1. Constitutional Law_Double Jeopardy_public nuisance action following prostitution
conviction
The Double Jeopardy Clause was not violated by an action by a district attorney seeking
the illegal profits from a public nuisance owned by defendants, who had been convicted of
maintaining a place for prostitution. The North Carolina statutes on abatement of nuisances,
examined under Hudson v. United States, 522 U.S. 93 (1997), do not reveal clear proof of
legislative intent to impose a criminal penalty.
2. Nuisance; Constitutional Law_prostitution_summary judgment_right to jury trial
Summary judgment for plaintiff was appropriate on an action for injunctive relief,
abatement, and forfeiture following defendants' conviction for maintaining a place for
prostitution. The State's evidence was sufficient to prove that defendants engaged in a nuisance
and that proceeds from the activity should be forfeited, while defendants provided no evidence to
refute plaintiff's account of their activity. This does not deprive defendants of their right to a
jury trial, which accrues only when there is a genuine issue of fact.
3. Nuisance_prostitution_damages_summary judgment
Summary judgment should not have been awarded to plaintiff on damages in a nuisance
action by a district attorney following defendants' conviction for maintaining a place for
prostitution. While the gross income from Rose Spa could be calculated from tax records, the
amount derived from unlawful activity is disputed.
N.C.G.S. § 19-6.
R. Stuart Albright, District Attorney, 18th Prosecutorial
District, and FORMAN ROSSABI BLACK, P.A., by Amiel J. Rossabi
and William F. Patterson, for the State.
A. Wayne Harrison for defendants.
TIMMONS-GOODSON, Judge.
This case involves a complaint by Guilford County District
Attorney R. Stuart Albright (“plaintiff”) to claim the illegal
profits from a public nuisance owned and operated by Robert C.
Arellano and Cha U. Arellano (“defendants”). Defendants appeal two
orders of summary judgment entered against them pursuant to N.C.
Gen. Stat. § 19. For the reasons stated herein, we affirm in part
and reverse in part the trial court's judgment.
The pertinent factual and procedural history of the case is as
follows: Defendants owned and operated Rose Spa, a massage
business in Greensboro, North Carolina from 1991 to 2001. The
Greensboro Police Department Vice/Narcotics Division suspected Rose
Spa of housing a prostitution ring. Following an undercover
investigation, the Greensboro Police Department obtained evidence
of prostitution.
Defendants were arrested and charged with the misdemeanor
criminal offenses of maintaining a place for purposes of
prostitution, permitting the use of a place for prostitution, and
aiding and abetting prostitution pursuant to N.C. Gen. Stat. § 14-
204(1), (2) and (7). Defendants were convicted in district court
on 14 February 2002 of all charges. The trial court sentenced
defendants to forty-five days in jail with a suspended sentence of
five years, and placed defendants on unsupervised probation on the
conditions that they not be convicted of a similar offense, and
that they pay a $500 fine.
Concurrent with the criminal prosecution, plaintiff filed the
underlying civil action in 2001 pursuant to N.C. Gen. Stat. § 19 to
permanently enjoin defendants from operating a public nuisance, andto seek “an order of forfeiture of all personal property, monies,
contents and other considerations received or used in conducting
and maintaining said nuisance.” Defendants filed a motion for
summary judgment on 15 February 2002, one day after their criminal
convictions, asserting that “this proceeding is barred by the
protection against double jeopardy.” Defendants presented no
evidence in support of their motion. Plaintiff filed a cross
motion for summary judgment on 22 April 2002 accompanied by
affidavits from three witnesses. The trial court heard oral
arguments on 22 July 2002 and granted plaintiff's motion for
summary judgment on 12 August 2002, granting plaintiff injunctive
relief, an order of abatement, and an order of forfeiture of
personal property. The trial court decreed in its order, inter
alia, that the matter would “proceed to trial solely on the issue
of damages.”
After an accounting of the income earned from Rose Spa from
1991 through 2001, plaintiff filed a motion for summary judgment on
damages on 1 November 2002 claiming that all of defendants' income
should be forfeited. Defendants filed affidavits on 29 October
2002 stating that they did not have the documentation necessary to
perform an accounting. Defendants filed a response to the motion
for summary judgment on 31 October 2002, asserting that “the amount
of damages, if any, is a subject for resolution of contested
factual and legal issues.” The trial court granted plaintiff's
motion for summary judgment in November 2002, and ordered
defendants to pay $1,633,137.13 in damages plus court costs andattorneys fees. It is from these two orders of summary judgment
that defendants appeal.
