State v. Sanders

IN THE COURT OF APPEALS OF NORTH CAROLINA

2022-NCCOA-417

No. COA21-358

Filed 21 June 2022

Iredell County, No. 20 CR 055180

STATE OF NORTH CAROLINA

v.

JERMAINE LYDELL SANDERS, Defendant.

Appeal by Town of Mooresville and Mooresville Police Department from

orders entered 24 November 2020 by Judge Deborah Brown and 26 January 2021,

and 11 February 2021 by Judge Christine Underwood in Iredell County District

Court. Appeal dismissed by order entered 20 April 2021 by Judge Christine

Underwood. We allowed a petition for writ of certiorari by the Town of Mooresville

and the Mooresville Police Department to review orders entered 24 November 2020

by Judge Deborah Brown and 26 January 2021, 11 February 2021, and 20 April 2021

by Judge Christine Underwood in Iredell County District Court. Heard in the Court

of Appeals 26 January 2022.

Perry Legal Services, PLLC, by Maria T. Perry, for defendant-appellee.

Cranfill Sumner LLP, by Steven A. Bader and Patrick H. Flanagan, for

appellants.

Acting United States Attorney William T. Stetzer, by Assistant United States

Attorney J. Seth Johnson, amicus curiae.

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Opinion of the Court

Kristi L. Graunke and Leah J. Kang for American Civil Liberties Union of

North Carolina Legal Foundation, Inc.; Dawn N. Blagrove and Elizabeth G.

Simpson for Emancipate NC, Inc.; Daryl Atkinson and Whitley Carpenter for

Forward Justice; and Laura Holland for North Carolina Justice Center, amici

curiae.

MURPHY, Judge.

¶1 Judicial proceedings pertaining to criminal seizures of personal property in

North Carolina are based on in personam, not in rem, jurisdiction. These proceedings

differ from federal civil forfeiture proceedings, which are based on in rem jurisdiction

over the property at issue. 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. Accordingly, we must vacate the

trial court’s orders and remand for further proceedings consistent with this opinion.

BACKGROUND

¶2 This appeal arises out of a seizure of property belonging to Defendant

Jermaine Lydell Sanders by the Mooresville Police Department (“MPD”). On or about

15 November 2020, MPD officers discovered a vehicle in a hotel parking lot matching

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the description of a vehicle provided by night shift officers. The vehicle, which

Defendant was renting, contained $16,761.00 in cash in a plastic bag in the center

console. Defendant, who was inside the hotel, fled upon seeing the officers.

Meanwhile, the MPD seized the cash.

¶3 On 19 November 2020, Defendant appeared through counsel before the Iredell

County District Court and filed a Motion for Personal Property to be Released to

Defendant (“November Motion”) arguing the currency’s seizure was unlawful.

However, the following day, while the November Motion was under consideration, an

officer of the United States Department of Homeland Security (“DHS”) informed the

MPD that, because Defendant was being investigated for money laundering under 18

U.S.C. § 1956, the DHS was “adopting the case.” On 23 November 2020, the MPD

relinquished the currency to the DHS, and a DHS officer converted the funds into a

check payable to United States Customs and Border Protection.

¶4 The District Court granted Defendant’s November Motion in an order entered

24 November 2020 (“November Order”). Defendant’s counsel promptly notified the

MPD of the November Order and attempted to coordinate the return of Defendant’s

cash; however, the MPD indicated in response that it could not return the cash due

to the adoption. Having received this response, Defendant filed a Verified Motion to

Show Cause on 10 December 2020 briefly describing the foregoing events and

alleging, inter alia, that the MPD unconstitutionally seized the $16,761.00, “has the

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financial ability to comply with the [trial] [c]ourt’s November [] [O]rder to return

[Defendant’s] cash[,]” “inexcusably failed to do so[,]” and “is subject to being held in

contempt until it complies with the order.” In response, the District Court, in an

order dated 26 January 2021 (“January Order”), “decreed that the [MPD] will be held

in contempt unless a representative from [the MPD] appears in person on [9

February] 2021 . . . to show cause why [it] should not be held in contempt for failure

to return funds to [Defendant] as ordered . . . .”

¶5 A hearing was held on 9 February 2021 in accordance with the January Order,

shortly after which the District Court entered another order (“February Order”). The

trial court made the following relevant findings of fact in the February Order:

1. On [15 November 2020], the [MPD] seized $16,761.00 in

cash as a part of a search of [Defendant’s] rental vehicle, in

violation of [his] 4th, 5th and 8th Amendment U.S.

constitutional rights, as made applicable to the states by

the 14th Amendment.

....

7. This [c]ourt acquired in rem jurisdiction over the cash on

[19 November 2020—]the date [Defendant] filed the motion

for return of property.

....

17. The [MPD] is an agency of the Town of Mooresville

[(“Mooresville”)], and it operates under the supervision and

control of . . . Mooresville. Together or severally, the said

town and [the MPD] have the financial means to comply

with the [November Order].

