The PEOPLE, Plaintiff and Respondent, v. Richard STAMPER, Defendant and Appellant.*
Richard Stamper, a lawyer, appeals a judgment convicting him of twelve counts of forgery (Pen.Code,1 § 470), nine counts of grand theft by embezzlement (§§ 487 subd. 1, 506) and three counts of petty theft by embezzlement (§§ 484, 488, 506); crimes involving surreptitious diversion of general funds from his law partnership. He contends that under California law a partner may not be convicted of theft under the theory of embezzlement for diverting assets of a law partnership of which he is a member, and that instructional error requires reversal of his forgery convictions. Except for a number of counts for which prosecution is barred because of the applicable statutes of limitations, we affirm the judgment.2 We find the error in refusing Stamper's proposed instruction that no law client was a victim of any crime charged, and in failing to sua sponte instruct pursuant to CALJIC No. 17.01, was harmless beyond reasonable doubt.
In this case, Stamper, a partner with David Dotson in a law practice, received monies from partnership clients which he deposited into the partnership client trust account in the name of the individual client. Some of these payments were nonreimbursable fees at the time they were paid and could have been deposited immediately into the partnership general account without violating any professional responsibility regulations imposed by the attorney-client regulations of the State Bar. Others were deposits which can be characterized as advances toward fees and expenses to be incurred in representing clients.
Stamper and Dotson segregated their partnership clientele with Stamper generally handling criminal and plaintiff's civil matters and Dotson conducting family law and civil defense cases. As a result, each processed separate client files and financial transactions. It was their custom, however, for each to deposit nonrefundable retainer fees in the partnership-client trust account and to leave earned fees there until needed for partnership purposes. Doing so gave the misleading appearance that the partnership had not yet earned this income and that the client retained an interest in those funds. Prosecution expert testimony characterized this as outside the ordinary custom and practice of attorneys who only retained funds in which the client had a present interest in their attorney-client trust accounts. Be that as it may, it was Dotson and Stamper's practice to lodge and maintain monies in which the client had no interest under the client's name in their trust account. From time to time, each partner would transfer the partnership's funds from those clients he processed to the general account.
Apparently Dotson did not closely monitor the client trust accounts, for Stamper succeeded in transferring partnership money unnoticed from that account to himself, bypassing accountings to the partnership. Once the attorney-client relationship had been terminated and no client money remained in the trust account, Stamper prepared letters to various clients advising them they were being forwarded a rebate of the fees paid. Although a copy of this letter was placed in the client's file, and a check drawn from the trust account payable to the client in the amount stated, the original letter was destroyed rather than mailed and the check was fraudulently negotiated by Stamper who deposited it in his personal account. Any remaining partnership money in these “trust” accounts then was transferred to the general account and designated as the total fee due for the specific case. It was only after Dotson and Stamper dissolved their partnership that the scam was discovered.
Any person to whom property is intrusted for the benefit of another is guilty of theft by embezzlement when it is used for purposes not within the scope of the fiduciary relationship established. (§ 503.) Section 506 is more specific and states, “[e]very trustee ․ attorney ․ or person otherwise intrusted with or having in his control property for the use of any other person, who fraudulently appropriates it to any use or purpose not in the due and lawful execution of his trust ․ is guilty of embezzlement․” (Emphasis added.) Stamper was ostensibly charged under section 506 and the verdict form bore the notation “guilty of the crime of embezzlement by trustee” as charged in specific counts. These counts as charged in the Information alleged Stamper violated “[s]ections 487, subdivision (1)/506 of the Penal Code (EMBEZZLEMENT BY TRUSTEE), ․ [in that] he did willfully, unlawfully and fraudulently appropriate or secret funds held in trust by him, ․ to a purpose not in the due and lawful execution of his trust.”
The prosecutor strenuously argued at length with defense counsel and the court over the propriety of instructing jurors on the specific embezzlement statute (§ 506) with its emphasis on Stamper's attorney status rather than relying on the general definition in section 503. He stressed the importance to a successful prosecution of the fact that Stamper was a lawyer and without this instruction he would not be able to refer to the general attorney-client fiduciary relationship and to argue Stamper was an evil lawyer. The prosecution prevailed, an instruction was given essentially in terms of section 506,3 and the prosecution pervaded the proceedings with its emphasis on Stamper's fiduciary duty to his client. This was error because no client property was the subject of any of these charged thefts.
