ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (Civil No. 75-2031)
Before Adams, Hunter and Weis, Circuit Judges.
This appeal is from a judgment by the district court rejecting the position of the Hudson County Board of Chosen Freeholders that a sum of money seized at the time of Jorge Morales' arrest was forfeited to it, ordering instead that a substantial portion of the money be paid to the United States in satisfaction of a lien for federal income taxes owed by Morales, and directing that the remainder be returned to Morales.
Morales was arrested by the police of Secaucus, New Jersey, on February 1, 1974, and charged with violating New Jersey law by possessing a controlled dangerous substance and by possessing such substance with an intent to dispense it. At the time of Morales' arrest, the trunk of the vehicle he was driving was opened at the request of a police officer, and in it the officer observed a paper bag containing a sizeable sum of cash.
After seizing the money, which totaled $27,805, the Secaucus police placed it in an account in the Plaza National Bank of Secaucus. There it has been retained in a safety deposit box.
While Morales was detained at the police station after his arrest, the police engaged in a consent search of his apartment. That search revealed the presence of heroin, cocaine and marijuana. A Hudson County grand jury subsequently returned an indictment against Morales. Morales pleaded guilty to the count charging him with possession of a controlled dangerous substance with intent to dispense, and the other counts were dismissed.
Shortly after the money seized from Morales' vehicle had been placed in the bank, a notice of levy against it was served on the Secaucus police by the Internal Revenue Service (IRS). The IRS sought the funds to satisfy federal income taxes claimed from Morales. In April of 1974, Morales filed a tax return for the year 1973, which resulted in an assessment for unpaid taxes for 1973 in the amount of $16,899.61. Thereafter, on May 28, 1974, the IRS served on the Secaucus police an updated notice of levy reflecting the newly-determined amount of tax liability.
On October 29, 1975, the Board of Chosen Freeholders of Hudson County filed a complaint in Hudson County Superior Court, Law Division, seeking a judgment that would "(d)eny the validity of the claimed lien by the Internal Revenue Service," declare "the money forfeited to the County of Hudson" and order "the Township of Secaucus and Plaza National Bank to remit said monies to the Treasurer of Hudson County." The theory of the complaint filed by Hudson County was that since Morales had committed a crime in violation of New Jersey law, the money seized at the time of his arrest was Ipso facto forfeited to the County "wherein the offense took place, namely Hudson, and said forfeiture became effective at the time of the commission of the offenses involved." On this basis, the complaint asserted, "the Internal Revenue Service's attempt to levy is invalid, and the said sum of $27,805.00 together with any accrued interest belongs to the people and government of Hudson County." Complaint at p. 2.
Acting for the IRS, the United States Attorney on November 28, 1975, filed a petition for removal of the suit to federal court. The petition stated that the action is "subject to removal pursuant to 28 U.S.C. § 1444 in that the complaint appears to allege a claim to quiet title to personal property on which the United States claims a lien."
In a letter opinion dated March 29, 1976, the district court concluded that it had jurisdiction over the case. It noted that the United States was named as a party to the action by means of the designation of the IRS as a defendant, and that the complaint sought to quiet title to cash to which the United States asserted a tax lien. The district judge then determined that the IRS had a right to remove the suit to federal court under 28 U.S.C. §§ 1444 and 2410(a), since the action was one to "quiet title to . . . real or personal property on which the United States has or claims a mortgage or other lien." 28 U.S.C. § 2410(a). In an order entered on May 6, 1976, the district court denied the County's petition for remand to the Superior Court.
The IRS filed an answer on May 25, 1976, in which it maintained, Inter alia, that the court should dismiss the complaint, and asserted a counter-claim seeking enforcement of a lien for unpaid federal income taxes against the sum of cash held in the Plaza National Bank. Morales filed an answer seeking, Inter alia, an order that the $27,805, less the sum of $16,899.61 due the United States, be returned to him.
An opinion by the district court dated March 3, 1977, reaffirmed its prior conclusions that it had jurisdiction pursuant to 28 U.S.C. §§ 1444 and 2410(a). The court also concluded that the $27,805 in Morales' possession at the time of his arrest was contraband, since it was derived from the sale of narcotics, and thus was forfeited to the County; that the money was not abandoned or unclaimed within the meaning of New Jersey law and therefore was not payable into the general municipal treasury; and that ...