M.w. Braxton, Plaintiff-appellant, v. United States of America, Defendant-appellee, 858 F.2d 650 (11th Cir. 1988)

This case began as an action to quiet the title to a 690-acre peanut farm in Jackson County, Florida. M.W. Braxton, the appellant, claimed title to the farm under a warranty deed executed in December 1980. Braxton brought this suit to remove the cloud on his title which was created by an order of the district court entered in October 1981, at the conclusion of a criminal prosecution under the RICO¹  statute, forfeiting the farm to the United States.²  The district court dismissed Braxton's suit for want of subject matter jurisdiction, and Braxton appealed.

While Braxton's appeal was pending, Congress amended RICO's forfeiture provisions to provide that anyone claiming an interest in property forfeited to the United States could petition the district court to determine the validity of his interest. See Comprehensive Crime Control Act of 1984, Pub. L. No. 98-473, Sec. 302, 98 Stat. 1837, 2040 (1984) (now codified at 18 U.S.C. § 1963(l) (2) (Supp. IV 1986)).³  The parties then asked us to vacate the district court's dismissal and to remand the case for further proceedings under the amended forfeiture provisions. We did so, United States v. Cobb, 762 F.2d 1021 (11th Cir. 1985) (unpublished), and, on remand, Braxton petitioned the district court pursuant to 18 U.S.C. § 1963(l) (Supp. IV 1986)⁴  to set aside the forfeiture of the farm.

In his petition, Braxton alleged, as required by section 1963(l) (6) (B), that he was "a bona fide purchaser for value of the [peanut farm] and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture" because of the smugglers' activities in violation of 18 U.S.C. § 1962(d).⁵  The Government, in its response, admitted that Braxton was in possession of a warranty deed purporting to give him title to the farm, but denied that he had purchased the farm for value. According to the Government, Braxton had paid nothing for the farm and had been holding title to the property as the smugglers' nominee. The Government also denied that Braxton had no cause to believe that the property was subject to forfeiture at the time he acquired his warranty deed.

Following a nonjury trial, the district court announced its findings of fact and conclusions of law from the bench. The court found that Braxton had been holding title to the farm as the smugglers' nominee,⁶  and therefore that he failed to prove that he was "a bona fide purchaser for value" of the farm. The court also concluded that Braxton failed to prove that he took title to the property without knowledge that it was subject to forfeiture as a result of its use in the drug smuggling venture. The court accordingly dismissed Braxton's petition.

After the court rendered its decision, the Government requested the court to enter a money judgment against Braxton in a sum equivalent to the fair rental value of the farm during the period that Braxton occupied the farm following its forfeiture to the United States. The court stated that it would consider the Government's request at a subsequent hearing, to be held two months later, and declared a recess in the proceeding until that hearing.

Prior to the hearing, Braxton moved the court to reconsider its decision dismissing his petition. He also objected, on alternative grounds, to any further consideration of the Government's claim for rent. Braxton's first ground was that RICO provided no basis for charging him rent; his second ground was that the Government had waived its claim by not raising it earlier in the proceeding.

The court summarily denied Braxton's motion to reconsider. Then, after hearing argument of counsel on the rent issue, it ruled for the Government; the court concluded that RICO's forfeiture provisions authorized it to make equitable adjustments between the parties and thus to require Braxton to pay a reasonable rent. After announcing its ruling, the court recessed the hearing for twelve days to enable the parties to marshall their evidence on the question of what constituted a reasonable rent for the period that Braxton occupied the farm after its forfeiture. When the hearing resumed, the parties put on their evidence, and the court found that $59,055.97 constituted a reasonable rent; it gave the Government judgment for that amount, plus interest, and Braxton took this appeal.