The issues presented on appeal are whether (I) the civil
action against defendants invokes the Double Jeopardy Clause; (II)
the trial court erred by granting summary judgment on the issue of
forfeiture; (III) the trial court erred by awarding damages in the
amount of $1,633,137.13; and (IV) the damages award violates the
excessive fines clauses of the North Carolina and United States
constitutions.
[1] Defendants first argue that the civil action against
defendants invokes the Double Jeopardy Clause because defendants
were convicted of criminal charges arising from the same conduct.
We disagree.
The Double Jeopardy Clause prohibits “a second prosecution for
the same offense after acquittal, a second prosecution for the same
offense after conviction, and multiple punishments for the same
offense.” Montana Dept. of Rev. v. Kurth Ranch, 511 U.S. 767, 769,
n.1 (1994). “The Law of the Land Clause incorporates similar
protections under the North Carolina Constitution.” State v.
Oliver, 343 N.C. 202, 205, 470 S.E.2d 16, 18 (1996), citing N.C.
Const. art. I, § 19.
In Hudson v. United States, 522 U.S. 93 (1997), the United
States Supreme Court modified the standard for Double Jeopardy
analysis. The Hudson Court noted that “the Double Jeopardy Clause
does not prohibit the imposition of all additional sanctions that
could, in common parlance, be described as punishment.” 522 U.S.at 98-99 (citations omitted). Instead, “[t]he [Double Jeopardy]
Clause protects only against the imposition of multiple criminal
punishments for the same offense.” 522 U.S. at 99 (citations
omitted). The Hudson Court then advanced a two-part inquiry for
determining whether a statutory scheme imposes punishment for
double jeopardy purposes:
Whether a particular punishment is criminal or
civil is, at least initially, a matter of
statutory construction. A court must first
ask whether the legislature, “in establishing
the penalizing mechanism, indicated either
expressly or impliedly a preference for one
label or the other.” Even in those cases
where the legislature “has indicated an
intention to establish a civil penalty, we
have inquired further whether the statutory
scheme was so punitive either in purpose or
effect,” as to “transform what was clearly
intended as a civil remedy into a criminal
penalty.”
522 U.S. at 99 (citations omitted). The Hudson Court further
established the following seven factors to be considered in
assessing whether the punitive nature of the statute transforms the
civil remedy into a criminal penalty:
(1) whether the sanction involves an
affirmative disability or restraint; (2)
whether it has historically been regarded as a
punishment; (3) whether it comes into play
only on a finding of scienter; (4) whether its
operation will promote the traditional aims of
punishment _ retribution and deterrence; (5)
whether the behavior to which it applies is
already a crime; (6) whether any alternative
purpose to which it may rationally be
connected is assignable to it; and (7) whether
it appears excessive in relation to the
alternative purpose assigned.
522 U.S. at 99-100 (emphasis omitted). The Hudson Court emphasized
that no one factor is controlling, 522 U.S. at 101, and cautioned
that “only the clearest proof will suffice to override legislativeintent and transform what has been denominated a civil remedy into
a criminal penalty.” 552 U.S. at 100 (citations omitted).
Pursuant to the two-part inquiry articulated in Hudson, we
analyze the case sub judice by first examining the purpose behind
North Carolina statutes on abatement of nuisances, which provide in
pertinent part the following:
Wherever a nuisance is kept, maintained, or
exists, as defined in this Article, the . . .
district attorney . . . may maintain a civil
action in the name of the State of North
Carolina to abate a nuisance under this
Chapter, perpetually to enjoin all persons
from maintaining the same, and to enjoin the
use of any structure or thing adjudged to be a
nuisance under this Chapter . . . .
N.C. Gen. Stat. § 19-2.1 (2003).
If the existence of a nuisance is admitted or
established in an action as provided for in
this Chapter an order of abatement shall be
entered as a part of the judgment in the case,
which judgment and order shall perpetually
enjoin the defendant and any other person from
further maintaining the nuisance at the place
complained of . . . . Such order may also
require the effectual closing of the place
against its use thereafter for the purpose of
conducting any such nuisance.
N.C. Gen. Stat. § 19-5 (2003).
All personal property, including money and
other considerations, declared to be a
nuisance under . . . other sections of this
Article, are subject to forfeiture to the
local government and are recoverable as
damages in the county wherein such matter is
sold, exhibited or otherwise used. . . . An
amount equal to the sum of all moneys
estimated to have been taken in as gross
income from such unlawful commercial activity
shall be forfeited to the general funds of the
city and county governments wherein such
activity took place . . . as a forfeiture of
the fruits of an unlawful enterprise, and as
partial restitution for damages done to the
public welfare.
