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.
2
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.
3
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
4
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).
5
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.
6
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
7
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
8
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.
9