United States v. Eleven Million Seventy-One Thousand One Hundred & Eighty-Eight Dollars & Sixty-Four Cents ($11, 071, 188.64) in U.S. Currency, More Or Less, Seized from Laostriches & Sons, Inc.

Decision Date13 February 2015
Docket NumberCase No. 4:12-CV-1559 (CEJ)
CourtU.S. District Court — Eastern District of Missouri

This matter is before the Court on the motion of the United States for summary judgment pursuant to Fed. R. Civ. P. 56. Claimant Laura Avila-Barraza has responded in opposition, and the issues are fully briefed.

I. Background

The United States brings this action pursuant to 18 U.S.C. § 981(a)(1)(A) for forfeiture of $11,071,188.64 in U.S. currency that was seized as property involved in or traceable to money laundering transactions. On March 19, 2013, claimants Laura Avila-Barraza, Humberto Ojeda-Avila, Paulina Ojeda-Avila, Valentino Ojeda-Avila, and LaOstriches & Sons, Inc., filed notices claiming interests in the defendant currency, alleging that LaOstriches and its accounts had been vetted by the British Virgin Islands (BVI), the majority of the funds seized from the company originated from the sale of a family business, Santa Rita Fishery, and additional funds had beendeposited into the LaOstriches corporate brokerage account from proceeds the family received from rentals of their farmland. [Doc. #31-35]. In the claimants' answer to the forfeiture complaint, they assert innocent ownership pursuant to 18 U.S.C. § 983(d) as an affirmative defense. [Doc. #44].

On February 13, 2014, the Court granted the government's motion to strike the claims and answers filed by LaOstriches, Paulina Ojeda-Avila, Humberto Ojeda-Avila, and Valentino Ojeda-Avila for disobeying court orders and obstructing discovery by repeatedly failing to appear for scheduled depositions. In the instant motion, the government moves for summary judgment on the sole remaining claim of Avila-Barraza.

II. Legal Standard

Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be entered if the moving party shows "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." In ruling on a motion for summary judgment, the court is required to view the facts in the light most favorable to the non-moving party, giving that party the benefit of all reasonable inferences to be drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir. 1987). The moving party bears the burden of showing both the absence of a genuine issue of material fact and its entitlement to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). If the moving party meets its burden, the non-moving party may not rest on the allegations of its pleadings, but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. Gannon Intern., Ltd.v. Blocker, 684 F.3d 785, 792 (8th Cir. 2012); Gibson v. American Greetings Corp., 670 F.3d 844, 853 (8th Cir. 2012). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (quoting Matsushita Elec. Industrial Co.., 475 U.S. at 587).

III. Discussion
A. Article III Standing

In support of its motion, the government first asserts that Avila-Barraza does not have an ownership interest in the property owned by LaOstriches, and so is without Article III standing to file a claim to the defendant funds on her own behalf. In a forfeiture action, Article III standing turns on whether the claimant has a sufficient ownership interest in the seized property to create a case or controversy. United States v. One Lincoln Navigator 1998, 328 F.3d 1011, 1013 (8th Cir. 2003). To meet its burden of proof, the claimant "need only show a colorable interest in the property, redressable, at least in part, by a return of the property." Id. (quoting United States v. 7725 Unity Ave. N., 294 F.3d 954, 957 (8th Cir. 2002)). A colorable ownership interest "may be evidenced in a number of ways including showings of actual possession, control, title and financial stake." Id. (quoting United States v. One 1945 Douglas C-54 (DC-4) Aircraft, 647 F.2d 864, 866 (8th Cir. 1981)).

Ownership interests in the Eighth Circuit are defined by "the law of the State in which the interest arose." Id. Here, Florida is the jurisdiction in which the accounts were established and maintained, while Missouri is the jurisdiction from which theproperty was seized.1 The government argues that because LaOstriches could not conduct any securities transactions without first being cleared and settled by First Clearing LLC in St. Louis, Avila-Barraza's alleged ownership interest only arose because of First Clearing LLC's involvement. Thus, according to the government, Missouri law should apply. The government and Avila-Barraza both argue that the application of either Missouri or California law yields a result favorable to their respective positions. Because the factual allegations do not provide a clear answer as to where the interest arose, the Court will look to both Missouri and Florida law in determining whether claimant has alleged an ownership interest sufficient to establish standing for her claim.

