# Jurisdictional Statement — Calero-Toledo v. Pearson Yacht Leasing Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Jurisdictional Statement
- **Published:** January 1, 1974
- **Citation:** 416 U.S. 663

## Text

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SUPREME COURT, U. S. JUL 2

In Tue

Ocroser Term, 1973

Astot Cauero-Totepo, Superintendent of Police, Enear R.
Bauzac, Administrator of the General Services Adminis-
tration of the Commonwealth of Puerto Rico,

Appellants,
v.

Pearson Yacut Leasrne Co.,
Appellee.

On AppEAL FROM THE Unrrep Srares Disrricr
CourrT For THE District or Purrro Rico

JURISDICTIONAL STATEMENT

Lywn R. CoLemMan
2100 First City Natl. Bank Bldg
Houston, Texas 77002

Of Counsel:

Francisco DE Jesus-Scouck
Attorney General,

MrrimmM Naverra dE Ropon
Solicitor General,

The Commonwealth of Puerto Rico
Post Office Box 192
San Juan, Puerto Rico 00902

Vinson, Exxrins, Szarus, Connatty & Smita
2100 First City Natl. Bank Bldg.
Houston, Texas 77002

AR Tee kee

INDEX
PAGE
Opinion Below ......... 0... cece eee eees errr rere 2
ee, ee ee ee ee ee ee ee ee 2
Questions Presented ...... ccc ccc cence cence cee eece 2
Statutes Involved ..... sa 4b CREAR SRESSE EE SS ESSE Eb ORD 3
GUAOURGME occ cece cece cca ster sictneseewensereess 3
The Questions Are Substantial .... 1.6.0... 2.0 ee eee ees 6

Summary of Appellants’ Position ................554 6

The Court Below Erred in Holding that Seizure without

Notice Deprived Pearson of Property without Due Process

OE EW ix ino s 6 0000005 4 et Eee Ca eek 9

The Court Below Erred in Holding that Pearson Suffered

a Taking of Property without Just Compensation ....... 11

¢
eee rer rer ee rere a rr 18
pL OTT TTT Tee eee 19
pC eee ee ee 33
PUNE GE aun 6 946.0545 4 RRR RE ORE Sees 37
CITATIONS
Cases
Americana of Puerto Rico, Inc. v. R. Kaplas, 368 F.2d 431

$f be | eT rn rere ree
Ashwander Vv. T.V.A., 297 U.S. 288 (1935) ..........26- 17
Bonet v. Texas Co., 308 U.S. 463 (1940) ...........048- 15
Burge v. United States, 342 F.2d 408 (9th Cir. 1965), cert.

me, Te SE: le ERO as ek ee Secs 10
Commonwealth v. Superior Court, 96 D.P.R. 843, 96 P.R.R.

Se GURL Sica 0 8 kno 4d ae oak keh ORR eae rus 16
Dobbin’s Distillery v. United States, 96 U.S. 395 (1878) ... 12
Downs Vv. Porrata, 75.P.R.R. 572 (1954) ..........008- 9
England v..Bd. of Medical Examiners, 375 U.S. 411 (1964) 15
Fornaris v. Ridge Tool Co., 400 U.S. 41 (1970) ......... 15

IRR eee PEER IN AIR RE ei ete —— SATE EEEERENCEEEe

PAGE
Fuentes v. Shevin, 407 U.S. 67 (1972) .........0005- 6, 7,9, 10
Garcia Vv. Superior Court, 91 P.R.R. 146 (1964) ......... 16
Goldsmith Jr—Grant Co. v. United States, 254 U.S. 505
CRORE 6604 ce obese ss edhek sired ecaes exp anseeses 12, 13
Gore Vv. United States, 357 U.S. 386 (1958) ............. 13

McKeehan v. United States, 438 F.2d 739 (6th Cir. 1971).. 12
Metro Taxi Cabs, Inc. v. Treasurer, 73 D.P.R. 171, 73 P.R.R.

SOE CIBGAS ihc cxccxcackansvaccintivacesceecaads 14, 15
Mora V. Meijas, 115 F.Supp. 610 (D.P.R. 1953) ........ 2
Mora V. Meijas, 206 F.2d 550 (ist Cir., 1953) ........... 2

Mullane v. Central Hanover Tr. Co., 399 U.S. 306 (1950) 11
N.L.R.B. v. Jones & Laughlin Steel Corp., 301 U.S. 130

Qi) Pere TET eee eT Ce eT ETT TORS TTT eT TTT 15
Ochoteco V. Superior Court, 88 D.P.R. 517, 88 P.R.R. 500

he | ee eee ee TTT ee TTT TTT TTT TTT eee eee 14, 15
The Palmyra, 25 U.S. (12 Wheat.) 1 (1827) ............ 12

Pa. Public Util. Comm'n v. Pa. R.R. Co., 382 U.S. 281 (1965) 2
Re One 1965 Ford Mustang, 105 Ariz. 293, 463 P.2d 827

to ee ere Ter rer eee TTT 15
Reetz v. Bozanich, 397 U.S. 82 (1970) ............506- 15
Robinson v. Hanrahan, 409 U.S. 38 (1972) ............ 11
Rorick v. Bd. of Comm'rs of Everglades Drainage Dist., 307

TE. De CAPD 60 0ccic sac wda dens eeenacecssscane 2

Stainback v. Wo Hock Ke Lok Po., 336 U.S. 376 (1949)... 2
Suhomlin v. United States, 345 F.Supp. 650 (D.Md. 1972).. 12

United States v. One 1971 Buick Riviera, 463 F.2d 1168

¢ 0 Bc: errr re ere re er 12
United States v. One 1967 Ford Mustang, 457 F.2d 931 (9th

CE BORE: 465.5660 44e ek ened cca eetenenwsh ees 12
United States v. One 1971 Ford Truck, 346 F.Supp. 613

CUR GE SPEED 86k eee ek censeebeadounee hee ue’ 12
United States Vv. Troiano, 365 F.2d 416 (3rd Cir. 1966) cert.

Gombed DAS VS. SSS CIDR) 6 acc ev accssiscascnnsss 10
United States v. One 1971 Buck Riviera, 463 F.2d 1168 (Sth

TAPOLADERD 600 Kd0 660k SwRA SOSA ERASER RR OREN 6, 8, 11, 12,14

Wackenhut Corp. v. Aponte, 266 F.Supp. 401 (D.P.R. 1966) 2

ENR RTE PIO HLT NOTE ANE INE BRIE

a POR PE

'

iii

Statutes
PAGE
21 U.S.C. §881(a), subparagraphs (A) and (B) ........ 6
MB. CF FOE 66 oy ss cae ne seen ee dansaxuensenss 6
28 U.S.C. §1343 2.0... . cc eee ROSE Se eeeeeeesewes 2,5
We UA GZFBE is nk cies deca decenescdabenescesnsaaes 2,5
WP TA BO 4 68 64 66 6 AN EAS 54d owe ne vas ware nes ekeas 6
Controlled Substances Act of Puerto Rico, 24 L.P.R.A. §2102-
2607 (Supp. 1972) ........ ccc ccc ec cece eee ee eee 4
24 L.P.R.A. §2512 (a)(4) and (2) (Supp. 1972) ..... 3, 4,5
24 L.P.R.A. §2510 (Supp. 1972) ................08. 10
Uniform Vehicle, Mount, Vessel and Plane Seizure Act, 34
Saws BRUGES 364400 400Ne dss ECR S tee edeew ks’ 3, 4, 5, 16
23 L.P.R.A. §451, 451b, and 45lc 2.2.2... eee ee eee 3, 5, 18
14A Fla. Stats. Ann. §398.24 2.20... 0c eee ee eee 6
56% Ill. Stats. Ann. §712, §1505 (Supp. 1973) ......... 6
18 Mich. Stats. Ann § 18.1070(55) (Supp. 1973) ........ 6

Supreme Court of the United States

OcroserR TERM, 1973

Astot Catero-ToLepo, Superintendent of Police, Epcar R.
Bauzac, Administrator of the General Services Adminis-
tration of the Commonwealth of Puerto Rico,

Appellants,
Vv.

Pearson Yacut Leasine Co.,
Appellee.
On AppEAL FROM THE Unitep Srates District
Court FOR THE District oF Puerto Rico

JURISDICTIONAL STATEMENT

Appellants take this appeal from the judgment of the
United States District Court for the District of Puerto
Rico, entered on March 29, 1973, declaring unconstitutional
and permanently enjoining the enforcement of certain
seizure and forfeiture statutes of the Commonwealth of
Puerto Rico. Appellants submit this Statement to show
that the Supreme Court of the United States has juris-
diction of the appeal and that a substantial question is
presented.

2

OPINION BELOW

The opinion of the District Court for the District of
Puerto Rico is not yet reported. A copy of the memorandum
opinion and order and a copy of the notice of appeal are
attached hereto (Appendix A).