As to the issue whether any general partner can be convicted of embezzling wholly-owned funds of a partnership in which he has a partnership interest, the fact the partners are engaged in a law partnership or a cooperage appears to be of no significance, and the culpability of a partner who converts partnership monies fraudulently is unrelated to the fact the defrauding partner may be an attorney. To the extent section 506 is instructive in this case, it is because it also refers to “any other person” intrusted with property and because it includes “trustees”. However, we first address Stamper's more basic contention that one partner cannot embezzle partnership property under California law.
Stamper argues the court erred in not following precedent expressed in a decision of this Appellate Division holding partners may not be convicted of stealing partnership property in which they share an interest with other partners. That rule is stated without analysis in People v. Oehler (1970) 7 Cal.App.3d 685, 687, 86 Cal.Rptr. 703, relying uncritically on dictum in People v. Foss (1936) 7 Cal.2d 669, 62 P.2d 372 and People v. Brody (1938) 29 Cal.App.2d 6, 83 P.2d 952. Oehler and the principle it espouses were criticized in People v. Sobiek (1973) 30 Cal.App.3d 458, 106 Cal.Rptr. 519, which refused to follow it and held that proposition was contrary to modern business practices and had been rejected by the American Law Institute (Model Pen.Code (Proposed Official Draft 1962) § 223.0) which defines “property of another” to include property in which any person other than the actor has an interest which the actor is not privileged to infringe even though the actor also has an interest in the property. (Id. at p. 466, 106 Cal.Rptr. 519.) Because the trial was held within the primary appellate jurisdiction of this division of the Court of Appeal, he contends the trial court was bound to have followed its holding in Oehler under the mandate of Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937, and disregard contrary decisions from other divisions. He is incorrect. Where appellate decisions conflict, the superior court is required to choose between the conflicting decisions. (Id. at p. 456, 20 Cal.Rptr. 321, 369 P.2d 937.) The trial court was free to follow the contrary authority in Sobiek as urged by the People to the extent it is legally applicable to the facts of this case.
The facts in Sobiek differ significantly from those with which we deal. In Sobiek, the partnership was an investment club formed to invest monies contributed by the partners to generate income for the partnership. The defendant was designated the agent for the partnership and given access to the “trust fund” created by the partners' contributions for the purpose of investing it on their behalf. He misapplied it. In essence, a special agency fiduciary relationship was created between Sobiek and his partners as to a fund which must be used for specific investment purposes. In contrast, Stamper merely diverted general property of his partnership designated for no specific purpose. Stamper's conduct is analogous to a cooperage partnership where one partner accepts cash (on the barrelhead) upon completion of a job and does not account for it to his partner.
Sobiek has been correctly analyzed as a case where a partner, Sobiek, was designated by the partnership as its agent to control certain partnership funds specifically for the purpose of investment on behalf of the partnership. As a factual matter it was Sobiek's agency status for the partnership, rather than his general ability to exercise partnership control over general partnership assets, on which Sobiek 's result was based. Section 506 specifically lists agents having under their control property to which they have been intrusted for specific purposes. Thus, the rationale for the general rule articulated in previous California cases relating to the liability of partners for theft of partnership assets need not have been distinguished to reach Sobiek's result. (See People v. Sobiek: Punishing the Embezzling Partner (1974) 25 Hastings L.J. 1266, 1277.)
