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United States v. Benitez

December 13, 1985

UNITED STATES OF AMERICA, PLAINTIFF,
v.
RICHARD BENITEZ; KENNETH CREASY; DUNCAN MATTESON; DAVID HAWKINS; JAMES IRWIN; JOHN E. AUSTIN; THOMAS GAMBOA; JOHN BERNARD; STEVEN BROCK; MARVIN TREPUS; ROBERT ROBINSON; DORIS LASHLEY; FRED BRYANT; JOSEPH CALDRILLO; ROBERT HILDEN; WALTER PASSERO; ARTHUR CHESSLER; FRANK DOMISH; STEVEN ROALDSON; ROBERT JOHNSON; RICHARD MIETZNER; DONALD VOTH; JOHN LOMENZO; THOMAS ANDERSON; HARRY NELSON; ROBERT SHORT; MARJORIE STEINFORTH; WILLIAM AUFLEGER; ROBERT JOHNSON; DANNY MALLICOAT; MARIO POSILLICO; CLYDE HENDERSON; F.C. STRANGE; ALLEN TORGERSON; MIKE CARLTON; RICK R. BEYERS; BILLY BOB BARNETT; SAMUEL MEVOROCH; BRENT L. KIDMAN; CHARLES PISCITELLI; GEORGE MARTIN; CHARLES NORRIS; KENNETH BROWNING; JIM RENTON; JOSEPH BOLKER; ALEX MOOD; MARVIN MARGOLIN; KENNETH FRANK; EDWIN BAKERMAN; JAMES ARIYOSHI; ROBERT WOODWARD; SCOTT ARRIGTON; ART BRYDEN; DOMINIC MACK; MEINE CONSTRUCTION CO.; UNIVERSAL GROUP; FOUNDERS EQUITY; S.T.T., INC.; JOHN EDDY; CLAUDE ELLENA; ROBERT CAMPBELL; SCM LAND CO.; JAMES HANNA; CHARLES ENGLE; DAVID ROTHBERG; RALPH WILCOX; JOHN GODFREY; ALLEN MORRIS CO.; ROBERT BJERKE; RONALD GOODWYN; JIM GRANGER; JACK HORTON; GARY JOHNSTON; MAX PROSISE; WARNER STONE; JAMES TAYLOR; RICHARD HADLEY; RAILAMERICA; CHARLES RIGBY; TAK ENOMOTO; GERWIN ROHRBACH; RONALD RAMOS; PATSCHECK DEVELOPMENT CO.; JAMES CHENEVERT; LAWRENCE CONKERTON; M.P. DUMESNIL; JOHN FEDERBUSCH; SANDRA FOUTZ; THOMAS GALLOWAY; JIMMY HAYES; JOHN KNIGHT; E.R. LOLLY; JESSE LONQUES; SAM MCVEA; CHARLES QUINN; EDMUND REGGIE; EMILE REGGIE; BOB ROGERS; WILLIAM L. STEELE; INNKEEPER ASSOCIATES; CROSSBOW VENTURES, INC.; E. DENNIS WHITE; LARRY YOUNG; JOE ZALTA; PARK-REDHILL CO-PAR; MICHAEL FRIEDMAN; SID FELDMAN; DANIEL HAMMON; GORDON MULLENS; HARRY MEIER; OLYMPIC-VERMONT SHOPPING CENTER; DENNIS HOLLYHAND; JOHN GOLESTANI; YARDARM RESTAURANTS; F.C. STANGL; JACK ATKINS; MIKE SEVERSON; CARL F. GUY; LAWRENCE MCREA; JACK J. RAND; YOUNG D. PARK; DEAN ECHELBARGER; LARRY A. HULL; AARON SELIGSON, DEFENDANTS, PHILLIP B. TANNENBAUM; WORLD INTERNATIONAL LIMITED; INTERNATIONAL CONDORESORT-PACIFIC VENTURES; HUCKOBEY LAND DEVELOPMENT, INC.; GRAND WILSHIRE INVESTMENT, INC.; GRAND WILSHIRE EQUITY, INC.; AND 