PEOPLE vs. KING

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

PEOPLE of the State of California, Plaintiff and Appellant, vs. Thomas KING and Andrew Hart, Defendants and Respondents.

Cr. 5375.

Decided: October 17, 1966

Thomas C. Lynch, Atty. Gen., Edward P. O'Brien, Paul N. Halvonik, Deputy Attys. Gen., San Francisco, for appellant. Lucille F. Athearn, San Francisco, for respondent Thomas King. James Martin MacInnis, San Francisco, for respondent Andrew Hart.

The People appeal from an order setting aside an indictment charging defendants Thomas King and Andrew Hart with conspiracy to commit grand theft and two counts of grand theft.

The sole question presented is whether the court was correct in concluding that defendants had acquired immunity from the instant prosecution by virtue of having been compelled to testify before the Insurance Commissioner of this state relative to the transactions subject of the indictment.

On August 7, 1964, the Insurance Commissioner filed in the superior court an application to be appointed conservator of Consumers and Distributors Insurance Exchange (hereafter referred to as “Exchange”) and its attorney-in-fact, Indemnity Management Corporation (hereafter referred to as “Indemnity”.)   The commissioner's application was based upon the grounds, among others, of insolvency and falsification of certain records required under the Insurance Code.   The commissioner sought an order appointing him conservator of both companies, directing him to take possession of all assets, books and records belonging to said companies, and further directing the officers, directors and employees of said companies to deliver all such items to him.   By order of August 7, 1964, the commissioner was duly appointed conservator and accorded the other relief applied for.

On August 11, 1964, the court, acting under section 1020 of the Insurance Code,1 issued an order directing King and Hart, and various other officers, directors and employees of Exchange and Indemnity, to appear at the commissioner's office at 10:00 a.m. on August 14, 1964, and to bring with them certain specified records of the two companies.   The individuals subject to the order were also directed to answer, under oath, at the time and place specified, all questions asked by the commissioner or his representative “regarding their association with [the two companies] and their knowledge of the business transactions and records of said companies.”

King did not appear at the commissioner's office at any time on August 14, 1964.   Hart appeared at 2:00 p.m. on that date, but produced no records and refused to answer any questions on the ground that his answers might tend to incriminate him.

On August 17, 1964, the commissioner, who was represented by the Attorney General, filed a declaration averring that King and Hart had intentionally violated the order of August 11, 1964, and praying that they be held in contempt and, particularly, that they be imprisoned until they produced the missing books and records.

On August 15, 1964, the court issued an order directing King and Hart to appear at 10:00 a.m. on August 19, 1964, and show cause why they should not be held in contempt.

On August 19, 1964, an attorney appeared on behalf of King and Hart and informed the court that his clients were attempting to locate the missing records but had thus far been unable to do so.   The matter was then continued until 2:00 p.m. that afternoon, at which time the attorney appeared with Hart but announced that illness had prevented King from attending.   The commissioner then produced evidence in support of the contempt charges set forth in his declaration.

At this stage in the proceedings, counsel was asked whether he intended to call any witnesses in defense of the contempt charges, and he replied that he did not.   The court then stated that the privilege against self-incrimination did not justify Hart's refusal to disclose the whereabouts of books or records, and counsel replied that his client was not asserting such privilege in the contempt proceedings and evinced surprise that the commissioner had not chosen to call him as a witness.   When the court expressed the view that Hart could not be compelled to testify in a contempt proceeding and that the commissioner was required to prove its charges by some other means, counsel replied that if that were the state of the law, he would call Hart himself.   Counsel for the commissioner then stated that if Hart was going to testify freely, there were a number of things he wanted to go into and he thought it would be more appropriate for the court to order the witness to appear and testify before the commissioner.   The court then asked counsel for the commissioner whether he was questioning Hart's right to refuse to incriminate himself by answering any questions which did not directly pertain to the whereabouts of the missing records.   Counsel replied that Hart could assert the privilege against self-incrimination at any time but that he did not believe that Hart could agree to answer certain questions and refuse to answer others.   Hart's counsel then stated that he was calling his client as a witness for the sole purpose of refuting the evidence which the commissioner had produced in support of the contempt charges.

