PEOPLE v. LOFTIS

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Court of Appeal, Fourth District, Division 2, California.

PEOPLE of the State of California, Plaintiff and Respondent, v. Michele Rae LOFTIS, Defendant and Appellant.

No. E012627.

Decided: May 16, 1994

Linn Davis, Norco, under appointment by the Court of Appeal, for defendant and appellant. Daniel E. Lungren, Atty. Gen., George Williamson, Chief Asst. Atty. Gen., Gary W. Schons, Sr. Asst. Atty. Gen., Janelle B. Davis and Esteban Hernandez, Supervising Deputy Attys. Gen., for plaintiff and respondent. Gascou, Gemmill & Thornton, Michael G. Evans and Travis R. Jack, Los Angeles, for amicus curiae on behalf of Escrow Agents' Fidelity Corp.

OPINION

In this case we consider the following issues:  (1) does Financial Code section 17414 require the trial court to order restitution for crimes other than the crime stated in that section;  (2) if not, is restitution to the Escrow Agents' Fidelity Corporation proper under Penal Code sections 1203.1 and 1203.04;  and (3) if so, should the trial court's order, based on Financial Code section 17414, nevertheless be affirmed?

We hold that the restitution required by Financial Code section 17414 only applies to the crime defined in that section but that the restitution order here was nevertheless proper under Penal Code sections 1203.1 and 1203.04 because the Escrow Agents' Fidelity Corporation was a victim of the crime.   We therefore find that the trial court was right for the wrong reasons and affirm its restitution order.

FACTS

Defendant Loftis pled guilty to one count of grand theft by embezzlement, a violation of Penal Code section 487, subdivision (a).1  The probation report discloses that she was an employee of an escrow company, Civic Plaza Escrow, Inc., from June 1991 through July 1992.   During that time, she altered checks to show that she was the payee.   She cashed the checks, thus embezzling over $16,000.   The funds were apparently used, at least in part, to pay her restitution obligations of $6,000 arising from a previous misdemeanor grand theft by embezzlement conviction in Orange County.

Under a plea bargain approved by the court, she was to be sentenced to not more than one year in the county jail followed by three to four years on probation.   Restitution was to be a proposed term and condition of probation.

At sentencing, the court sentenced defendant to 270 days in county jail, accepted the other probation terms and conditions recommended by the probation officer, and noted a discrepancy between the restitution sought by Civic Plaza Escrow, Inc., $20,000, and the amount stated in the police report, $16,250.   It therefore scheduled a further hearing to determine whether the escrow company was entitled to any restitution over $16,250.

Prior to the further hearing, the probation officer reviewed the amounts and recommended that restitution be in the sum of $20,000 plus a 10 percent fee, or $2,000, to be paid over a five-year-period.  (Pen.Code, § 1203.1, subd. (l ).)

An attorney for the amicus, Escrow Agents' Fidelity Corporation (“Fidelity Corporation”), appeared at the hearing.2  He stated that Fidelity Corporation had paid Civic Center Escrow for its losses and he argued that Financial Code section 17414 required the trial court to order restitution to Fidelity Corporation.

The trial court agreed.   As a term of probation, it ordered that restitution be paid to Civic Center Escrow for its out-of-pocket losses in the sum of $5,750,3 and that restitution be paid to Fidelity Corporation in the sum of $14,250.   The latter sum is the amount that Fidelity Corporation had actually paid to Civic Center Escrow.

FINANCIAL CODE SECTION 17414

Defendant first contends that the trial court erred in ordering restitution to Fidelity Corporation pursuant to Financial Code section 17414.4  She argues that the section, added in 1991, establishes a new crime.   Since she was not charged with that new crime, and did not plead guilty to violating it, she argues that the trial court erred.

Respondent agrees with this argument but contends that the trial court's error does not invalidate the restitution order.5

Amicus curiae, Fidelity Corporation, agrees that Financial Code section 17414 creates a new crime but otherwise disagrees with both appellant and respondent.   It argues that the restitution order was required by Financial Code section 17414 because defendant was convicted of a directly related uncharged crime.

