Willis Management (Vermont), Ltd. v. United States
652 F.3d 236
| 2d Cir. | 2011Background
- MacKay, employed by Willis Management (Vermont), embezzled funds from Willis and its clients from 2004 to 2008, financing a Williston home and other purchases.
- MacKay used a $500,000 home-equity line of credit from People's United Bank to secure a mortgage on his Williston home and bought a condo in Orlando.
- Willis, Venture, and others filed state-law actions and obtained attachments on MacKay's Williston and Orlando properties in February 2008.
- The United States filed criminal charges against MacKay in February 2008 and sought forfeiture of the two properties under 21 U.S.C. § 853; MacKay pleaded guilty in September 2008.
- Preliminary Orders of Forfeiture were entered in November 2008; Willis and Venture petitioned for ancillary proceedings asserting a constructive trust in the properties.
- The District Court dismissed Willis and Venture, holding that § 853(i) remission precluded any constructive trust; it subsequently entered a Final Order of Forfeiture following a settlement among remaining parties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 853(i) precludes a constructive trust | Willis argues constructive trust is permissible and not precluded by § 853(i). | United States argues remission under § 853(i) provides the exclusive remedy, precluding equitable relief. | § 853(i) does not preclude a constructive trust. |
| What is the proper standard of review on appeal | De novo review because law governs the decision to recognize a constructive trust. | Abuse of discretion applies to equitable relief decisions. | De novo review applies to legal conclusions; the case is reviewed on the merits of law and applied standards. |
| Whether a constructive trust can be a valid 'legal right, title, or interest' under § 853(n)(6)(A) | A traceable constructive trust can be a superior legal interest to the defendant's. | Ribadeneira supports remission and denies constructive trust when a legal remedy exists; Schwimmer supports trust only for properly traced interests. | Constructive trust can be a 'legal ... interest' under § 853(n)(6)(A) for properly traced interests. |
| Relation to the bona fide purchaser and distribution with bank's interest | Bank's status as mortgagee/bona fide purchaser may be subordinate to a constructive trust. | Bank's priority under § 853(n)(6)(B) may trump a constructive trust; allocation is for the district court on remand. | Questions of bona fide purchaser priority remain for the district court; the constructive trust does not automatically yield the same disposition as § 853(i). |
Key Cases Cited
- Schwimmer, 968 F.2d 1570 (2d Cir. 1992) (constructive trusts can suffice as a 'legal interest' under § 853(n)(6))
- Ribadeneira, 105 F.3d 833 (2d Cir. 1997) (remission under § 853(i) may obviate need for equitable relief; footnote held dictum here)
- BCCI Holdings (Lux.), S.A., 46 F.3d 1185 (D.C. Cir. 1995) (construction of § 853 remedial scheme and prematurity of granting constructive trusts)
- Salti, 579 F.3d 656 (6th Cir. 2009) (critiques BCCI and supports constructive trust considerations in forfeiture)
- United States v. $4,224,958.57, 392 F.3d 1002 (9th Cir. 2004) (equitable remedies in forfeiture contexts; illustrative authorities)