United States v. Maderera Numancia

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
DEC 17 1998
TENTH CIRCUIT PATRICK FISHER
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
1171 BANDERA ROAD, San Antonio,
Texas, Real Property Located at,
Described as: Lot Seventy-Four (74),
Block Three (3), New City Block 11315,
Parker Garden Subdivision San Antonio,
Bexar County, Texas; BANDERA
TERRACE APARTMENTS, San No. 97-6319
Antonio, Texas, Described as: Lot 87, (Western District of Oklahoma)
Block B, New City Block 11507, (D.C. No. CIV-94-1362-L)
Woodlawn Hills Subdivision, San
Antonio, Bexar County, Texas and Lot 89,
Block B, New City Block 11507,
Woodlawn Hills Subdivision, San
Antonio, Bexar County, Texas;
KENNEDY ARMS APARTMENTS, San
Antonio, Texas, Described as: 2.657
Acres, Lot Four (4), Block Eleven (11),
NCB 12309, San Antonio, Bexar County,
Texas; BANDERA OAKS
APARTMENTS, San Antonio, Texas,
Described as: Tract I: Lot 76, New City
Block 11507, Falbo Subdivision, San
Antonio, Bexar County, Texas; CASA
BLANCA APARTMENTS, San Antonio,
Texas, Described as: Block 53, NCP
15596, P-78C, Cable Ranch
Subdivision, San Antonio, Bexar County,
Texas; PROMISSORY NOTE
EXECUTED ON JULY 8, 1994, Maker
JNP Holding, General Partner of Bandera
Terrace L.P. and Bandera Oaks, L.P.,
Holder Andrea Kuhse, in the amount of
$330,000,
Defendants.
MADERERA NUMANCIA,
Claimant - Appellant.
ORDER AND JUDGMENT*
Before ANDERSON and BRORBY, Circuit Judges, and CAMPBELL,** District Judge.
This appeal arises out of a civil forfeiture action brought by the United States
pursuant to 18 U.S.C. § 981. At issue were two promissory notes, one for $300,000, the
other for $30,000. The United States had claimed, and there was no dispute, that the
promissory notes were traceable to the proceeds of money laundering. The appellant,
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
**
The Honorable Tena Campbell, District Judge, for the U.S. District Court for the
District of Utah, sitting by designation.
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Maderera Numancia, S.A., a Costa Rican corporation, contested the forfeiture, claiming
that it was the “innocent owner” of the promissory notes. Following trial, the jury
returned its verdict in favor of the United States, and the district court entered a judgment
of forfeiture. Maderera Numancia appeals the judgment of forfeiture and the denial by
the district court of Maderera Numancia’s post-trial motions for a new trial and to alter or
amend the judgment. We affirm.
BACKGROUND
On August 19, 1994, the United States Marshall for the Western District of
Oklahoma seized certain real properties on the basis that they were subject to forfeiture
under 18 U.S.C. § 981(a)(1)(A). Among the properties seized were the two promissory
notes that Maderera Numancia had purchased from Patrick Kuhse (“Kuhse”). Maderera
Numancia asserted the “innocent owner” defense, claiming that it was a bona fide owner
of the promissory notes and that it had no knowledge of the underlying offenses
committed by Kuhse.
Fernando Ortega Cervantes (“Ortega”), a Costa Rican businessman, is the
principal of Maderera Numancia. At trial, Ortega testified regarding his business
dealings with Kuhse, an American, whom Ortega met in 1994.1
1
Kuhse had been indicted in Oklahoma on charges of money laundering. He
moved to Costa Rica following his indictment, where he remained as a fugitive. The
parties stipulated that the two promissory notes were proceeds of Kuhse’s money
laundering.
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On July 5, 1994, Ortega purchased Maderera Numancia, a timber extraction
company, for the sole purpose of doing business with Kuhse. Thereafter, Maderera
Numancia purchased properties owned by Kuhse in the United States, including the two
promissory notes. The notes were secured by second liens on two apartment complexes
located in San Antonio, Texas. Maderera Numancia paid Kuhse $130,000 along with a
25% interest in Ortega’s Costa Rican rainforest property. At Kuhse’s request, Ortega
paid Kuhse the $130,000 in cash from the safe in Ortega’s office.
Before purchasing the promissory notes from Kuhse, neither Ortega nor anyone
representing Maderera Numancia visited the apartment complexes that secured the
promissory notes, or looked at the balance sheets or tax returns of these commercial
properties. Ortega testified that his attorneys and accountants, who had looked at
photographs of the properties, assured him that the deal was valid, but these individuals
did not testify at trial.
