United States v. White , 306 F. App'x 838 ( 2007 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 8, 2007
No. 06-30797 Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA
Plaintiff - Appellee
v.
LYMAN DAN WHITE, JR.
Defendant
v.
ABOUNDING LOVE MINISTRIES, INC.
Appellant
Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:01-CR-173-1
Before WIENER, DeMOSS, and PRADO, Circuit Judges.
PER CURIAM:*
Before Defendant-Appellant Lyman D. White pleaded guilty to health care
fraud, he unlawfully used Medicaid funds to purchase three lots of land in a
Baton Rouge, Louisiana, subdivision and donated these lots to Abounding Love
Ministries, Inc. (“Abounding Love”). As part of his plea agreement, White agreed
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 06-30797
to forfeit his interest in any asset that was traceable to his offense, which
included the three donated lots. Abounding Love does not contest the forfeiture
of these lots, but instead argues that, under 21 U.S.C. § 853(n)(6)(A), it has a
right, title, or interest in the improvements it made to the property and therefore
should be considered a bona fide purchaser to that extent under 21 U.S.C. §
853(n)(6)(B). We hold that Abounding Love was not a bona fide purchaser for
value of either the lots or of its improvements to these lots, and affirm the
district court’s decision to grant the government’s motion to dismiss under
Federal Rule of Civil Procedure 12(b)(6). Even though Abounding Love might
obtain relief under 21 U.S.C. § 853(i)(1), which allows it to petition the United
States Attorney General therefor, the courts are not the appropriate forum.1
I. FACTS AND PROCEEDINGS
During a three-month period in 1999, White illegally laundered $390,000
by taking Medicaid funds paid to his drug and alcohol counseling center and
depositing them into an account in the name of the center’s fiscal agent. In April
2001, he used $130,000 of these funds to purchase three lots in the Melrose East
Subdivision of Baton Rouge. In August 2001, White gratuitously transferred
these lots to Abounding Love through Albert White, its pastor and his brother,
by an Act of Donation filed and recorded in the public records of East Baton
Rouge Parish. In May 2005, White pleaded guilty to health care fraud, in
violation of 18 U.S.C. § 1347. As part of his plea agreement, White agreed to
1
“With respect to property ordered forfeited under this section, the Attorney General
is authorized to . . . (1) grant petitions for mitigation or remission of forfeiture, restore forfeited
property to victims of a violation of this subchapter, or take any other action to protect the
rights of innocent persons which is in the interest of justice and which is not inconsistent with
the provisions of this section . . . .” 21 U.S.C. § 853(i)(1); see also United States v. Lavin, 942
F.2d 177, 185 (3d Cir. 1991) (“For the majority of third parties . . . who assert an equitable,
rather than a legal, entitlement to relief, petitioning the Attorney General for remission and
mitigation remains the exclusive remedy.”) (footnote omitted).
2
No. 06-30797
forfeit his interest in any asset that was traceable to, derived from, or a
substitute for property that constituted the gross proceeds of his offense. The
three lots that White had donated to Abounding Love were among the properties
identified in the consent judgment of forfeiture as being derived from his fraud.
The district court signed a preliminary order of forfeiture under 18 U.S.C. §
982(a)(7), which included the three lots.
In March 2006, Abounding Love received notice of the preliminary order
of forfeiture, and the following month it filed a timely petition to recognize its
partial interest in the three lots. The interest that Abounding Love asserted in
the lots was the equivalent of its expenditures for maintenance, preservation,
repair, renovation, and improvements to the lots that it had made prior to its
having reasonable cause to believe that the property was subject to forfeiture.
Abounding Love claimed that it was a bona fide purchaser for value to the extent
of its improvement-related expenditures. In response, the government filed a
Rule 12(b)(6) motion to dismiss. The district court concluded that Abounding
Love had failed to allege any facts that would qualify it as a bona fide purchaser
for value and that any funds it might have spent on maintenance or
improvements did not constitute the purchase of an interest in the property.
The court concluded that Abounding Love’s petition failed to state a claim on
which relief could be granted and granted the government’s motion to dismiss.
Abounding Love timely filed a notice of appeal.
II. STANDARD OF REVIEW
We review a district court’s dismissal pursuant to Rule 12(b)(6) de novo,
employing the same standard as the district court.2 Dismissal is proper if the
complaint lacks an allegation regarding a required element necessary to obtain
2
Gen. Elec. Capital Corp. v. Posey, 415 F.3d 391, 395 (5th Cir. 2005).
3
No. 06-30797
relief.3 A plaintiff must assert more than “conclusory allegations or legal
conclusions masquerading as factual conclusions” to avoid dismissal.4 Rather,
the complaint “must contain either direct allegations on every material point
necessary to sustain a recovery . . . or contain allegations from which an
inference fairly may be drawn that evidence on these material points will be
introduced at trial.”5
Under 21 U.S.C. § 853(n), the legal right, title, or interest of a third party
is determined by state law.6 Federal law determines whether that interest may
be forfeited.7
III. ANALYSIS
The district court correctly determined that Abounding Love was not a
bona fide purchaser for value within the meaning of 21 U.S.C. § 853(n) on the
basis of the money it had spent on maintenance, improvements, and upkeep of
the three donated lots. Under this statute, only two “narrow categories”8 of third
parties may state a claim for property subject to forfeiture: (1) petitioners who
had “a legal right, title, or interest” in the property superior to that of the
defendant at the time the interest of the United States vested through the
defendant’s commission of an act giving rise to forfeiture, and (2) “bona fide
3
Rios v. City of Del Rio, 444 F.3d 417, 421 (5th Cir. 2006) (internal quotation marks
omitted).