Hart was then examined by his own counsel and denied that he had removed any of the missing records or that he knew where they were.   During cross-examination, Hart was questioned at length concerning the transactions which ultimately gave rise to the criminal prosecution subject of the instant appeal.   He answered freely and did not raise the privilege against self-incrimination.

The court continued the contempt proceeding until the following day, at which time counsel produced, on behalf of his clients, the bulk of the records sought by the commissioner.   Counsel for the commissioner then stated that he was satisfied that King and Hart had adequately complied with that portion of the order of August 11 which required the production of records but that King had still failed to comply with that portion of the order which required him to appear and testify before the commissioner.   The court ruled that it would direct King to appear before the commissioner, as required under the order of August 11;  that he would be purged of contempt as soon as he appeared;  and that he could then raise the privilege against self-incrimination and refuse to testify if he chose to do so.   With regard to Hart, the court announced that as a result of his testimony on the previous day and the production of the missing records, it found him not guilty of contempt.   The court expressed doubt as to whether Hart might not have waived his right to rely upon the privilege against self-incrimination by virtue of having testified in the contempt proceeding, but stated that the question was not before it and would arise only if the commissioner again sought to compel him to testify and he refused to do so.

On September 24, 1964, the court issued an order, under section 1020 of the Insurance Code, directing Hart to deliver certain cancelled checks and bank statements to the commissioner and to appear before him on September 29, 1964, and answer questions relating to such items and to any other cancelled checks and bank statements of the two companies subject of the conservatorship.   Hart was further directed to answer questions regarding the business and affairs of the two companies, the purchase of Indemnity by Hart and his associates, and the finances of both companies.

Hart appeared with counsel on the date specified, and the latter asked the hearing commissioner what statute authorized the taking of Hart's testimony.   The hearing commissioner replied that although witnesses were generally examined under section 1294 2 of the Insurance Code, Hart's appearance had been compelled by a court order issued under section 1020 of that code.   Hart's counsel indicated that this was agreeable to him, and Hart was then questioned at length by representatives of the Insurance Commissioner.   He did not rely upon the privilege against self-incrimination and answered many questions pertaining to the transactions which subsequently resulted in the prosecution of the instant criminal action.

On August 28, 1964, King had also appeared before the Insurance Commissioner in compliance with the order made in open court on August 20, 1964.   He, like Hart, freely testified as to the transactions resulting in the instant criminal prosecution and made no attempt to assert the privilege against self-incrimination.

On February 11, 1965, the indictment in the instant action was filed, and on June 22, 1965, defendants King and Hart moved to quash said indictment on the ground that they had obtained immunity from prosecution, under section 12924 of the Insurance Code.   On July 6, 1965, the court set aside the indictment and dismissed the action as to both defendants.

The People raise several arguments on appeal, one of these being that defendants did not obtain immunity from prosecution because they did not assert the privilege against self-incrimination during the hearings before the Insurance Commissioner and testified freely and voluntarily.   This contention is sound and requires reversal of the order appealed from.   In view of this conclusion we need not discuss the People's other arguments.

The record discloses that both the order of August 11, which directed both defendants to appear and testify before the commissioner, and the subsequent order of September 24, which was applicable to Hart only, show on their faces that they were issued under section 1020 of the Insurance Code.   That section, unlike section 12924, does not state that a witness shall be precluded from relying upon the privilege against self-incrimination and similarly does not state that he shall be immune from criminal prosecution based upon the matters subject of his testimony.

Defendants were thus aware, even prior to the contempt hearings held on August 19 and August 20, that the Insurance Commissioner was attempting to proceed under section 1020 rather than section 12924.   Both defendants were represented by counsel at the contempt hearings and were informed, by both the court and counsel for the commissioner, that they were entitled to raise the privilege against self-incrimination during the hearings before the commissioner and to refuse to answer any questions which did not directly pertain to the whereabouts of the missing records.   The court expressly informed King that he would be purged from contempt the moment that he appeared before the commissioner and that he was thereafter free to raise the privilege against self-incrimination.   Although the court and counsel for the commissioner both questioned Hart's right to raise the privilege after having elected to testify in defense of the contempt charges, the court declined to hold that a waiver had occurred and suggested that if Hart did not believe that he had waived the privilege, he was free to raise it if he were again ordered to appear and testify before the commissioner.