Although we can distinguish Sobiek on its facts from those cases in which the rule is stated that one partner cannot steal from another (for instance, Seavey v. State Bar (1935) 4 Cal.2d 73, 47 P.2d 281), its holding has been approved and broadly applied without further analysis on the theory modern legal concepts regard partnerships as unincorporated associations entitled to general recognition as entities separate and distinct from their individual partners. (See Cal–Metal Corp. v. State Bd. of Equalization (1984) 161 Cal.App.3d 759, 765, 207 Cal.Rptr. 783.) Thus, in People v. Pedersen (1978) 86 Cal.App.3d 987, 150 Cal.Rptr. 577, a partner, who was not authorized to sign on and had no right to access a limited partnership general account, forged the signature of an authorized partner and diverted partnership funds. The court upheld an embezzlement conviction relying heavily on Sobiek 's lengthy historical analysis. (See also People v. Mellor (1984) 161 Cal.App.3d 32, 38, 207 Cal.Rptr. 383, a case factually akin to the investment partnership in Sobiek.) Each of these three cases post-date Oehler.
Possession of property in some kind of fiduciary capacity is an essential item of embezzlement. (People v. Parker (1965) 235 Cal.App.2d 100, 44 Cal.Rptr. 909; People v. Holder (1921) 53 Cal.App. 45, 199 P. 832.) In Sobiek, that element was established by finding defendant was an agent for the benefit of the partnership and misapplied partnership property. Thus, Sobiek is not direct authority on the issue of whether a general partner stands as a fiduciary to another partner in relation to partnership property. However, the decision fully addresses the problem of joint interests in purloined property.
Sobiek and its progeny rely heavily on the Model Penal Code's definition of “property of another” as including property in which any person other than the actor has an interest which the actor is not privileged to infringe, regardless of whether the actor holds an interest in the same property. This definition of “property of another”, a phrase which also occurs in section 506, coupled with the modern concept of partnerships as separate entities apart from its individual partners, leads logically to the broader rule adopted in Sobiek, that partners can be guilty of theft from the partnership. It does not lead to the further conclusion that every theft by a partner from the partnership is embezzlement. As noted, in Sobiek, the theft was deemed to be embezzlement because the defendant partner was “intrusted” by the partnership with funds which he was authorized to use for the benefit of the partnership for investment purposes only. Although Sobiek and later cases which follow its holding find the Model Penal Code's definition of “property of another” dispositive in their determination of whether embezzlement of partnership property occurred, they do not discuss California's additional statutory requirement that there exist a fiduciary obligation toward the property. The Model Penal Code itself does not require an “instrustment”, because it categorizes theft differently than does California's statutory scheme.
The Model Penal Code defines several categories of conduct which it would deem thefts. The most analogous to California's embezzlement statutes is “failing to make required disposition of funds received.” (Model Pen.Code, § 223.8.) However, this provision does not require “intrustment” of the property. (Com. v. Schreiber (1983) 319 Pa.Super. 367, 466 A.2d 203, 208.) While Model Penal Code section 223.8 is broad enough to include breaches of fiduciary relationships such as a trustee/beneficiary relationship (see Matter of Wilson (1979) 81 N.J. 451, 409 A.2d 1153, attorney-client theft), no “intrustment” in the classic sense is required. As made clear in Schreiber, Model Penal Code section 223.8 does not limit the unlawfully disposed properties subject to theft to “intrusted” property, or even require it to be. On the other hand, sections 503 and 506 only apply where the trustee relationship has been established. Although unauthorized diversion of general partnership funds in violation of a partnership agreement may establish the theft element of Model Penal Code section 223.8, such misapplication would not be an embezzlement in this state except for the fact California law imposes a trustee relationship on every partnership relationship.
Corporations Code section 15021, subdivision (1) states: “Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners ․ or from any use by him of its property.” Facially, this statutory scheme establishes only a limited trustee relationship between partners as a matter of law. However, decisional law both after the 1949 enactment of Corporations Code section 15021 (Leff v. Gunter (1983) 33 Cal.3d 508, 514, 189 Cal.Rptr. 377, 658 P.2d 740) and prior to its enactment (see discussion in Ragsdale v. Haller (9th Cir.1986) 780 F.2d 794, 796–797) declares partners in this state are trustees for each other in all proceedings connected with the conduct of the partnership, and subject to the obligations of a fiduciary. (Leff v. Gunter, supra, 33 Cal.3d at p. 514, 189 Cal.Rptr. 377, 658 P.2d 740.) Accordingly, in California, one partner's diversion of partnership assets, intended to defraud other partners, constitutes theft by embezzlement.
