United States v. Buk , 314 F. App'x 565 ( 2009 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-1959
UNITED STATES OF AMERICA,
Plaintiff – Appellant,
v.
PETR BUK,
Claimant – Appellee,
and
BRUNO CAVELIER D’ESCLAVELLES,
Defendant.
No. 07-1960
UNITED STATES OF AMERICA,
Plaintiff – Appellee,
v.
PETR BUK,
Claimant – Appellant,
and
BRUNO CAVELIER D’ESCLAVELLES,
Defendant.
No. 08-1470
UNITED STATES OF AMERICA,
Plaintiff – Appellant,
v.
BRUNO CAVELIER D’ESCLAVELLES,
Defendant,
and
PETR BUK,
Petitioner – Appellee.
Appeals from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (1:06-cr-00235; 1:06-cr-00235-GBL-2)
Argued: December 4, 2008 Decided: March 5, 2009
Before WILLIAMS, Chief Judge, and SHEDD and AGEE, Circuit
Judges.
Affirmed in part, reversed in part, and vacated in part by
unpublished opinion. Judge Shedd wrote the opinion, in which
Chief Judge Williams and Judge Agee joined.
ARGUED: Stefan Dante Cassella, OFFICE OF THE UNITED STATES
ATTORNEY, Alexandria, Virginia, for the United States. Steven
Joseph McCool, MALLON & MCCOOL, L.L.C., Baltimore, Maryland, for
Petr Buk. ON BRIEF: Chuck Rosenberg, United States Attorney,
Karen Taylor, Assistant United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Alexandria, Virginia, for the United
States.
2
Unpublished opinions are not binding precedent in this circuit.
3
SHEDD, Circuit Judge:
Petr Buk filed a petition pursuant to 21 U.S.C. § 853asserting a third-party interest in property forfeited to the
United States. The district court imposed a constructive trust,
recognized Buk as the beneficiary, and concluded that Buk
possessed a superior interest in the forfeited property under
§ 853. For these reasons, the court awarded Buk $125,000 plus
attorneys’ fees. The government appeals this determination.
Buk cross-appeals, claiming that in addition to the constructive
trust, he should recover the forfeited property under a bailment
theory. Because we find that Buk has no superior interest under
§ 853(n)(6)(A), we reverse the district court’s award of the
$125,000 and attorney’s fees.
I
In 2006, Buk invested $125,000 in a new film (“Cell Game”)
being developed by filmmaker Fabien Pruvot. Buk and Pruvot
entered into an agreement (the “Investment Agreement”)
specifying that the $125,000 was to be used “for development of
Feature Films only,” that the funds could not be spent without
Buk’s written consent, that Buk was to receive 15% of the film’s
net profits, and that Buk could take the funds back at any time
with 14 days notice. J.A. 104. Pruvot personally guaranteed the
$125,000 and Buk’s investment was deposited into a Bank of
4
America account held by Cell Game, LLC (“the Cell Game
Account”).
Later in 2006, Pruvot and his associate Bruno Cavelier
D’Esclavelles pled guilty to conspiracy to commit money
laundering and agreed to forfeit the property involved in the
conspiracy. 1 When the funds that were directly traceable to the
offenses could not be located, D’Esclavelles and Pruvot agreed
to forfeit the funds in the Cell Game Account as a substitute
asset under 21 U.S.C. § 853(p). The district court entered
Consent Orders of Forfeiture and the contents of the account
($125,670.19) were sent to the United States Marshals Service.
Pursuant to § 853(n), Buk petitioned the court for a hearing to
adjudicate his interest in the forfeited property.
At this ancillary proceeding, Buk argued that because the
$125,000 was a bailment, rather than an investment, he retained
title to the property. Alternatively, Buk argued that he should
recover the $125,000 as the beneficiary of a constructive trust.
Although the district court held that Buk was not a bailor, it
imposed a constructive trust and declared Buk as the
beneficiary. The court found that Buk was thus entitled to the
$125,000 in the Cell Game Account. J.A. 179. In a separate
1
The Cell Game Account was controlled by Pruvot and
D’Esclavelles. D’Esclavelles also pled guilty to conspiracy to
distribute Ecstasy.