In support of her alleged interest, Avila-Barraza asserts that the transfer of the assets to the LaOstriches account created a resulting trust of which she is the beneficiary. Avila-Barraza claims that she contributed all of the assets that funded the LaOstriches accounts, and intended these payments to be maintained exclusively for her and her family's own benefit. She further alleges that in "no real sense was LaOstriches an independent operating entity" with its own assets and ongoing business activities; rather, it was simply a "personal holding company." Claimant's Resp. & Mem. in Opp'n, at *6-7 [Doc. #156]. Claimant states that she "does not view the account as a 'corporate' account having an independent existence separate and apart from her family but, rather, as a personal account with a name." Id. at *15.

Under Missouri law, a resulting trust "arises where property is transferred under circumstances that raise an inference that the person who makes the transfer or causes it to be made did not intend the transferee to take the beneficial interest in the property." Lynch v. Lynch, 260 S.W.3d 834, 838 (Mo. banc 2008) (quoting Matlock v. Matlock, 815 S.W.2d 110, 114 (Mo. Ct. App. 1991)). A resulting trust "is implied by law to meet the requirement of justice that a legal status be given to what is the clear intention of the parties." Id. (quoting Brown v. Brown, 152 S.W.3d 911, 918 (Mo. Ct. App. 2005)). To establish a resulting trust in Missouri, "an extraordinary degree of proof is required . . . vague or shadowy evidence or a preponderance of the evidence is not sufficient. The evidence must be so unquestionable in its character, so clear, cogent and convincing that no reasonable doubt can be entertained as to its truth and the existence of the trust." Jones v. Anderson, 618 S.W.2d 252, 255 (Mo. Ct. App. 1981) (quoting Pizzo v. Pizzo, 295 S.W.2d 377, 385 (Mo. banc 1956)).

Similarly, under Florida law, a resulting trust "is a reversionary, equitable interest that arises under circumstances which raise the unrebutted inference that the transferor does not intend the one who receives the property to have the beneficial interest." Persan v. Life Concepts, Inc., 738 So. 2d 1008, 1012 (Fla. Dist. Ct. App. 1999). As in Missouri, evidence in support of a resulting trust must be "so clear, strong and unequivocal as to remove . . . every reasonable doubt as to the existence of the trust." Grapes v. Mitchell, 159 So. 2d 465, 469 (Fla. 1963).

Claimant has failed to provide clear and convincing evidence to justify the equitable remedy of a resulting trust. To the contrary, the record in this case establishes that claimant incorporated LaOstriches, an ostrich farm operation, incompliance with all formal procedures as a legal entity for the purpose of receiving and managing the assets acquired from Timber Development. See A & E Enterprises, Inc. v. Clairsin, Inc., 169 S.W.3d 884, 888 (Mo. Ct. App. 2005) (stating that a corporation is a separate and distinct entity from its incorporators and shareholders); Gasparini v. Pordomingo, 972 So. 2d 1053, 1055 (Fla. Dist. Ct. App. 2008) (same). Timber Development's assets were acquired from proceeds generated by the Cifuentes-Villa family's drug trafficking organization. Gov't Statement of Uncontested Material Facts, at *1-2 [Doc. #155-2, ¶¶ 1-5].

Since its incorporation, and for more than ten years, LaOstriches represented to government agencies, including the Internal Revenue Service, and to financial institutions at which it held securities accounts, that it possessed legal title to the property as corporate accounts—not as Avila-Barraza's personal accounts. See A & E Enterprises, Inc., 169 S.W.3d at 888 (stating that "shareholders of a corporation should not be able to choose when its form is disregarded and when it is not"); Ed Skoda Ford, Inc. v. P & P Paint & Body Shop, Inc., 277 So. 2d 818, 819 (Fla. Dist. Ct. App. 1973) (holding that officers of a corporation "cannot avail themselves of the corporate shield when it suits their purpose and discard the same when it does not appear advantageous"). All of the brokerage account client statements were issued to LaOstriches, not to Avila-Barraza in her individual capacity.

Even if claimant supplied the capital or transferred personal funds to the corporation, she could not assert an individual claim that would deprive LaOstriches of its claim to the property seized from corporate accounts. See Emergency Patient Servs., Inc. v....

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