Somewhat illogically, Fidelity Corporation attempts to separate the second sentence of Financial Code section 17414, subdivision (b) from the first by arguing that, although the first sentence establishes a new crime, the second sentence, relating to restitution, does not apply solely to persons convicted of that new crime, but it also applies to anyone convicted of a similar crime.

 Fidelity Corporation primarily relies on People v. Baumann (1985) 176 Cal.App.3d 67, 222 Cal.Rptr. 32 and People v. Broussard (1993) 5 Cal.4th 1067, 22 Cal.Rptr.2d 278, 856 P.2d 1134.   In Baumann, the trial court considered evidence of uncharged embezzlements in setting the amount of the restitution order.   However, as Fidelity Corporation concedes, sentencing there was under a Harvey waiver,6 while the defendant here made no such waiver.   We agree with defendant that this distinction is important, and that, in the absence of a Harvey waiver, Baumann does not allow the trial court to consider unfiled charges (such as the apparent violation of Fin.Code, § 17414 here) to justify restitution to the Fidelity Corporation or in setting the amount of the restitution fine.

Broussard considers the effect of Proposition 8, which amended California Constitution, article I, section 28, subdivision (b).7  In that case, defendant was convicted of three crimes and was ordered to pay a total of $5,545 to the victims of those crimes.   None of the victims had sustained physical injury and defendant argued that, under the implementing legislation, Government Code section 13967, he could be ordered to pay restitution only when the criminal act caused physical injury.   Our Supreme Court rejected this argument, holding that the implementing legislation properly authorized the trial court to order criminals to compensate all crime victims, whether their losses resulted from physical injury or from the theft or destruction of their property.

 Fidelity Corporation relies on Broussard for the proposition that the Legislature, being under a constitutional mandate to enact implementing legislation that would provide for restitution in every case in which the victim suffered a loss, must have intended to comply with the constitutional provision when it enacted Financial Code section 17414.   It therefore argues that the section should be interpreted broadly to require restitution in every case covered by the second sentence of Financial Code section 17414, subdivision (b).

We reject this argument.   There is no indication that Financial Code section 17414, enacted in 1991, was intended to be legislation implementing the 1982 constitutional mandate.   Indeed, the legislative history provided by amicus indicates that the section was intended to protect Fidelity Corporation from the holding in People v. Williams (1989) 207 Cal.App.3d 1520, 255 Cal.Rptr. 778.   In that case, the court held that Government Code section 13967, subdivision (c) requires restitution to the victim of a crime under certain circumstances, and an order to pay restitution to an insurance company was improper because it was not the victim of the crime against its insured.   To avoid being put in the same classification as an insurance company, Fidelity Corporation lobbied for passage of the 1991 amendment to Financial Code section 17414.8

 In interpreting a statute we begin with its words.  Financial Code section 17414, subdivision (b) plainly creates a new crime, as the parties agree, and plainly provides that, upon conviction of that new crime, restitution to Fidelity Corporation shall be ordered in addition to any other punishment imposed.

We therefore reject Fidelity Corporation's argument that the second sentence of Financial Code section 17414, subdivision (b) requires a restitution order, without a Harvey waiver, when defendant is convicted or pleads guilty to some other related crime.  (Cf. People v. Campbell (1994) 21 Cal.App.4th 825, 830, 26 Cal.Rptr.2d 433.)

 The restitution order was therefore improper under Financial Code section 17414 because defendant was not charged or convicted of violating that section.

PENAL CODE SECTIONS 1203.1 AND 1203.04

 Since the trial court erred in making the restitution order under Financial Code section 17414, can the order be justified under Penal Code sections 1203.1 and 1203.04?

Fidelity Corporation answers this question affirmatively, citing this court's recent opinion in People v. Foster (1993) 14 Cal.App.4th 939, 18 Cal.Rptr.2d 1.   In Foster, we discussed and rejected the contention that restitution to an insurance company was improper because an insurance company was not a “victim” within the meaning of Penal Code sections 1203.1 and 1203.04.   Those sections apply to restitution orders when, as here, probation is granted to a defendant.   In contrast, Government Code section 13959, et seq., apply to restitution orders when probation is denied to a defendant.