JURISDICTION

This suit was brought under 28 U.S.C. § 1343 to redress
alleged deprivation of appellee’s rights under the Fifth and
Fourteenth Amendments. A three-judge court was con-
vened pursuant to 28 U.S.C. §2281. This Court has never
passed on the applicability of 28 U.S.C. § 2281 to the Com-
monwealth of Puerto Rico. But district courts have taken
Puerto Rico to be a “state” within contemplation of §2281
ever since shortly after it became a commonwealth. Mora
v. Meijas, 115 F. Supp. 610 (D.P.R. 1953) ; Wackenhut Corp.
v. Aponte, 266 F.Supp. 401 (D.P.R. 1966). See also Mora v.
Meijas, 206 F.2d 550 (1st Cir. 1953), and Americana of
Puerto Rico, Inc. v. R. Kaplas, 368 F.2d 431 (3rd Cir. 1966).
The judgment of the District Court was entered on March
29, 1973, and notice of appeal was filed in that court on
May 8, 1973. Assuming that the three-judge court was
properly called, the jurisdiction of the Supreme Court to
review this decision by direct appeal is conferred by Title
28, United States Code, Section 1253. Pa. Public Util.
Comm'n v. Pa. R.R. Co., 382 U.S. 281 (1965) ; Stainback v.
Wo Hock Ke Lok Po, 336 U.S. 376 (1949); Rorick v. Bd. of
Comm'rs of Everglades Drainage Dist., 307 U.S. 208 (1939).

QUESTIONS PRESENTED

1. Whether appellee, nominally lessor but effectively
conditional vendor of a yacht seized by and forfeited to
the Commonwealth of Puerto Rico, had such a property
interest in the yacht as would support a claim of deprivation

3

of property without due process of law and taking without
just compensation.

2. Whether certain confiscation and forfeiture statutes
of the Commonwealth of Puerto Rico, in authorizing seizure
of property without a prior adversary hearing, deny per-
sons with interests therein due process of law.

3. Whether these statutes must be construed as authoriz-
ing the taking without just compensation of Appellee’s
property, to wit, by denying owners and lienholders who
have consented to the use by others of the property seized
the right to challenge the forfeiture on the grounds of their
own innocence in the wrong for which the property is
seized and forfeited.

STATUTES INVOLVED

The pertinent parts of 24 L.P.R.A. § 2512 (a) (4) and (b)
(Supp. 1972), 34 L.P.R.A. § 1722 (a)-(e), and 23 L.P.R.A.
§ 451, 451b, and 451c are set forth in Appendix B.

STATEMENT!

Appellee (“Pearson”) is a New York incorporated and
based division of Grumman, Inc., engaged in leasing plea-
sure yachts. Appellants are the current Superintendent of
Police and the Administrator of the General Services Ad-
ministration of the Commonwealth of Puerto Rico. On
March 15, 1971, Pearson leased a yacht to Donovan and

1 The factual record on which this appeal is based consists of a
Stipulation of Facts and the lease and option-to-purchase
agreements between Pearson and Lessee, all of which is printed
as Appendix C.

4

Loretta Olson (“Lessee”) for a five year term.” The parties
simultaneously executed an option contract giving Lessee
the right to purchase the yacht on thirty days notice at
any time during the lease term, the price diminishing over
that period at a depreciation rate equivalent to the monthly
rental, At the end of the fifth year the yacht could be pur-
chased for $1.00. App. C, infra, pp. 53-54. In effect, then,
Pearson sold the yacht to its “lessee”, retaining title until
it had received full payment.

On May 6, 1972, Puerto Rican authorities discovered
marihuana on the yacht. Under the Controlled Substances
Act of Puerto Rico, 24 L.P.R.A. § 2102-2607 (Supp. 1972),
possession of marihuana is prohibited. It was stipulated at
trial that Pearson was wholly innocent of this violation of
law. On July 11, 1972, the yacht was seized by the Superin-
tendent of Police, predecessor in office of appellant Astol
Calero-Toledo. 24 L.P.R.A. § 2512 (a)(4) (Supp. 1972)
subjects to forfeiture to the Commonwealth of Puerto
Rico vessels used to transport controlled substances. Under
§ 2512 (b) such property is to be seized and forfeited in
the manner provided by the Uniform Vehicle, Mount, Ves-
sel and Plane Seizure Act, 34 L.P.R.A. § 1722. App. C,
infra, pp. 37-41.

Section 1722 requires the Superintendent to serve notice
of the seizure “on the owner of the property seized or the
person in charge thereof or any person having any known

2 The lease agreement provided that Lessee was to use the yacht
only for legal purposes ; that Lessee, at its expense, was to insure
Pearson against loss of the yacht “sustained in any manner
whatsoever”; that “forfeiture of said Equipment shall not dis-
charge or diminish the obligation of Lessee to pay rent....”
[emphasis supplied] ; that Lessee had the exclusive right to use
and possession of the yacht during the term unless and until
default by Lessee, written notice of default by Pearson, expira-
tion of a fifteen day correction period, and exercise by Pearson
of its right to terminate; and finally, that the yacht was to be
based at the contract date home port of Lessee, specified as a ¢
Puerto Rican address, except with the written consent of ,
Pearson. App. C, infra, pp. 42-50.

ey Veer" Ties PPE IE TRE AT EE

5

right or interested [sic] therein” within ten days. The
Superintendent duly notified Lessee, who was on record
with the Division of Marine Operations of the Ports Au-
thority as the owner of the vessel. 23 L.P.R.A. § 451b and
451c require the owner of the vessel who wishes to operate
it within the navigable waters of Puerto Rico to file an ap-
plication for an indentification number with the Authority.
Neither the Superintendent nor Lessee notified Pearson,
who was not on record with the Ports Authority. App. B,
infra, pp. 33, 34, 36; App. C, infra, p. 39.

Lessee failed to challenge the confiscation within the
fifteen day period following service of notice on him as
provided by §1722(a); under §1722(c), the yacht then
became subject to sale at auction or reservation for official
use of the Government of Puerto Rico. The Chief of the
Office of Transportation, predecessor in office of Edgar R.
‘Balzac, second-named appellant, chose the latter. Pearson
did not learn of the seizure until Lessee defaulted and
Pearson unsuccessfully attempted, on October 19, 1972, to
regain possession of the yacht. App. A, infra, p. 22.

On November 6, 1972, Pearson filed suit in the United
States District Court for the District of Puerto Rico under
28 U.S.C. § 1343, seeking to compel the return of the yacht,
to have 24 L.P.R.A. § 2512(a)(4) and (b) and 34 L.P.R.A.
§1722 declared unconstitutional, and to enjoin their en-
forcement. Pearson also filed a motion to have a three-judge
court convened in accordance with 28 U.S.C. § 2281. On
December 21, appellants withdrew their opposition (on
the basis of the abstention doctrine) to the convening of
the three-judge court, and submitted thereto. App. A, infra,
p. 20.

In its memorandum opinion and order issued March 29,
1973, the three-judge court ordered Puerto Rico to pay
Pearson the appraised value of the yacht, as provided
under 34 L.P.R.A. § 1722(d), and issued a permanent in-
junction against the enforcement of the challenged statu-

6

tory provisions. The order was based on two holdings.
First, the court declared that the challenged statutes, in
authorizing seizure without a hearing, permitted a depriva-
tion of Pearson’s property without due process. The court
claimed support for this proposition in Fuentes v. Shevin,
407 U.S. 67 (1972). (The court did not hold that Puerto
Rico had failed to make reasonable efforts to notify in-
terested parties before the forfeiture, specifically indicating
that had this issue been reached it would have ruled with
appellants. App. A, infra, p. 26.) Second, the court held that
the statutes effected a taking of Pearson’s property without
just compensation in that, as the court read the Supreme
Court of Puerto Rico’s construction of the statutes, they
do not allow the owner of seized property to nullify a for-
feiture by proving his own innocence in the crime for which
the property was seized. United States v. United States
Coin and Currency, 401 U.S. 715, 721-722 (1971) (herein-
after, Coin and Currency), was said to be controlling.

THE QUESTIONS ARE SUBSTANTIAL
Summary of Appellants’ Position

Forfeiture is a standard statutory prescription for prop-
erty used in connection with any of a broad range of viola-
tions of criminal law. See, e.g., 21 U.S.C. § 881(a), from
which the Puerto Rican statute was copied; 49 U.S.C. § 782;
26 U.S.C. § 7301; 56 1/2 Ill. Stats. Ann. § 712, § 1505 (Supp.
1973); 18 Mich. Stats. Ann. § 18.1070(55) (Supp. 1973);
14A Fla. Stats. Ann. § 398.24. All of these statutes and
many Others must fall if the decision below is affirmed.
None provides notice before seizure, which the district
court held due process to require; none of the cited federal
statutes by its terms protects innocent owners and lien-
holders against forfeiture, which the district court held
is necessary to avoid taking without just compensation. If

_ *
EET LLL REESE IEEE NE Ee OPENS nh

7

this Court affirms the district court’s decision without modi-
fication, it will make drafting an effective and constitu-
tional forfeiture statute an impossibility: notice and an
- adversary hearing would enable the genuinely criminal to
remove and hide any property sought to be seized.

By the same reasoning, the foundation of our under-
standing of the Fourth Amendment’s guarantee against
“unreasonable searches and seizures” would be under-
mined: if notice and an adversary hearing must be provided
before property whose possessor has already been arrested
can be seized, does it not follow that notice and an adversary
hearing must be provided before the suspect himself can
be arrested? Manifestly the issues involved in this case are
substantial.