5
opinion, the court granted Buk $17,322.50 in attorney’s fees for
substantially prevailing in a civil proceeding to forfeit
property under federal law pursuant to the Civil Asset
Forfeiture Reform Act (“CAFRA”), 28 U.S.C. § 2465(b)(1)(A).
The government appealed the imposition of the constructive
trust and the grant of attorney’s fees; Buk cross-appealed the
district court’s rejection of his bailment theory. We
consolidated the appeals and designated the government as the
appellant.
II
A.
In an ancillary proceeding where a third-party seeks to
recover criminally forfeited assets, we review the district
court’s factual findings for clear error and its legal
interpretations de novo. See United States v. Morgan, 224 F.3d
339, 342 (4th Cir. 2000).
B.
18 U.S.C. § 982(a)(1) requires criminal defendants
convicted of violating the federal money laundering statutes to
forfeit any property involved in the offense. If the property
directly traceable to the offense “cannot be located upon the
exercise of due diligence,” the district court shall order other
property of the defendant to be forfeited as a substitute asset.
§ 853(p)(1)(A); § 853(p)(2). Following the entry of such an
6
order, a third party “asserting a legal interest in property
which has been ordered forfeited . . . [may] petition the court
for a hearing to adjudicate the validity of his alleged interest
in the property.” § 853(n)(2). The court must amend the order
of forfeiture if it finds that the third-party petitioner has a
“legal right, title, or interest in the property” that was
“superior to any right, title, or interest of the defendant at
the time of the commission of the acts which gave rise to the
forfeiture of the property under this section[.]”
§ 853(n)(6)(A). 2 Simply put, Buk’s claim can succeed if he
establishes a legal interest as bailor of the property or
beneficiary of the constructive trust, because such interest
would be superior to the defendants’ interest at the time of the
acts resulting in forfeiture. United States v. Schecter, 251
F.3d 490, 494 (4th Cir. 2001).
Within the context of § 853(n)(6), the legal interest of a
third party is determined by state law. See id. (applying
Maryland law to determine what interest a third party claimant
retained in forfeited property). In this case, California law
2
There is also a “bona fide purchaser” exception,
§ 853(n)(6)(B), which does not apply in this case.
7
applies. 3 Once the legal interests have been defined under state
law, however, federal law determines whether they are sufficient
for the third-party petitioner to prevail under § 853(n)(6).
See United States v. Lester, 85 F.3d 1409, 1413 (9th Cir. 1996).
C.
Although Buk’s $125,000 transfer to Pruvot was styled as an
“investment,” Buk contends that it was in fact a bailment
because he delivered the funds for the specific purpose of
developing the film and could have recalled the money at any
time. We disagree.
Under California law, a bailment is property delivered “for
some particular purpose . . . that after the purpose has been
fulfilled it shall be redelivered to the person.” Meyer Koulish
Co. v. Cannon, 213 Cal. App. 2d 419, 427 (Cal. Dist. Ct. App.
1963). The bailor ordinarily retains title in the bailed
property and a bailor generally may assert title against any
third party to whom the property has been transferred. See
Calva Products v. Security Pac. Nat’l Bank, 111 Cal. App. 3d
409, 418 (Cal. Ct. App. 1980). In light of these principles,
we hold that Buk was not a bailor under California law. First,
the Investment Agreement did not stipulate that Pruvot would
3
Among other factors, the Cell Game Account was located in
California, Buk was a resident of California, and the Investment
Agreement was entered into in California.
8
return Buk’s funds upon the film’s completion; instead, Buk
would receive a percentage of earned profits. J.A. 104. In
addition, Buk did not retain title to the $125,000 and thus
could not have asserted title against third party vendors.
Pruvot was free to commingle the funds with other investments,
provided that he refund $125,000 (from any source) upon Buk’s
request. Simply put, Buk made an investment, not a bailment. 4
D.
