United States v. Anthony J. Peters, Appeal of Walter F. Kelly and Sandra J. Hays, Forfeiture Purchasers-Appellants

777 F.2d 1294, 1985 U.S. App. LEXIS 25186

• Court: Court of Appeals for the Seventh Circuit
• Decided: December 2, 1985
• Docket: 84-2636
• Status: Published

Opinions

RIPPLE, Circuit Judge.

Walter Kelly and Sandra Hays purchased a parcel of property from the United States. The government had obtained the property through criminal forfeiture proceedings pursuant to 21 U.S.C. § 848(a)(2)(A) (1970).¹ The purchasers appeal the district court’s decision denying their motion to compel the United States to convey the property by a warranty deed. We believe the district court was correct in concluding that the United States marshal lacked the authority to convey the property by such a deed. However, we remand to permit the district court to determine whether equity requires rescission or reformation of the contract.

On May 16, 1984, pursuant to the criminal forfeiture provision of the Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. § 848 (the 1970 Act), the district court ordered Anthony J. Peters to forfeit real property located at 3370 N. Gordon Place, Milwaukee, Wisconsin. The United States then placed the forfeited property on the market and agreed to put the proceeds from the sale in an interest-bearing escrow account pending the outcome of Peters’ appeal. On July 9, 1984, Walter Kelly and Sandra Hays submitted an offer to purchase the property from the United States. The offer to purchase contained “boilerplate” language requiring conveyance by warranty deed. The chief deputy United States marshal accepted the offer to purchase. In their offer, the purchasers required court approval of the sale within ten days of acceptance. On July 24, 1984, the district court approved the sale.

Subsequent to the initial court approval, the Assets Forfeiture Office of the Department of Justice informed the assistant United States attorney handling the case that the United States could convey only a quit-claim deed to the purchasers-appellants, Kelly and Hays — regardless of what kind of deed the criminal defendant tendered to the United States in satisfaction of the forfeiture judgment.² The assistant United States attorney immediately contacted Kelly and Hays and informed them of the Department of Justice policy. Several days before the scheduled closing, he gave them notice that transfer would be by a marshal’s (quit-claim) deed.

Kelly and Hays filed a motion in the district court to compel the United States to convey the property by warranty deed. On August 28, 1984, the district judge denied that motion, holding that the marshal had no authority to convey the property by warranty deed. Kelly and Hays closed the sale and, under protest, accepted the marshal’s deed. Although the court consolidated for oral argument this appeal with the criminal appeal of Anthony J. Peters, we decide the cases separately.

The question before the court can be simply stated: Did the Congress authorize the use of a warranty deed to convey to third parties real property obtained by the United States through criminal forfeiture proceedings? While the question is straightforward, the answer is somewhat more complicated since Congress — at least at the time it enacted the statute in question in this case³ — did not express its intent in the plain wording of the statute.

While section 408 of the 1970 Act, 21 U.S.C. § 848(a)(2)(A), clearly provided for the forfeiture of the property as a result of the criminal conviction, it provided no directions for disposing of the property. No other statute cited by the parties or found through our own research provides an explicit directive on the question. Faced with this absence of explicit statutory direction, we are left to find, as best we can, Congress’ intent from other and obviously less reliable sources.

While the starting point must be the forfeiture provision itself, not only does the statutory language provide no guidance but the usual tools of statutory construction also provide little assistance. The extensive legislative history of the 1970 Act is silent on this issue. Nor does the contemporaneous legislative history of the similar forfeiture provision in the Organized Crime Control Act of 1970, 18 U.S.C. § 1963, shed any light on the matter. Neither the submissions of the parties nor our own research has revealed any cases discussing the type of deed by which forfeited property is to be conveyed. The government submits that the Department of Justice has a national policy prohibiting transfer by warranty deed. However, the government points to no regulations, directives or other material which might support such an interpretation. Our own research has also been unavailing in this regard. Under these circumstances, we can hardly characterize this “national policy” as the “longstanding interpretation given the statute by the agencies charged with its interpretation.” United States v. Clark, 454 U.S. 555, 562, 102 S.Ct. 805, 810, 70 L.Ed.2d 768 (1982). See also United States v. Markgraf, 736 F.2d 1179, 1183-84 (7th Cir.1984), cert. dismissed, — U.S. —, 105 S.Ct. 1154, 84 L.Ed.2d 308 (1985) (applying the holding in Clark).

While this dearth of information affords us no guidance, we must attempt, nevertheless, to resolve the issue before us in the manner most compatible with the intent of Congress as manifested in the statutory scheme. An examination of the forfeiture provision reveals that Congress clearly intended that the government acquire only that interest which the criminal defendant held in the property. Unless the government takes other action to perfect its interest, it can only transafer that interest which it has acquired and nothing more. Transfer under a warranty deed would require the government to assume the substantial additional obligation of vouching for the soundness of the title held by a person it has just convicted. By contrast, a marshal’s deed is equivalent to a quit-claim deed; it transfers only that interest held by the seller; it makes no guarantees. Therefore, permitting the government to transfer only by a marshal’s deed is certainly most consistent with the overall statutory scheme Congress enacted in 1970.

