Opinion
98-CV-0060E(Sc)
September 7, 2000
Attorneys For The Plaintiff, Richard D. Kaufman, Esq., Asst. United States Attorney, Buffalo, NY
Attorneys For The Defendant, Frank LoTempio, Sr., Esq., LoTempio Brown, Buffalo, NY
MEMORANDUM and ORDER
Plaintiff commenced January 23, 1998 a civil in rem forfeiture action pursuant to 21 U.S.C. § 881 against the premises and real property located at 191 Whitney Place, Buffalo, N.Y. Michael A. Nicholopoulos, Sr. ("Claimant"), the holder of the legal title to said property, has filed a claim contesting the forfeiture. Presently before this Court is Plaintiff's motion to (1) dismiss the claim and answer of Claimant pursuant to Rule 37 of the Federal Rules of Civil Procedure ("FRCvP") for failure to comply with discovery directives, (2) dismiss the claim pursuant to FRCvP 12(c) and/or grant Plaintiff summary judgment pursuant to FRCvP 56 on the ground that Claimant lacks standing or (3) grant Plaintiff summary judgment on the ground that there is no genuine issue of material fact and Plaintiff is entitled to judgment as a matter of law. For the reasons given below, Plaintiff's motion to dismiss the claim and grant summary judgment will be granted.
To establish Article III standing, Claimant must demonstrate a sufficient interest in the property to create a "case or controversy." See U.S. v. Premises at 4492 S. Livonia Rd., Livonia, 889 F.2d 1258, 1262 (2d Cir. 1989); see also U.S. v. Premises and Real Property, 868 F. Supp. 513, 518 (W.D.N.Y. 1994), aff'd, 113 F.3d 310 (2d Cir. 1997). Mere ownership or possession may be evidence of standing but the ultimate inquiry regarding standing is an actual injury of a party. See United States v. Cambio Exacto, S.A., 166 F.3d 522, 527 (2d Cir. 1999). To demonstrate standing under Article III, a party must allege "distinct and palpable injury to himself." Torres v. $36,256.80 U.S. Currency, 25 F.3d 1154, 1157 (2d Cir. 1994) (citing Warth v. Seldin, 422 U.S. 490, 501 (1975)). The Second Circuit Court of Appeals has held that a "straw owner" who may hold legal title to a property but in reality is holding it for someone else does not have standing. See Premises, supra at 312.
To establish standing in a forfeiture case a claimant must demonstrate, by the preponderance of the evidence, either a colorable ownership interest or a colorable possessory interest in the defendant property. A claim of ownership with supporting evidence is typically enough to establish standing. See Torres, at 1158. However, "[p]ossession of mere legal title by one who does not exercise dominion and control over the property is insufficient * * * to establish standing." Premises, at 518 (citing United States v. One Parcel of Land, 902 F.2d 1443, 1444 (9th Cir. 1990). The rationale for this rule is to prevent individuals engaged in illegal activities from hiding their assets and circumventing the forfeiture laws by placing the legal title to property in another's name. See, e.g., Premises, at 518.
In the instant case, Claimant obtained the title to 191 Whitney Place from Francesca Mesi (the mother of his son Ricky's girlfriend) on December 12, 1994. Statement of Undisputed Facts ¶ 26. Claimant alleges that he paid Mesi $10,000 cash for the property. See Nicholopoulos Dep. at 54. The deed recorded in the Erie County Clerk's Office, however, shows that only nominal consideration in the amount of $1 was paid. See Notice of Lis Pendens, Ex. B. On the same day, Claimant provided his son with a power of attorney to control all aspects of the defendant property despite his admission that he was aware that his son Ricky had an extensive criminal history and had been incarcerated multiple times. See Nicholopoulos Dep. at 30-35. During the summer 1997, Ricky had used the property to store cocaine and to conduct sales of the illegal drug. See Statement of Undisputed Facts ¶ 1. He had been arrested August 2, 1997 and was later convicted in New York State Supreme Court for criminal possession of a controlled substance and criminal possession of a weapon, for which he is currently serving a prison term of 25 years to life. See Statement of Undisputed Facts ¶¶ 6-7.