We respectfully submit that the decision of the court
below is, equally clearly, erroneous. Pearson was not de-
prived of any property interest by the seizure of the yacht
from Lessee because it had no possessory interest whatso-
ever in the vessel at that moment, only a security interest,
or at most bare title. Even if Pearson had had a possessory
interest, due process has never been construed by this
Court to require an adversary hearing before seizure in a
quasi-criminal proceeding such as forfeiture, and Fuentes
v. Shevin, cited by the district court as supporting that
construction, expressly rejects it. Due process does require
an attempt to provide appropriate notice and opportunity
for hearing before forfeiture; but the challenged statutes
make adequate provisions for this, and the district court
expressed satisfaction with Puerto Rico’s efforts to notify
parties with interests in the yacht.

The district court found that Pearson’s property was
taken without just compensation because it would have been

"3 SE PIE IY PTET ITE AEA EIS LE EE

bh ie RTE EES TE IE GE LE ERS GERI

8

barred, under Puerto Rican law, from defending in any
forfeiture hearing on the grounds of its own innocence. This
conclusion is incorrect for four reasons. First, this Court’s
statement in Coin and Currency, supra, at 721-22, that for-
feiture statutes “are intended to impose a penalty only
upon those who are significantly involved in a criminal
enterprise” has never been authoritatively interpreted to
require legislative provision of such a defense as a con-
dition to the constitutionality of forfeiture statutes; the
weight of the expressions of lower courts is against«such
an interpretation; and policy and precedent are against
such a requirement. Second, even if the district court was
_ correct in finding that any constitutionally sound forfeiture
statute must permit the defense, there is ample Puerto
Rican precedent for recognizing it without invalidating
the statutes, The court below should have followed these
precedents to avoid declaring the statutes unconstitutional.
Third, depending upon the proper interpretation of another
part of the Puerto Rican statutes, Pearson either still has,
or once had but lost by inaction, an opportunity to present
its defenses to a Puerto Rican court. In neither case can
Pearson be found to have suffered any loss from the con-
stitutional infirmity it alleges. Fourth, it would be grossly
unjust to permit Pearson to extract from Puerto Rico the
appraised value of the yacht. Pearson is already entitled,
under its agreement with Lessee, to the insurance proceeds
and to an action against Lessee for the balance of the rent
due, each of which is presumably at least equal in value
to the yacht when seized, as stipulated by Pearson itself.
Moreover, whatever opportunities to contest the forfeiture
Pearson did have or should have had, it lost them by its
own negligent failure to register its interest in the yacht
with the Puerto Rican Ports Authority as required by the
laws of Puerto Rico.

Ce ey) eae

9

The Court Below Erred in Holding that Seizure without
Notice Deprived Pearson of Property without Due Process

of Law ,

Under Clauses 6 and 11 of the lease, Lessee, not Pearson,
had the exclusive right to possession of the yacht at the

‘time of seizure. App. C, infra, pp. 45, 47. In Puerto Rico,

title to seized property does not pass until forfeiture,
Downs v. Porrata, 76 P.R.R. 572 (1954). Therefore, the
court below erred when it found that Pearson “has been
deprived, since [the seizure of the yacht, on] July 11, 1972
of.valuable property .. .” App. A, infra, p. 21. And it is
therefore impossible for the seizure of the yacht to have
violated Pearson’s rights under the due process clause.

The district court found the statute unconstitutional on
its face because it made no provision for notice and a hear-
ing before seizure. The district court cited Fuentes v.
Shevin, 407 US. 57 (1972), as prohibiting such a “depriva-
tion”, and concluded that “forfeiture is not one of those
extraordinary situations justifying postponing a hearing”
[all emphasis supplied unless otherwise indicated]. App. A,
infra, p. 28. Tlie issue, of course, is whether seizure involves
considerations justifying postponing a hearing; Puerto
Rico, like other American jurisdictions, does provide oppor-
tunity for a hearing before forfeiture. The replevin statutes
which were held in Fuentes v. Shevin to deprive without
due process were described by this Court as follows:

The statutes, moreover, abdicate effective state control
over state power, Private parties, serving their own
private advantage, may unilaterally invoke state power
to replevy goods from another. No state official partici-
pates in the decision to seek a writ; no state official
reviews the basis for the claim to repossession ; and no
state official evaluates the need for immediate seizure.
(407 U.S. at 93.)

10

The Court then went on to say that:

The seizure of possessions under a writ of replevin is
entirely different from the seizure of possessions under
a search warrant. First, the search warrant is generally
issued to serve a highly important governmental need—
e.g., the apprehension and conviction of criminals—
rather than the mere private advantage of a private
party in an economic transaction. Second, a search
warrant is generally issued in situations demanding
prompt action. The danger is all too obvious that a
criminal will destroy or hide evidence or fruits of his
crime if given any prior notice. Third, the Fourth
Amendment guarantees that the state will not issue
search warrants merely upon the conclusory applica-
tion of a private party. It guarantees that the state
will not abdicate control over the issuance of warrants
and that no warrant will be issued without a showing
of probable cause. Thus, our decision today in no way
implies that there must be opportunity for an adversary
hearing before a search warrant is issued. (Id. at 93-94,
n. 30.)

Seizure in a forfeiture proceeding is, like seizure of
evidence for a criminal proceeding, subject to the “probable
cause” requirement of the Fourth Amendment, not the
adversary hearing requirement of the due process clause.®
United States v. Troiano, 365 F.2d 416 (8rd Cir. 1966),
cert. denied 385 U.S. 958 (1966); Burge v. United States,
342 F.2d 408 (9th Cir. 1965), cert. denied 382 U.S. 829
(1965) ; cf. 24 L.P.R.A. § 2510 (Supp. 1972).

The due process clause does obligate the state to make
efforts “reasonably calculated, under all the circumstances,

3 It would be especially absurd to require notice before seizure on
the specific facts of this case: is the state to carry the burden of
notifying all holders of security interests in a vessel transporting
contraband before seizing it?

11

to apprise interested parties of the pendency of the action
{in which their interests will be affected],” Mullane v.
Central Hanover Tr. Co., 399 U.S. 306, 314 (1950) ; Robinson
v. Hanrahan, 409 U.S. 38 (1972). The challenged statute
provides for such notice, and the court below stated that
“from the record in this case, we are not disposed to rule
that the Commonwealth of Puerto Rico did not have reason
to believe that notice to the owner was, in fact, given.”
App. A, infra, p. 26.

Pearson’s sole serious contention was that the hearing
Puerto Rico provides before forfeiture is not meaningful
because the defense of innocence of the crime for which the
vessel is forfeited is not provided by the statutes. The three-
judge court treated this contention as raising the issue of
taking without just compensation,‘ discussed below.

The Court Below Erred in Holding that Pearson Suffered a
Taking of Property without Just Compensation

1. The district court reasoned that if forfeiture statutes
“are intended to impose a penalty only upon those who
are significantly involved in a criminal enterprise,” Coin
and Currency, supra, at 721-2, it is a taking without just
compensation to deny one having an interest in property
seized, but lacking involvement in the crime for which the
seizure was made, the right to preserve his interest against
forfeiture by proof of his innocence. In support of this

“An approach which mystifies appellants. No property is being
taken “for public use” in the eminent domain sense which is
at the core of the just compensation requirement of the Fifth
Amendment. The issue here is whether a state may constitution-
ally apply quasi-criminal sanctions to one who consents to the
use of his property by another, who then uses it in the com-
mission of a crime. Whether the legislative power to define and
to punish criminal conduct extends this far would seem to raise
a question of substantive due process, or perhaps of “excessive
fines” under the Eighth Amendment, not of just compensation.

12

reasoning, the court offered one federal appellate decision
and two federal district court decisions. The appellate deci-
sion, McKeehan v. United States, 438 F.2d 739 (6th Cir.
1971), and one of the district court cases, Suhomlin v. United
States, 345 F.Supp. 650 (D. Md. 1972), each held that the
government was not entitled to forfeiture, given that it had
dropped the criminal charges upon which the initial seizure
had been made. Thus neither examined the status of the
property interest of an innocent party when the possessor
of the property seized is in fact guilty of a criminal viola-
tion supporting forfeiture. The remaining district court
decision, United States v. One 1971 Ford Truck, 346 F.Supp.
613 (C.D. Calif. 1972), does proclaim the principle sought
to be supported, but only in dictum: the court held that
the possessor of the truck was unlawfully in possession of
it when apprehended and so, under a statutory exception,
the innocent owner’s interest could not be forfeited. Jd. at
619-21. This same exception is judicially recognized in
Puerto Rico. Ochoteco v. Superior Court, 88 D.P.R. 517,
88 P.R.R. 500 (1963).

This Court has rejected in a long line of cases the prin-
ciple announced by the court below. Goldsmith Jr.-Grant
Co. v. United States, 254 U.S. 505 (1921); Dobbin’s Distil-
lery v. United States, 96 U.S. 395 (1878); The Palmyra,
25 U.S. (12 Wheat.) 1 (1827). On the strength of a single
district court’s dicta the court below believes that Coin and
Currency overruled these cases. At least two circuit courts
of appeal disagree flatly. United States v. One 1971 Buick
Riviera, 463 F.2d 1168 (5th Cir. 1972); United States v.
One 1967 Ford Mustang, 457 F.2d 931 (9th Cir. 1972). The
latter makes the obvious point that such a decision should
be made only by this Court or by the appropriate legisla-
ture. Id. at 932.

