Court Opinion

ID: 4270535
Source: CourtListenerOpinion
Date Created: 2018-04-27 14:06:48.941409+00
Date Added: 2024-06-11T07:49:22.952223
License: Public Domain

IN THE SUPREME COURT OF IOWA
                              No. 17–1237

                          Filed April 27, 2018

IN THE MATTER OF PROPERTY SEIZED FROM BO (BRIAN) LI,
NA TIAN, and WEI TIAN.

STATE OF IOWA,

      Appellant.

      Appeal from the Iowa District Court for Dubuque County, Michael J.

Shubatt, Judge.

      State appeals judgment dismissing civil in rem forfeiture action

against spa advertising massages. AFFIRMED.

      Thomas J. Miller, Attorney General, Louis S. Sloven, Assistant

Attorney General, Ralph Potter, County Attorney, and Brigit Barnes,

Assistant County Attorney, for appellant.

      Christopher M. Soppe of Pioneer Law Office, Dubuque, for appellees.
                                        2

WATERMAN, Justice.

      This appeal presents a question of statutory interpretation: whether

practicing massage therapy without a license constitutes a serious

misdemeanor. Police, responding to complaints by neighbors suspecting

prostitution, conducted surveillance on a spa in Dubuque advertising

massage services. Police raided the business and seized cash, cell phones,

and other property. The State filed a civil in rem forfeiture action alleging

the cash was the proceeds of an unlicensed massage business or

prostitution. Following a bench trial, the district court found the State

failed to meet its burden to prove prostitution and ruled that practicing

massage therapy without a license was not a crime and therefore could

not support forfeiture. The district court dismissed the forfeiture action

and ordered the cash returned to the claimants.           The district court,

however, denied the claimants’ application for return of the other property

and allowed the State to retain that property pursuant to its ongoing

criminal investigation. The State appealed, and we retained the case. The

claimants did not cross-appeal.

      For the reasons explained below, we hold that practicing massage

therapy without a license is not a serious misdemeanor. We affirm the

district court’s ruling finding that the State failed to prove prostitution and

affirm the district court’s judgment returning the cash to the claimants.

Because the claimants failed to file a cross-appeal, we do not review the

district court’s ruling allowing the State to retain the remaining property

while it completes its investigation.

      I. Background Facts and Proceedings.

      The claimants, Bo Li, Wei Tian, and Na Tian all live together in

Dubuque. Wei Tian and Na Tian are sisters, and Wei Tian is dating Bo Li.

Li owns Therapeutic Spa, located in Dubuque. Li, Wei Tian, and Na Tian
                                       3

all work at Therapeutic Spa, which provides massages and accupressure

to its clients. None of them have a massage therapy license. When Li

purchased the business from Hong Zhou in September 2016, he kept the

name because he thought it “promote[d] health” and because he could save

money by retaining the signage. Wei Tian and Na Tian sell dresses online

to make additional money.          They planned to open a dress store in

Dubuque.

      In the summer of 2016, months before Li purchased Therapeutic

Spa, police began investigating the business after neighbors complained

of hearing “sexual-type noises” inside. The police found Therapeutic Spa

listed on Craigslist and on “Rubmaps,” a website which reviews businesses

that offer sex services. Claimants learned that the business was listed on

Rubmaps when they applied for a credit card machine. They wrote and

emailed Rubmaps requesting that the business information be removed

from that website.

      City of Dubuque police officers conducted surveillance of the

business over several weeks. The daily surveillance varied from several

hours to the entire day. The police saw only male customers entering the

business, though Wei Tian later testified that the spa kept a list of

customers and identified names of female customers.

      One night, the police observed two females remove a trash bag from

the spa, ignore the dumpster behind the business, and dispose of the

garbage at the claimants’ shared residence. The police seized the trash

bag and found strips of toilet paper that appeared to be soiled with semen

and fecal matter.    They sent the toilet paper to the Iowa Division of

Criminal   Investigation   (DCI)    Criminalists   Laboratory   for   analysis.

