United States v. Martinez

UNITED STATES COURT OF APPEALS
For the Fifth Circuit

No. 99-20321

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

YOLANDA MARTINEZ,

Appellant.

Appeal from the United States District Court
for the Southern District of Texas

September 22, 2000

Before DAVIS, JONES and STEWART, Circuit Judges.

DAVIS, Circuit Judge.

After entering a guilty verdict on multiple RICO counts

pursuant to defendant’s plea agreement, the district court entered

a preliminary order forfeiting a number of the defendant’s assets.

The defendant’s wife, Yolanda Martinez (“Yolanda”), filed a claim

in the ancillary proceeding claiming an interest in some of these

assets on the basis of Texas community property law. The district

court rejected her claims to all assets acquired after the

commencement of the RICO conspiracy. Except for the district

court’s disposition of Yolanda’s claim to one item of property
purchased before the RICO conspiracy commenced, we affirm the

district court’s order.

I

Ramon Martinez (“Martinez”) was convicted pursuant to a guilty

plea of multiple RICO violations. The Government, as part of that

prosecution, sought to forfeit a number of Martinez’ assets under

the criminal forfeiture provisions of 18 U.S.C. § 1963. Martinez

agreed to the forfeiture of a number of his assets but contested

the Government’s attempt to forfeit other assets. The district

court held a forfeiture hearing on the contested assets and

concluded that the assets were, in fact, proceeds from the RICO

drug enterprise. The court then issued a preliminary order of

forfeiture as to those assets.

Following the district court’s entry of the preliminary order

of forfeiture, Yolanda, and others filed petitions in an ancillary

proceeding, each claiming an interest in a number of the forfeited

assets.1

Yolanda asserted in her petition that Texas community property

law entitled her to an undivided l/2 interest in the forfeited

1
18 U.S.C. § 1963(l)(2) states that:

[a]ny person, other than the defendant, asserting a legal
interest in property which has been ordered forfeited to
the United States pursuant to this section may ...
petition the court for a hearing to adjudicate the
validity of his alleged interest in the property. The
hearing shall be held before the court alone, without a
jury.

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assets and that Texas’ homestead laws protected her rights to her

and Martinez’ primary residence.

The Government filed a motion for summary judgment, seeking an

order declaring that Yolanda failed to present issues of fact and

thus, as a matter of law, Yolanda had no legitimate claim to any of

the forfeited property.2

Yolanda filed a response to the motion for summary judgment in

which she argued: (1) that the Federal Rules of Civil Procedure,

including the procedures for summary judgment, do not apply in

proceedings ancillary to a criminal case, and (2) that the property

interests claimed in her petition were not subject to forfeiture.

The district court, without specifically addressing Yolanda’s

arguments and without assigning reasons, rejected her claim to all

items of property except one which was designated “Asset 28" or

“Mindy’s Hacienda Apartments.”

With respect to this property, Yolanda claimed a community

property interest and also argued that under no circumstances could

the forfeiture affect her interest in the property because she and

her husband acquired the land underlying Mindy’s Hacienda

Apartments in 1970, before the Government contended the RICO

conspiracy began. The Government conceded Yolanda’s superior right

2
The Government also sought summary judgment and a declaration
that the remaining claimants also had no interest in the property
as a matter of law. The district court granted the Government’s
motion as to all claimants. However, Yolanda is the only claimant
who filed an appeal and for that reason we need not discuss any of
the other claims.

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to a l/2 interest in the land underlying Mindy’s Hacienda

Apartments. The Government then excepted from its motion for

summary judgment Yolanda’s claimed interest in l/2 of the land upon

which Mindy’s Hacienda Apartments was constructed. The Government,

however, challenged Yolanda’s claim to the apartments, and any

other improvements to this property, arguing that they were built

on the land after 1973, with proceeds from the RICO drug

conspiracy. The Government represented that Martinez purchased

the land in 1970 for $2,500. The district court, without

specifying reasons, awarded Yolanda l/2 of that amount, or $1,250.

