United States v. Maderera Numancia

• Court: Court of Appeals for the Tenth Circuit
• Decided: December 17, 1998
• Docket: 97-6319
• Status: Unpublished

Opinion

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* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel.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.

-2- 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.

-3- 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.

-4- 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

-5- “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.”

-6- 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

-7- For the foregoing reasons, we AFFIRM the judgment of the district court.

Entered for the Court

Tena Campbell United States District Judge

-8-