Court Opinion

ID: 1028052
Source: CourtListenerOpinion
Date Created: 2013-07-05 07:34:23.881155+00
Date Added: 2024-06-11T15:14:34.780580
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 07-1959

UNITED STATES OF AMERICA,

                  Plaintiff – Appellant,

            v.

PETR BUK,

                  Claimant – Appellee,

            and

BRUNO CAVELIER D’ESCLAVELLES,

                  Defendant.

                               No. 07-1960

UNITED STATES OF AMERICA,

                  Plaintiff – Appellee,

            v.

PETR BUK,

                  Claimant – Appellant,

            and

BRUNO CAVELIER D’ESCLAVELLES,

                  Defendant.
                                No. 08-1470

UNITED STATES OF AMERICA,

                  Plaintiff – Appellant,

            v.

BRUNO CAVELIER D’ESCLAVELLES,

                  Defendant,

            and

PETR BUK,

                  Petitioner – Appellee.

Appeals from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (1:06-cr-00235; 1:06-cr-00235-GBL-2)

Argued:   December 4, 2008                           Decided:    March 5, 2009

Before WILLIAMS,     Chief     Judge,       and   SHEDD   and   AGEE,   Circuit
Judges.

Affirmed in part, reversed in part, and vacated in part by
unpublished opinion.   Judge Shedd wrote the opinion, in which
Chief Judge Williams and Judge Agee joined.

ARGUED: Stefan Dante Cassella, OFFICE OF THE UNITED STATES
ATTORNEY, Alexandria, Virginia, for the United States.    Steven
Joseph McCool, MALLON & MCCOOL, L.L.C., Baltimore, Maryland, for
Petr Buk.   ON BRIEF: Chuck Rosenberg, United States Attorney,
Karen Taylor, Assistant United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Alexandria, Virginia, for the United
States.

                                        2
Unpublished opinions are not binding precedent in this circuit.

                                3
SHEDD, Circuit Judge:

     Petr    Buk    filed    a    petition     pursuant      to   21    U.S.C.   § 853

asserting a third-party interest in property forfeited to the

United States.       The district court imposed a constructive trust,

recognized    Buk     as    the    beneficiary,       and    concluded        that    Buk

possessed a superior interest in the forfeited property under

§ 853.     For these reasons, the court awarded Buk $125,000 plus

attorneys’    fees.        The    government       appeals   this      determination.

Buk cross-appeals, claiming that in addition to the constructive

trust, he should recover the forfeited property under a bailment

theory.     Because we find that Buk has no superior interest under

§ 853(n)(6)(A), we reverse the district court’s award of the

$125,000 and attorney’s fees.

                                         I

     In 2006, Buk invested $125,000 in a new film (“Cell Game”)

being    developed    by    filmmaker    Fabien      Pruvot.        Buk   and    Pruvot

entered     into     an     agreement        (the     “Investment         Agreement”)

specifying that the $125,000 was to be used “for development of

Feature Films only,” that the funds could not be spent without

Buk’s written consent, that Buk was to receive 15% of the film’s

net profits, and that Buk could take the funds back at any time

with 14 days notice. J.A. 104.            Pruvot personally guaranteed the

$125,000    and    Buk’s    investment       was    deposited     into    a    Bank    of

                                         4
America    account        held   by      Cell   Game,    LLC   (“the       Cell   Game

Account”).

     Later       in    2006,   Pruvot     and   his   associate     Bruno    Cavelier

D’Esclavelles          pled    guilty     to    conspiracy     to    commit       money

laundering and agreed to forfeit the property involved in the

conspiracy. 1         When the funds that were directly traceable to the

offenses could not be located, D’Esclavelles and Pruvot agreed

to forfeit the funds in the Cell Game Account as a substitute

asset    under    21    U.S.C.   § 853(p).        The   district     court    entered

Consent Orders of Forfeiture and the contents of the account

($125,670.19) were sent to the United States Marshals Service.

Pursuant to § 853(n), Buk petitioned the court for a hearing to

adjudicate his interest in the forfeited property.

     At this ancillary proceeding, Buk argued that because the

$125,000 was a bailment, rather than an investment, he retained

title to the property.           Alternatively, Buk argued that he should

recover the $125,000 as the beneficiary of a constructive trust.

