Rather, in defining a certified security as the certificate or an intangible interest, it appears the Illinois UCC contemplates more than one situs, as was discussed supra in Part A(1). See 810 ILCS 5/8-102(c) (1993) (formerly ILL. REV. STAT. ch. 26, P 8-102(c) (1991)).
Claimant Boosalis also argues common law recognizes the situs of stock as the place of incorporation of the issuing corporation. This is an incorrect proposition. Common law recognized stock as having more than one situs, such as the state of incorporation, the principal place of business, or where the certificate was physically located. See 2 ROBERT C. CASAD, JURISDICTION IN CIVIL ACTIONS § 9.01[c] (1991); FLETCHER CYC CORP § 5101 (Perm Ed) (although there is a tendency to merge the identity of shares into the certificate representing them and determine the situs by the location of the certificates, shares may have a situs at different places at the same time, depending on the circumstances and purposes). Admittedly, the Illinois UCC provides that no attachment upon a certified security is valid until the security is actually seized. See 810 ILCS 5/8-317 (1993) (formerly ILL. REV. STAT. ch. 26, P 8-317 (1991)). However, this section does not apply in situations where the government effectuates the seizure. See 810 ILCS 5/8-317 cmt. 6 (1993) (formerly ILL. REV. STAT. ch. 26, P 8-317 (1991)).
In Illinois-Indiana Fair Ass'n v. Phillips, 328 Ill. 368, 376, 159 N.E. 815, 818 (1927), after holding that stock certificates are unnecessary to the existence of shares, the Illinois Supreme Court stated, "but it is the payment, or the obligation to pay, for shares of stock, accepted by the corporation, that creates both the shares and their ownership." In the instant case, all contacts relating to payment of the shares of stock were in Illinois. All payments were made to FirstRock, and all stock depositors herein involved resided in Illinois. It is apparent the contractual relationship which creates a "share" was centered in Illinois. Consequently, for purposes of this forfeiture action the government seized the intangible interests on October 4, 1992, in Illinois. That these intangible interests were subsequently embodied in written certificates in Massachusetts is immaterial; the res had already been seized.
3. Valid Process
After determining what the government seized as well as its situs, the next step is to determine whether service of process on FirstRock's President and Chief Executive Officer was sufficient. The government contends the shareholders were owners of their respective shares at the time of the seizure, regardless of the absence of certificates. Claimant Leichter argues the government's concession rendered its service of process on FirstRock's president insufficient because it should have served process on the shareholders. Claimant Boosalis, on the other hand, disputes ownership. Boosalis notes that under Illinois statutory law, when stock is transferred through a financial intermediary, an actual transfer of the stock does not take place until the purchaser "acquires possession" of the security or when the financial intermediary sends confirmation of the purchase and records such by book entry or otherwise. See 810 ILCS 5/8-312(1)(a), (d) (1993) (formerly ILL. REV. STAT. ch. 26, P 8-313 (1991)). Boosalis argues neither of these events occurred in the instant case and concludes that as of October 4, 1992, the shares were still in FirstRock's possession.
The court need not determine who was the owner of the intangible interests in the FirstRock stock at the time of the seizure. As all parties concede at the hearing, no section of the Illinois UCC directly addresses the unique facts of the instant case. Moreover, while the court believes it should look to state law in defining the nature of the interests seized, cf. Easter House v. Felder, 910 F.2d 1387, 1395 (7th Cir. 1990) (state law may define a "property interest" for purposes of 42 U.S.C. § 1983), cert. denied, 498 U.S. 1067, 112 L. Ed. 2d 846, 111 S. Ct. 783, (1991), the procedure to follow regarding service of process is governed by federal law.
The Supplemental Rules for Certain Admiralty and Maritime Claims (Supplemental Rules) govern forfeiture cases, including the instant case. See 18 U.S.C. § 981(b)(2) (Supp. 1992).
