U.S. v. Vacant Land Known as Palm Estates, Ltd.
| Decision Date | 31 March 1992 |
| Docket Number | No. 91-55415,No. 628-101-18,C,628-101-18,91-55415 |
| Citation | 959 F.2d 243 |
| Parties | NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. UNITED STATES of America, Plaintiff, v. VACANT LAND KNOWN AS PALM ESTATES, LTD., aka Palm Estates Subdivision, Assessmentounty of San Diego, CA., et al, Defendants, Max WEXLER, Counter-Claimant/Appellant, v. UNITED STATES of America; Alan J. Le Zalla; Sandra Le Zalla; Kevin O'Neill, Counterclaim-Defendants/Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Before BRUNETTI, O'SCANNLAIN and T.G. NELSON, Circuit Judges.
Appellant Max Wexler appeals the denial of his motion challenging the federal magistrate judge's findings and the district court's order directing payment of specified funds to Appellee, the United States of America. The specified funds were to be the proceeds of a forfeiture sale of property the United States seized from Appellees Alan and Sandra LeZalla. The funds were to be distributed in accordance with a 1986 Stipulation Agreement with the LeZallas which was to account for all claims of lien holders.
The district court rejected Wecler's claim that he is a recognized lien holder under the stipulation on the ground that Wexler filed his judgment lien against the property after the stipulation and after the United States entered into a land sale contract with Appellee Kevin O'Neill. The district court also rejected Wexler's other claims to the sales proceeds and his procedural challenges to the forfeiture sales process.
We AFFIRM the district court's decision, DENY Appellee O'Neill's motion for attorneys' fees, and REMAND the case to the district court to enable it to consider entry of an order requiring Wexler to execute any and all documents necessary to allow the United States to consummate the sale of the property and to convey clear title to O'Neill.
This appeal arises from a Complaint for Forfeiture filed by Appellee the United States of America ("the United States" or "government") against Defendant Vacant Land Known as Palm Estates, Ltd. ("Property"). The forfeiture proceeding resulted from a criminal action prosecuted by the United States against Robert Max Capras ("Capras"), the original owner of the Property. Shortly before his arrest, Capras transferred the Property to the present titleholders, Appellees Alan J. and Sandra LeZalla ("LeZallas").
On September 25, 1984, the United States filed a complaint for forfeiture against the Property and, on October 1, 1984, recorded a Notice of Lis Pendens against the Property. AT that time there were four liens recorded against the Property (Jon Jentz, South Bay Union District School, Sweetwater Union High School District and Duffy Collections, Inc.).
On May 8, 1986, the United States and the LeZallas entered into a court-approved Stipulation for Interlocutory Sale in which they agreed, inter alia, that the government would retain fifty percent of the net proceeds and the remaining fifty percent of the net proceeds would be returned to the LeZallas. The Stipulation Agreement defined net proceeds as follows:
The "net proceeds" of the sale shall include all monies received from the sale of the defendant, excluding: (1) The principle amount of fifty thousand dollars ($50,000.00) owing to Jon Jentz, as reflected in a recorded deed of trust in favor of Jon Jentz, San Diego, California; and (2) one half of any real estate commissions, fees and other expenses and costs of the sale; and (3) any other lien recorded against the property.
Pursuant to a court-approved amended stipulation, in 1988, the United States Marshals Service retained a broker to sell the Property. The Property was appraised at $218,000 and publicly listed for several months.
On January 23, 1989, the Government entered into a contract with Appellee Kevin O'Neill ("O'Neill") to sell the property to him for $210,000. O'Neill placed $5,000 in escrow as consideration for the contract.
On January 30, 1989, seven days after the United States entered into its contract with O'Neill, Appellant Max Wexler ("Wexler") domesticated a judgment against the LeZallas and recorded a judgment lien against the Property for $171,062.51.
