Source: https://openjurist.org/942/f2d/177
Timestamp: 2019-03-26 12:05:04
Document Index: 140373869

Matched Legal Cases: ['§ 2255', '§ 853', '§ 853', '§ 853', '§ 46', '§ 853', '§ 2', '§ 853', '§ 2', '§ 2', '§ 1963', '§ 853']

942 F. 2d 177 - United States v. W Lavin Wmot
942 F2d 177 United States v. W Lavin Wmot
942 F.2d 177
Before proceeding to the merits of WMOT's appeal, we must dispose of a threshold challenge to our jurisdiction. WMOT filed its notice of appeal fifty-four days after the district court entered its order dismissing WMOT's petition under section 853(n). The government now contends that WMOT's appeal is untimely under Fed.R.App.P. 4(b). Rule 4(b) provides in pertinent part: "In a criminal case the notice of appeal by a defendant shall be filed in the district court within 10 days after the entry of ... the judgment or order appealed from...." (Emphasis added). The government maintains that WMOT's appeal was taken "in a criminal case," and that it therefore was filed after the appeal time set forth in Rule 4(b) had expired.
In contrast, WMOT asserts that Rule 4(b) is inapplicable because it is not appealing "in a criminal case." WMOT instead contends that it is appealing from a judgment entered "in a civil case," and that the time for appeal accordingly is controlled by Fed.R.App.P. 4(a)(1). Because Rule 4(a)(1) provides that a notice of appeal must be filed within sixty days if the United States is a party,4 WMOT insists that its appeal was timely filed.
The term "criminal case" in Rule 4(b) generally is construed narrowly to encompass only "a prosecution brought by the government to secure a sentence of conviction for criminal conduct." 9 J. Moore, B. Ward, & J. Lucas, Moore's Federal Practice p 204.15, at 4-132 (2d ed. 1991). Conversely, the term "civil case" in Rule 4(a)(1) generally is construed broadly to include "any action that is not a criminal prosecution." Id. p 204.08, at 4-29. As a result, proceedings that essentially are civil in nature are deemed to be "civil cases," even though they derive from a prior criminal prosecution. For example, habeas corpus cases, proceedings to vacate a sentence under 28 U.S.C. § 2255, and actions dealing with the forfeiture of a criminal bail bond all are "civil" for purposes of Rule 4(a)(1). See id. p 204.08, at 4-30--4-31.
Applying these principles to the case at bar, we are convinced that a proceeding under 21 U.S.C. § 853(n), which is closely analogous to a bail forfeiture proceeding, is a "civil case" for purposes of Rule 4(a)(1).5 As the government concedes, a hearing to adjudicate the validity of a third party's interest in forfeited property is not a criminal prosecution, i.e., an action commenced by the government to secure a sentence of conviction for criminal conduct. In fact, petitioners such as WMOT are barred by 21 U.S.C. § 853(k)(1) from intervening in the true "criminal case."6 Given that our decision in this appeal will have absolutely no effect on Lavin, the criminal defendant, we think that the government strains reason in attempting to characterize a proceeding under section 853(n) as a "criminal case."7 We therefore hold that WMOT's notice of appeal, which was filed fifty-four days after the entry of the order appealed from, was timely under Rule 4(a)(1). We turn now to the merits: whether WMOT's status as a victim of embezzlement was sufficient to confer standing under 21 U.S.C. § 853(n)(6)(B).
