North Carolina Lawyers Weekly
A bag with $16,761 in cash seized by state police and turned over to federal officers could not be recovered in a state court action, a panel of the North Carolina Court of Appeals has ruled, as the federal court has exclusive in rem jurisdiction.
On Nov. 15, 2020, officers of the Mooresville Police Department (MPD) discovered a vehicle in a hotel parking lot matching the description of a vehicle by night shift officers. The vehicle contained $16,761 in cash in a plastic bag in the center console, which the MPD seized.
Jermaine Lydell Sanders, who was renting the vehicle and inside the hotel, fled upon seeing the officers.
A few days later, he filed a motion against the Town of Mooresville and the MPD, seeking a return of the cash, arguing that the seizure was unlawful.
While the motion was under consideration in Iredell County District Court, an officer of the U.S. Department of Homeland Security (DHS) informed the MPD that because Sanders was being investigated for money laundering under 18 U.S.C. § 1956, the DHS was “adopting the case.”
On Nov. 23, 2020, the MPD relinquished the currency to the DHS.
In the meantime, the trial court granted the motion. When Sanders reached out to the MPD, they indicated that they could not return the cash due to its transfer to the feds.
In response, the trial court entered another order, ruling that the failure of the town and the MPD to comply with the November order was willful and holding the defendants in civil contempt.
The town and MPD filed a petition for writ of certiorari, asking the Court of Appeals to consider the trial court’s orders.
Reversing and remanding, the appellate panel found the trial court lacked jurisdiction over the case in a unanimous opinion authored by Judge Hunter Murphy.
“Judicial proceedings pertaining to criminal seizures of personal property in North Carolina are based on in personam, not in rem, jurisdiction,” he wrote. “These proceedings differ from federal civil forfeiture proceedings, which are based on in rem jurisdiction. For this reason, where a federal court adopts a seizure of property by North Carolina law enforcement, federal courts assume exclusive, in rem jurisdiction over the seizure, as no state-level in rem jurisdiction exists to take priority over the federal exercise of in rem jurisdiction; the ordinary rule prioritizing the in rem jurisdiction of the first in time to exercise it does not apply unless in rem jurisdiction exists in the first place. Here, where the trial court issued orders purporting to exercise in rem jurisdiction, it erred.”
Exclusive federal jurisdiction
Mooresville and the MPD argued that the trial court lacked in rem jurisdiction and therefore erred in issuing the challenged orders because it was prevented from interfering with the federal courts’ exclusive in rem jurisdiction.
In rem jurisdiction is a specialized form of personal jurisdiction, Murphy explained, and its existence or nonexistence is of great import, as a court assuming in rem jurisdiction precludes the subsequent exercise of in rem jurisdiction by all other courts.
Contrary to its assertions, the trial court never exercised in rem jurisdiction over the seized currency, he said.
“Unlike the federal government, North Carolina does not have a general purpose civil forfeiture statute,” he wrote. “The statute applicable to this case is N.C.G.S. § 90-112, which provides, in relevant part, for the criminal forfeiture of ‘[a]ll money … which [is] acquired, used, or intended for use, in selling, purchasing, manufacturing, compounding, processing, delivering, importing, or exporting a controlled substance … .’”
While federal civil forfeiture is an action against the property itself, North Carolina does not employ this conceptual framework, Murphy said. Instead, criminal forfeiture proceedings take place under the purview of a defendant’s criminal trial.
In a 2002 Court of Appeals decision, State v. Hill, the panel held that criminal forfeiture proceedings “are categorically predicated upon in personam jurisdiction – one of the many distinguishing factors between North Carolina’s criminal forfeiture proceedings and the in rem proceedings associated with civil forfeiture,” he wrote. “Here, where [Sanders’] currency was taken from the vehicle pursuant to N.C.G.S. § 90-112, we are bound by our decision in Hill to hold that any challenge to that forfeiture would have necessarily been predicated on in personam jurisdiction, not in rem jurisdiction.”
‘Hamstrung by Hill’
As the trial court never exercised in rem jurisdiction, it erred in any legal conclusion in the challenged orders premised on the exercise of in rem jurisdiction, Murphy said.
“In Hill, we held that ‘[o]nce a federal agency has adopted a local seizure, a party may not attempt to thwart the forfeiture by collateral attack in our courts, for at that point exclusive original jurisdiction is vested in the federal court,’” he said.
This proposition – that in rem jurisdiction attached due to the actions of law enforcement – stands in clear opposition to a 1935 U.S. Supreme Court decision in Penn General Cas. Co. v. Pennsylvania ex rel. Schnader, where the justices held that “the court first assuming jurisdiction over the property,” and not the executive agents, “may maintain and exercise [in rem] jurisdiction to the exclusion of the other.”
However, “as we are without power to override our prior holdings, Hill remains in effect until such time as it may be corrected by our Supreme Court,” Murphy said. “Accordingly, under Hill, the November Order was issued by a court without in rem jurisdiction; and, as [the] subsequent orders were premised on the validity of the November Order, those orders are void.”
Writing that the panel was “hamstrung by Hill,” he vacated the trial court’s orders and remanded for further proceedings.
Maria T. Perry of Perry Legal Services in Durham represented Sanders. She did not respond to a request for comment on the decision.
Neither did Raleigh attorney Steven A. Bader of Cranfill Sumner, who represented the Town of Mooresville and the MPD.
The 12-page decision is State v. Sanders (Lawyers Weekly No. XXX-XXX-22). The full text of the opinion is available online at nclawyersweekly.com.