In Foster, defendant sought to apply case law holding that an insurance company is not considered a victim under the Government Code sections, when probation is denied, to the Penal Code sections, applicable when probation is granted.   Defendant argued that the definition of “victim” should be the same in both cases, and that payment to insurance companies was therefore precluded.

We rejected the contention, pointing out that the term “victim” had been applied differently under the two statutory schemes.   We therefore found that the insurance company could be treated as a victim under the Penal Code sections.   The same is true of the Fidelity Corporation here.9

WAS THE ORDER AN IMPROPER ADJUDICATION OF CIVIL LIABILITY?

Defendant next contends that the restitution order was improper under Penal Code sections 1203.1 and 1203.04 because it was an adjudication of civil liability.   She relies on People v. Richards (1976) 17 Cal.3d 614, 131 Cal.Rptr. 537, 552 P.2d 97 and People v. Williams, supra, 207 Cal.App.3d 1520, 255 Cal.Rptr. 778.10

In Richards, decided under Penal Code section 1203.1, our Supreme Court held that “absent extraordinary circumstances probation for a defendant may not be conditioned on restitution of sums involved in a purported crime of which he was acquitted.”  (People v. Richards, supra, 17 Cal.3d 614, 616, 131 Cal.Rptr. 537, 552 P.2d 97.)   The Richards opinion also discusses the reasons why the criminal justice system must be careful not to adjudicate civil liability in the guise of restitution orders.   Defendant cites Richards for the proposition that “[d]isposing of civil liability cannot be a function of restitution in a criminal case.”  (Id., at p. 620, 131 Cal.Rptr. 537, 552 P.2d 97.)

In Williams, the court held that the trial court could not order restitution payable to the victim's insurance company after defendant hit her car while fleeing from police.   Specifically, the court held that an insurance company is not a victim under Government Code sections 13960, subdivisions (a) and (d), and 13967, subdivision (c).   Defendant argues that Williams is applicable in this part of her argument because it also states that the restitution order there was in effect a civil judgment for damages, payable on a subrogation theory.   She therefore contends that the order here was invalid because it was in effect a determination of her civil liability to Fidelity Corporation.

 Defendant's argument cuts too broadly.   While it is well-established that a restitution order under Penal Code section 1203.1 is not and should not be a vehicle for assessing civil liability, it is also true that any restitution order may have an impact on such liability.  (People v. Richards, supra, 17 Cal.3d 614, 620, 131 Cal.Rptr. 537, 552 P.2d 97;  People v. Goulart (1990) 224 Cal.App.3d 71, 82, 273 Cal.Rptr. 477.)

 Foster considered and rejected the contention that the order there was invalid because assessing civil liability was not a proper function of restitution.   As Richards makes clear, a restitution order serves a proper purpose when it makes “a criminal understand that he has harmed not merely society in the abstract but also individual human beings, and that he has a responsibility to make them whole.”  (People v. Richards, supra, 17 Cal.3d 614, 620, 131 Cal.Rptr. 537, 552 P.2d 97.)   It serves an improper purpose when it seeks to resolve civil liability, or is used to collect a debt.  (Ibid.)

The order here does not serve the purpose condemned in Richards, the adjudication of civil liability.   Defendant admitted liability for restitution of the amounts she stole “in excess of $16,000” and agreed to restitution as part of her plea bargain.   The order requiring repayment of the money she admitted taking was a proper restitution order under Penal Code sections 1203.1 and 1203.04.11

Since the trial court was right for the wrong reasons, the restitution order should be affirmed because there is no chance that a different or lesser order would be entered on remand.  (Pena v. Toney (1979) 98 Cal.App.3d 534, 542, 160 Cal.Rptr. 4.)

CONCLUSION

As part of her plea bargain, defendant agreed to reimburse her employer for the amounts she stole, amounting to over $16,000.   If the trial court's order of restitution to Fidelity Corporation were invalidated, it would give defendant an unjustified windfall that was not part of the plea bargain.

Although the order of restitution cannot be justified under Financial Code section 17414, it was proper under Penal Code sections 1203.1 and 1203.04.

DISPOSITION

The judgment is affirmed.