The thrust of WMOT's appeal is that the district court, in holding that a victim of embezzlement lacks standing under section 853(n)(6)(B), adopted an unduly narrow construction of the term "bona fide purchaser for value." WMOT urges us instead to construe the term more liberally so as to protect the legitimate interests of all innocent third parties. To bolster its interpretation of section 853(n)(6)(B), WMOT directs us to subsection (o), which states that "[t]he provisions of this section shall be liberally construed to effectuate its remedial purposes." Among the remedial purposes of section 853, WMOT contends, is the protection of the property rights of innocent third parties, see S.Rep. No. 225, 98th Cong. 1st Sess. 208, reprinted in 1984 U.S.Code Cong. & Admin.News 3182, 3391 [hereinafter S.Rep. No. 225]. WMOT also relies on the hoary maxim that "the law abhors a forfeiture." See United States v. One 1936 Model Ford V-8 De Luxe Coach, 307 U.S. 219, 226, 59 S.Ct. 861, 864-65, 83 L.Ed. 1249 (1939) ("Forfeitures are not favored; they should be enforced only when within both letter and spirit of the law."). By foreclosing its sole avenue of judicial relief, WMOT asserts, the district court contravened the salutary purpose of section 853(n).
WMOT further maintains that its more expansive reading of the term "bona fide purchaser for value" has been endorsed by two courts. See United States v. Reckmeyer, 836 F.2d 200 (4th Cir.1987); United States v. Mageean, 649 F.Supp. 820 (D.Nev.1986), aff'd, 822 F.2d 62 (9th Cir.1987); but see United States v. Campos, 859 F.2d 1233 (6th Cir.1988) (holding that general, unsecured creditors are not "bona fide purchasers for value"). In Reckmeyer, the criminal defendant's father, who had loaned the defendant money to purchase a parcel of real estate, and a gem merchant, who had sold two precious stones to the defendant on credit, petitioned the court under section 853(n) to amend the forfeiture order. 836 F.2d at 202. Both petitioners sought to recover out of the defendant's assets, virtually all of which had been ordered forfeited, the amount of their unsecured claims. The Fourth Circuit, after rejecting the government's claim that unsecured creditors lack a "legal interest" under the statute, construed the term "bona fide purchaser for value" liberally "to include all persons who give value to the defendant in an arms'-length transaction with the expectation that they would receive equivalent value in return." Id. at 208. The Reckmeyer court then held that both petitioners were bona fide purchasers in that they gave value to the defendant in anticipation of receiving value in return. Id. at 208-09.
As always, the most authoritative indicators of what Congress intended are the words that it chose in drafting the statute. See 2A N. Singer, Sutherland Statutory Construction § 46.03, at 82 (4th ed. 1984) ("What a legislature says in the text of a statute is considered the best evidence of the legislative intent or will."). Here, we think that Congress's use of the word "purchaser" by itself connotes an intent to include only volitional transactions. As the Mageean court observed, "it does not seem possible to stretch the definition of bona fide purchaser to include ... tort claimants." 649 F.Supp. at 824.
Nothing in the legislative history of section 853(n) persuades us to construe the term "bona fide purchaser for value" any differently. As we read the relevant history,9 Congress did not intend section 853(n) to serve as a vehicle by which all innocent third parties who are aggrieved by an order of criminal forfeiture can petition for judicial relief. Rather, it seems to us that Congress, in enacting section 853(n)(6)(A) and (B), intended to accord standing to only two narrow classes of third parties, and intended to require all other third parties to petition the Attorney General for relief, see 21 U.S.C. § 853(i).
To understand who Congress intended to protect in fashioning these two narrow exceptions, it is helpful to ascertain the source of Congress's language. As far as we can tell, Congress derived both exceptions essentially from hornbook commercial law. The first exception, codified in section 853(n)(6)(A), reflects the common-law principle, embodied in the venerable maxim nemo dat qui non habet,11 that a buyer acquires no better title than that of the seller. See UCC § 2-403(1) ("A purchaser of goods acquires all title which his transferor had or had power to transfer...."). Under the relation-back doctrine, the government acquires its interest in the defendant's forfeited property at the time of the commission of the criminal acts giving rise to the forfeiture. See 21 U.S.C. § 853(c). Thus, if a third party's interest in the forfeited property, at the time of the criminal acts, was superior to the criminal defendant's interest, then the interest that the government acquires when it steps into the defendant's shoes is subordinate to that of the third party. As we explained supra note 1, WMOT concedes that it cannot take advantage of this exception because, at the time of the commission of the criminal acts (beginning in 1978), it had not yet acquired any interest in Lavin's property (Stewart did not embezzle money from WMOT and transfer funds to Lavin until 1981).
