed by the court, and shall serve an answer within 20 days after the filing of
the claim.” Any claim filed must also be verified in order to protect against false
2
The government initially argued that Mr. Birkholz’s appeal to this court
is untimely because it was lodged on October 15, 1998, over four years after his
claim was stricken by Judge Nottingham at the August 31, 1994 hearing.
However, the government subsequently sought to withdraw this argument.
We grant the government’s request to withdraw its jurisdictional argument.
The procedural posture in this case is unique. Although Judge Nottingham orally
struck Mr. Birkholz’s Answer as untimely, he never entered a final judgment of
forfeiture as to Mr. Birkholz. Thus, the time for appeal did not begin to run
against Mr. Birkholz until August 21, 1998, when Judge Daniel issued the written
order granting the government’s Motion for Entry of Judgment and Final Order of
Forfeiture as to Mr. Birkholz. See Fed. R. Civ. P. 58, 54(b) . The appeal,
therefore, is timely. See Fed. R. App. P. 4(a)(1)(B) .
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claims. See United States v. 51 Pieces of Real Property, Roswell, N.M. , 17 F.3d
1306, 1318 (10th Cir. 1994).
Here, the warrant was executed on October 22, 1992, and Mr. Birkholz
filed a claim to the property on October 30, 1992. See Aplt’s App., doc. 5.
Although the claim was timely, it was unverified. See id. Mr. Birkholz then
failed to file an answer until December 29, 1992, over a month beyond the
twenty-day time limit. See id. , doc. 12.
In his appellate brief (filed by counsel), Mr. Birkholz “asks that this Court
set aside the default judgment and remand the case back to the District Court so
[he] can file an answer in the forfeiture action.” Aplt’s Br. at 19. Specifically, he
argues that the following three factors warrant setting aside the default judgment:
(1) his failure to comply with the procedural requirements of Supplemental Rule
C(6) was not wilfull, but the result of excusable neglect, (2) setting aside the
default judgment would not prejudice the government, and (3) he has meritorious
defenses to forfeiture of the defendant property.
We review a district court’s denial of a late claim in a civil forfeiture action
for abuse of discretion. See 51 Pieces of Real Property , 17 F.3d at 1318. For the
reasons set forth below, we conclude there was no such abuse here.
First, courts have held that “[i]t is not an abuse of discretion for the district
court to require strict compliance with Supplemental Rule C(6).” United States v.
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One Parcel of Property , 959 F.2d 101, 104 (8th Cir. 1992); see also United States
v. One Dairy Farm , 918 F.2d 310, 312 (1st Cir. 1990); United States v. United
States Currency in the Amount of $2,857.00 , 754 F.2d 208, 212-13 (7th Cir.
1985); United States v. One 1978 Piper Navajo PA-31 Aircraft , 748 F.2d 316, 319
(5th Cir. 1984). There is no dispute that Mr. Birkholz failed to comply with the
requirements of Supplemental Rule C(6) by filing an unverified claim and a late
answer. See United States v. $3, 817.49 , 826 F.2d 785, 787 (8th Cir. 1987)
(affirming district court’s denial of motion to set aside default judgment where
appellant filed an unverified claim and a late answer). Additionally, the fact that
Mr. Birkholz was proceeding pro se at the time he filed the claim to the defendant
property does not, by itself, excuse his noncompliance with the procedural rules.
See Green , 969 F.2d at 917; United States v. Three Parcels of Real Property , 43
F.3d 388, 392 (8th Cir. 1994) (“Procedural default is not excused merely because
claimants are proceeding pro se.”).
Second, this is not a case in which a balance of the equities favors
mitigation and warrants a more liberal construction of Supplemental Rule C(6).
See 51 Pieces of Real Property . 17 F.3d at 1318 (citing United States v.
Borromeo , 945 F.2d 750, 753 (4th Cir. 1991)); see also United States v.
Beechcraft Queen Airplane Serial No. LD-24 , 789 F.2d 627, 630 (8th Cir. 1986)
(stating that a more liberal approach would be appropriate in light of mitigating
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circumstances). Although Mr. Birkholz may have made a good faith effort to
comply initially with Rule C(6), the government would be severely prejudiced if
Mr. Birkholz were allowed to file a claim almost eight years after the government
filed its complaint for in rem forfeiture of the defendant property. See United
States v. Currency in the Amount of $103, 387.27 , 863 F.2d 555, 561 (7th Cir.
1988) (citing United States v. One (1) 1979 Mercedes 40 SE , 651 F.Supp. 351,
353 (S.D.Fla. 1987)) (stating that prejudice to the government is a factor to be
considered when deciding whether to allow a litigant to file a late claim).
Moreover, Mr. Birkholz has failed to direct our attention to any portion of the
record that refutes Judge Nottingham’s rejection of his primary defense to the
forfeiture: that he paid for the defendant property with legitimate funds. Cf. One
1978 Piper Navajo PA-31 Aircraft , 948 F.2d at 319 (finding conclusory
allegations of a meritorious defense insufficient to excuse failure to comply with
procedural rules governing forfeiture).
Also, Mr. Birkholz was properly served and he had actual notice of the
verified forfeiture complaint. See Borromeo , 945 F.2d at 753. In his motion
opposing the government’s motion to strike his Answer, Mr. Birkholz stressed
that he was incarcerated at the time the forfeiture complaint was filed. See Aplt’s
App., doc. 14. However, he admits that he received a copy of the verified
complaint for forfeiture in rem and the warrant for arrest of the property. See id.-9-
The warrant for arrest of the property in rem explicitly stated the proper time
requirements for filing a claim and answer. See id. at doc. 2.
Finally, the insufficiency of Mr. Birkholz’s untimely Answer (even
construed with the utmost liberality), see One (1) 1979 Mercedes 450 SE , 651 F.
Supp. at 353; Aplt’s App., doc. 12, the fact that Mr. Birkholz never requested an
enlargement of time to file his Answer, see id. , and the lack of any indication that
the government encouraged the delay or misled Mr. Birkholz, see Borromeo , 945
F.2d at 753, also support the court’s initial decision to strike the Answer for
failing to comply with Rule C(6) and its subsequent decision to enter a final order
of forfeiture as to Mr. Birkholz’s interest in the property.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s decision to enter
a final order of forfeiture as to Mr. Birkholz on the grounds that the court had
already struck his claim for failing to comply with the procedural requirements of
Rule C(6).
Entered for the Court,
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Robert H. Henry
Circuit Judge
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