Property Clerk of Police Dept. of City of New York v Harris

[*1] Property Clerk of Police Dept. of City of N.Y. v Harris 2005 NY Slip Op 50848(U) Decided on May 9, 2005 Supreme Court, New York County Shulman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 9, 2005
Supreme Court, New York County

Property Clerk of the Police Department of the City of New York, and the POLICE DEPARTMENT OF THE CITY OF NEW YORK, Petitioner,

against

Merv Harris, DELORES NEWTON HARRIS, and the NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS, Respondents. for a Judgement Pursuant to Civil Practice Law and Rules Article 78, etc.



05/400677

Martin Shulman, J.

Petitioners, Property Clerk of the Police Department of the City of New York and the New York City Police Department ("petitioners", "NYPD" or "Property Clerk") commenced this Article 78 proceeding by order to show cause seeking to annul as arbitrary, capricious and contrary to law a Memorandum Decision issued December 27, 2004 ("OATH decision" as Exhibit B to Verified Petition) by respondent, New York City Office of Administrative Trials and Hearings ("OATH"). In the OATH decision, the Administrative Law Judge determined that the NYPD could not retain the 2002 Mitshubishi Montero (the "vehicle" or "Montero") the police seized from titled owners, Merv Harris ("Harris" or "co-respondent") and Delores Newton Harris ("Ms. Harris" or "co-respondent"), as an instrumentality of a crime and which was being held for forfeiture pursuant to N.Y.C. Adm. Code §14-140.

In opposition, respondents' counsel contends the OATH decision was rational and in accordance with Krimstock v. Kelly, 306 F.3d 40 (2nd Cir., 2002) cert. denied, 123 S. Ct. 2640 (2003) ("Krimstock appeal decision").

As this Court noted in a prior unrelated matter, the Krimstock appeal decision held "that due process requires the NYPD to afford any defendant whose motor vehicle was seized at the time of arrest with the opportunity for a prompt, post-seizure hearing to determine the probable validity and justification for the pre-judgment retention of the vehicle, pendente lite." (Property Clerk v. Burnett, N.Y.L.J., August 6, 2004, p. 18, col.1 [Sup. Ct., NY Co.]).

[*2]Brief Underlying Facts of the Arrest

On October 20, 2004 near the intersection of 94th Street and Columbus Avenue, an undercover police officer completed a drug transaction with the assistance of an unapprehended male accomplice purportedly working in concert with Harris. The accomplice made a telephone call to arrange for the delivery of drugs. Shortly thereafter, Harris arrived at the transaction site in the Montero. Having received $40 in pre-marked buy money from the police officer, the accomplice gave this money to Harris in exchange for a glassine packet of cocaine retrieved from the vehicle which the accomplice handed over to the undercover officer. Harris drove away and was stopped by police about a block away from the transaction site. The police recovered four glassine packets of cocaine and retrieved the $40 buy money from the vehicle. Harris was arrested and charged with criminal sale and possession of a controlled substance in the third degree. At that time, the police also seized and vouchered the vehicle.

OATH Trial and Decision

Co-respondents filed a demand for a Krimstock hearing, i.e., post-seizure retention hearing and the OATH hearing was conducted on December 21, 2004. Harris appeared with counsel and Ms. Harris appeared without counsel. Counsel for the Property Clerk appeared with the NYPD arrest file on Harris and introduced into evidence an arrest report, a vehicle invoice for the Montero, Harris' rap sheet (showing approximately 11 prior arrests and at least 6 convictions, the last of which occurred in 1998), the Criminal Court complaint, a DMV extract showing Harris and Ms. Harris as the titled owners of the Montero registered in Virginia and a Kelly Blue Book printout valuating the Montero at about $16,000.[FN1]

During the Krimstock hearing, Property Clerk's counsel called Ms. Harris to testify presumably to negate a potential innocent owner defense (see, discussion, infra). The OATH decision noted the following from this co-respondent's testimony:

[A]fter dating Mr. Harris for a couple of years they wed in 2002. They lived together on West 109th Street and they each drove the vehicle on a weekly basis. Ms. Harris conceded that she was aware that her husband had a prior criminal record for drug-related offenses and that he spent time in prison. . . [T]hey had been making regular $600 payments for the vehicle each month for the past two years. The payments were made from Mr. and Ms. Harris's joint checking account. . .(see, Exhibit B to Verified Petition at

p. 3).