Claimant argues that he purchased the property as an investment but that Ricky — or Ricky's girlfriend Mary Mesi — controlled the day-to-day operations due to his age and disability. See Claimant's Response ¶ 8. In his deposition, claimant added that he bought the house to provide for his son's financial security. Nicholopoulos Dep. at 43, 68, 69. He admitted that he gave the property to his son through the power of attorney: "I said, Ricky, you are in charge of this here stuff now, this property. It's yours and good luck." Id. at 69. Claimant fully admitted that he had not received any of the rental income from the property. Id. at 72. This is supported by a review of his tax returns for 1994 through 1998, in which line 17 — "Rental real estate, royalties, * * *" — has been left blank. See Reply Mem. Ex. A. Ricky also had the responsibility of dealing with the tenants, collecting the rent, paying the taxes and insurance and making repairs on the property. See Nicholopoulos Dep. at 72-77, 108. Claimant has been unable to produce any receipts or documents relating to the property except for a receipt book for 1999 and a receipt for some plumbing work done on the property. See id. at 84, 90.
Local Rule of Civil Procedure 7.1(e) states, in relevant part, "Absent leave of court * * *, upon any motion filed pursuant to [FRCvP] 12 [or] 56 * * *, the opposing party shall file and serve with the papers in opposition to the motion an answering memorandum and a supporting affidavit. Failure to comply with this subdivision may constitute grounds for resolving this motion against the non-complying party." Claimant has filed only two statements signed by his attorney. Notwithstanding such procedural non-compliance by Claimant, this Court will consider the merits of the instant case.
The response papers of Attorney Frank L. LoTempio, Jr., state that Claimant received the rental payments but such is completely unsupported by the record and may be disregarded. See Claimant's Response ¶¶ 5, 18.
Accordingly, this Court finds that the record does not support Claimant's contention that he exercised dominion and control over 191 Whitney Place so as to have Article III standing to make a claim contesting forfeiture of the property. As indicated above, he has not lived in or even entered the structure, received any rental income, made the property tax payments, paid for the insurance, collected the rent or inspected the property. Ricky through his power of attorney, granted on the same day as the purchase of the property by Claimant, has exercised complete control over the property. Ricky acted as true owner of the property and Claimant was only a straw owner with legal title. As stated by Claimant, "I just told [Ricky], you take care of it from now on and let me alone, it's yours and all yours." Nicholopoulos Dep. at 68. Consequently, the real injury felt by the forfeiture of the property would be to Ricky and the only injury Claimant would suffer in the instant case is the knowledge that his son would forfeit his interest in the defendant property. A straw owner does not suffer any injury when the property is taken and therefore does not have Article III standing. See Cambio Exacto, at 527. The Plaintiff's motion for summary judgment will therefore be granted because Claimant does not have Article III standing to make a claim for the defendant property.
This Court is cognizant of the argument of Claimant that, due to his age and health, he was not able to carry out the day-to-day activities in managing the property. Nonetheless, such alleged infirmities would not have inhibited his overseeing, for example, tax and insurance payments. Nothing of the sort has been alleged in the instant claim.
Although the Plaintiff has styled this as a motion for judgment on the pleadings or, in the alternative, for summary judgment, inasmuch as matters outside the pleadings ( e.g., Claimant's deposition) are presented for this Court's consideration, this motion must be treated as one for summary judgment. See FRCvP 12(c).
Even if Claimant had standing, Plaintiff would be entitled to summary judgment inasmuch as Claimant has not shown the existence of any genuine issue of material fact precluding Plaintiff from being entitled to judgment as a matter of law. Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FRCvP 56(c). A factual dispute is material if its resolution "might affect the outcome of the suit under governing law" and is genuine if it reasonably could be resolved in favor of any party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-250 (1986). Evidence submitted by the non-moving party is to be believed and all justifiable inferences are to be drawn in his favor. See id. at 255. When the moving party has carried its burden, "conclusory statements," conjecture, or speculation by the party resisting the motion will not defeat summary judgment. Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir. 1996). To prevail herein, the Plaintiff must show that there is probable cause for forfeiture and that Claimant does not fall within the "innocent owner exception to 21 U.S.C. § 881 (a)(7). The record before this Court shows that forfeiture based on Ricky's illegal drug distribution activity is proper under the statute.
