Court Opinion

ID: 9497917
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:03:42.197704+00
Date Added: 2024-06-11T17:58:30.409809
License: Public Domain

RYMER, Circuit Judge,
dissenting.
I part company with the majority because I do not believe that forfeiture pursuant to 21 U.S.C. § 853 turns on who holds bare legal title. Otherwise, forfeiture could always be avoided by putting property in the name of a nominee. Recognizing that § 853(o) imposes upon us the obligation to construe § 853 liberally, I would hold that property of a defendant whose title is held by a straw or nominal owner may be forfeited.
I also part company with the majority’s suggestion that, when the claimant to forfeited property holds bare legal title, the burden shifts to the government to show that the property is held as a resulting or constructive trust for the defendant pursuant to state law. Section 853(n)(6)(A) in plain language puts the burden on the petitioner to show by a preponderance of the evidence that the petitioner’s right, title or interest was vested in the petitioner rather than the defendant. Absent particular circumstances warranting it (and here, absent any facts or argument justifying it), there is no reason for the validity of the petitioner’s alleged interest in the property to turn on the state law of trusts. Instead, when the character of the interest is uncontroverted, the only question is whether that interest is subject to forfeiture.
Thus, I would hold that Victoria Nava was required to prove that she held title to 414 South 25th Street (414) and 1102 South 28th Street (1102) for herself rather than for Victor at the time Victor committed the acts that gave rise to forfeiture. Following Victor’s trial and an evidentiary hearing on Victoria’s petition, the district court found that Victoria was not credible and that she had not established that the right, title or interest in either house was vested in her rather than Victor. The trial court’s credibility findings are entitled to deference, and its findings of fact are well supported given evidence that Victor paid taxes on these properties as well as others held by other people; repairs were done at his behest and at his expense; Frank Nava (Victor’s nephew who transferred 414 and 1102 to Victoria) held properties for Victor; 414 and 1102 came to be in Victoria’s name on the same date although for ostensibly different reasons; Victoria and her husband had no visible means of lawfully maintaining the properties; and they took out a $33,000 mortgage on 1102 to defray Victor’s legal expenses. I would, therefore, affirm.
I
Victor Nava, Sr. was indicted on November 20, 2000 for conspiracy to distribute dangerous drugs and possession with intent to distribute them on or before June 11, 1997. After he was convicted, the jury returned a special verdict of forfeiture against several pieces of property including 414 and 1102.1 The court held an *1138ancillary hearing when Victoria claimed that the properties belonged to her. Fed. R.Crim.P. 32.2(c)(1); 21 U.S.C. § 853(n)(2).
There was never any question that Victoria held title to the two houses; the whole purpose of the hearing was to allow the introduction of testimony and exhibits so that the trial judge could determine whether the properties were really Victor’s, or Victoria’s. Victoria did not prove that she was a bona fide purchaser for value, as she paid one dollar for one of the houses and was given the other. 21 U.S.C. § 853(n)(6)(B). Therefore, she had to establish a legal right, title or interest that rendered the forfeiture order invalid because it was vested in her, rather than Victor, or was superior to Victor’s right, title, or interest, when he was dealing drugs. Id. § 853(n)(6)(A).
The evidence shows that Victoria received warranty deeds from Frank Nava for both 414 and 1102 on April 11, 1996.2 She testified that Frank gave her the 1102 house because he had received it from their grandmother who wanted Victoria to have it when she turned eighteen, and that Frank gave her the 414 property to prevent his wife from acquiring it in a divorce. However, Victoria had previously told a federal probation officer assigned to a case involving her husband that she received 1102 as a gift from Victor.
Tax receipts indicate that Victor paid cash for overdue property taxes on both houses for the tax year 1998. The receipts show that taxes were paid from 1992 forward, but not who paid them. Victoria claimed that she paid Victor back, but her husband contradicted this. Victoria was not gainfully employed except for a few months in 2000 or 2001 when she earned no more than a thousand dollars for the year. She testified that her husband paid the taxes, but he was incarcerated from 1997 through early 2000.
Robert Schaefer testified that Victor arranged for Schaefer to do remodeling work and yard clean-up on both houses, and that Victor paid him for the work. Victor purchased the building supplies. Jeff Holli-day also did work for Victor on 1102. He stated that the house used to belong to Victor’s mother, then Victor had taken ownership from her “but he doesn’t live there.” Holliday testified to a conversation he overheard between Victor and Victor’s nephew, Frank Nava, in which Frank and Victor argued over Victor’s failure to pay Frank for his “service” of holding title to Victor’s property in his name. Another witness testified that he lived in the 1102 house and paid Victor rent. He also stated that Victor had refused to provide him a receipt for the rent because the house was held in someone else’s name. Bill Keene testified that he owned property at 414 which he sold to Victor Nava, Sr. for $2000 in cash; however, the deed was placed in the name of Victor Nava, Jr. and was never recorded. Victor paid taxes on this property.