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Opinion of the Court

18. Although Counsel for the [MPD] argued, in defense of

not being held in contempt, that . . . Mooresville and the

[MPD] are incapable of returning the seized funds because

a federal agency has them, this argument has previously

been resolved [by the November Order] and is res judicata.

19. Furthermore, this argument is meritless in view of . . .

Mooresville and [the MPD’s] ability to use funds, or to

liquidate assets, at their disposal so as to enable them to

comply with the subject order by releasing $16,761.00 to

[Defendant].

20. Finally, [the November Order] did not premise release

of the amount of $16,761.00 on the [MPD’s] ability to effect

reversal of its wrongful transfer of a different $16,761.00 to

a third party.

21. The [MPD] may never be able to reverse its

unauthorized conduct in attempting to remove from this

court’s jurisdiction rem over which the court had

jurisdiction. However, should said department later be

successful in recovering $16,761.00 from federal

authorities, it will obviously be entitled to keep those funds

to replenish the payment required by [the November

Order].

22. The [c]ourt also takes note that the [MPD] has not filed

an appeal of the November . . . Order, nor a motion to set

aside the [o]rder.

23. By its conduct, the [MPD] has willfully failed to comply

with [the November Order].

24. . . . Mooresville and the [MPD] have had 77 days to

make arrangements to comply with the [November] Order.

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Opinion of the Court

25. . . . Mooresville, by and through the [MPD], which town

also had notice of the November . . . [O]rder, has willfully

failed to comply with [the November Order].

Based upon these findings of fact, the District Court “conclude[d] as a matter of law[]

[that it had] jurisdiction over the subject matter and parties[,]” that “[t]he failure of .

. . Mooresville and the [MPD] to comply with [the November Order was] willful, and

[that] . . . Mooresville and the [MPD] have the present ability to comply with the

[November] Order.” Accordingly, it “decreed that the [MPD] and . . . Mooresville are

held in civil contempt of [c]ourt[] and shall purge themselves by returning $16,761.00

to [Defendant] within seven business days of entry of [the] [February] Order . . . .”

¶6 On 15 February 2021, Mooresville and the MPD filed a Notice of Appeal from

the November Order, January Order, and February Order. However, in an order

entered 20 April 2021 (“April Order”), the District Court dismissed the appeal on the

basis that it was not timely filed and failed to invoke Rule 3 appellate jurisdiction.

We allowed Mooresville’s and the MPD’s petition for writ of certiorari on 7 May 2021

to review the November, January, February, and April Orders.

ANALYSIS

¶7 On appeal, Mooresville and the MPD argue that the trial court lacked in rem

jurisdiction and, as such, erred in issuing the four challenged orders because it was

prevented from interfering with the federal courts’ exclusive in rem jurisdiction.

¶8 Under 21 U.S.C. § 881, “[a]ll moneys, negotiable instruments, securities, or

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Opinion of the Court

other things of value furnished or intended to be furnished by any person in exchange

for a controlled substance” are “subject to forfeiture to the United States . . . .” 21

U.S.C. § 881(a)(6) (2021). Moreover, federal courts “shall have original jurisdiction,

exclusive of the courts of the States, of any action or proceeding for the recovery or

enforcement of any fine, penalty, or forfeiture, pecuniary or otherwise, incurred under

any Act of Congress[.]” 28 U.S.C. § 1355 (2021). As such, the determinative question

in this case is whether, in light of federal law, the District Court actually possessed

the in rem jurisdiction on which it purported to base its orders.

¶9 In rem jurisdiction is a specialized form of personal jurisdiction. Coastland

Corp. v. N.C. Wildlife Res. Comm’n, 134 N.C. App. 343, 346, 517 S.E.2d 661, 663

(1999). “The standard of review of an order determining personal jurisdiction is

whether the findings of fact by the trial court are supported by competent evidence

in the record”; however, “[w]e review de novo the issue of whether the trial court’s

findings of fact support its conclusion of law that [it had] personal jurisdiction over

[a] defendant.” Bell v. Mozley, 216 N.C. App. 540, 543, 716 S.E.2d 868, 871 (2011),

disc. rev. denied, 365 N.C. 574, 724 S.E.2d 529 (2012). Here, because Appellants

challenge only whether the trial court possessed in rem jurisdiction as a matter of

law, we review de novo.

¶ 10 As an initial matter, we note that the existence or nonexistence of in rem

jurisdiction at the state level in this case is of great import, as a court assuming in

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rem jurisdiction precludes the subsequent exercise of in rem jurisdiction by all other

courts:

Where the judgment sought is strictly in personam, for the

recovery of money or for an injunction compelling or

restraining action by the defendant, both a state court and

a federal court having concurrent jurisdiction may proceed

with the litigation, at least until judgment is obtained in

one court which may be set up as res adjudicata in the

other. But, if the two suits are in rem or quasi in rem,

requiring that the court or its officer have possession or

control of the property which is the subject of the suit in

order to proceed with the cause and to grant the relief

sought, the jurisdiction of one court must of necessity yield

to that of the other. To avoid unseemly and disastrous

conflicts in the administration of our dual judicial system

and to protect the judicial processes of the court first

assuming jurisdiction, the principle, applicable to both

federal and state courts, is established that the court first

assuming jurisdiction over the property may maintain and

exercise that jurisdiction to the exclusion of the other.