The critical issue then becomes whether instructing so as to permit the prosecutor to improperly emphasize the fiduciary obligations of an attorney and refusing Stamper's request to instruct no client was a victim prejudiced Stamper. The prosecution strenuously urged its theory that the partnership's law clients were victims of each charged theft and forgery. However, it also correctly claimed Stamper's partner, Dotson, was a victim of each count. On appeal, the People argue Stamper embezzled funds from client trust accounts by use of client trust account checks. They point to expert testimony at trial by Professor Weckstein that, “if I saw funds in a client's trust account I would assume that they belonged to the client or in part to the client․” From this, the prosecution argues it was justified in suggesting at trial that Stamper's clients were victims of the embezzlement of funds maintained in the partnership trust account. However, Professor Weckstein's assumption is contrary with the uncontradicted trial evidence that the particular funds converted by Stamper belonged solely to the partnership and not to its clients.
The lack of relevance of this prosecution theory is illustrated by the facts adduced at trial. There were only two incidents not time-barred, each of which generated one guilty verdict for forgery and one for grand theft. One instance (counts 26/27) involved a $4,254.32 transaction relating to Stamper's representation of client Ryerson in a civil matter under a contingent fee arrangement guaranteeing the law firm 50 percent of the recovery. There was a $25,000 recovery deposited in the partnership attorney-client trust account in Ryerson's name. $12,500 was first forwarded to Ryerson who thereafter had no interest in the balance of the funds remaining in that account. Of the partnership's $12,500, Stamper prepared a check payable to a fictitious person in the amount of $4,254.32, and the balance was transferred to the partnership general account as fees for handling the Ryerson matter. The “Green” check was endorsed and deposited in Stamper's personal account. The remaining incident (counts 29 and 30) related to the representation of James Alexander. Alexander gave Stamper a $2,000 retainer fee but never received the later-prepared Dotson and Stamper client trust check in the amount of $2,000 purporting to refund him that retainer, nor does he claim to be entitled to any rebate. Such a check was endorsed by Stamper or on his behalf and deposited in his personal account. Although the entire $2,000 retainer deposit in the partnership attorney-client trust account was apparently earned by the partnership and became its property, no part of it was transferred to the general account.
As to the four convictions we review, it is clear no client was victimized.4 It is equally clear that Stamper diverted these partnership funds in such a manner as to conceal the partnership interest in them. Thus, the partnership itself was a theft victim. This theft was not of funds over which Stamper exercised a fiduciary relationship by virtue of his attorney status, but merely because under California law they were intrusted to him as a member of the partnership. Stamper's attorney status would have been relevant to the jury in the context of guilt only had a client been the victim of this embezzlement. Thus, it was error to instruct in the unedited language of section 506 to stress a listed trust relationship which was irrelevant to criminal culpability.
However, we are satisfied the erroneous emphasis on Stamper's attorney status and the failure to advise the jurors that no clients were victims of any crime charged constitute harmless error beyond reasonable doubt. (Chapman v. California (1967) 386 U.S. 18, 24, 87 S.Ct. 824, 828, 17 L.Ed.2d 705.) This is true even though the prosecution stressed these theories in final argument, because the evidence conclusively establishes Stamper's partner was a victim of these crimes. The jury was urged by the prosecutor to at least consider the partner as a victim.
In People v. Green (1980) 27 Cal.3d 1, 164 Cal.Rptr. 1, 609 P.2d 468, the People presented alternate theories, any one of which is urged to prove a defendant guilty of a kidnapping. All but one theory were legally insufficient to constitute the charged crime. However, there was evidence to support the legally erroneous theories as well as the legally proper one. On a record from which the reviewing court was unable to ascertain on which theory the jury based its verdict, reversal was required. The rule applies whether the defect in alternate theories is legal or factual. (Id. at p. 70, 164 Cal.Rptr. 1, 609 P.2d 468.)
Stamper argues his case must be reversed for the reasons expressed in Green. He contends the People's theories would have permitted a verdict based on a belief he had embezzled from a client. However, this case differs from Green in that there is no evidence to support even an inference the monies embezzled by Stamper were subject to any beneficial interest of a client. The evidence conclusively establishes that the law partnership and its partner members had the total ownership and beneficial interest in those monies at the time of the embezzlements.
