U.S. v. Real Property 874 Gartel Drive, Walnut, Cal.

• Decision Date: 22 March 1996
• Docket Number: No. 94-56237,94-56237
• Citation: 79 F.3d 918
• Parties: 96 Cal. Daily Op. Serv. 1945, 96 Daily Journal D.A.R. 3305 UNITED STATES of America, Plaintiff-Appellee, v. REAL PROPERTY 874 GARTEL DRIVE, WALNUT, CALIFORNIA, Including any Buildings, Appurtenances or Improvements Located Thereon, Defendant, and Isidro Beltran; Josefina Beltran, Claimants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 918

79 F.3d 918

96 Cal. Daily Op. Serv. 1945, 96 Daily Journal

D.A.R. 3305

UNITED STATES of America, Plaintiff-Appellee, v. REAL PROPERTY 874 GARTEL DRIVE, WALNUT, CALIFORNIA Including any Buildings, Appurtenances or Improvements Located Thereon, Defendant and Isidro Beltran; Josefina Beltran, Claimants-Appellants.

No. 94-56237.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 13, 1995.

Decided March 22, 1996.

Paul L. Gabbert, Santa Monica, California, for claimants-appellants.

Nicholas V. Morosoff, Assistant United States Attorney, Los Angeles, California, for plaintiff-appellee.

Appeal from the United States District Court Central District of California, A. Andrew Hauk, District Judge, Presiding.

Before: ALDISERT, ^* FARRIS and RYMER, Circuit Judges.

PER CURIAM:

Isidro and Josefina Beltran appeal an order forfeiting their property under 18 U.S.C. § 981. The government brought the forfeiture action alleging that the Beltrans' property was involved in, or was traceable to, a transaction that violated 31 U.S.C. §§ 5313(a) and 5324(a). See 18 U.S.C. 981(a)(1)(A). It is illegal under 31 U.S.C. § 5324(a)(3) to structure, or assist in structuring, any transaction for the purpose of evading the reporting requirements of 31 U.S.C. § 5313(a). Section 5313(a), when augmented by the Treasury Secretary's regulation, requires financial institutions to report payment or receipt of currency of more than $10,000 to the Internal Revenue Service.

The government also argued that the Beltrans' property was subject to forfeiture because the proceeds of its purchase stemmed from a violation of 18 U.S.C. § 1014. See 18 U.S.C. § 981(a)(1)(C). It is illegal under section 1014 to knowingly make false statements to a federally insured institution for the purpose of influencing the action of that institution.

The district court granted summary judgment in favor of the government, and ordered the property forfeited. The owners as claimants have appealed. Although the Beltrans present a number of issues, the major questions for decision involve the innocent owner's defense to a forfeiture proceeding based on 1) illegal structuring, and 2) misrepresentation of income in a loan application to a federally insured financial institution. We will also address the Eighth Amendment's Excessive Fines Clause.

Jurisdiction was proper in the district court under 28 U.S.C. §§ 1345 and 1355. We have jurisdiction pursuant to 28 U.S.C. § 1291. Appeal was timely filed under Rule 4(a), Federal Rules of Appellate Procedure.

I.

In May 1988, the Beltrans signed and submitted to Great Western Bank a residential loan application for the purpose of obtaining a mortgage to purchase the property that is the subject of this action. On the loan application, the Beltrans stated that Isidro Beltran was the owner and driver, and Josefina Beltran, the owner and cook, of Josefina's Catering. They represented that they had a joint monthly base income of $8,400.

At the time this representation was made, it was false. In their later verified responses to the government's interrogatories, both Isidro and Josefina Beltran admitted that Josefina's Catering actually operated out of Tijuana, Mexico, and that it generated an approximate weekly income of only $150. Nevertheless, although the Beltrans admit that they signed the loan application, they contend that they were ignorant of its contents-including the false statements regarding location and income-because the application had been prepared for them by their real estate broker, Jesus Montoya. They testified that they had not reviewed the contents before signing the instrument.

The Beltrans made a cash down payment of $95,000, tendered in the form of ten cashier's checks, to purchase the property. Purchased by Isidro Beltran and Montoya, these checks ranged in amount from $7,500 to $10,000 and were obtained from five different banks (including three separate branches of one bank) on five different dates. Although the Beltrans admit that this was how the checks were obtained, they say that they did not know of any structuring regulation, and that in purchasing the checks, Isidro Beltran was merely following Montoya's instructions.

After considering the application, including the $8,400 monthly income from "Josefina's Catering" on its Loan Risk Evaluation form, Great Western Bank approved a $267,000 residential loan for the property, based upon a sales price of $365,000. The sale closed and the loan was secured by a Deed of Trust on the defendant property. The proceeds of the loan were then disbursed to the sellers of the property, and the Beltrans took title.