Supplemental Rule E(4)(c) governs the execution of process against intangible property. See Supp. R. E(4)(c); 7A MOORE's FEDERAL PRACTICE P E.09. According to Rule E(4)(c), service of a warrant on intangible property is accomplished by leaving a copy of the complaint and process with "the garnishee or other obligor." See Supp. R. E(4)(c); United States v. Two Thousand, Five Hundred Thirty-Eight Point Eighty-Five Shares (2,538.85) of Stock Certificates of the Ponce Leones Baseball Club, Inc., 988 F.2d 1281, 1284 (1st Cir. 1993). Claimant Leichter argues that because there was no technical "garnishee" or "other obligor" in the present case, execution of service on Leichter was the only acceptable means of complying with Supplemental Rule E(4)(c). This is so, Leichter argues, because he is the owner of the shares and the only entity with any ownership control or custody of the property. Regardless of whether Leichter was owner of the shares on October 4, 1992, the court disagrees with the proposition that only the owner may be served with process under the Supplemental Rules.
While the court agrees service of process on the owner is permissible, the statute also allows for service of process on the "garnishee" or "other obligor. Supp. R. E(4)(c). An obligor may be "a broker or some other person acting in an agency or quasi-agency capacity and who expects to receive monies all or part of which he will have to forward to the defendant." 7A MOORE's FEDERAL PRACTICE P E.09. Arguably, FirstRock, the issuing bank, was still acting in the capacity of agent for the shareholders between October 2, 1992, and October 6, 1992. Therefore, regardless of whether FirstRock was the owner of the shares or agent of the shareholders on October 4, 1992, the government complied with Supplemental Rule E(4)(c) in serving FirstRock's CEO.
In light of the analysis set forth above, the government's alternative argument need not be addressed. The court wishes, however, to address a policy argument raised by counsel for claimant Leichter at the hearing. Claimant Leichter argued the government's actions, if found to be permissible, will have severe ramifications on the stock market. This is so, Leichter argued, because if the government is allowed to seize shares of stock without serving the shareholders and without seizing the certificates, those shareholders could begin trading on the open market in complete ignorance as to any government seizure. The resulting ramifications would be far-reaching, Leichter concluded.
The court is not persuaded by this argument. Congress has recently expressed a strong policy statement; the amended section 1355 allows a forfeiture action to be brought in the district court for the district in which any of the acts giving rise to the forfeiture occurred and authorizes extraterritorial process. See 28 U.S.C. § 1355(b)(1)(A), (d) (Supp. 1993). While this court does not address the retroactivity of the amended section 1355, see Republic Nat'l Bank of Miami v. United States, U.S. , 113 S. Ct. 554, 565-66 (1992) (Thomas, J., concurring), the court recognizes the amended version as expressing a strong Congressional intent to allow the government to vigorously pursue forfeiture actions. In granting expanded jurisdiction to the district courts, Congress presumably concluded that the benefits in allowing the government to pursue forfeiture actions outweighs any temporary ramifications caused by such actions. In addition, by subjecting civil forfeiture actions to the Supplemental Rules, which authorize the government to give notice by publication only, see Supp. R. C(4); Ponce Leones Baseball Club, 988 F.2d at 1284 n.4, Congress made a conscious decision to regulate civil forfeiture actions differently from civil lawsuits. These policy reasons do not change because the subject of the forfeiture action is stock allegedly derived from bank fraud rather than a car allegedly derived from an illegal drug transaction.
It is apparent from this court's decision that the government's actions in the present case were arguably supported by and in compliance with the applicable statutes. Consequently, the court finds claimant Boosalis' plea for Rule 11 sanctions is meritless. Likewise, his claims for a certificate of reasonable cause, see 28 U.S.C. § 2465 (1991), or for attorney's fees, see 28 U.S.C. § 2412 (Supp. 1993), are denied. The court is also unpersuaded by his argument that the government could have served claimant Boosalis with an in personam lawsuit. Civil forfeiture actions are in rem proceedings, and the government need only concern itself with properly securing the res. In addition, claimant Boosalis raises several arguments in his reply which more appropriately belong in his Rule 12(b)(6) motion to dismiss. Thus, the court will address those arguments at a later date.
For the reasons set forth above, claimants' motions to vacate the ex parte order and to dismiss for lack of subject matter jurisdiction are denied. Those claimants who have not filed reply briefs in support of their motions to dismiss/summary judgment are given until June 23, 1993, to do so. Those claimants who have not filed responses to the government's motion to strike are given until June 18, 1993, to do so. The government is given until June 23, 1993, to file a reply brief in support of its motion to strike. The briefing schedule for the government's motion for entry of default judgment remains in effect.
PHILIP G. REINHARD, JUDGE
UNITED STATES DISTRICT COURT
DATED: June 14, 1993