Claimant does not dispute the fact that illegal narcotics activity was taking place at the defendant property but argues that he was unaware of such and that he has an innocent owner defense to the forfeiture of the property. See Claimant's Response at ¶¶ 19-20. According to 21 U.S.C. § 881,
"[t]he following shall be subject to forfeiture to the United States and no property right shall exist in them: * * *(7) All real property, including any right, title, and interest (including any leasehhold interest) in the whole is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this subchapter punishable by more than one year's imprisonment."
It is clear that the illegal cocaine distribution activity falls within this definition. The innocent owner provision applicable at the relevant times provides "no property shall be forfeited * * * by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner." 21 U.S.C. § 881(7).
Public Law 106-185, § 2(c)(2) of April 25, 2000, deleted such provision from the statute. It is applicable only to civil forfeiture proceedings commenced 120 days after April 25, 2000. Therefore the statute as quoted is relevant to the instant case.
In interpreting the innocent owner provision, the Second Circuit Court of Appeals has stated that, "[u]nless an owner with knowledge can prove every action, reasonable under the circumstances, was taken to curtail the drug-related activity, consent is inferred and the property is subject to forfeiture." U.S. v. All Right, Title and Interest in real Property, 77 F.3d 648, 657 (2d Cir. 1996) (citing U.S. v. Certain Real Property, 922 F.2d 129 (2d Cir. 1990)).
Emphasis added.
The circumstances of the instant case require elaboration. In Claimant's unsworn response, it is alleged that he is a disabled veteran, has heart and high blood pressure problems and is a "recluse who does not venture outside his residence unless absolutely necessary." Claimant's response ¶ 5. these assertions are not supported by any medical evidence or affidavits from any health professional but are only statements of Claimant's attorney based in part on Claimant's deposition testimony. After giving all due weight to Claimant's health considerations, this Court finds that there is no genuine issue of material fact and that Claimant does not have a viable innocent owner defense to the forfeiture of defendant property. Claimant cannot prove, by a preponderance of the evidence, that narcotics activity on the property occurred without his know ledge or consent. See United States v. Milbrand, 58 F.3d 841, 844 (2d Cir. 1995). Claimant's professed ignorance regarding the involvement of his son — who had a lengthy criminal history dating back to about 1975 — in the sale of illegal drugs does not satisfy the innocent owner defense inasmuch as there is no genuine issue but that he was willfully blind. See U.S. v. One Parcel of Property, 985 F.2d 70, 72 (2d Cir. 1993). Claimant's deposition testimony indicates a willingness to stick his head in the proverbial sand and ignore activities, criminal or not, that were ongoing at his property — "I didn't have nothing to do with nothing." Nicholopoulos Dep. at 75. Claimant failed to any investigation of the inside of the building, caution his son that the power attorney would be revoked if he conducted illegal activities or review the records and receipts for the property. Claimant's allegation that he was "unable to visit the defendant house on a regular basis in the past few years" due to his age and health does not satisfy his burden of production under Kulak and is not sufficient to withstand the evidence adduced by Plaintiff in the form of affidavits and deposition testimony that show that Claimant was willfully blind and not an innocent owner. Therefore, even if Claimant had standing, the record before this Court shows that there is no genuine issue of material fact and that Plaintiff is entitled to judgment as a matter of law.
Accordingly, it is hereby ORDERED that, inasmuch as Claimant Michael Nicholopoulos has no standing to contest the forfeiture of defendant property, his claim is dismissed, that summary judgment shall be entered in favor of Plaintiff, that 191 Whitney Place shall be forfeited to the United States and that this case shall be closed.