N.C. Gen. Stat. § 19-6 (2003).
The fact that § 19-2.1 expressly labels a lawsuit brought in
this manner as a civil action indicates a legislative intent to
establish a civil remedy for nuisance issues. Having made this
determination, we next apply the seven-factor test discussed supra
to determine whether the effect of the statute is to impose a
criminal punishment.
The first factor requires a review of whether the statute
imposes an “affirmative disability or restraint,” i.e., whether it
imposes a sanction “approaching the infamous punishment of
imprisonment.” State v. Beckham, 148 N.C. App. 282, 285, 558
S.E.2d 255, 257 (2002), citing Hudson, 522 U.S. at 104 (citations
omitted). Defendants argue that this question must be answered in
the affirmative because the statute allows for permanent injunctive
relief, which can result in imprisonment for contempt if such an
injunction is violated. We disagree.
The realm of this statute does not provide for a punishment of
imprisonment. It is only the ancillary possibility of a contempt
violation which may impose such a punishment. This connection is
too tenuous to invoke the Double Jeopardy Clause. As the Court
reasoned in Hudson, if double jeopardy implications prevented
contempt rulings, then all civil remedies would give rise to double
jeopardy. See Hudson, 522 U.S. at 102. Our civil courts could
not use contempt rulings to reinforce injunctive relief because of
double jeopardy implications.
The second factor asks whether the civil remedy in question
has historically been regarded as a punishment. Defendants arguethat the answer to this question is “yes” because “prostitution has
been subjected to criminal punishment since the dawn of
civilization.”
Defendants' response indicates that they misinterpret the
nature of the question asked. The appropriate inquiry is not
whether the nuisance activity has been historically punished, but
rather if the civil remedy imposed by the statute has been
historically viewed by the courts as punishment. We hold that the
civil remedy imposed by General Statute § 19.6 has not been
historically viewed by the courts as punishment.
Historically, criminal “punishment has taken the forms of
incarceration and incapacitation.” State v. Evans, 145 N.C. App.
324, 333, 550 S.E.2d 853, 859 (2001). The statute in question does
not offer a remedy of incarceration or incapacitation. It only
allows for injunctive relief and monetary damages which “have
historically not been viewed as criminal punishment.” Beckham, 148
N.C. App. at 285, 558 S.E.2d at 257, citing Helvering v. Mitchell,
303 U.S. 391 (1938).
The third factor asks whether the civil remedy comes into play
only on a finding of scienter. Defendants argue that this question
must be answered affirmatively because General Statutes § 19-6
provides that money damages are “recoverable from such persons who,
under G.S. 19-2.4, have knowledge of the nuisance at the time such
moneys are received by them.” We disagree.
The sanction does not come into play upon a finding of
scienter. The paragraph that allows for forfeiture permits such a
penalty “upon judgment against the defendant or defendants in legalproceedings” without regard to defendants' state of mind. Thus,
defendants' intent is not at issue in this analysis. See Hudson,
522 U.S. at 105.
The fourth factor asks whether the sanction promotes the
“traditional aims of punishment _ retribution and deterrence.”
Beckham, 148 N.C. App. at 286, 558 S.E.2d at 258. Defendant argues
that “surely a statute that can result in the complete loss [of]
all assets of ones [sic] business, real and personal, carries a
deterrent impact, and voices societal retribution.” We find this
argument unpersuasive.
We “recognize that the imposition of both money penalties and
[other] sanctions will deter others from emulating [defendants']
conduct,” Hudson, 522 U.S. at 105; however, “the mere presence of
a [deterrent quality] is insufficient to render a sanction criminal
[because] deterrence may serve civil as well as criminal goals.”
Beckham, 148 N.C. App. at 286, 558 S.E.2d at 258, citing Hudson,
522 U.S. at 105 (citations omitted).
We also recognize that civil forfeiture has a retributive
effect. In fact, § 19-6 plainly states that “[a]n amount equal to
the sum of all moneys estimated to have been taken in as gross
income from such unlawful commercial activity shall be [treated]
. . . as a forfeiture of the fruits of an unlawful enterprise, and
as partial restitution for damages done to the public welfare.”
