A trial court erred in holding a business owner in bankruptcy and granting a final order to forfeit over $35,000 in assets to the commonwealth without trial, the Virginia Court of Appeals has determined.

Judge Randolph A. Beales said the district court erred in “holding that a defendant, in his answer in a civil asset forfeiture case, must provide additional evidence of his title to the seized property beyond the defendant’s sworn statement setting forth the facts supporting the defendant’s claim of ownership.” ”

Here, the entrepreneur satisfied both requirements of Code § 19.2-386.9(ii) by stating ownership interests in the seized money and offering sworn statements regarding the business transactions that produced the money.

Chief Justice Marla Graff Decker and Justice Lisa M. Lorish joined Beales McMillion v. Commonwealth (VLW 024-7-222).

Background

Chesterfield County police seized $35,293 from Roger McMillian’s place of business. He was arrested and charged with possession of a schedule I/II controlled substance.

The Commonwealth filed an “information for forfeiture” in July 2020, stating that the money was seized “as items used in material connection with an aggravated incident involving a schedule I/II controlled substance.”

In his first response in August 2020, McMillian said the funds were “legitimate proceeds” from the workshop’s business transactions. He filed five more responses; his final response repeated the claim that the funds were “legitimate proceeds of transactions conducted in the ordinary course of business at the workshop” and described a detailed accounting of the business transactions.

In summary, McMillian claimed that $31,000 of the seized assets came from seven specific transactions, with the balance from customers who had paid for work done on their vehicles.

The Commonwealth filed a motion for a stay of payment, arguing that the six responses did not comply with Va. Code § 19.2-386.1.

The circuit court said McMillian did not offer evidence sufficient to satisfy the statute’s requirements and held him in default. The district court issued an order to forfeit the assets to the commonwealth without holding a trial.

McMillian appealed.

Appeal

McMillian’s first assignment of error argued that the circuit court erred in granting the motion for default judgment and entering default judgment.

Beales said the assignment of error requires the court to “interpret the statutory requirements for filing an answer in a civil forfeiture proceeding.”

Law, Va. Code § 19.2-386.22, gives the commonwealth the power to seize money “used in material connection with (a) the unlawful manufacture, sale or distribution of controlled substances or possession with intent to sell or distribute controlled substances.”

The code further specifies procedures for when the state can acquire property and when a property owner can intervene in the case to avoid ending up in bankruptcy.

“In this case, McMillian timely filed six separate responses to the Commonwealth’s forfeiture information, but the circuit court found McMillian in default,” Beales pointed out.

The final sworn answer listed the specific business transactions that accounted for the $35,293, but the circuit court said that was insufficient to avoid default. The statute interpreted “as requiring McMillian to specifically describe or present (in addition to his sworn answer) evidence such as “a checkbook, bookkeeping, invoice, bank statement” to avoid default.”

Beales said it was the wrong call.

“Contrary to the circuit court’s interpretation of the statute, Code § 19.2-386.9(ii) does not require McMillian to provide the circuit court with a check register, ledger, invoice, bank statement, tax return, bill of sale, vehicle registration or DMV registration, photograph or third-party statement of any kind or blows” in addition to his sworn answer,” the judge explained.

He added that the circuit court’s examples of evidence “all constitute exhibitionsbut exhibits are only one type of evidence that a litigant may use to ultimately prove his case at trial.”

McMillian was not required at this stage of the trial to offer all that he could put to trial in his pleadings.

“Instead, McMillian only needed to provide his own allegations in response to the Commonwealth’s plea — which would then lead to a trial,” Beales wrote. “Especially at common law, “(i) it is an elementary rule in pleading, that when a state of facts is pleaded, it is sufficient merely to assert it, without stating the subsidiary facts which are the means of establishing it, or the evidence in support the accusation.’ We cannot say that Code § 19.2-386.9 requires litigants to identify or present all of their evidence when pleading a civil forfeiture proceeding.”

The Code section also requires a property owner’s appearance, stating that a sworn answer “shall clearly state … the exact right, title, or nature of the ownership or interest in the property and the evidence thereof.”

Citing a plain reading of “set forth” and § 19.2-386.9(ii), Beales said the statute does not require a litigant to present evidence of its ownership in the preliminary proceeding. Rather, a litigant is only required to provide an account of his ownership and a statement of proof of this ownership interest.

“Here, McMillian provided both ‘the exact right, title or nature of the ownership or interest in the property’ and ‘the evidence thereof’ in his sworn answer,” Beales wrote.

Specifically, Beales said that McMillian’s final answer complied with the basic requirements of the statute because it stated his ownership interest in his business’s property and evidence of that interest, noting that this “statement demonstrated McMillian’s contention that he—rather than his co-defendant ()—owned the confiscated money.”

McMillian also offered evidence of this ownership interest by providing a list of seven separate business transactions totaling at least $31,000 of the seized cash.

Accordingly, McMillian’s final answer, while not an exemplary answer, satisfied the bases of both requirements of Code § 19.2-386.9(ii) – stating (1) his ownership interest in the subject property and (2) some evidence of that ownership interest ,” Beales wrote. “The trial court erred in finding otherwise.”

The judge overturned the lower court’s decision to keep McMillian in bankruptcy, as well as its decision that McMillian would have to forfeit the seized cash to the commonwealth.

“In addition, we remand this case to the circuit court for a forfeiture hearing on these assets if the Commonwealth wishes to proceed to trial,” the judge concluded.