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United States v. Ruan

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

April 4, 2019



          Callie V. S. Granade, Senior United States District Judge.

         This action is before the Court on the United States' Motion for an Order Confirming Mortgage is VOID to Clear Title (Doc. 810), Xiulu Ruan's (“Ruan”) response thereto (Doc. 814), the United States' Reply (Doc. 815), and Ruan's Surreply (Doc. 816). For the reasons explained below, the United States' motion is hereby GRANTED.


         On February 24, 2017, Ruan was found guilty of racketeering and drug conspiracies in connection with his operation of a pain clinic. (Doc. 503.) Following the return of the verdict, Ruan agreed and stipulated to a forfeiture money judgment in the amount of $5, 000, 000 in addition to the forfeiture of multiple assets. (Docs. 498, 500, 503). On May 31, 2017, this Court sentenced Ruan to 252 months imprisonment and to pay $15, 239, 369.93 in restitution and a special assessment of $1, 500. (Doc. 665). On June 12, 2017, the United States filed a Notice of Lien for Fine/Restitution against Ruan in Mobile County, Alabama Probate Court and in Milwaukee County Wisconsin Register of Deeds. (Doc. 800-2). On May 3, 2018, the United States filed a third Notice of Lien for Fine and/or Restitution in Bay County, Panama City, Florida. (Id.) 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. (Doc. 800).

         On February 17, 2017, during his trial but prior to his conviction, Ruan signed a Power of Attorney (“POA”) granting his sister, Xiu Oing Martinie (“Martinie”), general authority to act on his behalf pursuant to the Alabama Uniform Power of Attorney Act. (Doc. 800-3). The POA includes the following restrictive language: “An agent that is not my ancestor, spouse, or descendant MAY NOT use my property to benefit the agent … unless I have included that authority in the Special Instructions” (Id. at 2). The Special Instructions state as follows: “This Power of Attorney shall not be affected by my disability, incompetency, or incapacity.” (Id.)

         On February 27, 2018, four days after his conviction, but before his sentencing and before the Notices of Liens were filed, Martinie executed a mortgage to twenty-one individuals for a total of $559, 200.00 against Ruan's then-unencumbered property located at 9073 Timbercreek Boulevard, Spanish Fort, Alabama 36527. (Doc. 800-1). One of the twenty-one named individuals was Steve Martinie (“Steve”), the husband of Martinie. (Id.)

         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 November 8, 2018, the United States filed a motion to set aside the above-mentioned mortgage as a fraudulent transfer. (Doc. 800). Thereafter, Ruan responded to the motion and submitted several documents relating to the transaction. (Doc. 806). Upon review of the exhibits filed, and while the motion remained pending, the United States filed the instant motion asserting that the mortgage was void because Martinie was without authority to execute the mortgage due to the language of the POA which excluded Martinie's authority to use Ruan's property to benefit herself. (Doc. 810). The United States simultaneously filed a Motion to Stay the ruling on its previous motion to declare the mortgage fraudulent pending a ruling on the current motion.[1] (Doc. 811). Ruan filed a response (Doc. 814), the Government filed a reply (Doc. 815), and Ruan filed a sur-reply (Doc. 816).


         The Government argues that the subject mortgage is void on its face because Martinie did not have the legal authority to use defendant's property to benefit herself, or self-deal. (Doc. 810, generally). As such, the Government posits that the mortgage did not and could not have transferred any interest to either Martinie or to the other named mortgagees. (Id. at 8-9). In response, Ruan contends that the mortgage is not void because Martinie did not self-deal, but alternatively, if self-dealing is determined, that the mortgage is not void as to the remaining mortgagees. (Doc. 814 at 1-4, Doc. 816). Ruan also argues that this court is without subject matter jurisdiction to determine the validity of the mortgage. (Doc. 814 at 4-7). The Government contends that jurisdiction exists and that the mortgage is not severable (Doc. 815, generally). This Court will address each argument.

         A. Jurisdiction

         In his response to the subject motion, Ruan suggests this District Court lacks subject matter jurisdiction to determine the facial validity of the mortgage at issue. (Doc. 814 at 7). Curiously, Ruan does not specifically argue that this Court does not have jurisdiction and plainly agrees that “[o]f course, the issue of enforcing a federal restitution order falls within the court's federal question jurisdiction”. (Doc. 814 at 4). Instead, Ruan acknowledges the Federal Debt Collection Procedures Act (FDCPA) and then only questions whether or not jurisdiction exists and challenges the Government to come forward with a cited example of a similar matter being adjudicated by a federal court. (Id.) In reply, the Government argues that the validity of the mortgage is squarely within this Court's jurisdiction pursuant to the FDCPA.[2]

         The Federal Debt Collection Procedures Act “provides ‘the exclusive civil procedures for the United States' to obtain satisfaction of a judgment in a criminal proceeding that imposes a ‘fine, assessment, penalty, [or] restitution' in favor of the United States.” United States v. Bradley, 644 F.3d 1213, 1309 (11th Cir. 2011) (quoting 28 U.S.C. §§ 3001(a)(1), 3002(3)(B), 3002(8)). The Act provides the United States several remedies to satisfy a judgment, one of which is to obtain a writ of execution. 28 U.S.C. §§ 3202(a), 3203. The Act provides that the United States may levy only property in which a judgment debtor has a “substantial nonexempt interest.” Id. § 3203(a). As such, the FDCPA requires the government to use reasonable diligence to identify and serve notice on any person who may have an interest in the property it targets for collection proceedings under the FDCPA. See 28 U.S.C. § 3202(c) (requiring the government to serve a “copy of the notice and a copy of the application for granting a remedy under this subchapter” on “each person whom the United States, after diligent inquiry, has reasonable cause to believe has an interest in the property to which the remedy is directed.”). 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. See U.S. v. Duran, 701 F.3d 912 (11th Cir. 2012) (held that a district court has the authority, under the FDCPA, to determine under state law the ownership interests in property against which the United States has obtained a writ of execution to collect a judgment of restitution in a criminal action.).

         While the circumstances of Duran may not be identical to those currently before this Court, the rationale for the Court of Appeals' holding remains applicable to the case at hand. Specifically, because at issue in this action is the validity of a mortgage that determines ownership interest in a property over which the United States has obtained a writ of execution, this Court has jurisdiction to determine the ownership interest in the subject property. Ruan has submitted no case law indicating that jurisdiction does not exist under the FDCPA or that Duran should be distinguished from this action. Further, Ruan's argument with respect to this Court's jurisdiction suggests that federal jurisdiction would exist if the mortgagees listed on the subject mortgage were given notice such that they had an opportunity to potentially seek to object to the writ, after which this Court could then determine their property interest, to the extent that they had any interest at all. (See Doc. 814 at 4). However, Ruan has not provided any case law to suggest that this Court does not have the same jurisdiction before notice is given, ...

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