Criminalists at the DCI laboratory confirmed the presence of semen but

did not run a DNA test.
                                      4

      Claimants testified that they threw away the trash at their personal

residence because the hair salon next door paid for the dumpster behind

the building and did not allow them to use it. One officer testified that he

never saw the women use the dumpster behind the building. Additionally,

Wei Tian claimed that she and Li engaged in sexual relations at the

business, so the semen on the toilet paper would have come from Li.

      In February 2017, Dubuque police officers obtained and executed a

search warrant for the business and the claimants’ apartment. During the

search, officers seized $16,278 from Li, $4341 from Na Tian, and $858

from Wei Tian. They also seized electronic devices (including phones and

an iPad™), several prepaid cards, and paper records.

      The State filed in rem forfeiture complaints against Li, Wei Tian, and

Na Tian pursuant to Iowa Code sections 809A.13 and 809A.8(1)(a)(2)

(2017), seeking to forfeit the seized cash. In each complaint, the State

alleged that the “[p]roperty was acquired from or is proceeds of a crime.”

Li, Wei Tian, and Na Tian each filed an answer to the in rem forfeiture

complaints, claiming that “[t]he money was not the proceeds from any

criminal activity.” The claimants also filed applications for return of the

other property that had been seized.

      In April, an undercover officer conducted a sting operation that

resulted in the arrest of a woman who solicited the officer for sex at a hotel

in Dubuque. Upon their search of the woman’s hotel room, officers found

a business card for Therapeutic Spa in the woman’s purse.

      On May 9, the district court held a civil forfeiture hearing, as well as

a hearing on the claimants’ applications for return of seized property, and

granted the parties additional time to file briefs. The State claimed the

cash was forfeitable as proceeds of either prostitution or the unlicensed

practice of massage therapy. The State argued that practicing massage
                                        5

therapy without a license is a serious misdemeanor and therefore could

serve as the predicate offense to forfeiture. The claimants argued that the

unlicensed practice of massage therapy was not a forfeitable offense. They

also contended that the State failed to prove the cash was proceeds from

prostitution.

      The district court entered its ruling on July 28.            The court

determined that practicing massage therapy without a license is not a

serious misdemeanor and therefore cannot support forfeiture. The court

reached that decision by determining that Iowa Code section 152C.4

provides a specific penalty—a civil fine—for practicing massage therapy

without a license. As a result, section 147.86, which provides that any

violation of a provision of that subtitle constitutes a serious misdemeanor

unless a specific penalty is otherwise provided, does not apply.

      The district court also found that the State had not proved by a

preponderance of the evidence that the seized funds were the proceeds of

prostitution, so the money could not be forfeited on that ground. The court

acknowledged it was suspicious of the claimants’ actions. But the court

explained that “forfeiture is a significant exercise of the State’s power[,]

and it requires more than a suspicion.” The court denied all three of the

State’s in rem forfeiture complaints.

      Finally, the court denied the claimants’ applications for return of the

noncash assets, concluding they were properly retained by law

enforcement under Iowa Code section 809.5 because they were “required

for use in an investigation.” The court acknowledged that law enforcement

was experiencing difficulty because the data on the electronic devices was

in Mandarin, so the time the State retained the assets was reasonable.

      The State appealed, and we retained the appeal.
                                         6

       II. Standard of Review.

       “We review questions of statutory construction . . . for errors at law.”

State v. Iowa Dist. Ct., 888 N.W.2d 655, 662 (Iowa 2016) (quoting Dykstra

v. Iowa Dist. Ct., 783 N.W.2d 473, 477 (Iowa 2010)). We review forfeiture

proceedings “for correction of errors at law.”            In re Prop. Seized for

Forfeiture from Young, 780 N.W.2d 726, 727 (Iowa 2010). In a forfeiture

proceeding, “[w]e examine the evidence in the light most favorable to the

district court judgment and construe the district court’s findings liberally

to support its decision.” In re Prop. Seized from Chiodo, 555 N.W.2d 412,

414 (Iowa 1996).        The district court’s “findings are binding on us if

supported by substantial evidence.” Id. The “possibility that inconsistent

conclusions might be drawn from the same evidence does not preclude a

finding from being supported by substantial evidence.” In re Prop. Seized

from DeCamp, 511 N.W.2d 616, 619 (Iowa 1994).