EE RPS IIS RRR I RRR ae nena AEE MERE ass

0 an ne ECE ASS REE Oe es Rees eR ns, Sie re ea Ae Sn Sea ee

13

The desirability of the result reached by the district court
is by no means self-evident. Of course it would be unjust
for an owner to lose his vehicle as a result of a crime com-
mitted by one who has stolen it, because the owner bears
no causal responsibility for the crime, did not in any wey
consent to the risk of its occurrence, and cannot be made
the medium of any deterrence of future occurrences by the
imposition of a forfeiture upon him. No American juris-
diction permits forfeiture in these circumstances. But the
owner who consents to the possession and use of his prop-
erty by another presents a different case. He is a physical
cause of the use of that property in a subsequent violation
of law by the possessor. He is in a position to know of the
risk, to discourage the possessor from committing the crime,
and to protect himself against loss.* In one of the decisions
which the court below thinks has been overruled, this Court
said that in enacting a forfeiture statute a legislature “inter-
poses the care and responsibility of [the owner of property
which may be used to facilitate violations of law] in aid
of the prohibitions of the law and its punitive provi-
sions. .. .” Goldsmith, Jr.-Grant Co. v. United States, 254
U.S. 505, 511 (1921). It is entirely consistent to interpose
the owner’s responsibility when he has consented to use
of the property by another and to refuse to do so when
use by another was against his will. Certainly it is a matter
of the “severity of punishment,’ “its efficacy or its futility,”
matters which this Court has said to be “peculiarly ques-
tions of legislative policy.” Gore v. United States, 357 U.S.
386, 393 (1958).

2. But if justice today insists on allowing the innocent
third party defense against forfeiture, in the form sought
by Pearson, justice can and should be done without striking

5 Pearson is a paradigm example. See lease clauses 4(a), 4(c).
6. App. C, infra, pp. 438, 44, 45.

14

=

down the Puerto Rican statutes as unconstitutional. There
are already two standard exceptions to the long-standing
rule that innocence will not save a third party’s interest in
the seized object, one exempting property used as a com-
mon carrier unless the owner or person in charge is a
consenting party to the violation, the other exempting con-
veyances unlawfully in the possession of one other than
the owner. See, e.g., 21 U.S.C. § 881(a), subparagraphs (A)
and (B). In Puerto Rico these exceptions exist, as the dis-
trict court remarked, by virtue of judicial recognition. App.
A., infra, p. 24, n. 12: Metro Taxi Cabs, Inc. v. Treasurer,
73 D.P.R. 171, 73 P.R.R. 164 (1952), and Ochoteco v.
Superior Court, 88 D.P.R. 517, 88 P.R.R. 500 (1963).

The district court emphasized that the irrelevance to
proceedings under Puerto Rican forfeiture statutes of the
owner’s innocence is “solely as a result of their interpreta-
tion by the Supreme Court of the Commonwealth of Puerto
Rico.” App. A, infra p. 24. The court continued :

We cannot in fairness say that the result is the fault
of the Supreme Court of the Commonwealth of Puerto
Rico, for it, like many other courts, state and federal,
was merely following the construction given the federal
forfeiture statutes by the Supreme Court of the United
States [before Coin and Currency].

The court below was, moreover, confident “that the
Supreme Court of the Commonwealth of Puerto Rico would
have reached the same result as we do here today, in view
of the fact that it has followed federal decisions in inter-
preting local forfeiture statutes.” App. A infra. p. 21. But
if the Puerto Rican Supreme Court were going to reach
this result, it is doubtful that it would have done so by
declaring the statutes unconstitutional. It is far more likely
that the Puerto Rican Supreme Court would have recog-
nized the innocence defense as a gloss on the statutes, just

eee

15

as it did with the other two innocence exceptions.® Metro
Taxi Cabs, Inc. v. Treasurer, supra; Ochoteco v. Superior
Court, supra. The district court below plainly erred when
it said “‘[t]here is no conceivable way in which the Com-
monwealth courts can construe’ the challenged statutes ‘to
avoid the constitutional issues raised in this case.’” App.
A, infra, p. 21.

This Court has said:

The cardinal principle of statutory construction is to
save and not to destroy. * * * as between two possible.
interpretations of a statute, by one of which it would
be unconstitutional and the other valid, our plain duty
is to adopt that which saves the act. Even to avoid a
serious doubt the rule is the same. (N.L.R.B. v. Jones
€ Laughlin Steel Corp., 301 U.S. 130 (1936).)

In this case this principle should apply with special force,
since the federal court elected not to abstain to allow the
Puerto Rican Supreme Court to construe and pass first on
the constitutionality of local statutes.’ Fornaris v. Ridge
Tool Co., 400 U.S. 41 (1970) ; Reetz v. Bozanich, 397 U.S. 82
(1970) ; Bonet v. Texas Co., 308 U.S. 463, 471 (1940).

3. The constitutionality of the alleged failure of Puerto
Rican law to allow the innocent third party defense in for-

®The Arizona Supreme Court so construed the Arizona vehicle
forfeiture statute, even though it had no similar Arizona prece-
dents for its interpretation. Re One 1965 Ford Mustang, 105
Ariz. 293, 463 P.2d 827 (1970).

7 Faithful adherence to the principle of preservative construction
is indispensable to support that narrow limitation of the doctrine
of abstention which this Court, on the grounds of duplication of
effort and expense, has insisted upon. England v. Bd. of Medical
Examiners, 375 U.S. 411 (1964). If state (or Commonwealth)
officials cannot confidently expect adherence to this principle,
they are remiss in their duties when they cooperate, as appellants
did, in facilitating federal consideration of the constitutionality
of state statutes.

16

feiture proceedings is an issue that the district court should
never even have reached. 34 L.P.R.A. § 1722(a) provides
that an interested party has fifteen days in which to chal-
lenge a forfeiture if the courts are to have jurisdiction over
his complaint. App. B, infra, p. 34. It is well established that
this period does not run against an interested party until
he himself has been notified. Garcia v. Superior Court, 91
P.R.R. 146 (1964). In 1964 the Supreme Court of Puerto
Rico said “we have no quarrel with the theory” of a plain-
tiff corporation seeking to contest a forfeiture on the
grounds that notice was not properly served on it more than
one year after notice had been served on its president. Com-
monwealth v. Superior Court, 96 D.P.R. 843, 845, 96 P.R.R.
822, 824 (1969), n.1 [translation from the Spanish text by
Fernando E. Agrait-Betancourt, Assistant Secretary, Office
of the Attorney General of the Commonwealth of Puerto
Rico].

Pearson by its own admission had actual knowledge of
seizure of the yacht by October 19, 1972, more than fifteen
days before it filed its suit in federal district court. If
actual notice satisfies the statutory requirements, then Pear-
son, like the plaintiff in Commonwealth v. Superior Co
supra, has lost its chance to air its third party dete
through its own inaction. "

Presumably this is the basis of the conclusion of the court
below that Pearson is time-barred from the Puerto Rican
courts. App. A. infra, pp. 21-22. If, however, only notice ac-
cording to the statutory formula will suffice, as Garcia v.
Superior Court, supra, would indicate, then Pearson has
not yet been notified and hence has not yet been barred
from the courts of Puerto Rico. On either interpretation,
Pearson has suffered no damage as a result of the alleged
failure of the Puerto Rican statute to satisfy the asserted
just compensation standard. As Justice Brandeis said in

17

his benchmark concurring opinion in Ashwander v. T.V.A.,
297 U.S. 288, 347-8 (1935):

The Court will not pass upon the validity of a statute
upon complaint of one who fails to show that he is in-
jured by its operation.

4. According to the district court, Pearson “is entitled
to be paid the amount of the appraisal, plus interest.” App.
A., infra, p. 30. The district court cannot be basing its de-
termination of what it would take to justly compensate
Pearson. Clause 4(a) of the lease required Lessee to fur-
nish Lessor with insurance policies with loss payable to
Lessor “insuring Lessor against damage, loss, or destruc-
tion of the Equipment under this lease sustained in any
manner whatsoever in an amount not less than the replace-
ment value of said Equipment.” App. C., infra, p. 43. The
record contains no pleading, much less any evidence, and
there is no reason to assume, that this insurance does not
exist or did not fully compensate Pearson.

In addition, clause 4(c) provides that “the damage, de-
struction, loss, disability or forfeiture of said Equipment
shall not discharge or diminish the obligation of Lessee to
pay rent as provided in this agreement.” App. C, infra, p. 44.
The agreement provided rental payments of $474.66 per
month, which over the full lease term comes to considerably
more than the “unit price” specified by Pearson. App. ©,
infra, p. 52. This sum became due no later than October 19,
1972, under clause 7, App. C, infra, p. 45, thus “entitling”
Pearson to an action in debt for that amount. This cause
of action is the compensation properly envisaged by the
lease in the event of forfeiture, and Pearson should be held
to it.

Finally, if Pearson is now badly placed to seek from
Puerto Rico courts the relief it believes itself guaranteed

EE Pras ie it ve PE Re sa

18

by the federal Constitution, this is doubly due to its own
negligence. Pearson knew — insisted on knowing — that the
yacht would be based in Puerto Rico, clauses 9, 12, App. C,
infra pp. 47-48, but failed to register with Puerto Rico
authorities the ownership interest which it claims, contrary
to. 23 L.P.R.A. §451b, 451e. A mortgagee who fails to
record his interest loses it to a good faith purchaser ; Pear-
son deserves no greater protection when it fails to comply
with a state’s police measures. Pearson knew by October
19, 1972 that the yacht had been seized, but failed to act
within the time provided by Puerto Rican law. This case
should present no occasion to reward inattention to local
law.

