U.S. v. Rubenstein
| Decision Date | 24 July 1992 |
| Docket Number | Nos. 90-30277,90-30265,s. 90-30277 |
| Citation | 971 F.2d 288 |
| Parties | UNITED STATES of America, Plaintiff, v. Harvey RUBENSTEIN, Defendant. Bernard C. SHERMAN, Claimant-Appellant, v. CITY NATIONAL BANK, Cross-Claimant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Brad Littlefield, Williams, Fredrickson, Stark, Weisensee & Goldsmith, Portland, Or., for claimant-appellant.
Michael J. Gentry, Tooze, Shenker, Holloway & Duden, Portland, Or., for claimant-appellee.
Appeal from the United States District Court for the District of Oregon.
Before: TANG, O'SCANNLAIN, and RYMER, Circuit Judges.
Dr. Bernard C. Sherman appeals from an order of the district court denying his motion for release of bail funds and granting City National Bank's motion to compel the Oregon district court clerk to comply with the bank's writ of garnishment. The district court concluded that ownership of the bail funds, which were advanced by Sherman to secure the release of criminal defendant Harvey Rubenstein, had passed from Sherman to Rubenstein. Accordingly, the district court held that Rubenstein's judgment creditor, City National Bank, was entitled to garnish bail funds remaining after Rubenstein paid restitution. Sherman challenges the district court's ruling that he conveyed ownership of the bail funds to Rubenstein. We vacate the judgment of the district court and remand.
In 1985, Rubenstein was indicted for wire fraud in the District of Oregon. He was also indicted on similar charges in California. Following his arrest in August 1988, the district court in Oregon set bail at $25,000 on the California charges and $75,000 on the Oregon charges.
On September 13, 1988, the Oregon district court received a $75,000 cashier's check from Rubenstein's attorney, David Audet. The following week, the court received a second cashier's check from Audet In January 1990, Rubenstein pleaded guilty to some of the pending charges. As part of his sentence, the district court required that $50,000 of the previously posted $100,000 in cash bonds be paid as restitution to three victims of Rubenstein's fraud. This appeal concerns the disposition of the remaining $50,000 in bail funds. We therefore recount the source of this money, and its disposition in the lower court.
for $25,000. 1 On the same day, Rubenstein executed appearance bonds in the two cases, thereby securing his release. On the $75,000 bond, Rubenstein stated his net worth to be $75,000; on the $25,000 bond, $25,000. Neither appearance bond indicates a surety other than Rubenstein himself
The two cashier's checks totalling $100,000 were payable to the district court clerk. They were drawn on the United States National Bank of Oregon, where Audet's firm maintained its client trust fund account. Into this account Sherman had previously wired a total of $100,000 from his personal account in a Canadian bank. The wire transfers, one for $75,000 and one for $25,000, both indicate the client trust account of Audet's firm to be the beneficiary of the transfers. The transfers state their purpose to be "Refer: H. Rubenstein."
Sherman's subsequently-declared purpose for advancing these funds was that Rubenstein owed him a large sum of money, that Rubenstein might eventually repay some of this debt, and that Sherman "couldn't see any benefit, from [his] viewpoint, of having [Rubenstein] languish in jail." Because Rubenstein had defrauded Sherman previously, Sherman claims he was only willing to advance the funds upon receiving Audet's assurance that the money would be kept from Rubenstein, and that it would otherwise be protected. Audet and Sherman have both disclaimed any intent to give or loan Rubenstein the money deposited as bail.
The only written instructions regarding the advances appear in two letters written by Audet to Sherman at the latter's request. The letter of September 9, 1988 reads:
Dear Dr. Sherman:
I represent Mr. Rubenstein on pending federal charges in Portland, Oregon. His bail has been set at $75,000.00 U.S. cash. If you wire the $75,000.00 to my office's client trust fund account, it will be posted as bail. When the case is concluded we will return the money to you.
The letter of September 29, 1988, regarding the remaining $25,000, is substantially the same, concluding: "We will return the money to you when the case is concluded and the money is returned to us by the court."
City National Bank began its attempts to garnish Rubenstein's bail funds in October 1988 by filing in Multnomah County (Oregon) Circuit Court a judgment previously obtained against Rubenstein in California. The bank sought an order directing Rubenstein and the federal district court clerk to show cause why a writ of attachment should not issue against the bail funds.
