United States v. Diaz
| Docket Number | 17-20631-CR-SCOLA/GOODMAN |
| Decision Date | 20 September 2023 |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. OSMANY RODRIGUEZ DIAZ, Defendant. Ex Rel PROPERTY INVESTMENT 7722 LLC and BRANDON FALCON, Petitioners. |
| Court | U.S. District Court — Southern District of Florida |
THE HONORABLE ROBERT N. SCOLA, JR.
REPORT AND RECOMMENDATIONS ON UNITED STATES' MOTION TO DISMISS PETITION FOR THIRD-PARTIES' INTEREST IN FORFEITED PROPERTY AND ON THE THIRD-PARTIES' PETITION
After this Court entered a Second Preliminary Order of Forfeiture [ ECF No. 416 (the “Forfeiture Order”)], Claimants Property Investment 7722 LLC (the “LLC” or the “Entity”) and Brandon Falcon (“Falcon” and collectively “Claimants” or “Petitioners”) jointly filed a petition [ECF No. 419], pursuant to Fed. R. Crim. P. 32.2(c) and 21 U.S.C. § 853(n)(2), to assert their legal interests in property identified in the Forfeiture Order. The Forfeiture Order granted the United States' motion for a second forfeiture order, based on the theory that the real property at issue (i.e., 21105 S.W. 213 Avenue Road, Miami, FL 33187, the “Subject Property”) belongs to the criminal defendant, Osmany Rodriguez Diaz (“Defendant” or “Diaz”), and is a substitute asset.
Under penalty of perjury, Claimants asserted their ownership interests in the real property. Claimants allege in their Petition that (1) Defendant Rodriguez has no ownership interest in the real property; (2) the LLC is the record title owner; (3) Claimant Falcon resides at the property with his family; (4) Falcon is the managing member and owner of the LLC; (5) Falcon obtained his controlling interest in the LLC on April 5, 2022, before entry of the substitute asset forfeiture order; and (6) the LLC has held title to the property since May 25, 2017.
Petitioners assert their legal and equitable right, title, and interest in the property under 21 U.S.C. § 853(n)(6)(A) -- in that their legal right, title, or interest in the property renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in them rather than the defendant, and was superior to any right, title, or interest of the defendant at the time of the substitute asset forfeiture. They also are pursuing their claim under 21 U.S.C. § 853(n)(6)(B) -- in that Claimants qualify as bona fide purchasers of property reasonably without cause to believe that the property was subject to forfeiture within the meaning of 21 U.S.C. § 853(n)(6)(B) when the property and the legal and equitable interests were acquired by Claimants.
Claimants also asserted a constructive trust interest in the real property for maintenance and preservation done on and to the property.
In response, the United States filed a motion [ECF No. 426] to dismiss the petition, arguing that Falcon lacks standing to pursue the third-party claim and that both Claimants (i.e., Falcon and the Entity) failed to establish grounds entitling them to relief in this ancillary forfeiture proceeding. Claimants filed a response [ECF No. 428] to the dismissal motion and requested, as alternative relief, leave to file an amended petition to cure any perceived pleadings defect. The United States filed a reply [ECF No. 431] and United States District Judge Robert N. Scola, Jr. referred [ECF No. 427] both the petition and the motion to dismiss to me.
For the reasons outlined in greater detail below, the Undersigned respectfully recommends that (1) the motion to dismiss be granted in part and denied in part; (2) Falcon be permitted to file an amended petition; (3) the LLC's claim be litigated at an evidentiary hearing type of ancillary proceeding; and (4) if Falcon were to submit an amended claim (in an amended petition) which would provide him with standing to challenge more than the $20,000 he asserts under a constructive trust theory, then the evidentiary hearing would accommodate that claim, as well.
The Undersigned notes that some of the United States' lack-of-standing and the-claim-fails-as-inadequate arguments are fact-based and are best resolved at the evidentiary hearing contemplated by the ancillary forfeiture proceeding framework, rather than through a motion to dismiss. Also, for purposes of the motion to dismiss only (as opposed to a possible to-be-filed summary judgment motion or the ultimate evidentiary hearing itself), the Undersigned recommends that Falcon's constructive trust theory remain (and not be dismissed for lack of standing or a failure to state a claim), though that theory encompasses only the improvements and repairs he made and/or paid for (but not the entire real property itself).
In addition, the Undersigned notes that the United States relies upon the lis pendens and renewal of the lis pendens which it recorded against the Subject Property. But, as we will explain later in the ruling, both of those recordings were unauthorized and therefore cannot be used to bolster the United States' legal position in its motion to dismiss.
At bottom, the two recordings of the lis pendens, while accomplished after Defendant's conviction, were filed and recorded before the United States moved to forfeit the real property as a substitute asset (and, obviously, before the Court entered a forfeiture Order which granted the motion and forfeited the Subject Property to the United States, subject to third-party interests). Until the Court forfeited the Subject Property, it was merely a potential substitute asset -- a status which was insufficient under both federal and Florida law to justify a lis pendens at that time.
The Superseding Indictment [ECF No. 79] contained a forfeiture count. That count lists specific properties, including real properties, which the United States contended would be subject to forfeiture under 18 U.S.C. § 982(a)(7) following a conviction. The Subject Property, however, was not listed. The Superseding Indictment also listed other properties, including real properties, which the United States had the “intent” to seek forfeiture of under 21 U.S.C. § 853(p) as substitute assets. But the Subject Property was not listed there either.
On April 17, 2018, the Court entered a Preliminary Order of Forfeiture [ECF No. 171 (“Preliminary Forfeiture Order”)], imposing a forfeiture money judgment of $1,728,508.00 against Defendant, as a leader in the conspiracy of the offense conduct, of which judgment Defendant has not attempted to pay down.
The United States was unable to recover Defendant's directly forfeitable property and ultimately identified the Subject Property, which was acquired by Defendant and titled in the name of the LLC.[1] The United States recorded a lis pendens against the Subject Property on September 13, 2018, and it recorded a renewal of its lis pendens on December 15, 2021. The renewal of the lis pendens was recorded four months after Petitioner Falcon's purported purchase of an interest in the Entity listed as the record owner of the Subject Property.
On August 5, 2022, the United States filed its Motion for Second Preliminary Order of Forfeiture. [ECF No. 415] The motion sought to forfeit the Subject Property as a substitute asset to satisfy, in part, the $1,728,508.00 forfeiture money judgment imposed on Defendant as part of his sentence. The United States submitted an FBI Special Agent's declaration [ECF No. 415-1] in support of the motion. The declaration explained that directly forfeitable property could not be located and was otherwise unavailable. The declaration did not, however, say anything about the representation, in the United States' motion, that the Subject Property was “acquired by [] Defendant through a company called Property Investment 7722 LLC” and that Defendant “is the Authorized Member and Registered Agent of Property Investment 7722 LLC that is he [sic] titled owner of real property located at 21105 SW 213 Avenue Road, Miami, FL 33187.” [ECF No. 415, p. 5].
On August 8, 2022, the Court entered a Second Preliminary Order of Forfeiture (the “Forfeiture Order”), which forfeited the Subject Property to the United States as substitute property in satisfaction of the forfeiture money judgment, subject to third-party interests. [ECF No. 416].
In the Petition, Falcon contends that he “would be personally obligated on the mortgage for the property and is otherwise responsible for the property” because, although he is not the record title owner of the property, he is “the sole owner and controlling officer” of the LLC. [ECF No. 419, p. 2]. He says that “he would be personally injured by the forfeiture of his solely-owned company's assets.” Id.
In its dismissal motion, the United States raises additional points about Falcon's claim in a footnote:
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