United States v. Lawrence S. Duran

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 12-12227
Non-Argument Calendar
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D.C. Docket No. 1:10-cr-20767-JLK-1
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
LAWRENCE S. DURAN,
Defendant,
CARMEN DURAN,
Claimant - Appellant.
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Appeal from the United States District Court
for the Southern District of Florida
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(November 29, 2012)
Before PRYOR, FAY and ANDERSON, Circuit Judges.
PER CURIAM:
The issue presented is whether a district court has the authority, under the
Federal Debt Collection Procedure Act, to determine under state law the ownership
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interests in property against which the United States has obtained a writ of
execution to collect a judgment of restitution in a criminal action. The United
States obtained a judgment for restitution of more than $85 million against
Lawrence Duran for crimes that he committed in a conspiracy to defraud Medicare.
After the United States obtained a writ of execution against an apartment that,
according to property records, was owned jointly by Lawrence and his former
wife, Carmen Duran, she moved to dissolve or stay the writ on the ground that she
had acquired sole title to the property as part of their divorce settlement several
months before his prosecution. The district court denied the motion without
prejudice on the ground that it lacked “jurisdiction to make findings with respect to
Duran’s divorce proceedings and corresponding property dispute.” Carmen
argues, and the United States concedes, that the district court erred in refusing to
adjudicate her motion. Because the Act provides that the United States may levy
only “property in which [a] judgment debtor has a substantial nonexempt interest,”
28 U.S.C. § 3203(a), the district court erred in refusing to adjudicate Carmen’s
motion. We vacate the order that denied Carmen’s motion and remand for further
proceedings consistent with this opinion.
I. BACKGROUND
In May 2011, Lawrence Duran pleaded guilty to 38 crimes related to his role
in a conspiracy to defraud Medicare. The district court sentenced Lawrence to 50
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years of imprisonment, followed by three years of supervised release. The district
court also entered a judgment against Lawrence and in favor of the United States
for $87,533,863.46 in restitution.
On October 19, 2011, the United States applied, under the Federal Debt
Collection Procedure Act, for a writ of execution against an apartment to collect
the judgment of restitution against Lawrence. See id. § 3203(c)(1). The United
States alleged that Lawrence had “possession, custody, or control” and “a
substantial nonexempt interest” in an apartment in New York City. The United
States stated in its certificate of service that it had “filed the [application] with the
Clerk of the Court” and that the application was “being served . . . by CM/ECF.”
Carmen was not served a copy of the application.
That same day, the Clerk of the district court granted the application of the
United States, and the Clerk issued a writ of execution. The writ ordered the
United States Marshal to satisfy the judgment of restitution against Lawrence by
“levying on and selling” the apartment.
On November 17, 2011, Carmen Duran moved to dissolve or stay the writ of
execution. Carmen argued that she was an “innocent owner” of the apartment, and
she requested an evidentiary hearing “on the critical issues of [her] legitimate
ownership of the apartment in question, the pertinent concerns of notice and due
process under Florida Law and [Federal Rule of Civil Procedure] 69, and [her]
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complete independence from [Lawrence], her former spouse.” Carmen alleged
that she had divorced Lawrence in June 2010; Lawrence had agreed as part of the
divorce settlement to transfer his interest in the apartment to Carmen; in July 2010,
Lawrence had executed a deed that conveyed his interest in the apartment to
Carmen; and she had “retained counsel to properly record the deed in New York.”
Carmen attached to her motion copies of the deed to the apartment, correspondence
between attorneys in Florida and New York about recording the deed, the
judgment of divorce, the divorce settlement agreement, and a financial affidavit
executed by Lawrence.
The United States opposed Carmen’s motion to dissolve. The United States
“[did] not dispute that Carmen Duran [was] entitled to recover one-half of the net
proceeds from the sale of the [apartment] since she was the one-half owner of the
property” when the United States recorded its lien. But the United States argued
that its lien had priority over Carmen’s unrecorded claim to sole ownership of the
apartment. See 28 U.S.C. § 3203(b). The United States attached to its response a
copy of its judgment lien and the deed it had found in the property records of New
York, which stated that the apartment was owned jointly by Carmen and
Lawrence.
Carmen replied that the United States could not levy the apartment to satisfy
Lawrence’s debt because he lacked any ownership interest in the apartment.
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Carmen alleged that she owned the apartment and that she had been unaware that
her divorce attorney had failed to record the deed. Carmen attached to her reply an
affidavit of her divorce attorney, which stated that he had attempted to file the
deed, had mistakenly omitted a required tax return, and had later “chose[n] not to
complete the recording of the deed” because the United States had filed criminal
charges against Lawrence. Carmen also attached to the reply her affidavit, which
explained how she was the lawful owner of the apartment.
