John Serendensky, also known as John Vitolano, Joseph Foti and Guy Foti, pled guilty and was convicted of bank fraud and conspiracy to launder money. Under federal law, he was ordered to forfeit his interest in a house he jointly owned with his wife, Maria Caporale.
After the criminal action was brought against Serendensky, he and Caporale stopped making payments on their $168,000 mortgage from Wilmington National Finance, which began a foreclosure action. At the lender’s foreclosure sale, the house was purchased by Plaza Homes LLC, which immediately resold the home to Barbara Pacheco who was informed about Serendensky’s pending forfeiture.
Purchase Bob Bruss reports online.
Pacheco brought a lawsuit to determine her ownership rights in the house. She argued the government could not acquire half of the house by forfeiture because co-owner Maria Caporale was an innocent co-owner.
But the government replied Pacheco knew of the criminal proceedings and the pending forfeiture before she bought the house after the foreclosure sale so she was not an innocent bona fide purchaser without notice.
If you were the judge would you rule the government acquired half of the house by Serendensky’s forfeiture after his criminal conviction?
The judge said yes!
“Under the criminal forfeiture statute, a third party may petition for a hearing to adjudicate its alleged interest in property to be forfeited,” the judge began. Federal law says, “Anyone convicted of certain crimes shall forfeit to the United States…any property constituting, or derived from, any proceeds of their crime,” he added.
The real issue in this case, he continued, is whether the federal criminal forfeiture statute permits partial forfeitures of real property that is co-owned with an innocent third party, such as Caporale. No previous court decision has decided if the criminal forfeiture statute permits partial property forfeitures, the judge explained.
“Indeed, we fail to see either how any legitimate interest could be furthered by reading the statute to forbid partial forfeitures or how Congress could have intended to forbid them,” the judge emphasized.
“We conclude that Serendensky, consistent with the government’s notice of pendency as well as the information to which Serendensky pleaded, could only have forfeited his interest in the premises. If Serendensky forfeited only his interest, then the foreclosure sale was valid with respect to Caporale’s interest. Because the government only acquired Serendensky’s interest in the premises, Wilmington was free to foreclose on the remainder,” the judge ruled. Therefore, the government owns half of the house and Pacheco owns the other half, he concluded.
Based on the U.S. Court of Appeals decision in Pacheco v. Serendensky, 393 Fed.3d 348.
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