On appeal, the Beltrans raise a host of issues. They contend (1) that as a matter of law, the evidence was insufficient to establish probable cause for the government to forfeit their residence under either of the government's two forfeiture theories; (2) that the district court lacked jurisdiction because the government failed to "plead and prove" probable cause in its complaint; (3) that the court erred in granting summary judgment because genuine issues of material fact were present; (4) that the court erred in denying leave to amend their answer, denying them the opportunity to add innocent owner and Eighth Amendment excessive fines defenses; and (5) that the forfeiture of their property violates the Excessive Fines Clause of the Eighth Amendment.

These contentions are subsumed in the overarching argument that the district court erred in granting summary judgment in favor of the United States. Summary judgment is reviewed de novo. Gasho v. United States, 39 F.3d 1420, 1427 (9th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 2582, 132 L.Ed.2d 831 (1995). Viewing the evidence in the light most favorable to the non-moving party, we must determine whether there are genuine issues of material fact and whether the district court correctly applied the relevant substantive law.

II.

Most of the issues raised do not require extensive discussion.

A.

The Beltrans argue that the evidence was insufficient as a matter of law to establish probable cause for the government to forfeit their residence under either of the government's forfeiture theories. The standard of probable cause to support forfeiture is similar to that required to obtain a search warrant. See United States v. One 56-Foot Motor Yacht Named Tahuna, 702 F.2d 1276, 1281 (9th Cir.1983). The government need prove only that it had reasonable grounds to believe that the property was involved in the alleged offenses, "supported by less than prima facie proof but more than mere suspicion," id. at 1282 (citations omitted), and that belief may be supported by hearsay evidence, id. at 1283.

Specifically, the Beltrans contend that the government lacked any basis to believe that Great Western Bank was a federally insured financial institution at the time that either the forfeiture complaint was filed or the false loan application submitted. Yet Special Agent Linda Morris, in a declaration dated June 2, 1993, explicitly stated that Great Western Bank was "a federally insured financial institution." This contention was not challenged by countervailing evidence. Moreover, on the loan application itself appears the caption "Great Western Bank, a Federal Savings Bank." Thus we hold that there was sufficient evidence to establish probable cause for forfeiture.

As to the government's contention that the Beltrans made false material statements in their residential loan application, the Beltrans argue that the false statements regarding their income were not material. We have made clear, however, that in the context of 18 U.S.C. § 1014, "[a] statement concerns a material fact when the statement has the capacity to influence the lending institution." Theron v. U.S. Marshal, 832 F.2d 492, 497 (9th Cir.1987) (citations omitted), cert. denied, 486 U.S. 1059, 108 S.Ct. 2830, 100 L.Ed.2d 930 (1988). It is irrelevant whether a lending institution actually relies upon an allegedly false statement, so long as the statement, as was the case here, was capable of influencing the lending decision. See United States v. Kennedy, 564 F.2d 1329, 1340-41 (9th Cir.1977), cert. denied, 435 U.S. 944, 98 S.Ct. 1526, 55 L.Ed.2d 541 (1978).

B.

The Beltrans contend also, without supporting authority, that the district court lacked jurisdiction. Yet the complaint clearly states the two bases for forfeiture: (1) 18 U.S.C. § 981(a)(1)(C), because the property constitutes, or is derived from proceeds traceable to, a violation of 18 U.S.C. § 1014 (the prohibition on making false statements to influence a lending institution); and (2) 18 U.S.C. § 981(a)(1)(A), because the property was involved in a transaction or attempted transaction in violation of 31 U.S.C. §§ 5313(a) (the reporting requirement) or 5324(a) (subsection (3), the illegal structuring prohibition).

The Beltrans appear to argue as well that a magistrate was required to review the government's civil forfeiture complaint for probable cause before the clerk of the court could issue a warrant of arrest in rem and thereby confer jurisdiction on the district court. The Beltrans offer no persuasive authority for this proposition.

C.

The Beltrans assert also that the statute of limitations bars the forfeiture proceeding because the complaint was filed five years after the loan application. However, 19 U.S.C. § 1621 permits the action to be "commenced within five years after the time when the alleged offense was discovered " (emphasis added). The statutory period thus begins to accrue only upon discovery of the offense, not with the commission thereof. The record shows a timely filing.

III.

To prevail in a forfeiture action, the government need not prove that the claimant himself committed the underlying offense. Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 683-84, 94 S.Ct. 2080, 2091-92, 40 L.Ed.2d 452 (1974) (due process permits...