Both houses were used to distribute drugs. Jeff Holliday testified that he had sold “crank” to Victoria at 1102. Laura Ison testified that Victor sent her to both houses to obtain drugs. Sandy Ilie testified that she went to 1102 for drugs between 1996 and 1999 and that she obtained drugs from Victor Nava, Jr. at 414.
Ison testified that Victor invited her to live at 414. Rudy Lucero lived at 414 for a couple of years when the property was in *1139Victoria’s name, but Victoria received no rent from him.
Victoria lived at 1102 for some of the time after the deed was recorded in her name in 1996. She and her husband, Joseph Reyna, took out a mortgage in the amount of $38,000 on April 4, 2001. She executed a warranty deed on 1102 to Reyna and herself as joint tenants on April 19, 2001. All of the proceeds of the mortgage except what was necessary to pay loan expenses went to pay Victor’s legal fees. There was no expectation that he would pay the money back.3
The district court explicitly found credible the probation officer’s testimony that Victoria had told him that Victor gave or sold 1102 to her, and the court found Victoria was not credible.4 The court concluded that Victoria had failed to show that the right, title or interest in either house vested in her rather than Victor, or that her interest in the houses was superior to Victor’s.
II
Victoria argues that the district court’s approach was flawed because criminal forfeiture cannot cause the forfeiture of property not owned by the defendant. She contends that she received both houses by direct deed from her cousin Frank Nava, and never received either from Victor, directly or indirectly. Victoria also submits that it was clear error for the district court to conclude that she failed to show a legal right to the property, as the titles of record establish that she was deeded both properties in 1996.
Victoria’s contentions necessarily fail as to 1102 because the district court explicitly found that this residence came from Victor. Her contentions equally fail as to 414 given the court’s adverse credibility determinations as to Frank Nava as well as Victoria. This leaves no evidence credited by the trier of fact that Victoria received either property as a gift from Frank, and substantial evidence that Victor exercised dominion and control over both properties. The only possible conclusion on this record is the one reached by the district court, that Victoria failed to carry her burden of showing that she held title for herself rather than for Victor.
Victoria has never argued that there is anything about Montana law that affects the analysis. I would not venture there, as the majority does. First, the path is uncharted, unbriefed, and unvetted. Even more importantly, there is no issue in this case about the nature of the petitioner’s alleged interest that requires resort to state law.5 The character of Victoria’s in*1140terest has nevér been in dispute: she had legal title that was free and clear except for occasional transfers to a bonding company and the mortgage she took out for Victor’s legal fees. Her position has always been that the title is truly hers, not Victor’s, because it came from Frank. However, the district court determined that this was not so.
Under the law of this circuit, ownership interests (such as community property) are defined under state law while the federal forfeiture statutes determine whether those property interests must be forfeited to the government. See, e.g., United States v. Lester, 85 F.3d 1409, 1412 (9th Cir.1996); United States v. Alcaraz-Garcia, 79 F.3d 769, 774 (9th Cir.1996). Here the ownership interest is legal title. The question is whether that interest may be forfeited. I believe this is a matter of federal law, and that the answer is yes, an interest based upon bare legal title may be forfeited if the title is held in name only.
The Fourth Circuit so held in a § 853(n) proceeding in United States v. Morgan, 224 F.3d 339 (4th Cir.2000). In Morgan, the defendant’s assets were forfeited to the United States when he was convicted of drug dealing. The defendant’s wife petitioned to set aside the forfeiture of a certificate of deposit and a checking account. She asserted that neither was the property of the defendant under § 853 because she had a property interest in both that was superior to her husband’s. The court found it unnecessary to consider the role of state law in these circumstances given the intent of Congress in enacting the forfeiture provisions of § 853. As it explained:
The intent of Congress in enacting the forfeiture provisions of § 853 was to “strip these offenders [racketeers and drug dealers] and organizations of their economic power.” S.Rep. No. 225, reprinted in 1984 U.S.C.C.A.N. 3182, 3374. Therefore, Congress noted that § 853(n)(6) “should be construed to deny relief to third parties acting as nominees of the defendant or who knowingly engage .in sham or fraudulent transactions.” • S.Rep. No. 225, supra at 3392 n. 47. In order to effectuate the legislative purpose of the statute, courts must evaluate whether the petitioner is a nominee when reviewing the substance of a § 853(n) claim.