CONCLUSION

For the foregoing reasons, probable jurisdiction should
be noted.
Respectfully submitted,

Lynn R. Coteman
2100 First City Natl. Bank Bldg.
Houston, Texas 77002

Of Counsel:

FRANCISCO DE JESUS-ScHUCK
Attorney General,

Miriam Naverra DE Ropon
Solicitor General,

The Commonwealth of Puerto Rico
Post Office Box 192
San Juan, Puerto Rico 00902

Vinson, ELxk1ns, SEARLS, Connat_y & SmitTH
2100 First City Natl. Bank Bldg.
Houston, Texas 77002

July 21, 1973
(Appendices Follow)

19
APPENDIX A

In Tue

United States District Cont

For Tue District or Purrto Rico
Crvi No. 1018-72

Pearson Yacut Leastnc Company, Division of

-Grumman Allied Industries, Inc.

Plaintiff,
Vv.

Luis Torres Massa, as Superintendent of Police of the

Commonwealth of Puerto Rico, and Manvet Martinez

Suarez, as Chief of the Office of Transportation of the
Commonwealth of Puerto Rico,

Defendant.

MEMORANDUM OPINION AND ORDER

Plaintiff instituted this suit seeking permanent injunc-
tive relief alleging that the seizure and forfeiture of its
property by the Superintendent of Police of the Common-
wealth of Puerto Rico (hereinafter referred to as the
Superintendent), violated the Due Process Clause, and con-
stituted a taking of property without just compensation,
contrary to the Fifth and Fourteenth Amendments of the
Constitution of the United States. As the action sought
to enjoin the enforcement of a state statute on the grounds
of its inconsistency with the Constitution of the United

20

States, a three-judge court was convened.’ Although the
jurisdiction of this Court is not in issue, we do neverthe-
less find that all prerequisites, both jurisdictional and
pseudojurisdictional,? are present and, therefore, conclude
that this case is properly before us.

‘1. The constitutional claim presented is substantial.
Monroe v. Pape, 365 U.S. 167 (1961) ; McNeese v. Board of
Education for Community School District No. 187, 373 U.S.
668 (1963); Lynch v. Household Finance Corporation, 405
U.S. 538 (1972).

2. The challenged statutes have statewide applicability.
Board of Regents of the University of Texas System v.
New Left Education Project, 404 U.S. 541 (1972).

3. The so-called pseudojurisdictional defenses, such as
exhaustion, abstention and comity, do not apply to this case.
Exhaustion of state judicial remedies is not a prerequisite
to invoking federal jurisdiction seeking constitutional pro-
tection, Marin v. University of Puerto Rico, 346 F. Supp.
470 (D.P.R. 1972). Insofar as abstention is concerned, we
specifically find that the statutes here involved, as well as
their predecessors, have been consistently interpreted by

1 At first, the defendants, represented by the Secretary of Justice
of the Commonwealth of Puerto Rico, opposed plaintiff’s motion
to convene a three-judge court, alleging as sole defense that this
was a case calling for the application of the doctrine of
abstention. After oral argument on the motion, the Secretary
withdrew this defense and filed a motion consenting to the
convening of a three-judge court. The District Judge, having
found that all jurisdictional pre-requisites had been met, then
requested the three-judge court.

2 This term is borrowed from Hobbs v. Thompson, 448 F. 2d 456
(5 Cir. 1971).

SE ee een Se TT eee

21

the Supreme Court of the Commonwealth of Puerto Rico*®
and, consequently, under the cases of Wisconsin v. Con-
stantineau, 400 U.S. 433 (1970); Fornaris v. Ridge Tool
Co., 400 U.S. 41 (1970); Reete v. Bozanich, 397 U.S. 82
(1970) ; Harman v. Forsseneius, 380 U.S. 528 (1964), and
Railroad Commission of Texas v. Pullman Co., 312 U.S. 496
(1941), we need not abstain. We do, nonetheless, believe that
the Supreme Court of the Commonwealth of Puerto Rico
would have reached the same result as we do here today, in
view of the fact that it has followed federal decisions in
interpreting local forfeiture statutes.

There is “no conceivable way in which the Commonwealth
Courts can construe” the challenged statutes “to avoid the
constitutional issues raised in ‘this case.” Rolando Santin

. Arias v. Examining Board of Refrigeration and Air Con-

ditioning Technicians, ...... F. Supp. ...... (D.P.R. 1972),
Opinion entered November 20, 1972). In rejecting absten-
tion, we have also taken into account the ensuing delay and
the prejudice and additional losses that plaintiff would
have to bear. Plaintiff has been deprived, since July 11,
1972, of valuable property and of the income produced by
it. Also, the nature of the property itself, a yacht, makes
it specially susceptible to deterioration and other perils of
the sea. But, most compelling, is the fact that under the
statutory scheme, the available procedure precludes plain-

8 General Motors Acceptance Corporation v. Brafiuela, 61 D.P.R.
725, 61 P.R.R. 701 (1943) ; Torres v. Buscaglia, 68 D.P.R. 336,
68 P.R.R. 314 (1948) ; Martinez v. Buscaglia, 69 D.P.R. 438, 69
P.R.R. 406 (1948) ; General Motors Acceptance Corporation v.
District Court, 70 D.P.R. 941, 70 P.R.R. 898 (1950) ; Metro

\ Taxicabs v. Treasurer, 73 D.P.R. 171, 78 P.R.R. 164 (1952) ;
Stuckert Motor Company, Inc. v. District Court, 74 D.P.R. 527,
74 P.R.R. 494 (1953) ; Melendez v. Superior Court, 90 D.P.R.
656, 677-678, 90 P.R.R. 639, 659-660 ; Commonwealth v. Superior
Court, 94 D.P.R. 717, 94 P.R.R. 687 (1967).

22

tiff from challenging the forfeiture in the state courts.‘
Finally, injunctive relief cannot be granted by the Courts
of the Commonwealth of Puerto Rico because of the exist-
ence in Puerto Rico of an anti-injunction statute.’ Having
thus considered these threshold issues, we face the issue
on the merits.

Our task has been greatly simplified by the cooperation
of the parties in stipulating the facts relevant to the con-
stitutional issues raised. These can be summdrized as
follows: Plaintiff is in the business of leasing pleasure
yachts in the United States and Puerto Rico. On July 11,
1972, one of its yachts was seized by the Superintendent
and forfeited to the Commonwealth of Puerto Rico. At the
time of seizure, the yacht in question was in the possession
of a third party pursuant to @ lease agreement, which
among other things specifically prohibited lessee from
using the leased property for an unlawful purpose. The
lessee had been discovered by police agents possessing
marihuana while on board the yacht which, under Puerto
Rican law is prohibited.* Plaintiff did not know that its
property was being used for an illegal purpose and was
completely innocent of the lessee’s criminal act. After the
seizure and within the time allowed by law,’ the Superin-
tendent notified lessee. Plaintiff was never notified and,

‘Title 34, Laws of Puerto Rico Annotated, Section 1722(a) pro-
vides: “The filing of such complaint within the period herein
established shall be considered a jurisdictional prerequisite for
availing of the action herein authorized.” During oral argu-
ment, the Government agreed that under the circumstances of
this case, the plaintiff was time barred.

5 Title 32, Laws of Puerto Rico Annotated, Section 3524; Arraras
v. Tribunal Superior, ...... DPB. ..ng ann PR. om (Decion
entered January 27, 1972).

6 Controlled Substances Act of Puerto Rico, Title 24, Laws of
Puerto Rico Annotated, Sections 2101-2607. This law is similar
- pe Federal Act, Title 21, United States Code, Section 801,

7 Title % 34, Laws of Puerto Rico Annotated, Section 1722(a).

23

since lessee did not post bond,® the yacht was forfeited to
the Commonwealth of Puerto Rico. It was not until plaintiff
attempted to recover possession of the yacht after lessee
had defaulted in the rental payments that plaintiff learned
of its forfeiture.

Plaintiff then instituted this suit seeking permanent in-
junctive relief alleging that the statutes under which the
defendants had seized the vessel violated the Due Process
Clause and, also, that its property had been taken for
public use without just compensation.® We agree with the
plaintiff.

‘The statutes involved are Title 24, Laws of Puerto Rico
Annotated, Section 2512, which is part of the Controlled
Substances Act,!° and Title 34, Laws of Puerto Rico An-
notated. Section 1722, better known as the Uniform Vehicle,
Mount, Vessel and Plane Seizure Act.’! Under Paragraph
(a) (4) of the Controlled Substances Act, it is provided that
forfeiture shall be had of:

“(4) all conveyances, including aircraft vehicles,
mount or vessels, which are used, or are intended for
use, to transport, or in any manner to facilitate the
transportation, sale, receipt, possession, or conceal-
ment of [a controlled substance} described in clauses
(1) and (2) of this subsection.”

Since marihuana is a controlled substance under the Act,
it is included in clause (1) of Section 2512, Subsection (a).
Thus, possession of marihuana while on board a vessel
makes the vessel subject to forfeiture. Subsection (a)(4),
like its predecessor, Title 24, Laws of Puerto Rico An-
notated, Section 975(f), makes no distinction between con-

® Title 34, Laws of Puerto Rico Annotated, Section 1722(c¢).