       III. Analysis.

       We must decide whether the district court erred in rejecting the

State’s forfeiture claims. The State argues the defendants’ cash is subject

to forfeiture as proceeds of a crime because the seized cash is the proceeds

of an unlicensed massage business, a prostitution operation, or both.

Under Iowa Code section 809A.4(3), “[a]ll proceeds of any conduct giving

rise to forfeiture” are subject to forfeiture. The conduct that may give rise

to forfeiture includes “[a]n act or omission which is a public offense and

which is a serious or aggravated misdemeanor or felony.”                Iowa Code

§ 809A.3(1)(a). The State has “the initial burden of proving the property is

subject to forfeiture by a preponderance of the evidence.” Id. § 809A.13(7)

(2017). 1 “If the state so proves the property is subject to forfeiture, the

       1In 2017, the legislature changed the state’s burden of proof to clear and

convincing evidence. 2017 Iowa Acts ch. 114, § 10 (codified at Iowa Code § 809A.13(7)
                                            7

claimant has the burden of proving that the claimant has an interest in

the property which is exempt from forfeiture . . . by a preponderance of the

evidence.” Id.

       “Forfeitures are not favored under the law[,] and this court strictly

construes statutes allowing forfeitures.” In re Prop. Seized for Forfeiture

from Williams, 676 N.W.2d 607, 612 (Iowa 2004). Forfeiture statutes have

faced increasing criticism in recent years. See, e.g., Leonard v. Texas, ___

U.S. ___, ___, 137 S. Ct. 847, 848–49 (2017) (Thomas, J., statement

respecting denial of certiorari) (acknowledging that civil forfeiture

operations—which have become more “widespread and highly profitable”

in recent decades—“frequently target the poor and other groups least able

to defend their interests in forfeiture proceedings” and expressing

skepticism over the constitutionality of the modern practice of civil

forfeiture); People ex rel. Hartrich v. 2010 Harley-Davidson, ___ N.E.3d ___,

___, 2018 WL 915075, at *14 (Ill. Feb. 6, 2018) (Karmeier, C.J., dissenting)

(emphasizing that “courts must be vigilant in safeguarding the rights of

innocent persons who have legitimate interests in the property at issue”).

Against this backdrop, we turn to the issues presented in this appeal.

       A. Whether Practicing Massage Therapy Without a License Is a

Serious Misdemeanor Under Iowa Code Section 147.86.                            We must

decide whether the unlicensed practice of massage therapy is a serious

misdemeanor. This is a question of statutory interpretation. We begin

with the statutory text. McGill v. Fish, 790 N.W.2d 113, 118 (Iowa 2010)

(2018)). The amendment also changed the claimant’s burden of proof so that the claimant
is only required to make a prima facie showing that an exemption exists. Id. Finally, if
the claimant makes such a showing, the amended statute requires the state to prove by
clear and convincing evidence that the exemption does not apply. Id. This amendment
only applies to forfeiture proceedings that began on or after July 1, 2017, and, therefore,
does not apply to this case, in which the forfeiture complaint was filed February 23, 2017.
See 2017 Iowa Acts ch. 114, § 15; see also Iowa Code § 3.7(1) (2017).
                                           8

(“[O]ur starting point in statutory interpretation is to determine if the

language has a plain and clear meaning within the context of the

circumstances presented by the dispute.”).

      Under Iowa Code section 147.2, “[a] person shall not engage in the

practice of . . . massage therapy . . . unless the person has obtained a

license for that purpose from the board for the profession.” Iowa Code

§ 147.2(1). Later in that chapter, the Code states, “Any person violating

any provision of this subtitle, except . . . where a specific penalty is

otherwise provided, shall be guilty of a serious misdemeanor.” Iowa Code

§ 147.86 (emphasis added). Here, a specific penalty is otherwise provided.