Id. at 343 (alteration in original). The court further reasoned that “[flailing to look beyond bare legal title or whether the petitioner has a property interest under state law would foster manipulation of ownership by persons engaged in criminal activity.” Id. Accordingly, based on evidence that the checking account was used to facilitate the defendant’s drug activity, that Mrs. Morgan had no idea about the logistics of the transactions involved in opening the account, that the defendant had acquired other properties in her name but she knew little or nothing about them, that the certificate of deposit was bought with the defendant’s funds, and that Mrs. Morgan did not draw upon these assets, the court affirmed the district court’s conclusions that the checking account and certificate of deposit were subject to forfeiture because Mrs. Morgan exercised insufficient dominion and control over them and her name on the accounts was merely nominal. See also United States v. Ben-Hur, 20 F.3d 313 (7th Cir.1994) (noting that the purpose of § 853 is not just to punish illegal conduct but to strip drug dealers of their economic power, and holding that properties in a third party’s name are forfeitable when, among other things, the defendant acted as if he retained ownership after entering into land contracts); Braxton v. United States, 858 F.2d 650, 654-55 (11th Cir.1988) (forfeiting property under the RICO statute, 18 U.S.C. § 1963(¿)(6)(A), which is identical to *1141§ 853(n), when third party held title through a warranty deed from defendant as a nominee); United States v. Totaro, 345 F.3d 989, 996 (8th Cir.2003) (recognizing that bare legal title is insufficient to prevent forfeiture under the RICO statute when property in which a spouse might otherwise have an interest is acquired with RICO proceeds because “[i]t would do a severe disservice to the intent and purpose of the RICO forfeiture statute if a criminal were able to protect and enjoy RICO proceeds by investing them in property titled to a spouse.”).6
I agree with this analysis. It is consistent with the text of the statute, and with what we, and other circuits, have said in other forfeiture contexts. The whole point of § 853(n)(6)(A) is that a person who holds legal title to property has to show that it is truly hers rather than the convicted felon’s.7
While we have not directly held that a straw owner holding nominal title may not invalidate a forfeiture order under § 853, we have held that a nominal owner lacks standing to claim return of property that was forfeited pursuant to 21 U.S.C. § 881. United States v. One Parcel of Land, 902 F.2d 1443 (9th Cir.1990) (per curiam); United States v. Vacant Land, 15 F.3d 128 (9th Cir.1993). In One Parcel of Land, for example, the claimant was listed as the title owner but he presented no documentary evidence regarding his finances or payments with respect to purchase of the property, and he claimed he paid property taxes but had no record to support it. In these circumstances, we upheld the district court’s determination that the claimant had failed to meet his burden of proving more than nominal ownership. It follows that we should uphold the district court’s determination here that Victoria failed to meet her burden of proving more than nominal ownership.8
Given the majority’s contrary conclusion, it bears repeating that § 853 imposes the burden of proof on Victoria, not on the government.9 Without actually saying so, *1142the majority appears to shift the burden by invoking the Montana presumption that the title holder of record owns the property (at least vis-a-vis subsequent purchasers or adverse possessors); ruling that Montana trust law applies; and faulting the government for failing to show that Victor paid the purchase price for the properties in behalf of Victoria, that he arranged for the gift of the properties or otherwise manipulated the system to disguise his real ownership, or that Victoria will be unjustly enriched by retaining her interest in the properties. However — and without regard to how Montana courts would treat the problem — this construct cannot comport with § 853, which squarely places the burden of proof on the petitioner.10
In sum, we are obliged to construe the provisions of § 853 liberally to effectuate its remedial purposes. 21 U.S.C. § 853(c).11 To allow straw owners to defeat forfeiture would defeat the statute’s prime remedial purpose: to strip drug traffickers of their economic power. I would therefore hold that to prevail in a § 853(n) proceeding, a petitioner holding legal title must prove by a preponderance of the evidence that the title vests in her truly, not nominally.
While any one of us might have measured the witnesses’ credibility or found the facts differently in this case, I am not firmly convinced that the district court got either wrong. It is implausible that Victoria came to hold title to 414 and 1102 on the same day because her grandmother wanted her to have 1102 when she turned eighteen and because Frank wanted to give 414 to her to hide it from his wife. There was a conflict in testimony about whether Victoria got 1102 from her grandmother via Frank (as she testified) or from Victor (as the probation officer testified she previously represented); who is telling the truth is for the district court to decide, not us. Victor used Frank Nava (and others) to hold property for him, so the district court could reasonably infer that Victor used Frank to hold (and transfer) 414 and to deed 1102 to Victoria as a subterfuge. Victor treated both premises as his own: he arranged and paid for repairs; he invited a friend to live in one of the houses; he rented them out and received the rental payments; he paid taxes on these and other properties that were titled to others; he was the sole beneficiary of the proceeds of a mortgage on 1102; and he used both places to deal drugs before, during, and after title was recorded in Victoria’s name.
There is no evidence credited by the trier of fact that Victoria received either *1143-1149property as a gift from Frank — which was her only claim — -and substantial evidence that Victor exercised dominion and control over both properties. The only possible conclusion on the record is the one reached by the district court: that Victoria failed to carry her burden of showing that she held title for herself rather than for Victor. Accordingly, I would affirm.