® The yacht was not sold at public auction in the manner pro-
vided by Title 34, Laws of Puerto Rico Annotated, Section
1722(¢). Nevertheless, the Government has set it aside for
official use.

10 Note 7, supra.

11 Title 34, Laws of Puerto Rico Annotated, Section 1721.

24

veyances owned by the person accused of the illegal act and
conveyances owned by a person who is innocent of the
possessor’s criminal act and is in no way whatsoever con-
nected with it.” |

In its brief and oral argument, the Commonwealth of
Puerto Rico conceded that the owner’s innocence is irrele-
vant to forfeiture proceedings under Section 2512(a) (4),
and other Commonwealth of Puerto Rico forfeiture statutes,
solely as a result of their interpretation by the Supreme
Court of the Commonwealth of Puerto Rico.'* We cannot
in fairness say that the result is the fault of the Supreme
Court of the Commonwealth of Puerto Rico, for it, like
many other courts, state and federal, was merely following
the construction given to federal forfeiture statutes by the
Supreme Court of the United States. See Goldsmith Jr.-
Grant Co. v. United States, 254 U.S. 505 (1921); United
States v. One Ford Coupe, 272 U.S. 321 (1926); Dobbin’s
Distillery v. United States, 96 U.S. 395, 399-401 (1878) ; The
Palmyra, 12 Wheat. 1, 14, 6 L. Ed. 531 (1827), which cases

have since been overruled. Inasmuch as Puerto Rican for- -

feitures statutes were, in most instances, copied from their
federal counterparts, as a matter of judicial construction
it was logically expected that they would have been inter-
preted by the Supreme Court of the Commonwealth of
Puerto Rico in like manner.

12 Title 24, L.P.R.A., Section 2512(a), save for some unimportant
differences, is an exact copy of its federal counterpart, 21
U.S.C., Section 881(a). The federal act, however, provides that
under certain circumstances, property may not be forfeited.
Subparagraph (A) excepts from forfeiture property used as a
common carrier unless the owner or person in charge was &
consenting party or privy to a violation of this chapter. Sub-
paragraph (B) excepts from forfeiture conveyances which are
unlawfully in the possession of a person other than the owner
in violation of the criminal laws of the United States or of any
state. Although excluded from 24 L.P.R.A., Section 2512(a) (4),
these exceptions have been judicially recognized by the Supreme
Court of Puerto Rico in the cases of Metro Taxicabs Inc. v. Treas-
urer, 73 D.P.R. 171,73 P.R.R. 164 (1952), and Ochoteco v.
Superior Court, 88 D.P.R. 517, 88 P.R.R. 500 (1963).

13 See cases cited in Note 3, supra.

—

25

The recent decision of United States v. United States
Coin and Currency, 401 U.S. 715 (1971), ended the fiction
that inanimate objects themselves can be guilty of wrong-
doing and it condemned, in the words of Blackstone, the
seizure of the property of the innocent “as based upon a
‘superstition’ inherited from the ‘blind days’ of feu-
dalism.”"* Justice Harlan, writing for the majority in that
case, stated:

“We would first have to be satisfied that a forfeiture
statute, with such a broad sweep, did not raise serious
constitutional questions under that portion of the Fifth
Amendment which commands that no person shall be
‘deprived of * * * property, without due process of
law; nor shall private property be taken for public
use, without just compensation.’®

Even before the advent of Coin and Currency, the Court
of Appeals for the Sixth Circuit, in the case of McKeehan
v. United States, 438 F. 2d 739 (1971), rejected the legal
fiction that inanimate objects can be guilty of wrongdoing
and went on to say that under the Fifth Amendment “the
imposition of forfeiture on the appellant is penal and
causes an unconstitutional deprivation of personal pro-
perty “without just compensation.”"* Justice Belaval of the
Supreme Court of the Commonwealth of Puerto Rico had
so held in writing the dissenting opinion in Commonwealth
v. Superior Court, 94 D.P.R. 717, 725-807, 94 P.R.R. 687,
695-773 (1967). In 1972, a California District Court, in the
case of United States v. One 1971 Ford Truck, 346 F. Supp.
613, followed Coin and Currency in setting aside the for-
feiture of a vehicle used in connection with an illegal trans-
action, but whose owner was innocent of the criminal act.

14 United States v. United States Coin and Currency, 401 U.S. 715,

at 721-723, citing from 1 W. Blackstone, Commentaries, C. 8,300.
15 Td. 401 U.S., at 720.
16 Td. 438 F. 2d at 745.

FEELERS LNAI AOLELR ELE ES EET PE ORR Na tyne ES

LORETO ERED AOE RHEE ROR AE GMD

26

A similar result was reached in Suhomlin v. United States,
345 F. Supp. 650, 655 (D. Maryland 1972).

It is clear that the forfeiture of plaintiff’s property under
Title 24, Laws of Puerto Rico Annotated, Section 2512(a)
(4), and Title 34, Laws of Puerto Rico Annotated, Section
1722, is unconstitutional in that property of a totally in-
nocent person has been taken for government use without
just compensation. To this extent, we hold that the forfei-
ture of plaintiff’s yacht is confiscatory and deprives plain-
tiff of property without just compensation.

Plaintiff also alleges that the proceedure under which
property is forfeited violates the Due Process Clause. It
claims that Title 34, L.P.R.A., Section 1722, known as the
Uniform Vehicle, Mount, Vessel and Plane Seizure Act,”
does not meet the due process requirements in allowing the
seizure of property without a hearing and before judgment,
in failing to require the giving of adequate notice, in not
providing for an adequate and meaningful hearing, in
providing a procedure where the illegal use-is presumed
and the burden of providing otherwise is on the claimant,
and in establishing a procedure with limited defenses.
From the record in this case, we are not. disposed to rule
that the Commonwealth of Puerté Rico did not have reason
to believe the notice to the owner was, in fact, given. Be-
cause of the result we reach here, this issue becomes acade-
mic. We realize that failure to provide proper notice may
violate i standards. Menkarell’v. Bureau of Nar-
cotics, 463 F. 2d 88, 94 (3 Cir. 1972); Jackel v. United
States, 304 F. Supp. 993, 999 (S.D.N.Y. 1969).

We do, however, agree with plaintiff that the prehearing,

17 34 L.P.R.A., Section 1722, is made applicable to forfeiture for
violations of the Controlled Substances Act of Puerto Rico, by
virtue of 24 L.P.R.A., Section 2512(b).

7

27

prejudgment provision of this statute does not meet due
process requirements. Section 1722(a) provides:

“... The proceedings shall be begun by the seizure
of the property by the Secretary of Justice, the Secre-
tary of the Treasury or the Police Superintendent,
through their delegates, policemen or other peace
officers.”

There is no provision whereby the seizure can be con-
tested before it is made. In this limited posture, the statute
on its face is unconstitutional, Recent Supreme Court de-
cisions have made it clear that, absent some justification
reflecting an important governmental or general public in-
terest, property or property rights may not be seized with-

- out first giving the affected party adequate and meaningful

hearing. Fuentes v. Shevin, 407 U.S. 67 (1972).

The decision to seize property rests solely, as in this
case, with the Police Superintendent, and it is only after
the seizure has taken place that the owner or person in
charge thereof may file a complaint and have his day in
court.

We rely not only on the Fuentes v. Shevin decision, but
on‘a number of other Supreme Court and three-judge dis-
trict court cases which have struck down state statutes per-
mitting prehearing or prejudgment seizures and depriva-
tions of property or property rights. Sniadach v. Family
Finance Corp. of Bay View, 395 U.S. 337 (1969); Lynch v.
Household Finance Corp., 405 U.S. 538 (1972); Bell v.
Burson, 402 U.S. 535 (1971); Wisconsin v. Constantineau,
400 U.S. 433, 437 (1971); Goldberg v. Kelly, 397 U.S. 254
(1970); Schneider v. Margossian, 349 F. Supp. 741 (D.
Mass. 1972) ; Dorsey v. Community Stores Corporation, 346
F. Supp. 103 (E.D. Wisc. 1972) ; MacQueen v. Lambert, 348
F. Supp. 1334 (M.D. Fla. 1972) ; Holt v. Brown, 336 F. Supp.
2 (W. D. Ky. 1971) ; Klim v. Jones, 315 F. Supp. 109 (N.D.
Cal. 1970). In this case, the only argument advanced in

28

defense of the prehearing seizure is the “need” for efficient
control of narcotics. However, we have not been shown in
what way prehearing confiscations are going to aid or make
more efficient the enforcement of criminal laws. It must be
pointed out that in this case the seizure of the yacht took
place on July 11, 1972, while the act for which it was for-
feited took place on May 6, 1972. Under such circumstances,
there is no justification for not including in the statute a
. provision that would require a hearing prior to seizure. As
stated in Fuentes v. Shevin, supra, efficiency and economy
do not justify obliterating procedural due process:

“The establishment of prompt efficacious procedures
to achieve legitimate stated ends is a proper state in-
terest worthy of cognizance in constitutional adjudi-
cation, But the Constitution recognizes higher values
than speed and efficiency. Indeed one might fairly say
of the Bill of Rights in general, and the Due Process
Clause in particular; that they were designed to protect
the fragile values of vulnerable citizenry from the over-
bearing concern for efficiency and efficacy which may
characterize praiseworthy government officials no less,
and perhaps more, than mediocre ones.” Stanley v.
Illinois, 405 U.S. 645,656 (1972).*®

Forfeiture is not one of those “extraordinary situations”
justifying postponing a hearing. Boddie v. Connecticut,
401 U.S. 371,379 (1971); nor nas the Commonwealth of
Puerto Rico claimed it to be such. Outright seizures without
opportunity for a prior hearing have been allowed only
in a few limited cases. The Court, in Fuentes v. Shevin, said.

