U.S. v. Shefton
| Decision Date | 17 November 2008 |
| Docket Number | No. 07-15773 Non-Argument Calendar.,No. 07-15772.,07-15772.,07-15773 Non-Argument Calendar. |
| Citation | 548 F.3d 1360 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Stacey SHEFTON, Michael D. Dunn, Willie J. Anderson, Jr., Defendants, Attorney's Title Insurance Fund, Inc., Interested Party-Appellant. United States of America, Plaintiff-Appellee, v. Willie J. Anderson, Jr., Defendant, Attorney's Title Insurance Fund, Inc., Interested Party-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
William C. Collins, Jr., John Michael Kearns, Burr & Forman, LLP, Atlanta, GA, for Appellant.
Amy Lee Copeland, Savannah, GA, for U.S.
Appeal from the United States District Court for the Southern District of Georgia.
Before HULL, MARCUS and PRYOR, Circuit Judges.
Attorney's Title Insurance Fund, Inc. (the "Fund") appeals the district court's dismissal of the Fund's petition, under 21 U.S.C. § 853(n)(2), for an ancillary hearing with regard to the Fund's interest in certain property that was subject to a criminal forfeiture order. The district court held that the Fund's constructive trust on the property is not a legal interest that can defeat the government's forfeiture claim. After review, we reverse.
This case involves a mortgage fraud scheme by which defendant Stacey Shefton fraudulently obtained $726,856.60 in loan proceeds from Long Beach Mortgage Company ("Long Beach") by presenting fraudulent documents.
The scheme began on November 23, 2004, when Lawrence Dillard (the "buyer") agreed to purchase real property at 1254 Greenridge Lane in Lithonia, Georgia (the "Greenridge Property") from PremierOne Properties (the "seller"). Before that sales transaction, GreenPoint Mortgage Funding, Inc. ("GreenPoint") already had two security deeds of record (the "GreenPoint mortgages") on the Greenridge Property.
In order to purchase the property, the buyer obtained two loans, totaling $800,000, from Long Beach. The Fund issued title insurance policies to Long Beach that insured Long Beach's security deeds securing the new loans.
Before closing, the seller informed the closing attorney that GreenPoint had sold its existing mortgages on the Greenridge Property and assigned them to Wilshire Mortgage Company ("Wilshire"). The seller gave the attorney statements purportedly from Wilshire that showed the amounts due to Wilshire to pay off the existing mortgages.
At closing, the closing attorney issued two payoff checks, totaling $726,856.60, payable to Wilshire out of the Long Beach loan proceeds. The attorney mailed the checks to the address provided in Wilshire's loan payoff statements.
Several months later, Long Beach discovered that the GreenPoint mortgages had never been assigned to Wilshire or anyone else. Moreover, they were in default. Consequently, the first and second GreenPoint mortgages had not and would not be canceled. Long Beach's security deeds were subordinate to the existing GreenPoint mortgages, leaving Long Beach with little or no security for its loans.
Long Beach made claims on the two title policies issued by the Fund, and the Fund paid off the total amount due under the GreenPoint mortgages to clear the encumbrances on Long Beach's title. On or about October 31, 2005, the Fund paid GreenPoint a total amount of $742,000.
This mortgage fraud scheme that resulted in the Fund's $742,000 loss was perpetrated by Stacey Shefton and others. Shefton was affiliated with both Wilshire and the seller PremierOne, and leased the unused office space to which the payoff checks were sent. Shefton obtained for his personal use the entirety of the Long Beach funds which were supposed to be used to pay off the existing mortgages and thus to clear title to the Greenridge Property and give Long Beach its desired security positions. Thus, because Shefton diverted the Long Beach loan proceeds to himself, Long Beach is the direct victim of Shefton's fraud.
Shefton was indicted and pled guilty to wire fraud. As part of his plea agreement, Shefton agreed to forfeit to the United States certain property in his possession or control (the "Forfeited Property") that constituted or derived from proceeds Shefton obtained as a result of the wire fraud. The Forfeited Property includes a car; a motorcycle; the funds in six different bank accounts; approximately $300,000.00 in cash seized from a storage facility; and furniture, appliances, and other personal property located at the Greenridge Property. Shefton admitted in his plea agreement that the cash and all the funds in the bank accounts represented proceeds of the mortgage fraud scheme by which Shefton intercepted the Long Beach loan proceeds.
The government sought, and the district court granted, a preliminary order of forfeiture.
Thereafter, the Fund asserted a legal interest in the Forfeited Property that Shefton obtained from the Long Beach loan proceeds. The Fund petitioned the district court for an ancillary hearing, pursuant to 21 U.S.C. § 853(n)(2), to adjudicate the validity of the Fund's alleged interest in the property. According to the Fund's petition, the Forfeited Property is, or can be traced to, the Long Beach loan proceeds,1 which Shefton fraudulently obtained, and Shefton's fraud was the sole reason the Fund had to pay off the GreenPoint mortgages.
The government moved to dismiss the Fund's § 853(n)(2) petition. The government recognized Long Beach (and the Fund) as a victim of Shefton's fraud. However, the government argued that the Fund, "one of the many victims of the Shefton ... fraud scheme," was merely an unsecured creditor and lacked standing to contest the forfeiture. Specifically, the government contended that the Fund did not have a "legal interest" in the Forfeited Property, as required by § 853(n)(6).