The second exception, codified in section 853(n)(6)(B), reflects another common-law rule (an exception to the nemo dat qui non habet principle), namely, that an "innocent purchaser for valuable consideration must be protected." Mowrey v. Walsh, 8 Cowen 238, ---- (N.Y.1828); see UCC § 2-403(1) ("A person with voidable title has power to transfer a good title to a good faith purchaser for value."). The good-faith purchaser exception developed over time in order to promote finality in commercial transactions and thus to encourage purchases and to foster commerce. It does so by protecting the title of a purchaser who acquires property for valuable consideration and who, at the time of the purchase, is without notice that the seller lacks valid and transferable title in the property. In Johnson & Johnson Products, Inc. v. Dal International Trading Co., 798 F.2d 100, 104 (3d Cir.1986), we described the purpose of this exception as follows:
The good-faith purchaser exception translates easily into the forfeiture context. After the commission of the criminal acts, title to the forfeitable property, by operation of the relation-back clause, actually belongs to the government. The property itself, however, generally remains in the criminal defendant's physical possession until the government discovers the criminal acts and takes possession of the forfeitable property. While the forfeitable property is in the defendant's possession, the defendant possesses only voidable title, but ordinarily, a prospective purchaser of the forfeitable property will have no notice that the defendant lacks a valid, transferable interest. Section 853(n)(6)(B) ensures that, if indeed the defendant transfers the forfeitable property for value to a purchaser who, at the time of the purchase, is without knowledge of the government's interest in the property, the government may not later assert title superior to that of the innocent purchaser. Extension of the good-faith purchaser exception to the forfeiture context thus facilitates commerce, as it does in the general commercial law context, by removing an impediment to commercial transactions--to wit, the need for a purchaser to engage in exhaustive research, in order to discover whether there are competing claims to the property, prior to consummating a sale.
We are reluctant to expand the reach of section 853(n)(6)(B) beyond that of its commercial-law analog, UCC § 2-403(1). We believe that allowing WMOT to avail itself of section 853(n)(6)(B) would not further in any way the historical purpose underlying the good-faith purchaser exception. Because WMOT acquired its interest in Lavin's property unwittingly, as a victim of embezzlement, its ability to protect its interest in the forfeited property vis a vis the government will have no effect whatsoever on commerce. Simply stated, commerce will not be promoted by facilitating the type of transactions by which WMOT acquired its interest in Lavin's property. Indeed, we can perceive of no economic justification, from the perspective of traditional commercial law, for protecting WMOT's "legal" interest rather than that of the government--which, as we noted earlier, acquired its "legal" interest in Lavin's property a full three years before WMOT. Because, under commercial law, WMOT's "legal" interest in Lavin's property is subordinate to the government's, WMOT must rely on an "equitable" argument that, in view of its sympathetic status as a victim of embezzlement, it nonetheless should be entitled to recoup some of its losses from Lavin's forfeited property. But that argument must be addressed to the Attorney General, not the courts.