81ST WEST RIVER COMPANY, DEFENDANTS-INTERVENORS, DUNCAN MATTESON; JOHN E. AUSTIN; THOMAS GAMBOA; ROBERT ROBINSON; ROBERT HILDEN; FRANK DOMISH; ROBERT JOHNSON; HARRY NELSON; LARRY A. HULL AND CARL F. GUY, DEFENDANTS-APPELLANTS, RICHARD BENITEZ; KENNETH CREASEY, DAVID HAWKINS; JAMES IRWIN; JOHN BERNARD; STEVEN BROCK; MARVIN TREPUS; DORIS LASHLEY; FRED BRYANT; JOSEPH CALDRILLO; WALTER PASSERO; ARTHUR CHESSLER; STEVEN ROALDSON; RICHARD MIETZNER; DONALD VOTH; JOHN LOMENZO; THOMAS ANDERSON; ROBERT SHORT; MARJORIE STEINFORTH; WILLIAM AUFLEGER; DANNY MALLICOAT; MARIO POSILLICO; CLYDE HENDERSON; F.C. STRANGE; ALLEN TORGERSON; MIKE CARLTON; RICK R. BEYERS; BILLY BOB BARNETT; SAMUEL MEVOROCH; BRENT L. KIDMAN; CHARLES PISCITELLI; GEORGE MARTIN; CHARLES NORRIS; KENNETH BROWNING; JIM RENTON; JOSEPH BOLKER; ALEX MOOD; MARVIN MARGOLIN; KENNETH FRANK; EDWIN BAKERMAN; JAMES ARIYOSHI; ROBERT WOODWARD; SCOTT CHARLESN; ART BRYDEN; DOMINICK MACK; MEINE CONSTRUCTION CO.; UNIVERSAL GROUP; FOUNDERS EQUITY; S.T.T., INC.; JOHN EDDY; CLAUDE ELLENA; ROBERT CAMPBELL; SCM LAND CO.; JAMES HANNA; CHARLES ENGLE; DAVID ROTHBERG; RALPH WILCOX; JOHN GODFREY; ALLEN MORRIS CO.; ROBERT BJERKE; RONALD GOODWYN; JIM GRANGER; JACK HORTON; GARY JOHNSTON; MAX PROSISE; WARNER STONE; JAMES TAYLOR; RICHARD HADLEY; RAILAMERICA; CHARLES RIGBY; TAK ENOMOTO; GERWIN ROHRBACH; RONALD RAMOS; PATSCHECK DEVELOPMENT CO.; JAMES CHENEVERT; LAWRENCE CONKERTON; M.P. DUMESNIL; JOHN FEDERBUSCH; SANDRA FOUTZ; THOMAS GALLOWAY; JIMMY HAYES; JOHN KNIGHT; E.R. LOLLY; JESSE LONQUES; SAM MCVEA; CHARLES QUINN; EDMUND REGGIE; EMILE REGGIE; BOB ROGERS; WILLIAM L. STEELE; INNKEEPER ASSOCIATES; CROSSBOW VENTURES, INC., E. DENNIS WHITE; LARRY YOUNG; JOE ZALTA; PARK-REDHILL CO-PAR; MICHAEL FRIEDMAN; SID FELDMAN; DANIEL HAMMON; GORDON MULLENS; HARRY MEIER; OLYMPIC-VERMONT SHOPPING CENTER; DENNIS HOLLYHAND; JOHN GOLESTANI; YARDARM RESTAURANTS; F.C. STANGL; JACK ATKINS; MIKE SEVERSON; LAWRENCE MCREA; JACK J. RAND; YOUNG D. PARK; DEAN ECHELBARGER; AARON SELIGSON, DEFENDANTS-APPELLEES, PHI LLIP B. TANNENBAUM; WORLD INTERNATIONAL LIMITED; INTERNATIONAL CONDO-RESORT-PACIFIC VENTURES; HUCKOBEY LAND DEVELOPMENT, INC.; GRAND WILSHIRE INVESTMENT, INC.; GRAND WILSHIRE EQUITY, INC.; AND 81ST WEST RIVER COMPANY, DEFENDANTS-INTERVENORS-APPELLEES