Moreover, the People did not argue to the jury any theory except that Stamper's law firm and his partner were victims of these embezzlements. Although the People did not tell the jurors to disregard clients as potential embezzlement victims, there was no closing argument suggesting the evidence would permit a finding they were victims. We cannot presume the jurors disregarded the court's admonition to base their decisions only on evidence adduced at trial. That evidence points unerringly to the conclusion that no client could be a victim of these embezzlements. On the other hand, the evidence compels a finding that Stamper's partner is a victim. The error addressed in People v. Green, supra, 27 Cal.3d 1, 164 Cal.Rptr. 1, 609 P.2d 468, is simply not present here.
As to the forgery counts, the fictitious check drawn from the partnership fees in the name of “Joseph Green” and the check drawn payable to client James Alexander, both of which contained forged endorsements and were deposited in Stamper's individual account, were in fact devices designed to defraud the law partnership. As to these counts, the partnership was the only victim named in the Information and there is no contention the jurors may have been confused into convicting Stamper under the theory the forgeries victimized clients. However, Stamper contends his forgery convictions must be reversed because the evidence was such that a guilty verdict could have been returned based on either of two separate acts, to wit he forged the checks and letters relating to the monies removed from the client trust account or he merely passed them knowing they were forged. Thus, he argues the court erred in not instructing the jurors they could not return a guilty verdict unless they unanimously agreed on the single act constituting the crime.
The People concede the court has an independent duty to instruct jurors that where the prosecution evidence suggests a defendant committed separate acts, any one of which could be the corpus of a single crime charged, that a defendant may be found guilty only if proof shows beyond a reasonable doubt that he committed one or more of the acts and the jurors agree that he committed the same act or acts. (CALJIC No. 17.01.) This instruction was offered by the prosecution. It should have been given. However, the trial court believed it to be surplusage and asked the prosecutor to state his reasons for including it. The prosecutor could articulate no reason, declared he also believed it was surplusage, a characterization with which the defense attorney agreed. As a result, the instruction was not given.
The prosecution first argues the error in not giving CALJIC No. 17.01 was waived when Stamper specifically agreed the instruction would be surplusage. However, this appears simply to have been a misunderstanding of the law as it related to the evidence at trial. There appears to be no appropriate trial strategy for such a waiver and the People suggest none. In the absence of a clear record showing a deliberate choice to give up a known right, we do not presume waiver.
We find the failure to instruct in terms of CALJIC No. 17.01 is not prejudicial on this record because it is uncontradicted that Stamper endorsed and deposited the forged documents, thus “passing” them under circumstances unquestionably amounting to an intent to defraud his partner and/or the partnership. That the jury might have found he was not the actual forger of these documents is irrelevant where the evidence conclusively establishes Stamper's guilt on the passing theory. (People v. Ramos (1984) 37 Cal.3d 136, 147, 207 Cal.Rptr. 800, 689 P.2d 430.)
The verdicts of conviction pursuant to counts one through four and seven through twenty-two are reversed and the superior court is directed to enter judgments of dismissal thereon. The judgment convicting Stamper of counts twenty-six, twenty-seven, twenty-nine and thirty is affirmed. The case is remanded for resentencing.
FN1. All statutory references are to the Penal Code unless otherwise specified.. FN1. All statutory references are to the Penal Code unless otherwise specified.
2. The People concede the three petty theft convictions, ten forgery convictions and seven grand theft convictions are time-barred and must be reversed. We thus are concerned with only two forgery and two grand theft convictions in addressing the remaining issues.
3. The instruction itself did not single out attorneys but states, “[e]very trustee, banker, merchant, broker, attorney, agent ․ or person otherwise intrusted with or having in his control property for the use of any other person who fraudulently appropriates it to any use or purpose not in the due and lawful execution of his trust․”
4. The same is true of each count as to which Stamper was acquitted and as to those of which he was convicted but are now set aside as time-barred.
WORK, Acting Presiding Justice.
TODD and BENKE, JJ., concur.