United States v. Xiulu Ruan
| Decision Date | 08 January 2020 |
| Docket Number | No. 19-11508,19-11508 |
| Parties | UNITED STATES OF AMERICA, Plaintiff-Appellee, v. XIULU RUAN, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
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Non-Argument Calendar
Appeal from the United States District Court for the Southern District of Alabama Before MARTIN, ROSENBAUM, and NEWSOM, Circuit Judges.
Xiulu Ruan, a federal prisoner currently serving a 252-month term of imprisonment, appeals the district court's order voiding the mortgage on one of his properties. After careful review, we reverse in part and vacate in part and remand to the district court.
In 2015, Ruan was indicted on racketeering and drug conspiracy charges in connection with his operation of a pain clinic. In 2017, before Ruan was convicted, he signed a power of attorney ("POA") granting his sister, Xiu Oing Ruan Martinie ("Mrs. Martinie"), general authority to act on his behalf pursuant to the Alabama Uniform Power of Attorney Act. The POA includes the following language: "An agent that is not my ancestor, spouse, or descendant MAY NOT use my property to benefit the agent . . . unless I have included that authority in the Special Instructions." The Special Instructions state: "This Power of Attorney shall not be affected by my disability, incompetency, or incapacity."
Following the return of the verdict, Ruan stipulated to a forfeiture money judgment in the amount of $5,000,000 in addition to the forfeiture of a number of assets. The district court ultimately sentenced Ruan to 252 months imprisonmentand ordered him to pay $15,239,369.93 in restitution as well as a special assessment of $1,500.
After Ruan's conviction, but before he was sentenced, Mrs. Martinie executed a mortgage (the "Mortgage") to twenty people for a total of $559,200.00 against Ruan's then-unencumbered property located on Timbercreek Boulevard in Spanish Fort, Alabama. Steve Martinie ("Mr. Martinie"), Mrs. Martinie's husband, was one of those receiving a mortgage interest in the property.
The district court entered the final order of forfeiture and issued an Order for a Writ of Execution for 15 properties owned by Ruan in 2018. The Timbercreek Boulevard property was on the list. The United States Marshals Service seized the property and filed a return of service. The government then sought to set aside the Mortgage on the Timbercreek Boulevard property as a fraudulent transfer. Ruan responded to the motion, arguing, among other things, that the Mortgage was not a fraudulent transfer because it was given to "ensure loans previously incurred to pay for legal fees were secured." He submitted evidence that those loans were used almost exclusively to pay his defense counsel. Based on this evidence, the government filed another motion requesting an order confirming the Mortgage was void and permitting the sale of the Timbercreek Boulevard property. The government argued that the Mortgage was void because, under the terms of thePOA, Mrs. Martinie did not have authority to execute the Mortgage and by granting the Mortgage to her husband, Mrs. Martinie engaged in self-dealing.
The district court granted the government's motion and held that the evidence Ruan submitted showed Mrs. Martinie benefitted from the Mortgage and therefore engaged in self-dealing in violation of the POA. It explained that because Mrs. Martinie was not authorized to grant the Mortgage, the Mortgage was null and void and Mr. Martinie's share of the Mortgage was not severable. Ruan timely filed his notice of appeal, and he raises two issues: first, whether the district court erred in holding the Mortgage was void, as opposed to voidable, under Alabama law; and second, whether Ruan's ratification of the Mortgage rendered Mrs. Martinie's actions consistent with her authority under the POA.
We review a district court's factual findings for clear error and review de novo the application of law to those facts. Lykes Bros. v. U.S. Army Corps of Engineers, 64 F.3d 630, 634 (11th Cir. 1995). "For a factual finding to be clearly erroneous, this court, after reviewing all of the evidence, must be left with the definite and firm conviction that a mistake has been committed." Id. (quotation marks omitted).
In order to determine whether the Mortgage is void, we must first decide what authority the POA granted to Mrs. Martinie and whether, when she granted the Mortgage, she exceeded those powers. See Dillard v. Gill, 166 So. 430, 433 (Ala. 1936) (). As set out above, the POA included this language: "An agent that is not my ancestor, spouse, or descendant MAY NOT use my property to benefit the agent or a person to whom the agent owes an obligation of support."