On August 28, 1989, the United States, finding that it was unable to convey clear title to O'Neill because of various liens (including Wexler's), moved the district court for an Order Directing Payment of Specified Funds to the United States, in order to enable the government to consummate the sale. The purpose of the government's motion was to put all lien holders, including those who had recorded their claims after the United States recorded its Notice of Lis Pendens, on notice of the priority of their liens, and to provide them with an opportunity to be heard in court. Wexler appeared at the hearing to argue against the motion. The district court denied the government's motion because the government lacked a judgment of forfeiture.
On October 17, 1989, the government filed an Ex Parte Application for Judgment of Forfeiture. Although all lienholders, including Wexler, received notice, none opposed the application.
On October 18, 1989, the district court entered the Judgment of Forfeiture, incorporating the terms of the May 8, 1986, Stipulation agreement.
On November 3, 1989, armed with the Judgment of Forfeiture, the government again filed an Ex Parte Application for an Order Directing Payment of Specific Funds to the United States. Wexler and the other lienholders received notice of the application, but none opposed it.
On November 6, 1989, the district court signed the Order, which incorporated the 1986 Stipulation. The Order specified that the liens recorded at the time of the Stipulation shall be paid from the proceeds of the sale, and any disputes shall be brought before the United States Magistrate for resolution.
On January 5, 1990, Wexler filed a motion before the Honorable Magistrate Judge Irma Gonzales requesting (1) authorization to file a claim and an answer in the forfeiture action; (2) a determination that his judgment lien should be paid from the sales proceeds of the Property prior to any determination of "net proceeds"; (3) a determination that he should be allowed to "redeem" the Property from the current sale to O'Neill; and (4) an evidentiary hearing on the validity of the Jon Jentz and the Profectus Futures, Inc., liens.
On February 2, 1990, the Magistrate denied Wexler's motion, deciding all issues in favor of the United States.
On October 16, 1990, the district court confirmed the magistrate judge's Findings of Fact and Conclusions of Law, and denied Wexler's motion to object to the magistrate judge's findings, holding that Wexler had no right of redemption and that the Property was not subject to judicial sale. The court found that the only liens with priority over the United States were those in effect at the time of the 1986 Stipulation.
Wexler appeals the district court's denial of his motion to challenge the findings of the magistrate judge, and its Order Directing Payment of Specific Funds to the United States. O'Neill requests damages and double costs against Wexler for bringing a frivolous appeal.
We reject Wexler's argument that the government and the LeZallas subordinated their claims to both present and future lienholders, which he claims is demonstrated by the provision in the Stipulation Agreement to pay "any other lien recorded against the property" before dividing the net proceeds.
The magistrate judge found that "it is only reasonable to interpret that language [i.e., "any other lien recorded against the property"] to mean any other lien recorded against the property prior to the date of the 1986 Stipulation."
The application of principles of contract interpretation to the facts is a question of law reviewable de novo. Aetna Casualty & Surety v. Pintlar Corp., 948 F.2d 1507, 1511 (9th Cir.1991). The de novo standard of review applies if the district court interprets a contract within its four corners, without reference to extrinsic evidence, or if there is no indication that the district court made factual findings regarding extrinsic evidence. In re Agricultural Research & Technology Grp., 916 F.2d 528, 538 (9th Cir.1990). Although the government offered the declaration of its attorney as evidence of its intent in drafting the Stipulation, there is no indication in the record that the district court considered this extrinsic evidence. Accordingly, we review the district court's interpretation of the Stipulation de novo.
The interpretation of a contract entered pursuant to federal law in which the United States is a party is controlled by federal law. Kennewick Irrigation District v. United States, 880 F.2d 1018, 1032 (9th Cir.1989). This court has adopted a reasonableness standard in contract interpretation. Id. ("Preference must be given to reasonable interpretations as opposed to those that are unreasonable, or that would make the contract illusory.")
In the present case, the United States clearly did not intend to subrogate its claim to subsequent lienholders. First, the government entered into a Stipulation Agreement with the LeZallas in order to facilitate the disposition of the Property, as demonstrated by the government's prompt placement of the property on the market followed soon after by a sales contract with Kevin O'Neill. The United States would not have acted in such a fashion if it did not believe it could convey clear title. Second, it is reasonable to assume that the government and the LeZallas only intended to account for present lienholders, since claims arising subsequent...
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