Yolanda raised three issues in the district court that are

properly before us on appeal: (l) whether the district court erred

in refusing to give her a hearing; (2) whether the district court

erred in concluding that she had no community property interest in

the forfeited property by virtue of her marriage to Martinez; (3)

whether the district court erred in concluding that she had no

homestead interest in certain forfeited assets; and (4) whether the

district court erred in its disposition of her claim to the land

purchased for Mindy’s Hacienda Apartments.3 We consider these

3
Yolanda also argues on appeal that summary judgment was
inappropriate because she and Martinez invested legitimate funds in
some of the forfeited properties and, presumably, she is entitled,
at least, to reimbursement of these funds. However, Yolanda did
not make this argument in the district court and we do not consider
issues raised for the first time on appeal. Diaz v. Collins, 114
F.3d 69, 71 (5th Cir. 1997) (holding that “[i]t is our well-settled
rule that ‘issues raised for the first time on appeal are not

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arguments in turn.

II

A

Although § 1963 gives a claimant a right to a hearing on the

merits of a claim presented in an ancillary proceeding within 30

days if practicable,4 no hearing on the merits is necessary if the

court can dispose of the claim on the pleadings as a matter of law.

See United States v. BCCI Holdings (Luxembourg), S.A., (In re

Petitions of General Creditors), 919 F.Supp 31, 36 (D.D.C.

1996)(“If a third party fails to allege in its petition all

elements necessary for recovery ... the court may dismiss the

petition without providing a hearing”); see also United States v.

Campos, 859 F.2d 1233, 1240 (6th Cir. 1988)(holding that under 21

U.S.C. § 853 a district court is not required to hold a hearing or

trial where claimants fail to allege or make a prima facie showing

of a legal right, title, or interest in the forfeited property).

We are satisfied that Congress intended to grant a third party the

right to a hearing only when facts are in dispute that require

resolution in order to resolve the claim. We therefore reject

Yolanda’s argument that a district court must hold a hearing and

reviewed by this Court unless they involve purely legal questions
and failure to consider them would result in manifest
injustice’”)(citation omitted).
4
“The hearing on the petition shall, to the extent practicable
and consistent with the interests of justice, be held within thirty
days of the filing of the petition.” 18 U.S.C. § 1963(l)(4).

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allow parties to call witnesses when their petition fails as a

matter of law to establish their claim to any of the forfeited

property.

B

Section 1963 provides for the criminal forfeiture of a

defendant’s interest in the proceeds of RICO activities. A

defendant’s interest in the proceeds of RICO activities extends to

property traceable to the proceeds of racketeering activity. See

18 U.S.C. § 1963(a)(3). “Under the doctrine of ‘relation back,’

[set forth in § 1963(c)] the defendant’s interest in the property

forfeited under § 1963(a) is divested at the time the racketeering

activity upon which the conviction is predicated occurs.”5 See

United States v. Pelullo, 178 F.3d 196, 201 (3rd Cir. 1999); see

also United States v. Bucuvales, 970 F.2d 937, 947 (1st Cir. 1992)

5
Yolanda argues that the relation back doctrine cannot be
applied retroactively to assets acquired prior to the October 1984
amendments to § 1963, which included § 1963(c). However, the
relation back doctrine was part of the 1970 RICO statute. See
United States v. Ginsburg, 773 F.2d 798, 803 (7th Cir. 1985)(en
banc), cert. denied, 475 U.S. 1011 (1986) (rejecting argument that
Congress intended to limit forfeiture to include only the property
titled to defendant at the time of conviction). And, Martinez
continued to operate the RICO enterprise after 1984, so the
amendment applies to the case at hand. United states v. McHan, 101
F.3d 1027, 1041 (4th Cir. 1996), cert. denied, 520 U.S. 1281
(1997)(holding that under comparable 21 U.S.C. § 853, also enacted
by the Comprehensive Crime Control Act of 1984, because defendant’s
continuing criminal enterprise continued after Congress’ amendment
to the forfeiture statute, the amended statute applies).
Therefore, we reject Yolanda’s argument and conclude that the
“relation back doctrine” applies to the contested assets.

