U.S. v. Napier

• Decision Date: 01 November 2001
• Docket Number: No. 01-1698,01-1698
• Citation: 273 F.3d 276
• Parties: (3rd Cir. 2001) UNITED STATES OF AMERICA, v. DAVID E. NAPIER, APPELLANT Submitted Under Third Circuit LAR 34.1(a)
• Court: U.S. Court of Appeals — Third Circuit

Page 276

273 F.3d 276 (3rd Cir. 2001)

UNITED STATES OF AMERICA, v. DAVID E. NAPIER, APPELLANT

No. 01-1698

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Submitted Under Third Circuit LAR 34.1(a) November 1, 2001

November 30, 2001

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Crim. No. 97-cr-00214) District Judge: Hon. James McGirr Kelly

Howard J. Bashman, Esq., Thomas P. Manning, Esq., Buchanan Ingersoll, Philadelphia, PA 19l03, for Appellant.

Anita D. Eve, Esq., Assistant U.S. Attorney, Michael L. Levy, Esq., United States Attorney, Robert A. Zauzmer, Esq., Assistant United States Attorney Chief of Appeals, Office of United States Attorney, Philadelphia, PA 19l06, for Appellee.

Before: Sloviter, Nygaard, and CUDAHY,^* Circuit Judges

OPINION OF THE COURT

Sloviter, Circuit Judge.

David E. Napier appeals from a judgment of sentence pursuant to U.S.S.G. S 2F1.1. Napier, who was indicted in the United States District Court for the Eastern District of Pennsylvania, pleaded guilty to four counts of bank fraud in violation of 18 U.S.C. S 1344. The sentence was appealed to this court and remanded to the District Court for re-sentencing. Napier now appeals the re-sentence. Napier argues that the District Court erred in interpreting this court's mandate on remand by failing to reduce the loss calculation by the appraised value of the property pledged to secure the loan. He also contends that the District Court erred in imposing accrued but unpaid interest in its recalculation of the fraud loss amount. Furthermore, Napier argues that the District Court erred in finding that Great Western Bank ("GWB") suffered a loss as it is, he contends, conclusively presumed to have sustained no loss under state law.

I.

In June of 1990, Napier borrowed approximately $384,000 from GWB to fund his purchase of property located in Bucks County, Pennsylvania. As part of the loan application, GWB had a licensed real estate appraiser prepare an appraisal valuation of the property Napier planned to purchase. The lender's appraisal valued the property at $480,000. After making only five payments, Napier defaulted on the loan and in January of 1991, GWB began foreclosure proceedings. The property was purchased at a sheriff's sale in April of 1995 by GWB, the sole bidder, for $305,000. In October of 1997, Napier pleaded guilty to four counts of bank fraud in violation of 18 U.S.C. S 1344.

U.S.S.G. S 2F1.1 provides a base offense level of six for fraud. It further provides offense level enhancements given in proportion to the magnitude of the "loss.""Loss" is defined as the "amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered (or can expect to recover) from any assets pledged to secure the loan." 18 U.S.C. S 2F1.1, cmt. n.8(b). At Napier's original sentencing hearing, the District Court based its determination of GWB's "loss" on the forced sale price, $305,000, finding that his total offense level was sixteen and that he was subject to a sentencing range between twenty-seven and thirty-three months imprisonment. The District Court sentenced Napier to a term of thirty months imprisonment, five years supervised release, ordered him to pay a special assessment of $200, and restitution totaling $16,000 ($14,000 to GWB and $2,000 to another lender for a fraudulent car loan).