After Braxton lodged this appeal, the district court, in a separate proceeding brought by the mortgagee of Braxton's grantee against that grantee, Braxton, and the United States, entered a final judgment of foreclosure in favor of the mortgagee. The parties agree that that judgment had the effect of extinguishing their respective claims to the subject property. Braxton's claim for quiet title relief is therefore moot.⁷  See DeFunis v. Odegaard, 416 U.S. 312, 316, 94 S. Ct. 1704, 1705-06, 40 L. Ed. 2d 164 (1974); North Carolina v. Rice, 404 U.S. 244, 246, 92 S. Ct. 402, 404, 30 L. Ed. 2d 413 (1971).

The controversy concerning the validity of Braxton's warranty deed is still live, however, but in a different context--the Government's claim for rent, which turns on the validity of that deed. Specifically, two questions are presented: whether, as the district court found, Braxton held title to the farm as the drug smugglers' nominee, and, if so, whether applicable substantive law requires Braxton to pay the Government rent for occupying its land. We address these questions in parts B. and C. below.

We review the district court's finding that Braxton held title to the farm as the smugglers' nominee under the clearly erroneous standard. See McCleskey v. Kemp, 753 F.2d 877, 898 (11th Cir. 1985) (en banc), aff'd 481 U.S. 279, 107 S. Ct. 1756, 95 L. Ed. 2d 262 (1987). Therefore, unless, after reviewing all the evidence presented at trial, we are "left with the definite and firm conviction that a mistake has been committed," the district court's finding must stand. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S. Ct. 525, 542, 92 L. Ed. 746 (1948); see also McCleskey, 753 F.2d at 898.

The evidence before the district court revealed the following. During the latter part of the 1970's, Clifford B. Wentworth, Clyde W. Cobb, and Thomas D. Abbey were involved in a large scale marijuana smuggling and trafficking venture; they smuggled Colombian marijuana into the United States through the Florida Panhandle and distributed it to various parts of the country. In the late fall of 1977, these smugglers found themselves in need of a "stash house," a storage place and distribution center for the marijuana, in the Jackson County area, to store a load of marijuana that was about to be off-loaded in the Gulf of Mexico. Believing that a farm would provide an ideal storage site, Cobb instructed Wentworth, who was an attorney, to find a suitable farm and to handle its purchase. Wentworth, in turn, contacted Braxton, his father-in-law, who had a farm in Jackson County and was likely to know of any farms for sale in the area. Braxton told him about several farms that were on the market, including the one in this case which was adjacent to Braxton's farm.

Cobb decided to purchase the farm and instructed Wentworth to form a corporation to hold title to the property. Carrying out Cobb's instruction, Wentworth incorporated Cottondale Farms, Inc. (Cottondale), and designated Abbey as the company's president, secretary-treasurer, resident agent, and sole shareholder. On December 22 or 23, 1977, Braxton's son, Kenneth, introduced Cobb and Wentworth to Walter Killin, the owner of the farm. A few days later, Cobb, Wentworth and Killin negotiated a contract for the purchase of the farm by Cottondale at a price of $690,000. Cottondale would pay this price by giving Killin at closing $175,000 in cash and a $152,500 second mortgage and by assuming the balance due on a $375,000 first mortgage Killin had given to an insurance company.

The closing took place on March 31, 1978, and Cottondale took title to the farm. Shortly thereafter, Braxton began to farm the land; he planted and harvested peanuts, soybeans, and corn and in general managed the land as if it were part of his own acreage.

On December 9, 1980, as federal law enforcement authorities were closing in on the drug smugglers, Cottondale gave Braxton a warranty deed to the farm. The deed recited that Braxton paid "$10 and other good and valuable considerations" for the farm and that he assumed and agreed to pay the two mortgages which still encumbered the property and had unpaid principal balances totaling $429,000.

The district court found that contrary to these deed recitals, Braxton gave Cottondale nothing of value for the farm; the transaction was an absolute sham, devised by the smugglers to keep the farm from being forfeited to the Government. As the court stated, Braxton "could have walked away" from the deal at any time;⁸  he was merely the smugglers' "nominee." Based on our review of the record, we are not "left with the definite and firm conviction" that the district court erred in finding that Braxton was a mere nominee.