We also think that WMOT's reliance on Reckmeyer and Mageean is misplaced. To begin with, the Mageean court expressly held that tort claimants are not "bona fide purchasers for value" under the statute. The petitioners in Mageean, aside from the unsecured trade creditors discussed supra at 183, were tort claimants who had been injured when an airplane, in which the forfeitor owned an interest, crashed. 649 F.Supp. at 820-21. Because the aircrash occurred after the criminal acts giving rise to the forfeiture, the only category into which the tort claimants possibly could fit was the bona fide purchaser exception. Id. at 823. The court, in holding that these tort claimants were not bona fide purchasers for value, explicitly rejected the claimants' argument, like the one advanced by WMOT here, that no statutory purpose would be served by denying them relief:
Furthermore, although neither Mageean nor Reckmeyer makes the point in terms, both courts defined the term "bona fide purchaser" to encompass only advertent transactions. We intimate no view concerning the propriety of these courts' construction of section 853(n)(6)(B), and we observe that both decisions are at odds with the Sixth Circuit's decision in United States v. Campos, 859 F.2d 1233 (6th Cir.1988).13 We simply point out that neither Reckmeyer nor Mageean bolsters WMOT's proposed construction of section 853(n)(6)(B). The Reckmeyer court concluded that
649 F.Supp. at 826. Both courts, in roughly defining "bona fide purchase" as an arm's length transaction, evince an understanding that the term bona fide purchase for value extends only to transactions into which the petitioner entered knowingly. Although the terms "arm's length" and "advertent" are, of course, by no means synonymous or interchangeable,14 arm's length transactions are by definition advertent.
The reason WMOT asserted no claim under section 853(n)(6)(A) was stated succinctly in WMOT's prehearing memorandum:
"The Government correctly observes that WMOT may not recover under 28 [sic] U.S.C. Section 853(n)(6)(A) because, under that [section's] 'relation-back provision,' the Government's interest in the forfeited estate vested when Lavin first committed the crimes giving rise to the forfeiture, which crimes occurred before WMOT obtained its putative interest in the forfeited estate."
F.Supp. 1065, 1067 (E.D.Pa.1990). As suggested above, the indictment to which Lavin pled guilty alleged a drug conspiracy commencing in 1978, a full three years before Stewart allegedly embezzled funds from WMOT, deposited them in the Escrow Account, and then transferred funds from that account to Lavin
In particular, the court concluded that "the entry of [a] default judgment establishes under Pennsylvania law an interest of sufficient dignity as to be regarded as 'a legal right, title or interest' for the purposes of 21 [U.S.C. § ] 853(n)(6)." Id. at 1068. The court remarked, however, that the government would be entitled, if it should prove necessary, to present evidence that WMOT in fact lacked a valid claim against Lavin's forfeited property
See United States v. Brouillet, 736 F.2d 1414, 1415 (10th Cir.1984) (en banc ) (holding that "the time for appeal from an order relating to the forfeiture of a criminal bail bond is governed by the rules for appeals from a civil case")
The legislative history discussed below actually involves 18 U.S.C. § 1963(l ), a provision of the RICO statute that is identical to section 853(n). Because these two provisions are identical, and section 853(n) adopted the language of section 1963(l ) without adding any history of its own, we think that the history of section 1963(l ) also serves as a guide to Congress's intent regarding section 853(n)
To round out the picture, we reiterate that WMOT is forced to attempt to fit itself into the bona fide purchaser exception of section 853(n)(6)(B) for two reasons. First, as we have explained above, WMOT is unable to take advantage of section 853(n)(6)(A)'s exception, because its interest in Lavin's estate arose a full three years after the government's interest had vested. See supra note 1. Second, WMOT is also unable to recover from Lavin, because it cannot identify in Lavin's estate the specific funds that were embezzled from it, and thus can assert no more than a general claim against Lavin's estate. Had Lavin deposited WMOT's funds in a separate account or in some other way made possible their specific identification or tracing, those funds--which derive from embezzlement, not drug trafficking--would not have been subject to forfeiture, and hence the government would have had no interest in them
We conclude that unsecured creditors ... should not be allowed to assert claims under § 853(n)(6)(B). Such unsecured creditors do not fit the traditional definition of "bona fide purchasers." As this is a legal term of art, we are unwilling to give the phrase an unnatural meaning only for the purpose of subsection (n)(6)(B). We recognize that this interpretation of the forfeiture statute mandates a harsh result, but it is a result frequently mandated by forfeiture procedures.