When a person is convicted of a federal crime, especially in a fraud case, but in lots of other kinds of federal criminal cases too, the district court sometimes also orders that the person pay restitution.
The point of restitution is that the person has to pay back any money that they took - they have to make any victims of the crime whole again.
To satisfy a restitution judgment, the federal government can go try to get that money from assets that a person has - they can go after bank accounts and retirement accounts and houses.
A frequent question many folks have is whether they can also go after property that a person jointly owns with his or her spouse.
The Eleventh Circuit recently opined on how this works in United States v. Duran.
Lawrence Duran and Carmen Duran were married.
Then Lawrence Duran was convicted of participating in a conspiracy to defraud Medicare. As a part of his sentence, he was ordered to pay restitution of more than $85 million. He was also sentenced to 50 years in prison.
Before Mr. Duran's legal troubles, he owned an apartment with Mrs. Duran in New York City.
The Durans divorced before Mr. Duran was sentenced. In the divorce, it appears that Mrs. Duran was given sole title to the New York apartment.
Hungry Like The Wolf
After Mr. Duran was sentenced, the government wanted its $85 million. It applied for a writ to execute the restitution judgment. In the application for the writ, the government said that the apartment was a substantial asset that it should be able to collect.
When the prosecutors applied for the writ of execution, they told the court that they were serving it by using the district court's electronic case filing system. By filing it, in other words, it would be sent electronically to any attorney who had filed a notice of appearance in the case.
Because Carmen Duran wasn't a lawyer involved in the case - and didn't have a lawyer in the case - she didn't get a copy of the motion asking for a writ.
Getting an application from the government, though, caused the Court to approve the application for a writ. The writ ordered the Marshals Service to satisfy the judgment against Lawrence Duran by "levying on and selling" the apartment.
Carmen Duran filed a motion to dissolve the writ and not have her apartment sold. She said she was an innocent owner of the apartment who deserved an evidentiary hearing. Mrs. Duran said that she got half the apartment in the divorce anyway.
The government opposed Mrs. Carmen's motion, saying that she could get half of whatever they collected when the Marshals sold it. They said that their judgment lien had priority over Mrs. Duran's unrecorded claim.
When you look at the property records of New York, apparently, the apartment is listed as jointly owned by both Durans.
It seems that Mrs. Duran's divorce lawyer failed to record the new deed that showed she owned the apartment alone.
The district court said it didn't have jurisdiction to hear the claim. If Mrs. Duran wants to challenge this, the district court's view was that the right place for a property dispute in New York was a state court in New York.
Mrs. Duran appealed.
The Eleventh Circuit started by looking at the Fair Debt Collections Act - the statute that the government has to use to collect a restitution judgment.
As the Eleventh Circuit explained,
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 also says the government has to give notice to any co-owner or any other person with an interest in the property before they can take it. And the government has an affirmative burden to look for people who might have an interest.
Most importantly, the Eleventh Circuit said,
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.
So, all ended well for Mrs. Duran - except as to her ex-husband's fifty year prison sentence.
The Eleventh Circuit directed that
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.