The OATH judge initially found that petitioners met their burden of proof in establishing probable cause for Harris' arrest, the likelihood of success in a civil forfeiture action against Harris and the necessity to retain the vehicle, pendente lite. However, the OATH judge went further and determined that Petitioners failed to proffer [*3]any evidence that Ms. Harris knew or should have known Harris was going to use the Montero to sell drugs and was therefore not an innocent co-owner. Thus, the OATH judge concluded that without even a preliminary showing against this co-respondent, petitioners could not retain the vehicle and ordered its release to Ms. Harris.

Petitioners challenge the OATH Judge's decision for going beyond the scope of a vehicle retention hearing. Instead of just testing the merits of the Property Clerk's case, petitioners argue, the OATH judge transformed the Krimstock hearing into a de facto civil forfeiture bench trial. Petitioners specifically contend that it was contrary to law for the OATH judge to direct the Property Clerk to bear the additional burden of overcoming an innocent owner defense at this limited vehicle retention hearing. In this context, it was further argued that this defense is not implicated here where Ms. Harris as a joint owner would otherwise never be at risk of totally losing her interest in the Montero [FN2]. Petitioners also argue that the OATH Judge's reliance on New York City Police Department v. Pagano, 170 AD2d 30, 573 NYS2d 658 (1st Dept., 1991) was misplaced as that decision addressed the proof required to successfully prosecute a civil forfeiture action; an evidentiary showing greater than what is required at a Krimstock hearing. In addition, petitioners distinguish Pagano from this case as the former addressed the circumstances of a sole owner of a vehicle ostensibly victimized by another's use of the vehicle as an instrumentality of a crime, not a joint owner of a vehicle such as Ms. Harris who knew or should have known of her husband's purported criminal activities and his potential use of the vehicle to carry out those activities. Finally, petitioners advance the notion that applying an innocent owner defense to a joint owner would violate "public policy, in that it offers an incentive to wrongdoers to evade the consequences of a forfeiture action by the simple expedient of arranging for a co-signatory." (Verified Petition at ¶47).

In opposition, respondents emphatically contend that when the Second Circuit in Krimstock, supra , mandated the requirement of a prompt post-seizure retention hearing, pendente lite, this federal appeals court was particularly focusing on the plight of innocent owners.[FN3] Respondents argue that the Krimstock hearing provides a "prompt opportunity to test [the] probable validity" of retention . . . to safeguard the property interests of non-offending spouses like Ms. Harris. . ."(see, Wasserman Opp. Affirmation denominated as a Verified Answer at ¶11). Respondents further state that in accordance with NYC Adm. Code §14-140[e][1], the Property Clerk had the burden at [*4]the Krimstock hearing of establishing the likelihood of success in the prospective forfeiture action against a person "who permitted or suffered"[FN4] the illegal use of vehicle such as Ms. Harris as joint owner of the Montero. Respondents then observed that petitioners never sought a continuance to obtain any proof of Ms. Harris' passive complicity in Harris' activities. Finally, respondents argue that Property Clerk was afforded the opportunity to test the issue of whether Ms. Harris permitted or suffered the illegal use of the Montero which proved to be futile warranting the release of the vehicle; therefore, the well reasoned OATH decision was firmly supported by the record.

Discussion

The standard of review in an Article 78 proceeding is whether an administrative tribunal's determination was arbitrary, capricious or an abuse of discretion, was made in violation of a lawful procedure and/or was affected by an error of law. CPLR §7803 (3). See also, New York City Health & Hospitals Corp. v McBarnette, 84 NY2d 194, 203, n 2 (1994); Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 757-758 (1991).