Although the district court held that Buk was not a bailor, it

imposed    a      constructive          trust   and     declared     Buk     as    the

beneficiary.          The court found that Buk was thus entitled to the

$125,000 in the Cell Game Account. J.A. 179.                        In a separate

     1
        The Cell Game Account was controlled by Pruvot and
D’Esclavelles.   D’Esclavelles also pled guilty to conspiracy to
distribute Ecstasy.

                                            5
opinion, the court granted Buk $17,322.50 in attorney’s fees for

substantially    prevailing        in    a     civil    proceeding        to     forfeit

property     under     federal     law       pursuant       to   the     Civil     Asset

Forfeiture Reform Act (“CAFRA”), 28 U.S.C. § 2465(b)(1)(A).

     The government appealed the imposition of the constructive

trust and the grant of attorney’s fees; Buk cross-appealed the

district     court’s     rejection       of     his     bailment       theory.        We

consolidated the appeals and designated the government as the

appellant.

                                         II

                                         A.

     In an ancillary proceeding where a third-party seeks to

recover    criminally    forfeited       assets,       we    review     the    district

court’s    factual      findings     for       clear     error     and     its     legal

interpretations de novo.           See United States v. Morgan, 224 F.3d

339, 342 (4th Cir. 2000).

                                         B.

     18     U.S.C.      § 982(a)(1)          requires        criminal      defendants

convicted of violating the federal money laundering statutes to

forfeit any property involved in the offense.                      If the property

directly traceable to the offense “cannot be located upon the

exercise of due diligence,” the district court shall order other

property of the defendant to be forfeited as a substitute asset.

§ 853(p)(1)(A); § 853(p)(2).             Following the entry of such an

                                         6
order, a third party “asserting a legal interest in property

which has been ordered forfeited . . . [may] petition the court

for a hearing to adjudicate the validity of his alleged interest

in the property.”              § 853(n)(2).        The court must amend the order

of forfeiture if it finds that the third-party petitioner has a

“legal       right,      title,    or    interest     in    the     property”         that    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[.]”

§ 853(n)(6)(A). 2           Simply      put,   Buk’s       claim    can        succeed   if   he

establishes         a    legal    interest     as     bailor       of    the     property      or

beneficiary         of   the     constructive       trust,     because         such   interest

would be superior to the defendants’ interest at the time of the

acts resulting in forfeiture.                      United States v. Schecter, 251

F.3d 490, 494 (4th Cir. 2001).

     Within the context of § 853(n)(6), the legal interest of a

third       party   is    determined      by   state       law.         See    id.    (applying

Maryland law to determine what interest a third party claimant

retained in forfeited property).                     In this case, California law

        2
        There is also a “bona fide purchaser”                                        exception,
§ 853(n)(6)(B), which does not apply in this case.

                                               7
applies. 3        Once the legal interests have been defined under state

law, however, federal law determines whether they are sufficient

for   the    third-party       petitioner      to    prevail   under      § 853(n)(6).

See United States v. Lester, 85 F.3d 1409, 1413 (9th Cir. 1996).

                                          C.

      Although Buk’s $125,000 transfer to Pruvot was styled as an

“investment,”         Buk   contends    that    it    was    in   fact     a   bailment

because      he    delivered    the    funds    for    the    specific     purpose    of

developing the film and could have recalled the money at any

time.     We disagree.

      Under California law, a bailment is property delivered “for

some particular purpose . . . that after the purpose has been

fulfilled it shall be redelivered to the person.”                      Meyer Koulish

Co. v. Cannon, 213 Cal. App. 2d 419, 427 (Cal. Dist. Ct. App.

1963).        The    bailor    ordinarily      retains       title   in    the   bailed

property and a bailor generally may assert title against any

third party to whom the property has been transferred.                               See

Calva Products v. Security Pac. Nat’l Bank, 111 Cal. App. 3d

409, 418 (Cal. Ct. App. 1980).                  In light of these principles,

we hold that Buk was not a bailor under California law.                          First,

the Investment Agreement did not stipulate that Pruvot would

      3
       Among other factors, the Cell Game Account was located in
California, Buk was a resident of California, and the Investment
Agreement was entered into in California.

                                          8
return    Buk’s    funds   upon    the   film’s       completion;      instead,   Buk

would receive a percentage of earned profits.                       J.A. 104.      In

addition, Buk did not retain title to the $125,000 and thus

could    not    have    asserted    title      against    third    party    vendors.

Pruvot was free to commingle the funds with other investments,

provided that he refund $125,000 (from any source) upon Buk’s

request.       Simply put, Buk made an investment, not a bailment. 4

                                         D.