Appeal from the memorandum of decision and order of United States District Court for the Northern District of New York, McCurn, J., issued pursuant to Fed. R. Civ. P. 53(e)(2). The court adopted in part and rejected in part the report of the Special Master in an interpleader action and ordered that 53 defendants-claimants share pro rata in the property held by the United States as a disinterested stakeholder. Affirmed. Judge Van Graafeiland concurs in a separate opinion.

Author: Meskill

Before: FEINBERG, Chief Judge, VAN GRAAFEILAND and MESKILL, Circuit Judges.

MESKILL, Circuit Judge:

This is an appeal from a memorandum of decision and order of the United States District Court for the Northern District of New York, McCurn, J., issued pursuant to Fed. R. Civ. P. 53(e)(2). The court adopted in part and rejected in part the report of the Special Master in an interpreter action and ordered that 53 defendants-claimants share pro rata in the property held by the United States as a disinterested stakeholder. The district court had jurisdiction in this case under 28 U.S.C. § 1345 (1982). This Court has jurisdiction to consider the appeal under 28 U.S.C. § 1291 (1982).

For the reasons that follow we affirm the decision of the district court.

BACKGROUND

Donald Maloney hatched a confidence scheme. He induced parties from all over the United States to advance earnest money to him on his false promise of obtaining from them cheap loans from union pension funds. The defrauded parties lost their earnest money and did not receive the promised loans. In this manner Maloney collected approximately $2.5 million in advance fees for loans that never materialized.*fn1

In December 1981, six of the defendants-claimants (diligent creditors) began actions against Maloney in the New York courts and obtained prejudgment attachments under N.Y. Civ. Prac. Law § 6214(b). Neither Maloney nor his attorney released any money to the diligent creditors. On January 15, 1982, Maloney was arrested by the FBI for mail and wire fraud; the FBI seized approximately $151,000 from him that day.

On January 18, 1982, a bail application hearing (Bail Hearing) was held before a United States Magistrate. Maloney's attorney recited that he was turning over several negotiable instruments and gems to the FBI.*fn2 In return, the government consented to a reduction in Maloney's bail.*fn3 The government's attorney then stated that

the items. . . are being received and accepted by us as being contraband, fruits of the crime that is involved here. Mr. Rinaldi [Maloney's attorney] and Mr. Maloney are not conceding that on this record, but they are not objecting to my identification of these items as such, and we are receiving them as fruits of the crime, and we are going to hold them in that capacity pending the resolution of all the criminal procedure.

Bail Hearing Tr. 6. The assets were to be returned to Maloney only if there were no civil orders of attachment for the property and he was acquitted.*fn4

On January 28, 1982 the six diligent creditors obtained summary judgment against Maloney in state court. Executions of judgment were served the next day on Maloney, his attorney, the United States Attorney and the FBI. On February 1 the United States filed an action in the nature of interpleader under section 1345.

On February 3, 1982, three more creditors brought suit in the New York courts. On February 27, 1982, the orders of attachment of all nine diligent creditors were confirmed under New York Civil Practice Law section 6211(b). A tenth creditor, Attorney Guy, had had a judgment outstanding since 1975. All the creditors unsuccessfully tried to levy upon the interpreter fund.

In April 1982, the district court discharged the government from liability and ordered that a Special Master be appointed. In January 1985, the Special Master submitted his report. He ruled that federal, not New York, law should apply to determine the rights of the parties. He recommended that the district court should impose a constructive trust on the ...


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