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United States v. Fisch

United States District Court, S.D. Texas, Houston Division

March 28, 2018




         Malkah Bertman, a third-party petitioner, moves to require the government to pay property taxes, interest, and penalties that have accrued on the Wickford property since the offenses for which her husband, Abraham Moses Fisch, was convicted. (Docket Entry No. 674). Bertman also moves for miscellaneous relief and for reconsideration of the Bank of the Ozarks' third-party claim for accrued interest and attorney's fees. (Docket Entry No. 677). The motions are denied, for the reasons explained below.

         I. Background

         After Fisch's conviction, the Harris County taxing authorities, the Bank of the Ozarks, and Bertman all petitioned the court under 21 U.S.C. § 853(n) asking for adjudication of their alleged interests in the Wickford property. (Docket Entry Nos. 502, 509, 511, 515, 552). The government agreed that the taxing authorities and the Bank of the Ozarks had "superior interests in the property" and argued that "[i]n the event of sale ... the delinquent taxes and mortgage payments should be paid out of the gross proceeds." (Docket Entry No. 599, at 3). No. party disputed that the Wickford property is "subject to a mortgage" and "to taxes on which the owner is in default." Id. After the court granted an interlocutory sale of the Wickford property, the court granted the government's motion to amend the order. (Docket Entry No. 620). The amended interlocutory-sale order states:

1. At closing of the sale of 9202 Wickford Drive, Houston, Texas 77024, the following shall be paid out of the gross sales proceeds:
b. all ad valorem taxes due and owing on the Wickford Property at the time of closing to the taxing authorities in accordance with the petitions for adjudication of interest filed in the case under Docket Entry Nos. 502 and 552 and the notices of amounts due and owing in Docket Entry Nos. 584 and 587; and
c. all amounts due and owing to Bank of the Ozarks, successor by merger to OmniBank, N.A., in accordance with the petition filed in this case under Docket Entry No. 511.
2. The United States shall deposit the remaining proceeds into the registry of the Court until further order of this Court.

(Docket Entry No. 620).

         II. Bertman's Motion to Deny the Taxing Authorities' Claims

         Bertman moved to deny the taxing authorities' claims, arguing that the Harris County taxing authorities have failed to establish an interest under 21 U.S.C. § 853(n)(6) in taxes claimed for 2013 to 2016. (Docket Entry No. 674 at 2). She argues that although the property was forfeited to the government in 2015, (Docket Entry No. 471), the relation-back doctrine means that the government's interest vested when the offenses occurred between 2006 and 2010. Id. Bertman asserts that because the government's interest in the property vested before 2013, the taxing authorities cannot claim an interest in taxes from 2013 or later. She also asserts that the taxing authorities do not fall into the "bona fide purchasers" exception of § 853(n)(6)(B). Id.

         Bertman asserts that the taxing authorities had constructive notice that the property was subject to forfeiture because the government recorded a lis pendens claiming an interest in the property in 2011. Id. at 3. She cites to a recent Sixth Circuit case, United States v. Hall, 877 F.3d 676, (6th Cir. 2017), in which the government represented that it had a '"pattern of practice of always paying'" forfeited property accrued taxes, "regardless of whether a taxing authority files a claim asserting its interest under 21 U.S.C. § 853(n)." Id. at 679. Bertman argues that the I government's position in Hall should apply to all forfeiture proceedings. (Docket Entry No. 674 at 3).

         The government argues that the relation-back doctrine does not automatically vest and perfect title to property in the United States. (Docket Entry No. 675 at 2). It argues that title to the property has not been perfected and that taxes continued to accrue because there was no final order of forfeiture. The government recognizes the taxing authorities' superior interest under § 853(n)(6)(A) "because the Taxing Authorities' continuing lien renews annually and always runs with the land." (Docket Entry No. 675 at 4).

         The court ordered forfeiture on October 28, 2015, (Docket Entry No. 470), and amended the order to include the Wickford property on October 30, 2015, (Docket Entry No. 471). The relation-back statute provides that "[a]ll right, title, and interest in [forfeited property] vests in the United States upon the commission of the act giving rise to forfeiture under this section." 21 U.S.C. § 853(c). The government's interest in the Wickford property vested before 2013, when Fisch committed the acts giving rise to the forfeiture. But the government's interest in the Wickford property is not undivided. When Bertman petitioned the court for a hearing to adjudicate the validity of her interest in the property, the government did not dispute that she had a ...

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