     Moreover, Buk has not established the conditions necessary

for a constructive trust. 5         Under California law, a constructive

trust    has    three   elements:    (1)       the   existence    of   a   res   (some

     4
        To the extent that Buk attempts to challenge the
government’s interest as an unsecured creditor under United
States v. Reckmeyer, 836 F.2d 200 (4th Cir. 1987), we find that
his challenge fails.      Reckmeyer recognized an exception to
§ 853(n)(6) in cases where the defendant’s entire estate has
been forfeited.    Here, Buk has not shown that the defendant’s
entire estate was forfeited. See Schecter, 251 F.3d at 496
(distinguishing   Reckmeyer   when  the  defendant   forfeited a
specific item of property, rather than his entire estate).
     5
        Although the government argues that federal law is
controlling, we agree with Buk and other circuits that state law
determines whether a constructive trust should be imposed within
the context of § 853(n). See e.g. United States v. Shefton, 548
F.3d 1360 (11th Cir. 2008)(holding that a company was entitled
to constructive trust on criminally forfeited property under
Georgia law); United States v. Andrews, 530 F.3d 1232, 1238
(10th Cir. 2008)(“We recognize that in federal forfeiture
proceedings, ownership interests (including constructive trusts)
are defined by state law.”); United States v. Ribadeneira, 105
F.3d 833, n.5 (2nd Cir. 1997)(declining to impose a constructive
trust in the § 853 context because “Appellants have not met the
elements required by New York law for a constructive trust[.]”)

                                           9
property or interest in property), (2) the plaintiff’s right to

that res, and (3) the defendant’s gain of the res “by fraud,

accident,    mistake,          undue   influence         or   other       wrongful       act.”

United     States       v.     Pegg,   782        F.2d    1498,          1500    (9th     Cir.

1986)(citing and applying California Civil Code §§ 2223-24).

     Buk    has   not        identified     any    wrongful        act    by    Pruvot    that

induced him to part with the $125,000. 6                      Instead, the evidence

presented shows that Pruvot asked Buk to invest in the Cell Game

Account    for    the    purposes      of    developing        a    feature       film,    and

nothing suggests that Pruvot intended otherwise.                                 Buk cannot

point to a misrepresentation by Pruvot regarding the nature or

purposes    of    the        investment;     further,         the    acts       leading     to

forfeiture were wholly unrelated to the $125,000. 7                            The fact that

     6
        Buk suggests that Pruvot’s concealment of his criminal
activity is the necessary wrongful act. Such concealment is not
the type of conduct contemplated by California constructive
trust law.    See e.g. Nevarez v. Nevarez, 202 Cal. App. 2d 596,
602 (Cal. Dist. Ct. App. 1962)(finding a constructive trust
where son defrauded mother into unknowingly signing over title
to   property   while  she   was  seriously  ill);  Saltares  v.
Kristovich, 6 Cal. App. 3d 504, 516-517 (Cal. Ct. App.
1970)(finding a constructive trust where a joint tenant
intentionally causes the death of his co-joint tenant and
thereby acquiries the entire property); Cramer v. Biddison, 257
Cal.App. 2d 720, 723-725 (Cal. Ct. App. 1968)(finding a
constructive trust where judgment of divorce obligated a father
to provide for children in his life insurance policy but he
failed to do so).
     7
       In his brief, Buk concedes that none of his funds were
connected to the underlying criminal activity of Pruvot and
D’Esclavelles.

                                            10
Buk’s money was ultimately forfeited does not retroactively turn

Pruvot’s    truthful    statements    to   Buk   into     fraudulent    ones.

Therefore, we find no constructive trust under California law.

                                     III

     Buk cannot show a superior interest in the invested funds,

because there was no bailment and there is no properly imposed

constructive trust.       We therefore find that Buk possesses no

protected    interest    within      the   meaning   of     § 853(n)(6)(A).

Accordingly,   we   reverse   the     district   court’s     award     of   the

$125,000 and attorney’s fees. 8

                                                          AFFIRMED IN PART,
                                                          REVERSED IN PART,
                                                        AND VACATED IN PART

     8
        CAFRA allows for attorneys’ fees when the claimant
“substantially prevails.” 28 U.S.C. § 2465(b)(1). In light of
our disposition of this case, Buk has not substantially
prevailed and thus does not qualify for attorneys’ fees. We do
not reach any further consideration of CAFRA.

                                      11