United States v. Real Property At 2659 RoundHill DR.

The appellants are claimants (Robert Fitzstephens et al., hereinafter “purchasers”) and intervenors (World Savings and Loan Association, hereinafter “World”) in an in rem forfeiture suit brought by the government against real property. They appeal the district court’s summary judgment order in favor of the government. For the reasons set forth below, we reverse.

I. Facts and Procedural History

In 1990, Anthony and Kathryn Payton purchased real property located at 2659 Roundhill Drive, Alamo, California (hereinafter “the property”) for $682,500. The Paytons paid $558,310 and financed the remainder through a loan from World. The loan, which was for $300,000, was secured by a mortgage and deed of trust recorded on January 24, 1993.

The government alleges that the Pay-tons used the proceeds of Anthony Pay-ton’s illegal drug trafficking activity, which took place beginning in 1974, to make then-down payment on the property. On October 5, 1994, the government filed a corn- *1023 plaint for forfeiture pursuant to 21 U.S.C. § 881 (a)(6), 2 naming the real property as the defendant res. On October 19, 1994, the government arrested the property and recorded a notice of Us pendens in the…