Under the circumstances, there is no merit whatever in defendants' claim that they testified before the Insurance Commissioner only because they believed that they were being compelled to do so, under section 12924, and were being granted immunity from prosecution.   The record demonstrates, to the contrary, that King and Hart were fully aware, at the time of their respective appearances before the Insurance Commissioner, that the commissioner was not challenging their right to rely upon the privilege against self-incrimination and was not seeking to exert absolute testimonial compulsion in exchange for immunity.   When King appeared before the commissioner on August 28, he knew that his appearance was itself sufficient to purge him from contempt, but he nevertheless chose not to rely upon the privilege against self-incrimination and voluntarily answered all questions asked of him.   Hart had similarly been advised of his right to rely upon the privilege if he were again directed to appear before the commissioner.   The order of September 24, like the prior order subject of the contempt proceeding, was based upon section 1020.   Moreover, when Hart and his counsel appeared before the commissioner on September 29, the latter was told that the commissioner was proceeding under section 1020, rather than section 12924, and indicated that this was entirely agreeable to him.   Although Hart thus had every opportunity to raise the privilege against self-incrimination, he failed to do so and testified voluntarily.

 It is settled that the privilege against self-incrimination is a purely personal one which is solely for the benefit of the witnesses and which is deemed waived unless invoked.  (Rogers v. United States (1950) 340 U.S. 367, 370–371, 71 S.Ct. 438, 95 L.Ed. 344;  Steinmetz v. Cal. State Board of Education (1955) 44 Cal.2d 816, 824, 285 P.2d 617;  People v. Barker (1965) 232 Cal.App.2d 178, 181, 42 Cal.Rptr. 651.)   The record in the instant case conclusively demonstrates that although both defendants well knew that they were not being offered immunity under section 12924, they waived the privilege against self-incrimination and testified voluntarily before the Insurance Commissioner.

The order setting aside indictment is reversed.

FOOTNOTES

1.   That section provides in part that “Upon the issuance of an order * * * [appointing the Insurance Commissioner conservator of any person's business] or at any time thereafter, the court shall issue such other injunctions or orders as may be deemed necessary to prevent any or all of the following occurrences:  (a) Interference with the commissioner or the proceeding.  (b) Waste of assets of such person.  (c) The institution or prosecution of any actions or proceedings.  (d) The obtaining of preferences, judgments, attachments, or other liens against such person or its assets.  (e) The making of any levy against any such person or its assets.  (f) The sale or deed for nonpayment of taxes or assessments levied by any taxing agency of property [in which such person has an interest of the type specified]. * * * (g) Any managing general agent or attorney in fact from withholding from the commissioner any books, records, accounts, documents or other writing relating to the business of such person * * *.”

FN2. That section provides in part that “(a) The commissioner may issue subpoenas for witnesses to attend and testify before him on any subject touching insurance business, or in aid of his duties.   Such process may be served, obeyed, and enforced as provided in the Code of Civil Procedure for civil cases.   A defaulting witness may be punished as provided in the Penal Code. * * * (b) A person shall not be excused from testifying or from producing any book, document, or other thing under his control upon any such hearing or investigation on the ground that his testimony, or the book, document, or other thing required of him, may tend to incriminate him, or may have a tendency to subject him to a punishment for a felony or misdemeanor;  but no person shall be prosecuted or punished by any criminal action or proceeding for or on account of any act, transaction, matter or thing concerning which he is so compelled to testify under oath, except for perjury committed in such testimony.”.  FN2. That section provides in part that “(a) The commissioner may issue subpoenas for witnesses to attend and testify before him on any subject touching insurance business, or in aid of his duties.   Such process may be served, obeyed, and enforced as provided in the Code of Civil Procedure for civil cases.   A defaulting witness may be punished as provided in the Penal Code. * * * (b) A person shall not be excused from testifying or from producing any book, document, or other thing under his control upon any such hearing or investigation on the ground that his testimony, or the book, document, or other thing required of him, may tend to incriminate him, or may have a tendency to subject him to a punishment for a felony or misdemeanor;  but no person shall be prosecuted or punished by any criminal action or proceeding for or on account of any act, transaction, matter or thing concerning which he is so compelled to testify under oath, except for perjury committed in such testimony.”

SHOEMAKER, Presiding Justice.

AGEE and TAYLOR, JJ., concur.

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