«* * * Thus, the Court has allowed summary seizures
of property to collect the internal revenue of the United
States, to meet the needs of a national war effort, to
protect against the economie disaster of a bank failure
and to protect the public from misbranded drugs and
contaminated foods.”?*

18 405 U.S., at page 90,91, Footnote 22.
19 407 U.S. at page 91,92, and cases cited in footnotes 24, 25, 26,
27 and 28.

29

Finally, the Commonwealth of Puerto Rico has asked
this Court that, if we find the plantiff’s constitutional rights
have been violated, we declare this forfeiture null and
void, but sustain the constitutional validity of the statutes.
Were this Court faced with a question of a government
official’s action in applying the statute, we might be in a
position of granting such remedy. But the officials involved
herein have acted strictly in accordance with the statutes
challenged as they have been construed and, therefore,
we cannot escape meeting our judicial burden. The Com-
monwealth of Puerto Rico in this case was fully aware
of the remedy requested and had the option of returning
the property confiscated or its appraisal value, thereby
taking the matter out of our hands.

For the foregoing reasons, it is hereby declared that
Section 2512(a)(4) of Title 24, and Section 1722(a) of
Title 34 of the Laws of Puerto Rico are unconstitutional,
and an injunction will issue permanently restraining defen-
dants and their successors from enforcing the foregoing
provisions insofar as they deny the owner or person in
charge of property an opportunity for a hearing, due to
the lack of notice, before the seizure and forfeiture of its
property and, insofar as a penalty is imposed upon innocent
parties. .

ee ee ee CS OOPS SURE

30

At the close of its argument, plaintiff pointed out that
at present the return of the seized property might not
be an adequate remedy, due to the probable deterioration of
the vessel. We need not provide a specific remedy, inasmuch
as Section 1722(d) of Title 34 provides adequate relief.
Plaintiff did stipulate that the appraisal of the property
was fair and reasonable and, therefore, is entitled to be
paid the amount of the apraisal, plus interest thereon at
the rate of 6% per annum, computed from the date of the
seizure.

IT IS SO ORDERED.
San Juan, Puerto Rico, March 28, 1973.

s/ FRANK M. COFFIN
Frank M. Corrin, Chief Judge
U.S. Court of Appeals for the
First Circuit, Presiding

s/ HIRAM R. CANCIO,
Hiram R. Cancro, Chief Judge
U. S. District Court for the
District of Puerto Rico

s/ JOSE V. TOLEDO
Joss V. ToLepo, United States
District Judge for the District
of Puerto Rico

LEE G ELIT ENE BNE EL GEE ELD DERE A REPO ART BOLE RMIT Ip STE ION

31
In THE

United States Bistrict Comt

For Tue District or Pverto Rico

Crvim No. 1018-72

Pearson Yacut Leastnc Company, Division of
Grumman Allied Industries, Inc.

Plaintiff,
Vv.

Astot Caero-To.epo, as Superintendent of Police of
the Commonwealth of Puerto Rico, and Epcar R. Bauzao,
as Administrator of the General Services Administration

of the Commonwealth of Puerto Rico

Defendants.

NOTICE OF APPEAL TO THE SUPREME COURT
OF THE UNITED STATES

TO THE HONORABLE COURT:

Notice is hereby given that the defendants above named,
hereby appeal to the Supreme Court of the United States
from the final order entered in this action on 29 March 1973.

32

This appeal is taken pursuant to 28 U.S.C. 1253.
San Juan, Puerto Rico, this 7th day of May, 1973.

RY Oh Thy phi) Sarat alm

Francisco Dr Jesus-Scnuck
Attorney General for the
Commonwealth of Puerto Rico

J. F. Ropriguez-Rivera
Acting Solicitor General

Ruts Tentort De Lesron-
VELAZQUEZ

Assistant Solicitor General

Attorneys for Defendants

P. O. Box 192

San Juan, Puerto Rico 00902

WOES SEN OT MNP NA PSSST IR EELS MRI TY: SARS, MAND) 00,4

bey CLAD ORY wt yee

33

APPENDIX B
STATUTES INVOLVED

Section 512 of the Controlled Substances Act of Puerto

Rico, 24 L.P.R.A. § 2512 (Supp. 1972) provides in per-
tinent part:

(a) The following shall be subject to forfeiture to
the Commonwealth of Puerto Rico:

(4) All conveyances, including aircraft, vehicles,
mount or vessels, which are used, or are intended for
use, to transport, or in any manner to facilitate the
transportation, sale, receipt, possession, or concealment
of property described in clauses (1) and (2) of this
subsection ;

(b)
z
ed
|
a
:
3
2

‘

44

In case of failure of the Lessee to procure and maintain
said insurance and pay the premiums therefor, in addition
to any and all'other remedies to the Lessor as contained in
this Lease, Lessor may effect such insurance, in which event
the cost thereof shall be payable by the Lessee as additional
rent with the next month’s installment of rent.

(b) Lessee hereby assumes all liability for, and agrees
to save Lessor harmless against all loss imposed by law
resulting from the use or operation, during the term of the
Lease hereunder, of Equipment leased hereunder and
arising out of death or bodily injury. to Lessee or any other
or different person or persons and/or damage to property
belonging to Lessee or to any other or different person or
persons. Lessee agrees to defend at its own expense all
claims or suits for damages for the causes hereinbefore set
forth and to pay all costs hereof.

(c) The damage, destruction, loss, disability or for-
feiture of said Equipment shall not discharge or diminish
the obligation of Lessee to pay rent as provided in this
agreement, except as may be otherwise mentioned herein.

(d) In the event the leased Equipment is damaged, its
repair shall be the responsibility and obligation of the
Lessee. In every such instance, Lessor agrees to assign to
Lessee any and all rights Lessor may have under insurance
policies owned or controlled by Lessor with respect to such
damage, as well as any rights Lessor may have to be reim-
bursed for such damage pursuant to insurance coverage
carried by others, provided that the Lessee shall not then
be in default of any of the terms and conditions of the lease
on its part to be performed.

(e) In the event the leased Equipment is destroyed,
stolen,-or damaged to such extent that Lessee finds it un-
desirable to continue its use, all of the Lessor’s right, title
and interest in the Equipment, together with any and all

45

rights it may have with respect to such Equipment under
insurance carried by others, shall be assigned to Lessee or
its designee upon payment by Lessee of the remaining un-
paid rental payments as to such Equipment up to the end
of the contract term (proportionately adjusted to reflect the
deduction in Lessor’s financial or carrying costs).

d. -Lessee agrees that Lessor may assign all right, title

and interest of Lessor in and to such lease agreements, all
monies due and to become due thereon, and the Equipment
leased hereby, and Lessee agrees, if requested by such
assignee, to pay direct to such assignee all monies due and
to become due by it on such lease agreements. Lessee may,
upon written consent of Lessor, assign its interest in this
agreement as to the Equipment described in Schedule “A”.
All benefits, rights and liabilities then existing shall flow to
and be assumed by the assignee, but without relieving the
assignor of any liability hereunder.

6. Lessee may use the Equipment leased hereunder at
any and all times for any and all legal purposes. Lessor
shall not use or suffer or permit any Equipment to be
used for any unlawful purpose or for the transportation of
any property or material deemed extra hazardous, explosive
or inflammable.

7. Incase of the Lessee’s failure to pay the rentals pro-
vided for above, or to fulfill or perform the conditions im-
posed upon the Lessee by this lease, the Lessor shall give
written notice to the Lessee of such default. If the condition
is not corrected within fifteen (15) days after date of written
notice, the Lessor shall have the right, at its option, to
declare all unpaid rentals forthwith to be due and payable
and to terminate this agreement and Lessor shall have the
right:

(a) To enter any premises where any Equipment may
be, with or without the assistance of any person or persons,

er ee SF:

eects race nie eee ee es
PF bs

Pre ae eT ’ i 0 at . .
ibe bis Re Akg haeeHELe Bb aE A Ne cna ratte

Wat

EP UR Rea tAY Sy EEN Ree

46

and to take, retake and remove the same, including all sub-
stituted parts and accessories, without being liable to any
suit, action, defense, or other proceedings by the Lessee,
and to hold, use, sell, lease or otherwise dispose of any of
said Equipment or to keep said Equipment idle, severally
or entirely as the Lessor may elect, such election by the
Lessor to have no effect upon Lessee’s liability under this
agreement, or Lessor’s rights hereunder and, upon such
possession or repossession, all Lessee’s rights herein and
thereto, shall cease and determine.

(b) If the Lessee, or its agents, shall fail or refuse to
deliver, or shall convert or destroy any of the lease property,
the Lessor shall have the right, as an alternative in place
of subdivision (a) hereof, and in addition to such other
remedies as are available to it hereunder, to hold the Lessee
and its said agents liable for the value of the said withheld
or destroyed property.

