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United States v. Ruan

United States District Court, S.D. Alabama, Southern Division

November 19, 2018

UNITED STATES OF AMERICA
v.
XIULU RUAN, M.D.,

          ORDER

          CALLIE V. S. GRANADE SENIOR UNITED STATES DISTRICT JUDGE

         This action is before the Court on the objection of Defendant Xiulu Ruan to the Writ of Execution filed by the United States and the Ex Parte Order granting the Writ of Execution (Doc. 785), the response thereto of the United States (Doc. 796), and Ruan's reply (Doc. 799). For the reasons explained below, the Court finds a hearing is not necessary and that the transfer of property in Ruan's divorce decree to Ling Cui and the resulting quit claim deeds should be declared void and set aside.

         Defendant Ruan filed a one-page objection to the Writ of Execution filed by the United States and the Ex Parte Order granting the Writ of Execution and requested a hearing on his objection based on the following grounds:

The Circuit Court of Mobile County, Alabama has granted a divorce to Xiulu Ruan and his wife, Ling Qui, which sets out the terms upon which these parties are divorced, and the Writ of Execution and the Order are an attempt by the United States of America to circumvent the divorce decree.

(Doc. 785). However, as detailed in the United States' response, the divorce decree and resulting quit claim deeds should be set aside as fraudulent transfers.

         On May 31, 2017, this Court sentenced Defendant Xiulu Ruan to 252 months imprisonment and to pay $15, 239, 369.93 in restitution and a special assessment of $1, 500. (Doc. 665). The United States reports that Ruan has paid no funds towards restitution and has paid only $100 towards the special assessment through the Inmate Financial Responsibility Program. Ruan's court-ordered restitution gives rise to a lien in favor of the United States on all of his property and rights to property, just as if the liability were for a tax assessed under the Internal Revenue Code of 1986. 18 U.S.C. § 3613(c).[1] That lien arose upon the entry of judgment. Id.

         A judgment of divorce was entered on December 10, 2017 which transferred the majority of Ruan's assets to Ling Cui. (Doc. 796-2). On May 10, 2018, this Court entered a restraining order prohibiting Ruan, his former wife and their agents from “pursuing further action to transfer the real and personal property set forth in the ‘JUDGMENT OF DIVORCE' filed December 7, 2017, in Circuit Court of Mobile County, Alabama, CIVIL ACTION No. DR-2011-901100.00-H.” (Doc. 769). On May 11, 2018 and June 7, 2018, quit claim deeds were recorded to perfect the transfer of Alabama and Florida properties from Ruan and his LLC to his former wife, Ling Cui, in accordance with the divorce decree. (Docs. 796-9, 796-10). A deed must be recorded to perfect the transfer of property set out in the divorce decree from Ruan and his LLC to Cui . Johnson v. Haleyville Mobile Home Supply, Inc., 477 So.2d 328 (Ala. 1985) (properly recording an instrument perfects the transfer of title). As such, recording the deed constitutes “pursuing further action to transfer the real ... property set forth in the ‘JUDGEMENT OF DIVORCE' ” and violates this Court's restraining order.

         On May 29, 2018, this Court issued an Order for a Writ of Execution for 15 properties that were owned either solely by Ruan or Ruan's single member LLC (XLR Properties, LLC) or jointly by Ruan and his former wife, Ling Cui. (Doc. 772). The United States Marshal's service seized the properties and filed returns of service. (Docs. 781, 784, 790, 791, 793, 794, 795). On September 5, 2018, counsel for the United States served counsel for Ling Cui, via email. (Doc. 796-11). On September 12, 2018, Ruan filed the instant objection. In response, the United States moves to proceed with the execution and to void and set aside the divorce decree and quit claim deeds as fraudulent transfers.

         Pursuant to 18 US.C. § 3613(d), upon the proper filing of a notice of lien, a restitution lien is “valid against any purchaser, holder of a security interest, mechanic's lienor or judgment lien creditor” in the same manner as a notice of tax lien filed under 26 U.S.C. § 6323(f)(1) and (2) of the Internal Revenue Code. In the instant case, the United States filed notices of lien with the Mobile County, Alabama Probate Court on June 12, 2017 and in Bay County, Panama City, Florida on May 3, 2018. (Doc. 796-1). Upon filing the notices of lien, the lien was perfected against all third-party claims that did not have a prior perfected lien. The quit claim deeds in question were perfected on May 11, 2018 and June 7, 2018, after the United States' lien was perfected.

         A transfer or obligation “is fraudulent as to a debt to the United States, whether such debt arises before or after the transfer is made or the obligation is incurred, if the debtor makes the transfer or incurs the obligation”-

(A) with actual intent to hinder, delay, or defraud a creditor; or
(B) without receiving a reasonably equivalent value in exchange for the transfer or obligation if the debtor-
(i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(ii) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to ...

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