Penn General Cas. Co. v. Pennsylvania ex rel. Schnader, 294 U.S. 189, 195, 79 L. Ed.

850, 855 (1935) (citations omitted) (emphasis added). However, contrary to its

assertions in the February Order, the District Court never exercised in rem

jurisdiction over the seized currency.

¶ 11 Unlike the federal government, North Carolina does not have a general-

purpose civil forfeiture statute. See generally 19 U.S.C. § 1607 (2021). 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,

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in selling, purchasing, manufacturing, compounding, processing, delivering,

importing, or exporting a controlled substance . . . [.]” N.C.G.S. § 90-112(a)(2) (2021).

As a procedural safeguard, forfeitures under N.C.G.S. § 90-112 require

process issued by any [D]istrict or [S]uperior [C]ourt

having jurisdiction over the property except that seizure

without such process may be made when[] (1) [t]he seizure

is incident to an arrest or a search under a search warrant;

[or] (2) [t]he property subject to seizure has been the

subject of a prior judgment in favor of the State in a

criminal injunction or forfeiture proceeding . . . .

N.C.G.S. § 90-112(b) (2021). While federal civil forfeiture is, quite literally, an action

against the property itself,1 North Carolina does not employ this conceptual

framework; instead, our criminal forfeiture proceedings take place under the purview

of a defendant’s criminal trial. See, e.g., State v. Johnson, 124 N.C. App. 462, 478

S.E.2d 16 (1996), cert. denied, 345 N.C. 758, 485 S.E.2d 304 (1997).

¶ 12 In State v. Hill, we 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. State v. Hill, 153 N.C. App. 716, 718, 570 S.E.2d 768,

769 (2002) (“It is important to note that our forfeiture provisions operate in personam

1 In federal civil forfeiture proceedings, the “party” opposite the government is—in an

exercise of legal fiction—the very item seized. See, e.g. United States v. $119,000 in U.S.

Currency, 793 F. Supp. 246 (D. Haw. 1992); United States v. One Black 1999 Ford Crown

Victoria LX, 118 F. Supp. 2d 115 (D. Mass. 2000).

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and that forfeiture normally follows conviction.”). Moreover, we previously held that

law enforcement may—and, indeed, must—cooperate with federal authorities and

permit adoption by the federal government where applicable:

State and local agencies are allowed to cooperate and assist

each other in enforcing the drug laws. [N.C.G.S.] § 90-95.2

(2001). Cooperation by state and local officers with federal

agencies is mandated by [N.C.G.S.] § 90-113.5 which

provides:

It is hereby made the duty of . . . all peace

officers within the State, including agents of

the North Carolina Department of Justice,

and all State’s attorneys, to enforce all

provisions of this Article [Controlled

Substances Act] . . . and to cooperate with all

agencies charged with the enforcement of the

laws of the United States, of this State, and all

other States, relating to controlled

substances.

[N.C.G.S.] § 90-113.5 (2001) (emphasis added).

Id. at 721, 570 S.E.2d at 771. Here, where Defendant’s 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.

¶ 13 As the trial court never exercised in rem jurisdiction, the trial court erred in

any legal conclusion in the challenged orders premised on the exercise of in rem

jurisdiction. In Hill, we held that “[o]nce a federal agency has adopted a local seizure,

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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.” Id. at

722, 570 S.E.2d at 772. The proposition that in rem jurisdiction attaches due to the

actions of law enforcement stands in clear opposition to Penn General, in which the

United States Supreme Court held that “the court first assuming jurisdiction over the

property”—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. Penn General, 294 U.S. at 195, 79 L. Ed. 2d at 855

(emphasis added); see also In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37

(1989) (“Where a panel of the Court of Appeals has decided the same issue, albeit in

a different case, a subsequent panel of the same court is bound by that precedent,

unless it has been overturned by a higher court.”). Accordingly, under Hill, the

November Order was issued by a court without in rem jurisdiction; and, as the three

subsequent orders were premised on the validity of the November Order, those orders

are void.2

2 With certiorari having been allowed and the underlying orders having been entered

in error, any further issues arising from the April Order are moot. See McVicker v. Bogue

Sound Yacht Club, Inc., 257 N.C. App. 69, 73, 809 S.E.2d 136, 139–40 (2017) (“A case is ‘moot’

when a determination is sought on a matter which, when rendered, cannot have any practical

effect on the existing controversy.”).

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CONCLUSION

¶ 14 We are hamstrung by Hill; we must therefore hold that Defendant’s sole

avenue for retrieving the currency unlawfully seized from him by the MPD is to seek

redress from federal authorities. Accordingly, we vacate the trial court’s orders and

remand for further proceedings consistent with this opinion.

VACATED AND REMANDED.

Judges DILLON and ZACHARY concur.