N.C. Gen. Stat. § 19-6 (2003). However, as we have previously
noted,
[c]ivil forfeitures in contrast to civil
penalties, are designed to do more than simply
compensate the Government [for the cost of
investigating and prosecuting this case]. Forfeitures serve a variety of purposes, but
are designed primarily to confiscate property
used in violation of the law, and to require
disgorgement of the fruits of illegal conduct.
They are not, however, intended as punishment,
and therefore do not constitute penal measures
in violation of double jeopardy prohibitions.
Belk v. Cheshire, 159 N.C. App. 325, 329, 583 S.E.2d 700, 704
(2003), citing U.S. v. Ursery, 518 U.S. 267, 284-88 (1996).
Therefore, we conclude that there is not a sufficient criminal
effect under this statute to invoke double jeopardy.
The fifth factor asks whether the behavior to which the
statute applies is already a crime. Section 19-1 provides a civil
remedy for public nuisance. The statute defines public nuisance as
follows:
[t]he erection, establishment, continuance,
maintenance, use, ownership or leasing of any
building or place for the purpose of
assignation, prostitution, gambling, illegal
possession or sale of alcoholic beverages,
illegal possession or sale of controlled
substances as defined in the North Carolina
Controlled Substances Act, or illegal
possession or sale of obscene or lewd matter.
N.C. Gen. Stat. § 19-1 (2003). There is a correlating criminal
statute regarding prostitution. See N.C. Gen. Stat. § 14-203 et
seq. However, “'this fact is insufficient to render'” the civil
remedy “'criminally punitive, particularly in the double jeopardy
context.'” Beckham, 148 N.C. App. at 286, 558 S.E.2d at 258,
citing Hudson, 522 U.S. at 105 (citations omitted).
The sixth and seventh factors ask whether any purpose, other
than criminal punishment, to which the statute may rationally be
connected is assignable to it, and whether the statute appearsexcessive in relation to the alternative purpose assigned. We hold
that there is an alternative purpose that is assignable to this
statute. As discussed supra, there is a remedial purpose behind
this civil remedy since it allows the government to recover the
cost of investigating and prosecuting violators, and it disables
the illegal activity which allows the general public to recover its
sense of safety and well-being. The effect that the statute has on
criminal activity is not excessive in relation to these benefits.
Having examined N.C. Gen. Stat. § 19 in light of the two-part
analysis established by Hudson, we find no clear proof that the
true legislative intent of the statute is to impose a criminal
penalty. Accordingly, we reject defendants' assignment of error
that N.C. Gen. Stat. § 19 constitutes punishment under a double
jeopardy analysis.
[2] Defendants also argue that the trial court erred by
granting plaintiff's motion for summary judgment awarding plaintiff
injunctive relief, an order of abatement, and an order of
forfeiture of personal property. Defendants argue that the trial
court violated their constitutional right to a jury trial. We
disagree.
Summary judgment is appropriate when “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits . . . show that there is no genuine
issue as to any material fact and that any party is entitled to a
judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c)
(2003). “When a motion for summary judgment is made and properly
supported . . . the adverse party may not rest upon the mereallegations or denials of his pleading, but must, by affidavit or
otherwise, set forth specific facts showing that there is a genuine
issue for trial.” Five Star Enters., Inc. v. Russell, 34 N.C. App.
275, 278, 237 S.E.2d 859, 861 (1977).
A public nuisance is defined to include, inter alia, “[e]very
place which, as a regular course of business, is used for the
purposes of . . . prostitution, and every such place in or upon
which acts of . . . prostitution[] are held or occur.” N.C. Gen.
Stat. § 19-1.2(6) (2003). Additionally, all “money or other
valuable consideration . . . received or used in . . .
prostitution” is deemed a nuisance. N.C. Gen. Stat. § 19-1.3(3)
(2003).
Section 19-6 provides for forfeiture of all moneys that are
declared to be a nuisance:
An amount equal to the sum of all moneys
estimated to have been taken in as gross
income from such unlawful commercial activity
shall be forfeited to the general funds of the
city and county governments wherein such
activity took place, to be shared equally, as
a forfeiture of the fruits of an unlawful
enterprise, and as partial restitution for
damages done to the public welfare.
N.C. Gen. Stat. § 19-6 (2003).
With regard to the proof required to show knowledge of
nuisances involving prostitution, the statute provides that
“evidence that the defendant knew or by the exercise of due
diligence should have known of the acts or conduct constitutes
proof of knowledge.” N.C. Gen. Stat. § 19-1.1(1a) (2003).