At trial, the district court gave the following instruction:
INSTRUCTION NO.12
ELEMENTS OF PROOF - INNOCENT OWNERSHIP
18 U.S.C. § 981 provides that the property of innocent persons shall
not be forfeited. The statute provides, in pertinent part that:
No property shall be forfeited under this section to the extent
of the interest of an owner or lienholder by reason of any act
or omission established by that owner or lienholder to have
been committed without the knowledge of that owner or
lienholder.
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In this case, the claimant must show by a preponderance of the
evidence that it was an “innocent owner” as that term is defined in the
statute. “Innocent ownership” is a defense to forfeiture for owners of the
property who are uninvolved in and unaware of the illegal activity. In order
to come within this exception, claimant must prove by a preponderance of
the evidence that it did not know about the illegal actions when it purchased
the promissory notes. If the claimant meets its burden, then the property is
not forfeited and your verdict should be in favor of the claimant and against
the plaintiff. If the claimant fails to meet its burden, then the property is
forfeited and your verdict should be for the plaintiff and against the
claimant.
Maderera Numancia objected to this instruction. Maderera Numancia proposed an
alternative instruction that stated that the innocent owner defense bars forfeiture if “the
activity giving rise to the forfeiture occurred without the Plaintiff’s actual knowledge,”
and defined the term “actual knowledge” in contrast to “constructive knowledge.” The
district court declined to give the instruction proposed by Maderera Numancia.
On appeal, Maderera Numancia argues that the instruction given by the district
court failed to make clear to the jury that in order to prevail as an innocent owner,
Maderera Numancia needed only to prove that it did not have actual knowledge that the
promissory notes were tainted. Maderera Numancia contends that the instruction
permitted the jury to reject Maderera Numancia’s innocent owner defense if the jury
concluded that Maderera Numancia had constructive knowledge that the property
purchased was tainted.
DISCUSSION
In reviewing a challenge to a district court’s jury instructions, we consider
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“whether the jury, considering the instructions as a whole, was misled.” United States v.
Pappert, 112 F.3d 1073, 1076 (10th Cir. 1997) (internal quotations omitted). Where an
objection is made at trial, we review de novo the instructions actually submitted to the
jury. See id. We review the district court’s refusal to give a particular jury instruction
proposed by a party for abuse of discretion. See United States v. Swallow, 109 F.3d 656,
658 (10th Cir. 1997).
Although Maderera Numancia contends that the district court’s instruction
improperly permitted the jury to reject the innocent owner defense upon a finding of
constructive knowledge, we need not reach the question of whether 18 U.S.C. § 981
permits a jury to consider whether an owner had “constructive knowledge” of
wrongdoing. The instruction given clearly required the jury to find that Maderera
Numancia had “actual knowledge” that the promissory notes were tainted in order to
return a verdict in favor of the government. In its jury instructions, the district court
quoted 18 U.S.C. § 981 which provides that property shall not be forfeited if the illegal
acts giving rise to the forfeiture were committed “without the knowledge” of the owner.
The district court explained that the innocent owner defense protects against forfeiture
when the owner was “uninvolved in and unaware of the illegal activity.” The jury was
instructed to find for the claimant Maderera Numancia if it “prove[d] by a preponderance
of the evidence that it did not know about the illegal actions when it purchased the
promissory notes.”
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Contrary to Maderera Numancia’s assertions, the instruction submitted to the jury
gave no indication that the jury could reject the innocent owner defense upon finding that
Maderera Numancia “should have known” that the promissory notes were tainted.
Instead, the instruction directed the jury to determine if Maderera Numancia was
“unaware of” or “did not know about” Kuhse’s illegal activity. The only reasonable
interpretation of this instruction required the jury to determine whether Maderera
Numancia had “actual knowledge” of Kuhse’s illegal activity. The district court’s choice
of words accurately reflected the statutory requirement and adequately communicated the
requirement of “actual knowledge” advocated by Maderera Numancia. Applying a de
novo standard of review, we conclude that the instructions submitted to the jury “correctly
state the law and provide the jury with an ‘intelligent, meaningful understanding of the
applicable issues and standards.’” United States v. Winchell, 129 F.3d 1093, 1096 (10th
Cir. 1997) (quoting United States v. Laughlin, 26 F.3d 1523, 1528 (10th Cir. 1994)).
Because the instruction submitted to the jury on the innocent owner defense
adequately conveyed the “actual knowledge” standard, the district court did not need to
further instruct the jury on the difference between “actual” and “constructive” knowledge.
Therefore, we find that the district court did not abuse its discretion by rejecting Maderera
Numancia’s proposed instruction on the innocent owner defense.
CONCLUSION
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For the foregoing reasons, we AFFIRM the judgment of the district court.
Entered for the Court
Tena Campbell
United States District Judge
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