The district court denied Carmen’s motion “without prejudice to re-file in a
court with jurisdiction.” The district court ruled that it lacked “jurisdiction to make
findings with respect to [Carmen’s] divorce proceedings and corresponding
property dispute.” Carmen filed this appeal.
II. STANDARD OF REVIEW
“Our review of a district court’s determination of subject matter jurisdiction
as well as statutory interpretation is de novo.” United States v. Rendon, 354 F.3d
1320, 1324 (11th Cir. 2003).
III. DISCUSSION
The Federal Debt Collection Procedure Act “provides ‘the exclusive civil
procedures for the United States’ to obtain satisfaction of a judgment in a criminal
proceeding that imposes a ‘fine, assessment, penalty, [or] restitution’ in favor of
the United States.” United States v. Bradley, 644 F.3d 1213, 1309 (11th Cir. 2011)
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(quoting 28 U.S.C. §§ 3001(a)(1), 3002(3)(B), 3002(8)). The Act provides the
United States several remedies to satisfy a judgment, one of which is to obtain a
writ of execution. 28 U.S.C. §§ 3202(a), 3203. Under section 3203(a), the United
States may levy “[a]ll property in which the judgment debtor has a substantial
nonexempt interest.”
The Act limits the authority of the United States to levy against jointly-
owned property. The United States may levy “property which is co-owned by a
debtor and any other person only to the extent allowed by the law of the State
where the property is located.” Id. § 3010(a). With regard to levying against
property under a writ of execution, “[c]o-owned property [is] subject to execution
[only] to the extent such property is subject to execution under the law of the State
in which it is located.” Id. § 3203(a).
The Act provides that co-owners and other persons interested in the property
have rights to receive notice of and to challenge the levy. The United States must
provide notice that the property “is being taken by the United States Government,”
id. § 3202(b), and the United States must serve a copy of the notice and its
application for the writ of execution “on each person whom the United States, after
diligent inquiry, has reasonable cause to believe has an interest in property to
which the remedy is directed,” id. § 3202(c). And after the district court issues the
writ, “[t]he court may[,] . . . [on] the motion of any interested person, and after
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such notice as it may require, make an order denying, limiting, conditioning,
regulating, extending, or modifying the use of any” remedy available to the United
States. Id. § 3013.
The Act obliges a district court to adjudicate any contested ownership
interests in property subject to a writ of execution. The Act provides that the
United States may levy only property in which a judgment debtor has a
“substantial nonexempt interest.” Id. § 3203(a). To that end, the district court
must determine whether the debtor has any ownership interests in the property, and
the district court must determine the ownership interests of any person who moves
to dissolve or modify any writ.
Two sister circuits also have interpreted the Act to allow nonparties to
participate in these proceedings to adjudicate their interests in the property under
state law. In United States v. Kollintzas, 501 F.3d 796 (7th Cir. 2007), the Seventh
Circuit explained that “[t]he FDCPA’s third-party notice requirement and the
provision regarding jointly owned property together imply that nonparties with an
interest in the targeted property may participate in the collection proceedings for
the purpose of asserting their interest in the property.” Id. at 801. And the court
determined that “the government’s liens were perfected and the garnishment
proceedings commenced before [the debtor’s spouse had] filed for divorce.” Id. at
803; see also United States v. Rogan, 639 F.3d 1106, 1107–09 (7th Cir. 2011)
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(vacating an order that granted a writ of garnishment obtained by the United States
priority over creditors’ claims to collect from a housing business under state law).
And in United States v. Coluccio, 51 F.3d 337 (2d Cir. 1995), the Second Circuit
allowed the mother of a defendant to challenge the right of the United States to
seize a cost bond that the mother had posted on her son’s behalf. Id. at 339–42.
The Second Circuit remanded the case to the district court to determine, under state
law, whether the mother was the beneficiary of a constructive trust on the cost
bond. Id. at 342.
The district court erred when it refused to adjudicate Carmen’s motion to
dissolve or stay the writ of execution. Because the district court had a duty to
determine what, if any, “substantial nonexempt interest” Lawrence held in the
apartment, 28 U.S.C. §§ 3203(a), 3013, when the United States levied against the
property, id. § 3203(b), we vacate the order that denied Carmen’s motion. On
remand, the district court must determine the respective ownership interests, if any,
of Carmen and Lawrence in the apartment when the United States obtained the writ
of execution and whether Lawrence had a “substantial nonexempt interest” in the
apartment that the United States could levy.
IV. CONCLUSION
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We VACATE the order that denied Carmen’s motion to dissolve, and we
REMAND for the district court to conduct further proceedings consistent with this
opinion.
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