The plain language of the POA prohibits Mrs. Martinie from using Ruan's property to benefit a person to whom she owes an obligation of support—namely, her husband. Under Alabama law, an "obligation of support" or "support obligation" generally refers to domestic obligations, like obligations one spouse owes to the other, or the obligations a parent owes to her child. See, e.g., 1 Judith S. Crittenden & Charles P. Kindregan Jr., Alabama Family Law § 20:4 (July 2019 Update) ("A domestic support obligation is one which is . . . owed to or recoverable by . . . a spouse"); see also Glenn v. Glenn, 626 So. 2d 638, 639 (Ala. Civ. App. 1993) ().This being the case, Mrs. Martinie exceeded the scope of the authority granted to her under the POA.
We next must determine whether the Mortgage is void—i.e., a legal nullity—or voidable—i.e., capable of being affirmed or rejected at the option of the mortgagees. Ex parte Banks, 64 So. 74, 75 (Ala. 1913). Alabama courts have not specifically addressed the question of whether, when an attorney-in-fact uses the principal's real property to pay off debts the principal owes to the attorney-in-fact, the attorney-in-fact's spouse, and other third parties, that conveyance is entirely null. However, Alabama has generally made clear that breaches of fiduciary duty, including self-dealing, are voidable. See Bay Shore Props., Inc. v. Drew Corp., 565 So. 2d 32, 34 (Ala. 1990) (); Myers v. Ellison, 31 So. 2d 353, 355 (Ala. 1947) ; Pike v. Reed, 47 So. 3d 253, 260 (Ala. Civ. App. 2009) (quoting Myers, 31 So. 2d at 355) (same); see also Sevigny v. New S. Fed. Sav. & Loan Ass'n, 586 So. 2d 884, 887 (Ala. 1991) ().
We recognize there is a "lack of preciseness and different shades of meaning involved in the use of the word 'void,' which causes confusion . . . generally," Ham v. Blankenship, 194 F.2d 430, 432 (5th Cir. 1952) (footnote omitted), including in interpreting Alabama courts' decisions. See Banks, 64 So. at 75 (). Yet Alabama courts have generally described breaches of fiduciary duty as being void "at the option" of the non-guilty party—a hallmark quality of a voidable contract. Banks, 64 So. at 75 (quotation marks omitted) (describing difference between void and voidable contracts); Calloway v. Gilmer, 36 Ala. 354, 357-58 (1860) (). As our predecessor court explained, we think that when an attorney-in-fact breaches her fiduciary duty, courts have "ruled only that the illegal contract was 'void' in the sense that the Court would not lend its aid to a guilty party seeking to enforce it." Ham, 194 F.2d at 431.1 Thus, the one-sided illegal conveyance by Mrs. Martinie renders the Mortgage voidable and subject to be set aside and cancelled pursuant toa suit brought by the mortgagees. See Myers, 31 So. 2d at 356 ().
The district court relied on In re Shelton, 593 B.R. 755 (Bankr. N.D. Ohio 2018), to hold that, because Mrs. Martinie "did not have the authority to use the POA to self-deal, the mortgage is a legal nullity." The district court concluded the Mortgage was not voidable based on Shelton's analysis of Lamb v. Scott, 643 So. 2d 972 (Ala. 1994):
Conveyances that are merely voidable are subject to be set aside and cancelled at the suit of a party with a superior interest. When an act is void, however, it is entirely destitute of legal effect. The Alabama Supreme Court in Banks admonished that judges have frequently used the words "voidable" and "void" indiscriminately, when referring to contracts, but this Court is not prepared to conclude that the Alabama Supreme Court in Lamb confused the two words and their meaning. Because the Alabama Supreme Court in Lamb described deeds given by an attorney-in-fact to herself without express authority to do so as void, this Court concludes that the law of Alabama holds such purported deeds to be legal nullities.
593 B.R. at 763 (). But the Shelton court looked only to Lamb and did not consider other long-established Alabama precedent. Our review of this precedent leads us to conclude that the Alabama Supreme Court indiscriminately used the word "void" in Lamb when, in fact, it was in keeping with the court's precedent to mean "void...
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