No doubt, Congress could have determined that public policy requires the government to assume the role of warrantor. Transfer by warranty deed makes the property more marketable, more valuable, and more easily transferred in the future. Indeed, in the newly enacted section 303 of the Comprehensive Crime Control Act of 1984, 21 U.S.C. § 853(n),⁴ Congress did manifest such a policy choice. This amendment to the criminal forfeiture provision establishes an extensive procedure for protecting the interests of third parties. Following written notice, notice by publication, and hearings, the government acquires “clear title to the property that is the subject of the order of forfeiture and may warrant good title to any subsequent purchaser or transferee.” 21 U.S.C. § 853(n)(7).⁵ The structure of the new provision protects both the third party’s and the government’s interest since after complying with the statutory procedure, the government acquires clear title. Thus, the risk the government assumes in conveying a warranty deed under the amended statute is far less than the risk which would be imposed by a warranty deed under the old statute before us today. The old scheme contains none of the devices set forth in the new statute to minimize the risk assumed by the United States in conveying by warranty deed. We think it highly improbable that Congress was willing to assume a risk in 1970 that it was clearly unwilling to assume in 1984. In short, we simply are unwilling to assume, absent an explicit legislative directive, that the Congress expected the United States to undertake such a liability. Our examination of the new provision and its legislative history convinces us that this amendment was not designed to clarify existing law. Rather, it reflects a new legislative policy decision with respect to the allocation of risks in the transfer of property obtained by the government through criminal forfeiture proceedings. Indeed, the existence of this new statute makes it abundantly clear that, had Congress intended the government to convey property by a warranty deed under the earlier statute, it would have used more precise language.

The appellants further argue that, even if the statute did not authorize the transfer of property by warranty deed, such a transfer ought to be judicially mandated in this case. The appellants’ offer to purchase contained the provision for transfer by warranty deed. The chief deputy United States marshal accepted the offer on behalf of the United States and the district judge approved the sale. The chief deputy or deputy marshal is authorized to execute a deed or transfer title to a purchaser on behalf of and in the name of the United States marshal. 28 C.F.R. § 0.156 (1984). The United States marshal’s office handles all judicial sales of property acquired by the United States through operation of law. However, the duties of an officer selling property at a judicial sale are ministerial. He must observe requirements of the applicable law. Quinn v. S.S. Jian, 235 F.Supp. 975, 977 (D.Md.1964). The government cannot be placed at risk each time one of its agents fails to follow a government policy or regulation. Schweiker v. Hansen, 450 U.S. 785, 790, 101 S.Ct. 1468, 1471, 67 L.Ed.2d 685 (1981). The marshal’s acceptance of a purchase offer containing a provision for transfer by a warranty deed was beyond the scope of his power and therefore did not bind the United States.

While the district judge approved the sale, we do not believe that, under the circumstances of this case, this action es-topped the government from later contesting whether a warranty deed must be issued. Nothing in the record indicates that the court or the parties focused, at the time of the initial judicial approval, on the warranty provision in the offer to purchase. Moreover, the court’s action must be evaluated in light of the fact that, approximately one month later, when both parties argued the issue before him, the same district judge unequivocally ruled that the marshal was not empowered to issue a warranty deed. Under those circumstances, we cannot say that the district judge abused his discretion in declining to order specific performance by the government through the delivery of a warranty deed.⁶

Although Kelly and Hays knew before the closing that the conveyance would be by a marshal’s deed, the record is unclear as to whether the district court or the parties considered rescission or reformation of the contract as a remedy still available to the purchasers. We believe that justice requires that we remand this matter to the district judge to permit him to consider any equitable relief in the way of rescission or reformation which he may deem appropriate. We express no opinion as to the appropriateness of any particular remedy — or even as to whether any relief at all is appropriate. We leave those matters in the hands of the district court.

So ordered.

1 . In 1984, the Congress replaced 21 U.S.C. § 848, the section at issue in this appeal, with 21 U.S.C. § 853. This new section permits the government, as long as it complies with the procedures set forth in the statute, to grant a warranty deed to third party purchasers. The new statute took effect October 12, 1984.

2 . Subsequently, on August 29, 1984, Anthony J. Peters agreed to convey to the United States a warranty deed on the property located at 3370 N. Gordon Place.

3 . See supra note 1.

⁴

5 . No question with respect to the constitutional adequacy of these provisions is before us in this case and therefore we express no view on that question.

6 . The district judge was certainly within his authority, granted by 21 U.S.C. § 848, in taking such actions. We also note that 28 U.S.C. § 2001(a) (1949) directs that sales of real property “shall be upon such terms and conditions as the court directs.” It is well established that confirmation of a judicial sale rests in the sound discretion of the district court and will not be disturbed on appeal except for abuse. United States v. Branch Coal Corp., 390 F.2d 7, 10 (3d Cir.1968); United States v. Heasley, 283 F.2d 422, 426 (8th Cir.1960).