      Subtitle 3 of Title IV of the Iowa Code encompasses both chapter 147

and chapter 152C, which deals exclusively with massage therapy. Iowa

Code section 152C.5 prohibits the unlicensed practice of massage

therapy. 2 Section 152C.4 provides a specific civil penalty for practicing

massage therapy without a license:

      The board may, by order, impose a civil penalty upon a person
      who practices as a massage therapist without a license issued
      under this chapter or a person or business that employs an
      individual who is not licensed under this chapter. The penalty
      shall not exceed one thousand dollars for each offense. Each
      day of a continued violation after an order or citation by the
      board constitutes a separate offense, with the maximum
      penalty not to exceed ten thousand dollars.

Id. § 152C.4(1).

      2Section   152C.5 provides,
               The practice of massage therapy as defined in section 152C.1 is
      strictly prohibited by unlicensed individuals. It is unlawful for a person to
      engage in or offer to engage in the practice of massage therapy, or use in
      connection with the person’s name, the initials “L.M.T.” or the words
      “licensed massage therapist”, “massage therapist”, “masseur”,
      “masseuse”, or any other word or title that implies or represents that the
      person practices massage therapy, unless the person possesses a license
      issued under the provisions of section 152C.3.
Iowa Code § 152C.5.
                                      9

      The language of section 147.86 is unambiguous: a person who

violates a provision of subtitle 3 is guilty of a serious misdemeanor, “except

where a specific penalty is otherwise provided.” Id. § 147.86 (emphasis

added). Section 152C.4 provides for a civil penalty for practicing massage

therapy without a license. Id. § 152C.4. The district court concluded this

civil penalty exempts the unlicensed practice of massage therapy from

criminal liability under section 147.86.      We agree.     Under the plain

meaning of these statutes, the unlicensed practice of massage therapy is

not a serious misdemeanor and, therefore, cannot be the predicate offense

for forfeiture.

      Our conclusion is reinforced by other licensing provisions, which

show that when the legislature chooses to criminalize practicing without a

license, it says so expressly. For example, as the district court noted,

chapter 152D provides that “[i]t is unlawful for a person to engage in the

practice of athletic training . . . unless the person is licensed pursuant to

this chapter.” Id. § 152D.7(2). The next subsection expressly provides, “A

person who violates a provision of this chapter is guilty of a serious

misdemeanor.”     Id. § 152D.8.    Reading the statutes together, we can

conclude that if the legislature had intended to make practicing massage

therapy without a license a serious misdemeanor, it would have said so in

chapter 152C, as it did in section 152D.8 for athletic trainers.          See

Shumate v. Drake Univ., 846 N.W.2d 503, 512 (Iowa 2014) (determining

legislative intent by noting “closely related chapters demonstrate that

when the legislature ‘wished to provide a private damage remedy, it knew

how to do so and did so expressly’ ” and acknowledging that the legislature

did not do so in the provision at issue (quoting Touche Ross & Co. v.

Redington, 442 U.S. 560, 572, 99 S. Ct. 2479, 2487 (1979))); Oyens Feed

& Supply, Inc. v. Primebank, 808 N.W.2d 186, 193 (Iowa 2011) (“The
                                          10

legislature selectively incorporated the prefatory clause, ‘Except as

provided in section 570A.2, subsection 3,’ into section 570A.5 subsection

(2) but not subsection (3).          We presume this clause was located in

subsection (2) for a reason—to apply the affirmative defense solely to the

equal priority lien recognized in that subsection.” (Emphasis added.));

Freedom Fin. Bank v. Estate of Boesen, 805 N.W.2d 802, 812 (Iowa 2011)

(relying on selective placement and omission of phrase in related statutes

to determine meaning).

       The State suggests the words “strictly prohibited” and “unlawful” as

used in section 152C.5 show the legislature intended the unlicensed

practice of massage therapy to be a serious misdemeanor. We disagree.

The legislature also used the word “unlawful” in section 152D.7(2).

Interpreting the use of the word “unlawful” to automatically make an act

a serious misdemeanor would render section 152D.8 surplusage.                      See

State v. Nall, 894 N.W.2d 514, 518 (Iowa 2017) (“[W]e try to interpret

statutes in a way that avoids rendering parts of them superfluous.”

