PEOPLE v. BIRKETT (1997)

Defendant contends on appeal that the trial court order determining restitution was owed to the insurance companies “based on the current state of the law” amounted to an unauthorized sentence and should be stricken on appeal.

As explained below, we disagree and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On November 17, 1994, Officer Lang, a Murietta policeman, initiated a traffic stop of a tan Toyota truck because of its broken front windshield.¹  The driver was Shirley Birkett, whom Officer Lang knew from previous occasions.   During the stop, Lang told Mrs. Birkett he had information regarding a stolen Chrysler Le Baron in her backyard.   Mrs. Birkett told Lang that there was indeed a Chrysler Le Baron in her yard, but she did not think it was stolen.

Lang asked Mrs. Birkett if he could go to her house and look at the car, and she said it would be fine with her.   Officers Lang and Stotts went to the Birkett home and verified that the Le Baron was not stolen.   There were numerous vehicles in the yard in various stages of being dismantled or restored.

Officer Lang asked to speak to Mr. Birkett, and Mrs. Birkett gave him permission to enter the home and speak to Mr. Birkett, the defendant.   During their conversation, Officer Lang told the Birketts he had been told they might be running a clandestine methamphetamine lab.   Mrs. Birkett told Officer Lang she had given up “cooking” a long time ago and that he could go ahead and look.   Officer Lang had already obtained a signed consent search warrant from Mrs. Birkett.

During the search, Officer Lang found a blue Toyota truck that had been stolen.   A subsequent search by other officers revealed that the tan Toyota pickup truck Mrs. Birkett had been driving was a stolen vehicle.   Other vehicles and parts of vehicles found on the property had been reported stolen.   After being advised of his constitutional rights under Miranda,² defendant admitted he had switched the VIN on the Toyota truck.

On March 15, 1995, the Riverside County District Attorney filed an information charging defendant in count I with owning and operating a chop shop in violation of Vehicle Code section 10801.   Count II charged him with tampering with a VIN in violation of Vehicle Code section 10802.   Count IV charged defendant, along with his wife, with receiving stolen property in violation of Penal Code 3 section 496.⁴

On March 30, 1995, defendant was arraigned.   He pleaded not guilty to all charges.   He filed a motion to suppress evidence, which was denied on August 14, 1995, after a hearing.

On December 22, 1995, the information was orally amended to add one count of auto theft in violation of Vehicle Code section 10851.   Pursuant to a plea bargain, defendant pleaded guilty to one count of auto theft and one count of operating a chop shop.   In return, the remaining charges were dismissed.   After waiving time and a pre-sentence probation report, defendant was placed on three years probation and ordered to serve 365 days in jail.   Defendant was referred to the probation department for a recommendation on the issue of restitution.

On February 2, 1996, a restitution hearing was held, and the court took the matter under submission.   On March 18, 1996, defendant was ordered to pay restitution to three individuals and two insurance companies.   The court ordered $3,095.41 to be paid to National General Insurance and $3,642.53 to Allstate Insurance Company.   These companies had indemnified two of the victims.   On March 20, 1996, defendant was ordered to pay an additional $5,000 in restitution to another individual.

On April 2, 1996, the court denied defendant's motion for a modification of the terms of probation.   Defendant filed a notice of appeal on April 30, 1996.

DISCUSSION

Defendant contends that under People v. Sexton (1995) 33 Cal.App.4th 64, 39 Cal.Rptr.2d 242 and section 1202.4, the trial court exceeded its statutory discretion to order restitution to the insurance carriers.   Defendant notes the continual changes that the Legislature has made in the statutory provisions for restitution over the last few years and the disagreement among the courts as to whether or not restitution could be ordered to insurers.   Defendant maintains that the issue was finally resolved in People v. Sexton, which held that the last amendment to former section 1203.04, the predecessor of current section 1202.4, clearly did not contemplate restitution to an indirect victim such as an insurance company.  (People v. Sexton, supra, 33 Cal.App.4th 64, 70, 39 Cal.Rptr.2d 242;  Stats.1994, ch. 1106, No. 11 West's Cal. Leg. Service, pp. 5450-5452.)