He appealed from the judgment of sentence. This court remanded the case to allow the District Court to recalculate the "loss" sustained by GWB in light of this court's decision in United States v. Sharma, 190 F.3d 220 (3d Cir. 1999). In recalculating the fraud loss amount on remand, the District Court found no reason to rely on the appraisal value, given that an appraisal is simply an estimate. Instead, the District Court determined that GWB's subsequent sale of the property one month following its purchase to EMC Mortgage Company ("EMC") for $307,500 was a more reliable indication of the property's fair market value. The District Court also included unpaid interest lost to GWB, although the government had not argued this issue at the original sentencing hearing. The new fraud loss amount resulted in an increased offense level of seventeen and sentencing range between thirty and thirty-seven months imprisonment. Because the court was reluctant to increase Napier's already completed sentence, it reimposed the original sentence. Napier has completed serving his prison sentence and is currently serving the supervised release portion of his sentence. He filed a timely appeal from the District Court's reimposition of his sentence. He seeks a ruling that GWB sustained no loss in order to reduce the amount of restitution he has been ordered to pay to GWB's successor, and he seeks a ruling that he served an unlawfully long prison sentence so that he can persuade the District Court to reduce his term of supervised release.

II.

Whether the District Court Erred in Using the Market Value of Napier's Property Instead of the Appraisal Value in Recalculating the Fraud Loss Amount.

The appropriate standard of review of a district court's decision regarding the interpretation of the Sentencing Guidelines, including what constitutes "loss," is plenary. Sharma, 190 F.3d at 226. Factual findings, however, are simply reviewed for clear error. Id. at 229. Because the District Court's refusal to grant credit for the appraisal value based on the existence of a more reliable value is essentially a fact-based determination, we should review for clear error. Id. (finding that the district court's decision to deny credit was entitled to deference).

Napier asserts that this court's opinion and judgment deciding his prior appeal ordered the District Court to re-sentence him using the appraisal value to calculate loss in accordance with Sharma. In Napier's prior appeal, we ordered: "In Sharma, we held that failure to use the appraisal value was an error.... Thus, we believe it is appropriate to remand this matter for reconsideration in light of Sharma." App. at 177a-78a. Napier misconstrues our mandate, which was to reconsider Napier's case in light of Sharma. We did not direct the district court to recalculate the fraud loss amount using the appraisal value. What we stated was: "The government... recommends that we remand since the District Court did not have the benefit of Sharma when it sentenced Napier. We agree." Id. If we had intended simply that the appraisal value be substituted for the forced sale price, it would not have been necessary to remand. Instead, the remand allowed the district court to reconsider this issue in light of Sharma. Thus, we reject Napier's argument that the District Court here ignored or thwarted our mandate.

We turn therefore to our opinion in Sharma. In that case, we held that the district court improperly credited Sharma only $40,000 for property that had been appraised at $80,000. 190 F.3d at 229. In reversing, we reasoned that because the bank eventually was successful in its suit to obtain the parcel of land, Sharma was entitled to a credit for the full value of the land less the bank's expenses in the litigation to acquire title. Id. In this case, the District Court found Sharma did not "stand for the proposition that an appraisal value should always be used in preference to other, perhaps more reliable, valuations of property." United States v. Napier, No. 97-214, 2001 WL 33569, at *2 (E.D. Pa. Jan. 11, 2001). It is not disputed that Napier is entitled to the full value of the property; the issue instead is what is the most reliable value of the property.

Napier argues that the appraisal value of the property at $480,000 is the most reliable valuation of the property. The District Court found the $307,500 valuation to be most reliable as it "represents the result of an arm's length transaction between sophisticated parties." Napier, 2001 WL 33569, at *2. It reasoned: "Such valuations of property, if available, should be used in preference to appraisals, which are, by definition, merely estimates of what property will cost in an arm's length transaction." Id.

Napier argues, however, that despite the District Court's assertions that GWB's subsequent sale of the property to a third party was "an arm's length transaction between sophisticated parties," the District Court record is devoid of evidence that any subsequent purchaser was a true arm's length purchaser who paid fair market value. The government bears the burden to prove by a preponderance of the evidence the facts in support of a sentence enhancement. United States v. Evans, 155 F.3d 245, 253 (3d Cir. 1998). Napier...