The Fund responded that it had the requisite legal interest through Long Beach. Shefton fraudulently obtained from Long Beach the proceeds of Long Beach's loans and used those proceeds to acquire the Forfeited Property. Long Beach was therefore entitled to a constructive trust on Shefton's Forfeited Property bought with Long Beach's money. And, pursuant to the terms of the Fund's title insurance policies and state law, the Fund was subrogated to the rights and claims of Long Beach against Shefton once it paid off the GreenPoint mortgages on Long Beach's behalf. Thus, the Fund succeeded to all of Long Beach's rights and disabilities with respect to the Long Beach loan proceeds fraudulently transferred to Shefton. See Landrum v. State Farm Mut. Auto. Ins. Co., 241 Ga.App. 787, 527 S.E.2d 637, 638 (2000). In other words, the Fund stands in the shoes of Long Beach. For simplicity, we will refer hereafter to the Fund's interest in the Forfeited Property, though the interest at the time of the fraud was Long Beach's.
In reply, the government did not contest that the Forfeited Property was, or was purchased with, the Long Beach loan proceeds. Instead, the government noted that Congress has not defined the term "legal interest" in § 853(n)(6)(A), and argued that "it would frustrate the operation and effect of the forfeiture statute" to construe as a § 853(n)(6)(A) "legal interest" a constructive trust that arises "whenever a victim to a fraud voluntarily transfers money to another person."
The district court granted the government's motion to dismiss, concluding that the Fund's constructive trust claim could not be imposed to defeat the government's forfeiture claim. The Fund appealed.
"In the context of third-party claims to criminally forfeited property, we review the district court's factual findings for clear error and its legal conclusions de novo." United States v. Watkins, 320 F.3d 1279, 1281 (11th Cir.2003). Because the district court disposed of the Fund's ancillary hearing petition on the government's motion to dismiss, we assume (as did the district court) that the facts alleged in the petition are true. See Fed. R.Crim.P. 32.2(c)(1)(A). Thus, the only issues before us in this appeal are legal ones meriting de novo review.
Section 853 governs criminal forfeiture proceedings, see 28 U.S.C. § 2461(c), and provides that persons convicted of certain criminal violations shall forfeit to the United States any property used to commit or facilitate the crime, or any property "constituting, or derived from, any proceeds the person obtained" from the crime, 21 U.S.C. § 853(a)(1)-(2). "All right, title, and interest" in the forfeited property "vests in the United States upon the commission of the act giving rise to forfeiture." 21 U.S.C. § 853(c).
Section 853(n) establishes a procedure for third parties who claim an interest in forfeited property to avoid its forfeiture. Such parties may "petition the [district] court for a hearing to adjudicate the validity of [their] alleged interest in the property." Id. § 853(n)(2). The statute establishes the following standard by which third-party interests are adjudicated:
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 petitioner 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; or
(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section;
the court shall amend the order of forfeiture in accordance with its determination.
Id. § 853(n)(6) (emphasis added). The Fund does not claim to be a "bona fide...
To continue reading
Request your trial
-
United States v. Tardon
...interest in the forfeited property is superior and requires an amendment to the forfeiture order. See United States v. Shefton, 548 F.3d 1360, 1364 (11th Cir. 2008) (citing United States v. Fleet, 498 F.3d 1225, 1231 (11th Cir. 2007) )."Standing in forfeiture cases has ‘both constitutional ......
-
United States v. Dupree
...to the relation-back doctrine's rule: Willis Mgmt. (Vt.), Ltd. v. United States, 652 F.3d 236 (2d Cir.2011), and United States v. Shefton, 548 F.3d 1360 (11th Cir.2008). (Watts Opp. at 15–17.) However, the holdings of Willis Management and Shefton are distinguishable from the facts of this ......
-
U.S. v. One Hundred Thirty–three (133) United States Postal Serv. Money Orders Totaling $127,479.24 In United States Currency
...a constructive trust theory can provide at least Article III standing to challenge a forfeiture. See, e.g., United States v. Shefton, 548 F.3d 1360, 1365 (11th Cir.2008) ( “We agree with the large majority of courts that have determined (1) that a constructive trust, despite being an equita......
-
Willis Mgmt. (vt.) v. U.S.
...the Attorney General's discretion. DSI Assocs. LLC v. United States, 496 F.3d 175, 186 (2d Cir.2007); see also United States v. Shefton, 548 F.3d 1360, 1364–65 (11th Cir.2008). It therefore is not an adequate legal remedy that would deprive a district court of its equitable powers to recogn......
-
D.C. Circuit Poised To Consider Major About-Face On Constructive Trust Precedent
...F.3d 656, 670-71 (6th Cir. 2009) (rejecting BCCI and noting that its reasoning has been subject to criticism); United States v. Shefton, 548 F.3d 1360, 1366 (11th Cir. 2008) (rejecting BCCI because "[o]ne of its premises is incorrect. . ."); United States v. $4,224,958.57, 392 F.3d 1002, 10......
-
Insurance - Bradley S. Wolff, Stephen L. Cotter, and Stephen M. Schatz
...298 Ga. App. at 470, 680 S.E.2d at 444. 294. Id. at 468, 470-71, 680 S.E.2d at 443, 444. 295. Id. at 470, 680 S.E.2d at 444. 296. 548 F.3d 1360 (11th Cir. 2008). 297. Id. at 1365. 298. Id. at 1361-62. 299. 21 U.S.C. Sec. 853(n)(2) (2006). 300. Shefton, 548 F.3d at 1362. 301. Id. at 1363. 30......