Respondent traces the history of the differing interpretations of the word “victim” in case law and states that People v. Sexton construed too narrowly the “isolated language” referring to “direct victim of a crime” in the last version of former section 1203.04, which was carried over into current section 1202.4, subdivision (k).   In support of this argument, respondent cites the Supreme Court case of People v. Crow, which we find inapposite under the facts of this case.  (People v. Crow (1993) 6 Cal.4th 952, 957, 26 Cal.Rptr.2d 1, 864 P.2d 80 [a government agency is entitled to restitution payments when the agency itself was defrauded by appellant].)

In setting out a policy argument in favor of its position, respondent points out that article I, section 28, subdivision (b) of the California Constitution states that all persons who suffer losses as a result of criminal activity shall have the right to restitution.   Also, respondent urges, the legislative intent expressed in section 1202.4, subdivision (a)(1), states:  “It is the intent of the Legislature that a victim of crime who incurs any economic loss as a result of the commission of a crime shall receive restitution directly from any defendant convicted of that crime.”   Respondent also cites the broad discretion of judges in determining the conditions of probation.   Moreover, respondent disputes that insurance carriers are indirect victims at all, since the losses they suffer are directly attributable to the criminal conduct of the defendants.

This court's decision in People v. Foster rested on the different meanings of “victim” found in the two former statutes governing restitution.   (People v. Foster (1993) 14 Cal.App.4th 939, 949, 18 Cal.Rptr.2d 1.)   We found that when probation was denied and Government Code section 13967 governed restitution, insurance companies were not considered victims.   (Foster at pp. 949, 950, 18 Cal.Rptr.2d 1.)   On the other hand, when probation was granted and former section 1203.04 governed restitution, an insurance company was treated as a victim.  (Foster at p. 951, 18 Cal.Rptr.2d 1.)   This was not seen as an anomaly, but rather as a reflection of Legislative intent.  (Foster at p. 952, 18 Cal.Rptr.2d 1.)   The Foster court noted that a detailed definition of the term “victim” had been incorporated into the Government Code, but the term had not been defined for purposes of section 1203.04.  (Foster at p. 953, 18 Cal.Rptr.2d 1.)  Foster also emphasized that the courts could impose any reasonable conditions of probation that served justice, made amends to society, and promoted the reform and rehabilitation of a defendant.  (Foster at p. 954, 18 Cal.Rptr.2d 1.)

Subsequent to the Foster decision, former section 1203.04 was amended to the version in which the “direct victim” language appeared.   Section 1203.04 and Government Code section 13967 have both been repealed and their provisions have been combined in current section 1202.4.   The question is, now that there is one statute governing cases in which probation is granted and probation is denied, does the statute's definition of “victim” include insurance companies?   As defendant points out, the current statute's definition of “victim” is virtually the same as that in the version of former section 1203.04 in effect when he committed his crimes.   Therefore, the issue is the same, regardless of which version is applied to his case.   In any event, absent a saving clause, defendant would be entitled to the benefit of a decision finding that insurance companies are no longer seen as victims under section 1202.4.⁵

Even though our decision in People v. Foster interpreted former section 1203.04 in an earlier version, we find it is still true that “[a] flexible interpretation of the term ‘victim’ best addresses the purpose of [section 1203.04].” (Foster, supra, 14 Cal.App.4th at p. 953, 18 Cal.Rptr.2d 1.)   We are not persuaded by the reasoning of People v. Sexton and find, for reasons similar to those set forth by respondent, that under the facts of this case, the order to pay restitution to the insurance companies is proper.  (Sexton, supra, at pp. 70-72, 39 Cal.Rptr.2d 242.)   We believe that once an insurance company has indemnified the victim of a crime, the insurance company stands in the shoes of the victim and is therefore entitled to restitution from the perpetrator of the crime.   On the facts of this case, the insurance companies are in essence the direct victims of defendant's criminal conduct.

People v. Sexton relies exclusively on the phrase “direct victim of a crime” to support its holding that insurers cannot benefit from restitution.   (Sexton, supra, at p. 70, 39 Cal.Rptr.2d 242.)   According to Sexton, insurance companies incur expenses solely by virtue of a contractual duty to indemnify direct victims.   Therefore they are not the object of the crime.   Since they are not the object of a crime, they are not a direct victim.   By finding that the statute does not contemplate restitution to indirect victims, Sexton disposes of the issue.