Having affirmed the district court's finding that Braxton held title to the farm as a mere nominee, we turn to the next question: whether Braxton is liable to the Government for rent. In the district court's view, 18 U.S.C. § 1963(l) (Supp. IV 1986) obligates one who occupies forfeited land to pay the Government a reasonable rent for the period of his occupancy.

We find nothing in the text of section 1963(l) to support the district court's conclusion. Section 1963 authorizes a district court to "appoint receivers, conservators ... or trustees, or take any other action to protect the interest of the United States" in the forfeited property, see 18 U.S.C. § 1963(e) (Supp. IV 1986),⁹  but the statute does not make a person standing in Braxton's shoes liable to the government for rent. If such liability exists, it must be created by a law other than the RICO forfeiture provision.

We know of no federal law that would require Braxton to pay the Government the rent it seeks. Florida law, however, would impose the obligation. Under Florida law, the owner of land is entitled to reasonable rent, or "mesne profits," from one who occupies the land without the owner's permission.¹⁰  We see no reason for not applying Florida substantive law in this case and accordingly do so; the Government is entitled to rent from Braxton, measured by the reasonable rental value of the peanut farm, for the period he occupied the farm after its forfeiture. The district court fixed this rent at $59,055.97, plus interest. The evidence in the record amply supports this figure, and we therefore accept it.¹¹  We must affirm the district court's award unless, as Braxton contends, the Government waived its claim for rent by presenting it too late in the proceeding.¹² D.

As Braxton correctly observes, the Government should have counterclaimed for rent when it responded to his petition, for the basis of the claim was well known at that time. Federal Rules of Civil Procedure 13(f), however, gave the Government the right to seek leave of court to file its counterclaim later on in the proceeding, even at trial.¹³  Rule 13(f) provides that: "When a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader may by leave of court set up the counterclaim by amendment." The decision to grant leave to file a counterclaim is an exercise of discretion, which will not be disturbed absent a showing of abuse. We find no abuse here.

When the Government asked the district court for leave to file its claim for rent, the court gave the parties two months to research the question of the Government's right to rent, and then, after it held for the Government, the court gave the parties two additional weeks to assemble their proof on what constituted reasonable rent. When the evidentiary hearing on that issue convened, the parties were fully prepared and put on their evidence. Nothing in the record indicates that Braxton was prejudiced in any way by the Government's delay in presenting its claim; he had a full and fair opportunity to confront the Government's proof, to put on his evidence, and to persuade the court to his point of view.

In summary, we dismiss as moot Braxton's petition for relief under 18 U.S.C. § 1963(l) (Supp. IV 1986). We affirm the district court's judgment awarding rent to the Government.

DISMISSED IN PART; AFFIRMED IN PART.

EATON, Senior District Judge, concurring in part and dissenting in part.

I concur with the majority save for the holding that Braxton is liable to the government for rent.

I see no showing of oversight, inadvertence, or excusable neglect such as to allow the government to file, during the final stage of this protracted proceeding, a counterclaim seeking past due rent from Braxton. And, in my opinion, justice did not require the allowance of the counterclaim.

For almost four years following the order of forfeiture, the government acquiesced in Braxton's farming the subject land.¹  During that period the government did not avail itself of the broad remedies available to it to seize the property and maintain the value of the farmland. Because Braxton's farming of the land benefitted the land,²  the government never suggested to Braxton that he give up the farm. Nevertheless, during the final stages of the litigation, the government was allowed to proclaim itself the landlord and Braxton the hostile tenant, thereby avoiding the financial risks that go part and parcel with raising peanuts, soy beans, and corn on a West Florida farm. I see no equity in that.

RICO was designed in such a way as to cut a wide swath, but in my opinion the windrow was piled far too high in this case.