. Under the instructions, the jury had to find that Victor's property (specifically including 414 and 1102) was acquired with proceeds of, or was used to commit or facilitate commission of, the drug-trafficking offenses of which *1138he was found guilty, whether or not the property was held in someone else’s name.

. The chain of title shows that Frank Nava also recorded quit claim deeds to 414 to Victoria on January 20, 1998 and June 15, 1998. This would, of course, have been unnecessary had Victoria’s title truly been vested in her (rather than in Frank as Victor’s nominee) on April 11, 1996.

. The district court admitted Victor’s written plea agreement (signed September 25, 2001 but later withdrawn) in which he acknowledged that 414 and 1102 were the proceeds of, or were used for, his drug-trafficking crimes that he would forfeit. He also agreed to do whatever was necessary to pass clear title, including for property held or controlled by a nominee. Victoria appeals the admissibility of the agreement, but it is not necessary to resolve the issue because the district court did not rely on Victor's admissions for its decision.

. This finding is based in part on disbelieving Victoria's denial of knowledge about Victor’s drug trafficking. The court also found testimony of Frank Nava and Joseph Reyna to the same effect implausible. Victor was known in the community as a drug dealer. Also, there is evidence that Holliday sold "crank” to Victoria at the 1102 house; that Sandy Ilie arranged between 1996 and 1999 for a third party to acquire drugs from “one of Victor's daughters” living in the 1102 house; and that Laura Ison sometimes acquired drugs from Joseph Reyna, Victoria's husband, who told her that the drugs came from Victor.

.In particular, there is no issue here about Victoria's right, title or interest vis-a-vis a subsequent purchaser or encumbrancer, or an adverse possessor, from whence the Montana presumption relied upon by the majority— that the person who possesses record title is the lawful owner — arises.

. The Sixth Circuit considered the issue so straightforward that it affirmed rejection of a claim on facts quite similar to those now before us in an unpublished disposition. See United States v. Warner, 968 F.2d 1217, 1992 WL 163258 (6th Cir.1992) (per curiam) (unpublished table decision) (concluding that under § 853(n) "in spite of the fact that the normal indicia of legal ownership, the deed, indicated that [the petitioners] had a legal interest in [the property], they were in reality nothing more than the nominal legal owners of the property."). Id. at *3.

. This being so, I do not see how the validity of an order of forfeiture has anything to do with whether state law "would recognize an 'actual' owner over a ‘straw’ or ‘nominal’ owner." Maj. op. at 1129. For purposes of criminal forfeiture, federal law already assumes the possibility of nominal ownership and provides a procedure for determining it.

. Other circuits also look through bare legal title to whether the holder is a straw or nominal owner when considering third party claims in other forfeiture contexts. See, e.g., United States v. Carrell, 252 F.3d 1193, 1204 (11th Cir.2001) (holding in the context of civil forfeiture that courts must look beyond bare legal title to determine whether the record title owner is a strawman); United States v. 526 Liscum Drive, 866 F.2d 213, 217 (6th Cir.1989) (holding in a § 881 proceeding that claimant holding legal title must prove indicia of true ownership to demonstrate she was not a nominal or straw owner), abrogation on other grounds recognized by United States v. Certain Real Property Located at 16510 Ashton, 47 F.3d 1465 (6th Cir.1995); United States v. One 1945 Douglas C-54 (DC-4) Aircraft, Serial No. 22186, 604 F.2d 27, 28-29 (8th Cir.1979) (indicating that bare legal title may be insufficient to establish ownership in a § 881 forfeiture challenge).

.Section 853(n)(6) provides in this respect:
If, after the hearing, the court determines that the petitioner has established by a preponderance of the evidence that — •
(A) the petitioner has a legal right, title, or interest in the property, and such right, title or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the *1142petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this . section; ...
the court shall amend the order of forfeiture in accordance with its determination.

. Victoria makes the different point that allocating the burden to petitioners and including the trial record in a § 853(n) proceeding offends due process. However, § 853(n)(5) specifically allows for consideration of relevant portions of the trial record in an ancillary proceeding; Victoria offers no authority, and no basis in the record of the ancillary proceeding, in support of her argument that she lacked opportunity to cross-examine witnesses whose testimony was offered for the court's consideration. Section 853(n)(6) also specifically prescribes the burden of proof (preponderance of the evidence) and places it on the petitioner. This is not inconsistent with United States v. James Daniel Good Real Property, 510 U.S. 43, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), the only authority upon which Victoria relies.

. Section 853(o) states:
Construction
The provisions of this section shall be liberally construed to effectuate its remedial purposes.