We find that, although they may not always be the object of the crime, insurers fall within the definition of “direct victim” in certain cases.   This is especially true when the insurance company has indemnified the insured before the defendant was ordered to pay restitution-indeed before the perpetrator of the crime was even apprehended.

Moreover, the language of the California Constitution provision adopted by the voters of this state does not restrict restitution to the direct victims of crimes but rather provides for restitution to all persons who suffer losses as a result of criminal activity.  (Cal. Const., art.   I, § 28, subd. (b).)  This section states:  “It is the unequivocal intention of the People of the State of California that all persons who suffer losses as a result of criminal activity shall have the right to restitution from the persons convicted of the crimes for losses they suffer.  [¶] Restitution shall be ordered from the convicted persons in every case, regardless of the sentence or disposition imposed, in which a crime victim suffers a loss, unless compelling and extraordinary reasons exist to the contrary.   The Legislature shall adopt provisions to implement this section during the calendar year following adoption of this section.”  (Cal. Const., art.   I, § 28, subd. (b).)  Since former section 1203.04 and its successor 1202.4 were enacted to implement the constitutional provision, we believe our construction of those statutes is consistent with the constitution.  (See People v. Crow, supra, 6 Cal.4th 952, 956, 26 Cal.Rptr.2d 1, 864 P.2d 80.)

Furthermore, in enacting the amendments to the statute, if the Legislature had intended to prohibit a court from conditioning probation on a restitution order to an entity that was an “indirect” victim, the Legislature easily could have done so by providing that restitution to such an entity was permitted only when the entity was a direct victim, or by stating the court shall not order restitution to such an entity when it was an “indirect” victim.   We decline to follow the Sexton case and impose a restriction in the statute that the Legislature did not intend, particularly when such a restriction would conflict with the constitutional provision governing victim restitution.

We also find that allowing a court to order restitution to an insurance company as a condition of probation can further the rehabilitation of the criminal, the primary goal of probation.  (People v. Foster, supra, 14 Cal.App.4th at p. 950, 18 Cal.Rptr.2d 1.)   A defendant learns that a loss still occurs despite the availability of insurance to the public, and he understands the full extent of his criminal activity.   As we stated in Foster in interpreting former section 1203.04, it makes no sense to prohibit restitution being paid directly to an insurance company that has reimbursed a victim for the loss.  (People v. Foster, supra, 14 Cal.App.4th at p. 952, 18 Cal.Rptr.2d 1.)   Such a prohibition would relieve a defendant of the responsibility to pay restitution when his victim was insured, or it would result in a double payment to the insured victim.  (Ibid.) The Sexton court's remedy for prevention of a windfall to the insured person is to “leave it to the insurer and the victim-insured to work out repayment under the terms of their insurance contract.”  (Sexton, supra, 33 Cal.App.4th at p. 72, 39 Cal.Rptr.2d 242.)   We find this remedy, which is likely to cause more litigation, does not promote the efficient use of the judicial system.

Accordingly, we conclude that the term “victim” should be construed broadly to include insurance carriers that suffer the consequences of crime by virtue of indemnification of their insureds.   We find that in such cases the restitution order will further the objectives of deterring future criminal activity and thus rehabilitating the defendant.   We decline to follow People v. Sexton since its interpretation of the language in former section 1203.04, which is also found in section 1202.4, conflicts with the broad constitutional provisions providing for restitution to victims of criminal activity.

DISPOSITION

The judgment is affirmed.

FOOTNOTES

1.   The facts are taken from the transcript of defendant's preliminary hearing on March 2, 1995.

2.   Miranda v. Arizona (1966) 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694.

FN3. All future statutory references refer to the Penal Code unless otherwise stated..  FN3. All future statutory references refer to the Penal Code unless otherwise stated.

4.   Count III referred to defendant's wife only.

5.   The last version of section 1203.04 was in force at the time defendant committed his offenses in November 1994, i.e., the version of 1203.04 that became effective on September 29, 1994.   This version was the predecessor to section 1202.4, whose language regarding victims is the same.   Current section 1202.4 merely combines all the language referring to victims in one subsection, which reads as follows:  “For purposes of this section, ‘victim’ shall include the immediate surviving family of the actual victim.  ‘Victim’ shall also include any corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity when that entity is a direct victim of a crime.” (§ 1202.4, subd. (k).)

RICHLI, Associate Justice.

McKINSTER, Acting P.J., and WARD, J., concur.