4
Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir. 1993).
5
Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995) (internal quotation
marks omitted).
6
United States v. Alcarez-Garcia, 79 F.3d 769, 774 (9th Cir. 1996).
7
United States v. Hooper, 229 F.3d 818, 820 (9th Cir. 2000); see also United States v.
Lester, 85 F.3d 1409, 1412 (9th Cir. 1996) (“Once ownership interests are defined under state
law, the federal forfeiture statutes determine whether these property interests must be
forfeited by the Government.”).
8
United States v. Lavin, 942 F.2d 177, 185 (3d Cir. 1991).
4
No. 06-30797
purchaser[s] for value of the right, title, or interest in the property” who had no
knowledge of the forfeitability of the property.9 Abounding Love does not contest
the forfeiture, arguing instead that, under 21 U.S.C. § 853(n)(6)(A), it has a
right, title, or interest in improvements it made to the lots and therefore should
be considered a bona fide purchaser under 21 U.S.C. § 853(n)(6)(B) to the extent
of the cost of these improvements. As discussed below, its claim is without
merit.
Abounding Love cannot be considered a bona fide purchaser of the lots
under the statute, because it was a donee of the forfeited property. Louisiana
law rejects Abounding Love’s argument that a donee may be a bona fide
purchaser for value.10 Similarly, to qualify as a bona fide purchaser under
federal forfeiture law, the claimant must have given value in exchange for
property.11 The bona fide purchaser provision in 21 U.S.C. § 853(n)(6)(B) is
applicable only to purchases of the forfeiter’s interest in the asset.12 Abounding
Love gave nothing of value in exchange for the underlying property, which was
9
21 U.S.C. §§ 853(n)(6)(A) & (B).
10
See, e.g., Diesel Equip. Corp. v. Epstein, 169 So. 2d 61, 63 (La. 1964) (discussing
whether purchase of personal property in payment of pre-existing debt renders purchaser bona
fide purchaser, Louisiana Supreme Court noted that to be considered “bona fide purchaser” one
who obtains property must have parted with value at time he obtained property); Mathews v.
Mathews, 817 So. 2d 418, 421 (La. Ct. App. 2002) (noting that parties who did not pay any
consideration for real property but merely accepted gratuitous donation were not purchasers
for value of property); Wood v. Powell, 96 So. 2d 335, 339 (La. Ct. App. 1957) (donation “falls
into an entirely different category from an act of sale,” and therefore “a donee is not entitled
to the benefit of the protection accorded bona fide purchasers for a valuable consideration”);
see also La. Civ. Code Ann. arts 1523-1525.
11
See, e.g., United States v. Jones, 837 F.2d 1332, 1334 (5th Cir. 1988); see also U.C.C.
§ 1-201(44).
12
See, e.g., United States v. Soreide, 461 F.3d 1351, 1354 (11th Cir. 2006) (noting that
because § 853(n)(6)(B) exists to protect purchasers of defendant’s interest in asset, parties who
purchased interest in properties subject to forfeiture from third party seller are not protected
by provision).
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No. 06-30797
not purchased but instead was received by gratuitous donation from White.
Thus, Abounding Love cannot be classified as a bona fide purchaser of the lots.
Abounding Love does not assert, however, that it was a bona fide
purchaser of the underlying immovable property, but a bona fide purchaser of
the improvements it made to the property. It claims to have an interest that
entitles it to relief by virtue of having made subsequent improvements to the
lots, not an interest in the lots themselves. Abounding Love may be considered
a bona fide purchaser under § 853(n)(6)(B) only if it purchased or paid valuable
consideration for White’s interest in the property. But White had an interest
only in the underlying immovable property; he never had any interest in the
improvements that Abounding Love made subsequent to White’s divestiture of
all interest in the lots.13 Even if, arguendo, Abounding Love had paid valuable
consideration for the lots, it could not be considered a bona fide purchaser of the
improvements, because White never had any interest in the post-donation
improvements to the lots.
IV. CONCLUSION
We hold that Abounding Love is not entitled to relief under § 853(n)(6)(B)
for its improvements to the three donated lots. Abounding Love failed to present
a valid claim for relief in the forfeiture proceeding, because it was not a bona fide
purchaser for value of the underlying property or the improvements to it.
Abounding Love might be entitled to petition the Attorney General for
discretionary relief under 21 U.S.C. § 853(i)(1), but the instant claim for relief
must be denied and the judgment of the district court granting the government’s
motion to dismiss for failure to state a claim AFFIRMED.
13
In its brief, Abounding Love expressly concedes that White had “no interest
whatsoever in the improvements to the lots because they were made at Appellant’s expense,
after Lyman White divested himself of his interest by donation.”
6