Ticor Title Ins. Co. v. Florida

• Decision Date: 25 June 1991
• Docket Number: No. 90-15068,90-15068
• Citation: 937 F.2d 447
• Parties: RICO Bus.Disp.Guide 7792 TICOR TITLE INSURANCE COMPANY, Plaintiff-Appellee, v. Alvin FLORIDA, Jr.; Homer H. Shepard, Defendants-Appellants, and Jeffrey Anthony; Deborah V. Blue, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 447

937 F.2d 447

RICO Bus.Disp.Guide 7792

TICOR TITLE INSURANCE COMPANY, Plaintiff-Appellee, v. Alvin FLORIDA, Jr.; Homer H. Shepard, Defendants-Appellants, and Jeffrey Anthony; Deborah V. Blue, Defendants.

No. 90-15068.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 12, 1991.

Decided June 25, 1991.

Craig R. Lewis, Law Offices of Curtis G. Oler, San Francisco, Cal., for defendants-appellants.

Arnold S. Rosenberg, Bancroft, Avery & McAlister, San Francisco, Cal., for plaintiff-appellee.

Before WALLACE, Chief Judge, GOODWIN and FLETCHER, Circuit Judges.

WALLACE, Chief Judge:

Ticor Title Insurance Company (Ticor) brought suit for damages resulting from its reliance on a fraudulent federal tax lien release that had been forged by Shepard and Florida. The district court, following a bench trial, entered a judgment in favor of Ticor after concluding that Shepard and Florida had violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs. 1961-1968, and had engaged in fraud. The district court had jurisdiction pursuant to 18 U.S.C. Sec. 1964(c). We have jurisdiction over this timely appeal pursuant to 28 U.S.C. Sec. 1291. We affirm.

I

Shepard and Florida were partners in Realty Information Systems (Realty), a business which invested in real estate, particularly distressed properties in foreclosure. In August 1987, they purchased a San Francisco condominium. The condominium was encumbered by a federal tax lien, recorded in 1986, in the amount of $39,487.52. Shepard and Florida subsequently offered the condominium for resale.

Landis contacted Shepard and Florida as an interested purchaser in September 1987, but advised them that title to the property would have to be delivered free of any liens. The parties agreed on a purchase price, but a title search performed by Ticor revealed that title to the property was clouded by the tax lien, which gave the Internal Revenue Service (IRS) a right of redemption on the condominium. Shepard and Florida tried to persuade the IRS to release its right of redemption so that the sale could be consummated, but they met with no success. Fearing that Landis might retract his offer to purchase, a Realty employee notified him on November 15, 1987, that Shepard and Florida were close to obtaining a release. The next day, a forged certificate of release, purporting to release the IRS lien for unpaid taxes, was recorded in the office of the San Francisco County Recorder. In reliance upon this fraudulent release, Ticor agreed to insure Landis's title to the property without an exception for the IRS's right of redemption, and Landis purchased the condominium.

Five days after escrow had closed, the IRS discovered that a fraudulent release had been recorded and notified Landis. After learning from the IRS that it intended to redeem his newly purchased condominium, Landis contacted Shepard and Florida. They told him not to worry because he had a title insurance policy, and they made no attempt to clear the title on the property. Landis then made a title insurance claim against Ticor. Ticor paid him $190,041 under the policy, and in return received title to the condominium. Two days later, however, the IRS exercised its right of redemption and took the property from Ticor for $75,000, the amount paid by Florida and Shepard, at the trustee sale held for the benefit of the first lienholder. See 28 U.S.C. Sec. 2410(d).

Ticor sued Shepard and Florida, alleging fraud, RICO violations, and other claims. It based its RICO claim on the Landis sale forgery and two prior tax lien release forgeries. The district court found that Florida, assisted by Shepard, had perpetrated the three forgeries, and entered a judgment in favor of Ticor on the fraud and RICO claims.

II

Shepard and Florida first argue that the district court erred in finding that Florida forged the three certificates of release and that Shepard assisted him in doing so. We review the district court's forgery findings for clear error. Kruso v. International Telephone & Telegraph Corp., 872 F.2d 1416, 1421 (9th Cir.1989) (Kruso ), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990).

Shepard and Florida were the only individuals who had an interest in all of the properties involved in the three forgeries. A handwriting expert testified that the three certificates were forged by the same person, and that Florida deliberately disguised his handwriting when providing a sample prior to trial. Evidence also showed that Florida knew the recorder's instrument number of the San Francisco condominium release within minutes after it was recorded. This information could have been known only by the person who recorded the release, because recorded documents are not available for public review until the day after recordation. On the basis of this and other evidence, we conclude that the district court did not clearly err in finding that Florida forged the three certificates.

With regard to whether Shepard assisted in the forgery scheme, an IRS officer testified that when he told Shepard and Florida that the IRS would require a large payment to release its right of redemption on the San Francisco condominium, Shepard told him that they "weren't going to do it that way" and asked him to leave the room so Shepard and Florida could "reach an agreement" on how to proceed. The forged release was recorded a few days later. Ticor introduced evidence showing that one of the forged certificates that was prepared allowed Shepard to qualify for a bank loan on his property. Shepard destroyed this forged certificate after it was mailed to him. In addition, the IRS employee whose signature was forged on the certificates was known by Shepard and had previously investigated whether to redeem property owned by Shepard. In that capacity, she had mailed a notice bearing her signature to an attorney representing Shepard. We hold that the district court did not clearly err in finding that Shepard assisted in the forgeries.

Shepard and Florida argue that we should overturn the forgery findings because no direct evidence supported them. Indeed, the only direct evidence concerning their alleged involvement in the fraud was Shepard and Florida's own testimony, which supported a ruling in their favor. However, the district judge was entitled to disbelieve this testimony based on his assessment of Shepard and Florida's credibility. See Fed.R.Civ.P. 52(a) (requiring that deference be paid to the trial court's credibility determinations). That no direct evidence supported the district court's ruling is not determinative; circumstantial evidence can stand alone in proof of any fact. See United States v. Brady, 579 F.2d 1121, 1127 (9th Cir.1978), cert. denied, 439 U.S. 1074, 99 S.Ct. 849, 59 L.Ed.2d 41 (1979).

III

Shepard and Florida next contend that we should reverse the judgment against them on the RICO claim, because Ticor has failed to show that they engaged in a pattern of racketeering activity as required by the RICO statute. See 18 U.S.C. Sec. 1962. The district court's interpretation of the RICO pattern requirement is a ruling of law which we review de novo. Kruso, 872 F.2d at 1421.

In H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989), the Supreme Court discussed the term "pattern of racketeering activity," and held that it requires a plaintiff to "show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." Id. at 239, 109 S.Ct. at 2900 (emphasis in original). The relationship requirement is satisfied by a showing that the racketeering predicates "have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." Id. at 240, 109 S.Ct. at 2901 (quotation omitted). To satisfy the continuity prong of the test, one need only show that the predicates pose a threat of continued criminal activity, such as when the illegal conduct is "a regular way of conducting [a] defendant's ongoing legitimate business." Id. at 243, 109 S.Ct. at 2902.

The RICO judgment against Shepard and Florida was based on the three episodes of forgery. These forgeries were related under the Supreme Court test, because they had both similar purposes and identical methods of commission. See id. at 240, 109 S.Ct. at 2901. The forgeries also posed a threat of continued criminal activity. Shepard and Florida forged the three releases within a 13-month period. The frequency...