FOOTNOTES

1.   Formerly subdivision 1.

2.   The Fidelity Corporation is a nonprofit mutual benefit corporation required to be created and maintained by escrow agents.   It is established to indemnify member escrow agents against losses resulting from embezzlement and fraud of officers, trustees or employees of an escrow agent.  (Fin.Code, § 17300 et seq.)

3.   The escrow company was obligated to pay the statutory deductible of $5,750 to the Corporation.  (Fin.Code, § 17314.3.)   It would appear that the Corporation should have paid the escrow company for the full amount of the loss, and the escrow company should then have paid the deductible to the Corporation.  (Fin.Code, § 17314.3, subd. (b).)

4.   Subsection (b) of Financial Code section 17414 provides:  “Any director, officer, stockholder, trustee, employee, or agent of an escrow agent, who abstracts or willfully misappropriates money, funds, trust obligations or property deposited with an escrow agent is guilty of a felony.   Upon conviction, the court shall, in addition to any other punishment imposed, order the person to make full restitution, first to the escrow agent and then to Fidelity Corporation, to the extent it has indemnified the escrow agent.   Nothing in this section shall be deemed or construed to repeal, amend, or impair any existing provision of law prescribing a punishment for such an offense.”

5.   Respondent argues that defendant waived the issue by failing to object to the restitution order.   While respondent is correct that defendant agreed to the plea bargain which included full restitution, defendant did object to the amount of the order at the hearing held to determine the amount of restitution.   Her objection to the reimbursement of the Corporation at that hearing was sufficient to preserve the issue for appeal.  (Cf. People v. Welch (1993) 5 Cal.4th 228, 19 Cal.Rptr.2d 520, 851 P.2d 802 [Failure to challenge the reasonableness of a probation condition at the sentencing hearing is a waiver of the claim on appeal].   The hearing here was held before the Welch case was filed.)

6.   People v. Harvey (1979) 25 Cal.3d 754, 159 Cal.Rptr. 696, 602 P.2d 396.

7.   That 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.”

8.   An attorney for the Corporation provided a declaration to the trial court stating that he drafted the amendment to Financial Code section 17414 to clarify that restitution would be payable to the Corporation, notwithstanding the holding of People v. Williams, supra, 207 Cal.App.3d 1520, 255 Cal.Rptr. 778.   The legislative history accompanying the declaration supports the conclusion that restitution would be ordered only in the situation where the new crime established by Financial Code section 17414 was committed.   For example, the Ways and Means Committee analysis states:  “[The bill provides] that any officer or employee, as specified, of an escrow agent who misappropriates trust funds is guilty of a felony․  [¶] [It requires] the court to order a person convicted of this felony to make restitution․”  (Emphasis added.)

9.   In People v. Crow (1993) 6 Cal.4th 952, 26 Cal.Rptr.2d 1, 864 P.2d 80, our Supreme Court upheld an order requiring restitution to a defrauded government agency because the agency was a direct victim of the crime.   It noted a conflict in appellate court decisions on the question of restitution to indirect victims and expressed no view on that question.  (Id., at p. 958, fn. 4, 26 Cal.Rptr.2d 1, 864 P.2d 80.)   However, it extensively referred to People v. Narron (1987) 192 Cal.App.3d 724, 237 Cal.Rptr. 693, which held that restitution is not limited to direct victims.  (Id., at p. 732, 237 Cal.Rptr. 693.)

10.   The trial court discussed and applied Williams on the erroneous theory that the definition of victim was the same under the Government Code and the Penal Code restitution provisions.   The trial court was apparently unaware of our decision in People v. Foster, supra, 14 Cal.App.4th 939, 18 Cal.Rptr.2d 1.  Foster was filed 20 days before the hearing here, and counsel did not cite it to the trial court at the hearing.

11.   Defendant argues that she was deprived of due process because she did not have the opportunity to be heard on the issue of whether the losses to her employer were $16,000 or $20,000.   The argument has no merit because defendant participated in the March 29, 1993, hearing held to consider that very issue, i.e., whether any restitution over $16,250 should be ordered.

HOLLENHORST, Associate Justice.

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