In the case sub judice, the trial court notes in its order of
summary judgment that The plaintiff has offered evidence in support
of its motion in the form of affidavits and
portions of the transcript of the defendants'
prior criminal trial and depositions. The
defendants have offered no evidence in
response . . . except the “verified” answer.
The defendants' responses to the specific
allegations are simple, mostly one-word,
responses: “Admitted” or “Denied.” When
questioned during depositions about the nature
of operations at their property and the
activities being undertaken there, the
defendants invoked their privileges against
self-incrimination.
The State's evidence is sufficient to prove that defendants engaged
in nuisance activity, and that the proceeds of the activity should
be forfeited. Defendants provided no evidence to refute
plaintiff's account of defendants' activity, and therefore failed
to raise a genuine issue of material fact. Accordingly, we
conclude that summary judgment was appropriate. We further note
that summary judgment does not deprive defendants of their right to
a jury trial. The right to a jury trial accrues only when there is
a genuine issue of fact to be decided at trial. See Kidd v. Early,
289 N.C. 343, 368-69, 222 S.E.2d 392, 409 (1976). For these
reasons, we overrule this assignment of error.
[3] Defendants next argue that the trial court erred by
granting plaintiff summary judgment on the issue of damages. We
agree.
Section 19-6 states in pertinent part the following:
Upon judgment against the defendant or
defendants in legal proceedings brought
pursuant to this Article, an accounting shall
be made by such defendant or defendants of all
moneys received by them which have been
declared to be a nuisance under this Article.
An amount equal to the sum of all moneys
estimated to have been taken in as grossincome from such unlawful commercial activity
shall be forfeited to the general funds of the
city and county governments wherein such
activity took place, to be shared equally, as
a forfeiture of the fruits of an unlawful
enterprise, and as partial restitution for
damages done to the public welfare.
(emphasis added).
In the case sub judice, both defendants filed affidavits on 29
October 2002 stating the following:
1. I am aware of the order of Judge Lindsay
R. Davis, Jr. dated August 12, 2002,
which states that I should provide an
accounting for all gross income earned
from Rose Spa from 1991 to the present
date including the dates and amounts of
each item of income, with a detailed
description of goods or services provided
therefore.
2. It is impossible for me to comply with
the letter of that order since all the
records relative to the income of Rose
Spa and any description of goods or
services provided are presently there, in
the possession of the Internal Revenue
Service and the United States Attorney's
Office for the Middle District of North
Carolina. My lawyer advises me that he
has asked that the records be copied and
the copies returned to me, but that the
Federal Authorities have refused to
return the items. In addition, it may be
practically impossible for anyone to
determine a separate accounting for each
item of income; and, unless the
description of services provided appear
on the document held by the Federal
Authorities, I have no knowledge as to
the specific nature of them.
3. I have earlier provided all information
concerning gross income from Rose Spa to
Mrs. Erma T. Reynolds. I have instructed
my counsel to release all that
information to this Court, however, it is
my belief that the plaintiff in this
action has already filed copies of my
business tax returns from the pastseveral years. A [sic] this time, I can
do no more by way of an accounting.
Defendants later filed a response to the motion for summary
judgment on damages stating that “the amount of damages, if any, is
a subject for resolution of contested factual and legal issues.”
The only evidence presented on the issue of damages was the State's
affidavit by Erma Reynolds (“Reynolds”) stating that she was
defendants' accountant from 1991 or 1992 until 2001, that she
prepared defendants' income tax returns during those years, that
her records show defendants' income over that period of time to be
$1,633,137.13, and providing defendants' tax records for those
years. Based on this information alone, the trial court awarded
plaintiff damages in the amount of $1,633,137.13.
We conclude that while the total amount of gross income from
Rose Spa may be calculated based on the accountant's copies of
defendants' tax records, the amount of gross income derived from
defendants' unlawful activity is disputed. Thus, summary judgment
on the issue of damages was premature. Thus, we reverse the trial
court's summary judgment on the issue of damages.
Defendants also argue that the damages award was excessive
pursuant to the Eighth Amendment of the United States Constitution
and Article I, Section 27 of the North Carolina Constitution.
Because we reverse the trial court's summary judgment on damages,
it is unnecessary to address this assignment of error.
For the aforementioned reasons, we hereby affirm in part, and
reverse in part the judgment of the trial court, and remand the
case for further proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED. Judges WYNN and McCULLOUGH concur.
*** Converted from WordPerfect ***