(quoting State v. Merrett, 842 N.W.2d 266, 275 (Iowa 2014))). 3

       Under the State’s interpretation, a friend without a license for

massage therapy who exchanges a backrub for ten dollars would be
committing a serious misdemeanor punishable by a one-year jail sentence.

The State’s statutory interpretation depends on a finding of ambiguity and

would violate “the rule of lenity, which guides us to resolve ambiguous

criminal statutes in favor of the accused.” State v. Hagen, 840 N.W.2d

140, 146 (Iowa 2013). By contrast, our holding serves the purposes of the

rule of lenity: “providing fair notice that conduct is subject to criminal

       3The State also contends the legislative history supports the conclusion that the

unlicensed practice of massage therapy is a serious misdemeanor. The district court
determined that the legislative history is inconclusive. We reach the same conclusion
and rely on our textual analysis instead.
                                             11

sanction” and “promoting separation of powers by ensuring that crimes

are created by the legislature, not the courts.” State v. Hearn, 797 N.W.2d

577, 585 (Iowa 2011). 4 The legislature is free to criminalize the unlicensed

practice of massage therapy but has not done so yet.

       B. Whether the District Court Erred in Finding the State Failed

to Meet Its Burden of Proving the Seized Funds Are Proceeds of

Prostitution. We next consider whether the district court erred in finding

that the State did not meet its burden of proving that the seized funds are

proceeds of prostitution. 5 The district court concluded,

       [F]orfeiture is a significant exercise of the State’s power[,] and
       it requires more than a suspicion. It requires that the State
       prove by a preponderance of the evidence that the money it
       seized is the proceeds of an act constituting a serious
       misdemeanor, aggravated misdemeanor or felony. The State
       has not met this burden.

The State acknowledges this “heavy burden” but argues that “the

circumstantial evidence of prostitution is simply overwhelming.”                          We

disagree. The State offered no direct testimony by an undercover officer

or customer that sex was for sale at the spa. The claimants denied they

engaged in prostitution and had plausible explanations for the evidence

relied upon by the State. We must view the evidence in the light most

favorable to the district court judgment. In re Prop. Seized from Chiodo,

555 N.W.2d at 414.           The district court’s factual findings supported by

substantial evidence are binding on appeal.                  Id.   The “possibility that

inconsistent conclusions might be drawn from the same evidence does not

       4When   interpreting statutes, we turn to the rule of lenity as a last resort. State v.
Velez, 829 N.W.2d 572, 585 (Iowa 2013) (“[W]e only invoke the rule of lenity after we have
‘exhausted all interpretive techniques.’ ” (quoting Hearn, 797 N.W.2d at 586)); see also
Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 197
(2012) (“[T]he rule of lenity applies only when a reasonable doubt persists after the
traditional canons of interpretation have been considered.”).
       5Prostitution   is an aggravated misdemeanor under Iowa Code section 725.1.
                                    12

preclude a finding from being supported by substantial evidence.” In re

Prop. Seized from DeCamp, 511 N.W.2d at 619. We review the record to

evaluate the State’s claim that it proved prostitution by overwhelming

evidence.

      The State notes that Li did not change the name of the spa after

purchasing it, despite knowing that, under the previous owner, the spa

was “tied to maybe something . . . to do with sexual things.” Additionally,

the reputation of Therapeutic Spa made it more difficult for the claimants

to get a credit card machine. But Li provided plausible reasons for keeping

the name: he thought it “promote[d] health,” and it allowed him to save

money by not having to purchase new signs.

      The listing of Therapeutic Spa on Rubmaps also does not

conclusively establish that the claimants engaged in prostitution; the

business was originally listed there before Li took ownership, and he

testified he attempted to remove the spa’s business information from the

website.

      The State points out that one Rubmaps user, who reviewed the spa

before Li took ownership, also left a review of a massage by “Alice” at

Therapeutic Spa after Li purchased the business.           The schedules

presented by the claimants referred to Wei Tian and Na Tian as “Jess” and

“Alice,” respectively. Two subsequent reviews were written by premium

Rubmaps members (members who pay monthly or yearly fees to access

reviews and ratings of businesses on the website). The State suggests that

these premium members “did not see anything in the review about ‘Alice’

that had dissuaded them from visiting Therapeutic Spa.” The State further

speculates that the members would have “declin[ed] to visit any massage

parlor that was receiving reviews . . . that cautioned that sexual contact
                                     13

with masseuses was prohibited.” The district court was not required to

credit this hearsay evidence as proving prostitution.