After careful review of the Krimstock hearing transcript and documentary evidence (Exhibits 2 and 3 to OATH's Verified Answer), this Court finds the OATH decision to be neither arbitrary and capricious nor contrary to law.

Contrary to petitioners' contentions, the Krimstock appeal decision made it crystal clear that the Property Clerk has to anticipate and test the merits of a potential innocent owner defense a claimant may raise in seeking the release of a seized vehicle during the pendency of a civil forfeiture action:

With respect to innocent owners, the City's authority to seize property may be broader than its authority to cause the forfeiture of the property. In the due process context, the Supreme Court has shown special concern for the risk of erroneous deprivation posed to innocent owners. See, James Daniel Good Real Prop., 510 U.S.at 55. n.55 The impact of N.Y.C. Code §14-140 on innocent owners is vividly illustrated by the predicament of plaintiff Sandra Jones, whose Plymouth van, which she had lent to her estranged husband, was seized in connection with her husband's arrest on drug and weapon charges. Although these charges were eventually dismissed, Ms. Jones was deprived of her vehicle for some ten months while continuing to make monthly auto payments. Ms. Jones was given no early opportunity to test the probable validity of the City's continued impoundment of her vehicle.

* * * * * *

. . . The plight of innocent owners, as exemplified by the experience of plaintiff Sandra Jones, persuades us that an early retention hearing following seizure under N.Y.C. [*5]

§ 14-140 is constitutionally required. Krimstock, 306 F.3d 55-56

Stated differently, the Krimstock appeal decision squarely puts the burden on the Property Clerk to justify the continued retention of the vehicle, pendente lite. And the issue of a titled owner's innocence will invariably surface when someone other than the titled owner of a vehicle uses same to commit a crime. Petitioners confronted with this fact pattern at a Krimstock hearing cannot possibly claim surprise and/or prejudice and must be prepared to "test" this issue, and if unprepared, to be lawfully ordered to release the vehicle during the pendency of the civil forfeiture action. The Krimstock appeal decision compels this result.

Moreover, in pointing out the deficiency of NYC Adm. Code §14-140, vis-a vis, the due process rights of innocent owners of seized property, the Krimstock appeal decision noted that the primary federal civil drug forfeiture statute has an express "innocent owner" defense provision which was codified as amended in 2000 (viz., 18 U.S.C. 983). Significantly, a co-owner may utilize this defense under federal law:

The statute specifically mentions owners who "did not know of the conduct giving rise to forfeiture"; bona fide purchasers or sellers for value; claimants who acquire a property interest through marriage, divorce, or legal separation; spouses or legal dependents who acquired property by inheritance or probate; and joint tenants and others with a partial interest in property. (emphasis added) 306 F.3d at 58, n.19.

Thus, there is no simply reason to relieve the Property Clerk from what is not an additional burden, but rather the required burden where a co-owner such as Ms. Harris, claims innocence in not permitting or suffering the illegal use of the Montero.[FN5]

The notion, as petitioners advance, that a co-owner is akin to a lien holder without any right to challenge the post-seizure retention of the vehicle, pendente lite, is meritless. A co-owner can never be in the same position as a lien-holder as the former, unlike the latter, has a present possessory interest in the vehicle. Cf., Property Clerk v. Molomo, 179 AD2d 210, 583 NYS2d 251 (1st Dept., 1992) affd., 81 NY2d 936, 597 NYS2d 661 (1993). Based on the foregoing, a sole owner and a co-owner enjoy the same rights and opportunity to challenge the post-seizure retention of the vehicle pendente lite. Therefore, the OATH judge correctly determined Ms. Harris to have standing to demand and potentially benefit from the Krimstock hearing.