(c) If any action shall be brought by either party to this
lease for the interpretation thereof, for the recovery of
damages resulting from the breach of any term thereof, the
prevailing party to such action shall be entitled to reasona-
ble attorney’s fees incurred thereby, and said fees shall be
included in the judgment awarded in such action to the pre-
vailing party. Lessee does hereby further covenant and
agree that all rights and remedies hereunder are cumulative
and not exclusive and that a waiver by Lessor of any breach
by Lessee of the terms, covenants and conditions hereof,
shall not constitute a waiver of future breaches or defaults.

8. If before the commencement of the term of this agree-
ment, or at any time during the term, Lessee shall make an
assignment for the benefit of creditors, or shall become in-
solvent, or if a receiver or trustee of Lessee’s property shall
be appointed, or if the Lessee (where it is a corporation)
shall terminate its existence or take any steps to terminate

PEMA PKI SE wk Et AIL

47

°
a ——

its existence, or if a petition is filed by or against Lessee ~
pursuant to any of the provisions of the United States
Bankruptcy Act, as amended, for the purpose of effecting ©
an arrangement or composition with Lessee’s creditors, then ©
and in each and every such case, this agreement shall
terminate forthwith, without any further act or notice by
the Lessor, and the Lessor shall immediately have any and
all of the rights set forth herein including, but not limited
to, paragraphs designated “7” and “12” hereof.

=e

9. The Equipment shall be based at the home port of
Lessee, as.of contract date, and shall not be moved toanew =|
permanent location without the written consent of the ~
Lessor. Lessee may sublet Equipment to a third party only
with the written approval ‘of the Lessor.

10. All said Equipment shall remain personal property ~
of the Lessor and the title thereto shall remain in the Lessor
exclusively. Lessee shall keep the Equipment free from any —
and all liens and encumbrances. Upon termination of the =
Lease the Equipment shall be returned to Lessor, at Lessee’s
sole expense and in the same condition as when received
by Lessee, less reasonable wear and tear resulting from
proper use thereof. All replacement parts, additions and
accessories incorporated in or affixed to the Equipment after
the commencement of the Lease shall become the property
of the Lessor.

11. Lessor agrees together with Lessee that Lessor is
the lawful owner of said Equipment free from all encum-
brances, and that, conditioned upon Lessee’s performing
the provisions hereof, Lessee shall use and maintain the
Equipment in a rightful manner during said term without
interference. The Lessor or any assignee of Lessor is au-
thorized to file any Financial Statements without the signa-
ture of the Lessee. ,

12. Upon termination of this agreement, as provided by

Page ee eee Pe 4

paragraphs numbered “7” and “8”, or otherwise, the Lessor,
in addition to any or different rights in this agreement pro-
vided, shall be entitled to all gains and/or profits prevented
and damages sustained, liquidated herein for all purposes
including claims and suits against the Lessee’s assets in
bankruptcy, reorganization or arrangement proceedings, or
pursuant to other provisions of the United States Bank-
ruptcy Act, or in any assignment for the benefit of creditors
proceedings as follows:

(a) All sums due and unpaid at the time agreement is
terminated.

(b) The total of sums which would have become due
under the normal operation of this agreement from the date
of such termination to the date it would have normally
expired had it not been earlier terminated.

In determining said liquidated damages, the parties have
made due allowances for the Lessor’s investment in buying
and/or reconditioning the leased Equipment, the uncer-
tainty of leasing them to others, cost to Lessor for the
period during which they may remain idle, or if sold, the un-
certainty of the sales price and the Lessor’s loss in selling
said Equipment, commissions and legal expense to be paid,
etc.

13. Nothing contained in this agreement shall affect the
Lessor’s right to receive payment from a Trustee, Receiver,
Debtor or other representative of the Lessee, in bankruptcy,
reorganization or arrangement proceedings, or otherwise,
or from an Assignee for the Benefit of Creditors, for the use
of the Equipment subsequent to the termination of this
agreement; provided, however, that the payment received
therefrom shall be offset against the liquidated damages
provided for in paragraph “12” above.

14. This agreement shall extend to and be binding upon

49

the successors and assigns of the parties hereto.

15. All notices to be given to Lessor shall be given by
depositing the same in the United States mail, registered
or certified, postage prepaid and addressed to Lessor as
follows: Pearson Yacht Leasing Company, 600 Old Country
Road, Garden City, N. Y. 11530.

All notices to be given to Lessee shall be given by de-
positing the same in the United States mail, registered or
certified, postage prepaid and addressed to Lessee as fol-
lows:

Mr. & Mrs. Donovan Olson
Blvd Monroig AX 36 Levittown,
Catano, Puerto Rico

16. The Lessor is authorized to file any required financ-
ing statement without the signature of the debtor.

17. This agreement, with Schedule “A” and Schedule
“B” affixed hereto and made part hereof, constitute the
entire agreement and understanding of the Lessor and
Lessee, and shall not be amended or altered in any way
unless such amendment or alteration be endorsed hereon
in writing and signed by the executive officers of both
parties or, if the Lessee is not a Corporation, by the Lessee
in person.

50

IN WITNESS WHEREOF, the parties hereto have
caused this agreement to be duly executed, in triplicate, as
of the day and year first above written.

LESSOR: PEARSON YACHT
LEASING COMPANY

By Rosert F. Low
Director

LESSEE: DONOVAN &
LORETTA OLSON

By Donovan OLson
Donovan Olson Title

By Loretta OLson
Loretta Olson

Schedule “A”

This Schedule “A” is part of and subject to the Lease
Agreement No. 405, between Pearson Yacht Leasing Com-
pany, “Lessor”, and Donovan & Loretta Olson, “Lessee”,
dated March 15, 1971.

51

DESCRIPTION

1 — Pearson 300 Hull No. 127 with the following equipment:
BOW Rail; Lifelines; 2 Boarding Gates; Stern Rail;
Genoa Gear; Sea Hood; H & C Water Pressure Sys-
tem; Shower; Edson Wheel w/compass; Edson Brake;
Interior Handrails; Ex. Water Tank; 2 Add’l Opening
Ports; Two-Tone Deck; Electric Bilge Pump; Fabric
Cushions ; Carpets; Curtains ; Diesel Engine; Winches;
Stove; Roller Furling; Roller Reefing; Salt Water
Pump; Cockpit Cushions; Tachometer and 2 Dorado
Ventilators; and Mainsaid; Jib and Sail Cover.

LESSOR: PEARSON YACHT
LEASING COMPANY

By Roserr F. Low
Director

LESSEE: DONOVAN &
LORETTA OLSON

By Donovan OLson
Donovan Olson Title

By Lorerra OLson
Loretta Olson

Executed in Triplicate this
15th day of March, 1971

PASTS Mae

52
Schedule “B”

This Schedule “B” is part of and subject to the Lease
Agreement No. 405, between Pearson Yacht Leasing Com-
pany, “Lessor”, and Donovan & Loretta Olson, “Lessee”,
dated March 15, 1971.

Rental Charges
Price Basi Monthly
Based on Unit Price of $23,983.00 $474.66*
Less: Down Payment 2,887.00
Amount Financed $21,096.00

*NOTE: Late payment of rentals are charged 144%
monthly on delinquent amounts.

Annual Percentage Rate: 12.50%

LESSOR: PEARSON YACHT
LEASING COMPANY

By Rosert F. Low
Director

LESSEE: DONOVAN &
LORETTA OLSON

By Donovan OLson
Donovan Olson Title

By Lorerra OLson
Loretta Olson

Executed in Triplicate this
15th day of March, 1971

53
Addendum No. 1

This Addendum No. 1 is part of and subject to the Lease
Agreement No. 405, between Pearson Yacht Leasing Com-
pany, “Lessor”, and Donovan & Loretta Olson, “Lessee”,
dated March 15, 1971.

Lessee is hereby given the right and privilege, at its op-
tion, to purchase vehicles described in Schedule “A” of this
lease, at the respective option prices for the periods of time
indicated below, provided that all rents theretofore due and
payable have been paid in full.

Option Option Price
Period Percentage Depreciation — Option Period —_—Per Unit

End of Ist year 0... $18,092.24
End of 2nd year ou... 14,456.72
End of 3rd year ............cccceee 10,239.44
End of 4th year 0... 5,440.40
End of 5th year .........cceceee 1.00

The option to purchase shall be exercisable by Lessee by
giving Lessor not less than thirty (30) days notice in writ-
ing prior to the expiration of the 60 months term. Lessor
covenants and agrees that upon exercise of the option
Lessor shall duly execute and deliver to the Lessee all docu-
ments necessary and proper to effect transfer of ownership
of said vehicles to Lessee, free and clear of all encumbrances
and liens (other than encumbrances or liens suffered or per-
mitted by Lessee to become effective thereon) upon payment
by the Lessee in cash or certified check of the full balance
of said option price and thereupon this lease shall terminate

LOS nT Oe Fe eee al

si heats

iii wh tebe at he

54

and no further rents shall become due thereunder with refer-
ence to the vehicles leased by the Lessee.

LESSOR:
PEARSON YACHT
LEASING COMPANY

By Robert F. Low
Director

LESSEE:

DONOVAN &
LORETTA OLSON

By Donovan OLson
Donovan Olson Title

By Loretta Otson
Loretta Olson
Executed in Triplicate this
15th day of March, 1971

NDS! te NESE GES PEERS ON PER DNR

WEF aa OR at %

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0280%3A2. Public record. Not legal advice.