      The State notes that officers who conducted surveillance testified

that only male customers were entering the spa. But the police did not

conduct surveillance around the clock. Wei Tian testified that the spa kept

a list of customers and identified female customers. A detective testified a

male customer reported sexual activity at the spa. The customer did not

testify; nor did the neighbors who complained they heard sexual noises

there. The district court could give such hearsay no weight.

      The State also argues the disposal of trash at a personal residence—

instead of using the dumpster near the spa—is probative of guilt, as is the

presence of semen on toilet paper found in the spa’s garbage. If the semen

on the toilet paper in the trash was from Li, as Wei Tian testified, “there

would be no need for clandestine disposal.” Yet Wei Tian testified that the

hair salon next to the spa owned the dumpster and did not let the spa use

it. Their innocent explanations for this evidence are plausible. Credibility

determinations are for the district court as the finder of fact.

      The district court found the cash in the claimants’ possession to be

“most compelling,” noting that the claimants had a bank account into

which they could have deposited the funds.         A detective testified that

keeping a large amount of cash at a residence instead of a bank account

“is an indicator that there is potential money laundering going on or . . . is

an attempt to hide the assets of [a] business.”       But the district court

concluded, “[T]he State did not establish to the Court’s satisfaction that

any laundering was occurring or that the seized money was tied to a

specific criminal act or acts.” At the hearing, Wei Tian testified that the

claimants were going to deposit the cash into a new account for the dress

store they planned to open. She also provided an explanation for why the
                                          14

claimants did not deposit the money in Therapeutic Spa’s existing bank

account: she believed transferring large sums of money from an existing

account to a new account “would become a tedious process because there

are daily limits as to how much you can take out.” Moreover, the claimants

experienced delays in their effort to obtain a credit card machine. 6

       The district court found that the State failed to meet its burden to

prove the seized cash was the proceeds of prostitution. That finding is

supported by substantial evidence. Viewing the evidence in the light most

favorable to the district court’s judgment, we must affirm.

       C. Whether the District Court Properly Denied Claimants’

Applications for Return of Seized Property. The district court ruled

that the State could retain the noncash property (including the cell phones

and iPad™) for its ongoing criminal investigation pursuant to Iowa Code

section 809.5. The district court determined that “law enforcement was

making a reasonable effort to conclude the investigation in a timely

manner” given delays translating data on the electronic devices in

Mandarin. The claimants did not file a cross-appeal of that adverse ruling.

See Iowa R. App. P. 6.101(2)(b) (providing that “any notice of cross-appeal

must be filed within the 30-day limit for filing a notice of appeal, or within

10 days after the filing of a notice of appeal, whichever is later”). For that

reason, claimants failed to preserve this issue for our review, and we

decline to reach it. Hagen, 840 N.W.2d at 144 n.3 (“Hagen did not file an

appeal or cross-appeal on the issue of the underlying tax due of $10,355

as determined by the district court. Therefore, this issue has not been

preserved for appeal.”); Ten Hagen v. DeNooy, 563 N.W.2d 4, 10 (Iowa Ct.

       6The district court incorrectly found that the claimants were “forced to deal in
cash” because they had not yet obtained a credit card machine. But the record shows
the claimants were able to obtain a credit card machine after a delay.
                                     15

App. 1997) (“It cannot go unnoticed that plaintiff did not file a cross-appeal

in this matter. Plaintiff was the unsuccessful party when the case was

tried on the merits; thus, we do not believe error has been adequately

preserved on this issue for our review.”).

      IV. Disposition.

      For these reasons, we affirm the judgment of the district court

denying the State’s in rem forfeiture action and ordering return of the cash

to the claimants, while allowing the State to retain the phones, computers,

and paper records pending completion of its criminal investigation.

      AFFIRMED.

      All justices concur except Hecht, J., who takes no part.