Petitioners are still free to prosecute the civil forfeiture action and obtain the quantum of proof necessary to establish that Ms. Harris permitted or suffered the illegal [*6]use of the vehicle ultimately forfeiting her property interest in the Montero. In this context, in affirming the OATH decision as being lawful and rational, this Court does not express any opinion as to whether Ms. Harris, if ultimately found to be an innocent co-owner, would be permitted to retain the vehicle in the event Harris is found by a preponderance of the evidence to have used the Montero in the commission of the illegal drug transaction. Guidance at the federal level suggests that an innocent co-owner would not have the right to keep a seized vehicle used in the commission of a crime, but could conceivably receive one-half of the forfeiture sale proceeds, less administrative expenses (see, Bennis v. Michigan, 516 U.S. 442, 116 S. Ct. 994 [1996] which the Krimstock appeal decision cited to and briefly discussed referable to this issue [306 F.3d at 56, n.15]).[FN6] Stated more succinctly, "courts have consistently construed the [federal] civil forfeiture statute, 21 U.S.C. §881, to permit partial

takings. . ." Pacheco v. Serendensky, 393 F.3d 348, 355 (2nd Cir., 2004) (purpose of forfeiture is to punish a criminal without the government taking an innocent co-owner's share of the property interest). This appears to be an issue of first impression here in New York and the courts will have to "cross that bridge" at the appropriate time and address same.

Accordingly, the Article 78 petition is hereby denied, the stay enjoining the release of the vehicle is hereby vacated and this proceeding is dismissed in its entirety. The Property Clerk's Office is directed to release the 2002 Mitshubishi Montero to co-respondent, Ms. Harris, within ten (10) days after issuance of this decision and order. This constitutes the decision and order of this Court. Courtesy copies of this decision and order have been mailed to counsel for the parties.

Dated: New York New York

May 9, 2005

______________________________

HON. MARTIN SHULMAN, J.S.C.

Footnotes

Footnote 1: As a named respondent, OATH submitted a verified answer to the Article 78 petition for the purpose of submitting the record of the proceeding of that administrative tribunal before the court (see, CPLR §7804[e]) which contained the underlying OATH decision, the Krimstock hearing transcript, hearing exhibits and OATH docketing forms, etc.

Footnote 2: As more fully stated in petitioners' supporting memorandum of law at p. 8, petitioners claim that even if the Montero is ultimately forfeited, Ms. Harris , unlike a titled owner, apparently will retain the right to potentially receive her one-half share of the proceeds after NYPD's forfeiture sale of the vehicle.

Footnote 3: The Krimstock appeal decision defined an " 'innocent owner' as. . . a person who has an ownership interest in property threatened with civil forfeiture but who neither participated in nor permitted or suffered the alleged illegal use of the property, and persons who claim that status. . ." (306 F.3d at 48, n.9).

Footnote 4: The Pagano court, relying on well settled case law, noted that "a statute which holds a person liable for having permitted or suffered certain activity may only be enforced against one who knew, or should have known, that the activity would take place in this case that activity being the use of the vehicle in furtherance of a crime. . . " 170 AD2d at 35, 537 NYS2d at 661.

Footnote 5: The issue of joint and several liability of co-owners in an unrelated area of personal injury was discussed in Payne v. Payne, 28 NY2d 399, 322 NYS2d 238 (1971). There, the Court of Appeals had the occasion to consider the issue of whether an absentee co-owner would be liable for the negligent operation of a vehicle by his co-owner. Rejecting the rigid interpretation of the presumption of co-ownership being conclusive to trigger vicarious liability under all circumstances, the Court of Appeals recognized that a fact-based inquiry at trial may be required which could potentially absolve the non-using co-owner for the negligence caused by the other.

Footnote 6: Seemingly, vehicle finance companies and/or any individual with a security interest in a vehicle seized for forfeiture could be in an better position than an innocent co-owner as the former clearly would be able to receive the proceeds of the forfeiture sale, less expenses and seek any deficiency from the defendant vehicle owner including interest and attorneys' fees. Molomo, supra ; see also, Property Clerk v. Aquino, et al., 2004 NY Slip Op 51848U, 6 Misc 3d 1031A; 2004 NY Misc. LEXIS 3021 (Sup. Ct., NY Co.). Query: in the event of forfeiture, what is the likelihood of the innocent co-owner spouse suing his/her other spouse for any deficiency and being made whole as to his/her property interest?