Moreover, Buk has not established the conditions necessary
for a constructive trust. 5 Under California law, a constructive
trust has three elements: (1) the existence of a res (some
4
To the extent that Buk attempts to challenge the
government’s interest as an unsecured creditor under United
States v. Reckmeyer, 836 F.2d 200 (4th Cir. 1987), we find that
his challenge fails. Reckmeyer recognized an exception to
§ 853(n)(6) in cases where the defendant’s entire estate has
been forfeited. Here, Buk has not shown that the defendant’s
entire estate was forfeited. See Schecter, 251 F.3d at 496(distinguishing Reckmeyer when the defendant forfeited a
specific item of property, rather than his entire estate).
5
Although the government argues that federal law is
controlling, we agree with Buk and other circuits that state law
determines whether a constructive trust should be imposed within
the context of § 853(n). See e.g. United States v. Shefton, 548
F.3d 1360 (11th Cir. 2008)(holding that a company was entitled
to constructive trust on criminally forfeited property under
Georgia law); United States v. Andrews, 530 F.3d 1232, 1238
(10th Cir. 2008)(“We recognize that in federal forfeiture
proceedings, ownership interests (including constructive trusts)
are defined by state law.”); United States v. Ribadeneira, 105
F.3d 833, n.5 (2nd Cir. 1997)(declining to impose a constructive
trust in the § 853 context because “Appellants have not met the
elements required by New York law for a constructive trust[.]”)
9
property or interest in property), (2) the plaintiff’s right to
that res, and (3) the defendant’s gain of the res “by fraud,
accident, mistake, undue influence or other wrongful act.”
United States v. Pegg, 782 F.2d 1498, 1500 (9th Cir.
1986)(citing and applying California Civil Code §§ 2223-24).
Buk has not identified any wrongful act by Pruvot that
induced him to part with the $125,000. 6 Instead, the evidence
presented shows that Pruvot asked Buk to invest in the Cell Game
Account for the purposes of developing a feature film, and
nothing suggests that Pruvot intended otherwise. Buk cannot
point to a misrepresentation by Pruvot regarding the nature or
purposes of the investment; further, the acts leading to
forfeiture were wholly unrelated to the $125,000. 7 The fact that
6
Buk suggests that Pruvot’s concealment of his criminal
activity is the necessary wrongful act. Such concealment is not
the type of conduct contemplated by California constructive
trust law. See e.g. Nevarez v. Nevarez, 202 Cal. App. 2d 596,
602 (Cal. Dist. Ct. App. 1962)(finding a constructive trust
where son defrauded mother into unknowingly signing over title
to property while she was seriously ill); Saltares v.
Kristovich, 6 Cal. App. 3d 504, 516-517 (Cal. Ct. App.
1970)(finding a constructive trust where a joint tenant
intentionally causes the death of his co-joint tenant and
thereby acquiries the entire property); Cramer v. Biddison, 257
Cal.App. 2d 720, 723-725 (Cal. Ct. App. 1968)(finding a
constructive trust where judgment of divorce obligated a father
to provide for children in his life insurance policy but he
failed to do so).
7
In his brief, Buk concedes that none of his funds were
connected to the underlying criminal activity of Pruvot and
D’Esclavelles.
10
Buk’s money was ultimately forfeited does not retroactively turn
Pruvot’s truthful statements to Buk into fraudulent ones.
Therefore, we find no constructive trust under California law.
III
Buk cannot show a superior interest in the invested funds,
because there was no bailment and there is no properly imposed
constructive trust. We therefore find that Buk possesses no
protected interest within the meaning of § 853(n)(6)(A).
Accordingly, we reverse the district court’s award of the
$125,000 and attorney’s fees. 8
AFFIRMED IN PART,
REVERSED IN PART,
AND VACATED IN PART
8
CAFRA allows for attorneys’ fees when the claimant
“substantially prevails.” 28 U.S.C. § 2465(b)(1). In light of
our disposition of this case, Buk has not substantially
prevailed and thus does not qualify for attorneys’ fees. We do
not reach any further consideration of CAFRA.
11