On December 1, 1988, the Oregon state court issued the requested order to show cause. At about the same time, Rubenstein executed and filed with the district court clerk assignments purporting to transfer the deposited bail funds to Sherman. According to Audet and Sherman, the purpose of this assignment was to compensate for omitting Sherman's name as Rubenstein's surety at the time the bail funds were posted and generally to secure the deposited funds in Sherman's name. Audet testified the assignments were not intended to suggest that Rubenstein actually had an interest in the funds. Indeed, Rubenstein himself disclaimed ever having an interest in the bail funds.
Shortly after these assignments were executed, the United States removed the garnishment proceeding to federal court. On December 13, 1988, the district court remanded the action for lack of federal jurisdiction. 2
2] On remand, City National Bank prevailed in its efforts to obtain a writ of garnishment against the bail funds.
Rubenstein spent 1989 vacillating with regard to the federal criminal charges pending against him. In February he withdrew his not guilty plea and pleaded guilty. In June, he changed his plea again. In January 1990, he again pleaded guilty. Sometime during this period, Rubenstein learned that he might avoid a long prison sentence by making restitution to victims of his fraudulent schemes. Rubenstein then convinced Sherman in late 1989 to assign half of the deposited funds, $50,000, to the district court clerk solely for use in paying restitution on behalf of Rubenstein. Rubenstein also assigned to the district court clerk whatever interest he retained in the bail funds.
When Rubenstein was sentenced on March 23, 1990, he was ordered to pay restitution. To assure performance, the district court set aside $50,000 of the bail funds for distribution to Rubenstein's victims. The court then turned its attention to City National Bank's recently-filed motion to compel the district court clerk to comply with the bank's newly-obtained writ of garnishment. Because ownership of the remaining $50,000 in bail funds was unclear, the district court instructed the bank to apply to the state court "for [a] determination of who the balance of the bail money belongs to."
At this point, Sherman and City National Bank returned to state court, where Sherman filed a claim of exemption alleging that he, not Rubenstein, owned the bail funds. After a hearing, the state court denied Sherman's claim and confirmed the bank's writ of garnishment on the ground that Sherman had transferred ownership of the bail funds to Rubenstein. Despite this ruling, Sherman returned to federal court and filed a motion pursuant to 28 U.S.C. §§ 2041, 2042, and Fed.R.Crim.P. 46(f) seeking release of the remaining $50,000 in bail funds.
In a July 12, 1990, decision considering both Sherman's motion and the motion of the bank to compel compliance with its writ of garnishment, the district court concluded that the Oregon state court was a proper forum in which to determine ownership of the funds and that the state court correctly concluded that Rubenstein, rather than Sherman, owned the bail funds. Sherman has timely appealed this decision of the district court. The district court's order denying Sherman's motion is an appealable collateral order. See United States v. Badger, 930 F.2d 754, 756 (9th Cir.1991).
This court has a special obligation to satisfy itself of the lower court's jurisdiction. Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986). Subject matter jurisdiction is a question of law reviewed de novo. Persons v. United States, 925 F.2d 292, 294 (9th Cir.1991).
In United States v. Arnaiz, 842 F.2d 217 (9th Cir.1988), we held that district courts are empowered to consider motions and issue orders if they are "necessarily ancillary to the order exonerating [a] bond." Id. at 221. Thus, we held that jurisdiction existed to consider a criminal defendant's motion to require a bailbonder to return collateral posted with the bailbonder by the defendant. "That collateral stood in the same position as if it had been posted directly with the court; exoneration necessarily included release of the collateral, because the defendant's appearance obligation had been mooted by his surrender." Id. In finding jurisdiction, we relied on cases in which federal courts implicitly recognized the ability of third parties to seek release of bail funds which they posted on behalf of a criminal defendant. Id. at 221-22. 3
The parties do not dispute that Rubenstein satisfied the conditions of the bonds he signed. Release of bail funds was therefore required by Fed.R.Crim.P. 46(f). To release the funds, it was necessary to determine to whom they should be released. See Arnaiz, 842 F.2d at 222 (). The district court thus had jurisdiction to consider Sherman's motion because it was "necessarily ancillary" to release of...
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