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cert. denied 507 U.S. 959 (1993). Section 1963, in broad terms,

permits third-parties to challenge an order of forfeiture where

that party can demonstrate that: (1) she had a vested interest in

the property at the time the criminal acts took place; or (2) she

is a bona fide purchaser for value. 18 U.S.C. § 1963(6).

Because Yolanda does not argue that she is a bona fide

purchaser we consider only whether she has shown that she owned an

interest in the contested property at the time Martinez engaged in

the criminal acts. On the merits, we agree with the Government

that Yolanda has failed to assert a legal right or interest in any

of the contested assets.

Yolanda argues that she has a property interest in the

contested assets based on Texas’ community property law. However,

all of the assets that Yolanda claims, except the land underlying

Mindy’s Hacienda Apartments, were acquired by Martinez with the

proceeds of the RICO operation for which Martinez was convicted.

Because the “relation back doctrine” operates to vest title in the

Government to the proceeds of Martinez’ RICO activities as of the

time Martinez engaged in those illegal activities, these proceeds,

and any property purchased with the proceeds, never became

community property.

We further conclude that Yolanda has failed to establish a

homestead interest in the property referred to as “Asset 2" or the

“Martinez Compound,” one of the contested assets. For

substantially the same reasons as above, the forfeiture relates

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back to the time of the illegal activity for which Martinez was

convicted. Thus, neither Martinez nor Yolanda, individually or

through the community, ever had title to the claimed homestead

property. Because Yolanda is not an owner or owner’s spouse, she

is precluded under Texas law from asserting a homestead exemption.

See Shepler v. Kubena, 563 S.W.2d 382, 386 (Tx. Civ. App. -- Austin

1978, no writ) (holding that the benefits of homestead laws are

based upon homestead claimants’ rights in property and have no

separate existence independent of such rights, such that homestead

rights in property can rise no higher than right, title, or

interest which claimant owns in property); see also Sparks v.

Robertson, 203 S.W.2d 622, 623 (Tx. Civ. App. – Austin 1947, writ

ref’d).

C

With the exception of its resolution of Yolanda’s claim to

Mindy’s Hacienda Apartments, we agree with the district court that

Yolanda stated no legal claim to the forfeited property and the

district court correctly dismissed her petition.

As to Yolanda’s claim to Mindy’s Hacienda Apartments, for

reasons stated above, Yolanda acquired no interest in these

improvements on the land purchased in 1970 because the improvements

constructed on the land were fueled by proceeds from Martinez’ RICO

drug conspiracy. As to the land acquired in 1970, however,

Yolanda owned an undivided l/2 interest in that property. We

disagree with the district court, however, that the value of that

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property is necessarily determined by the 1970 purchase price. The

Government conceded that Yolanda owned a l/2 interest in the land.

Therefore, the district court should have entered a judgment

recognizing Yolanda’s l/2 interest in that land or, alternatively,

l/2 the current value of the land rather than the 1970 value of the

land. Because the Government made clear in its motion that it had

no claim to the land underlying Mindy’s Hacienda Apartments, that

property and its value was completely outside the scope of the

motion and was not properly before the district court.

Accordingly, we remand to the district court Yolanda’s claim to l/2

of the land underlying Mindy’s Hacienda Apartments so that both

parties will have an opportunity to present evidence of the current

value of that land.

We also note that Yolanda requested a trial by jury to

adjudicate her interest in the forfeited property. We leave to the

district court in the first instance to determine the 7th Amendment

guarantees to Yolanda a jury trial to determine the current market

value of the land underlying Mindy’s Hacienda Apartments. We

therefore REMAND this case to the district court to resolve

Yolanda’s claim to this item of property.

AFFIRMED in part, REVERSED and REMANDED in part.

Judge Carl S. Stewart concurs in the judgment only.

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