The PEOPLE, Plaintiff and Respondent, v. Emelda Enrique NILSEN, Defendant and Appellant.
Defendant Emelda Enrique Nilsen was charged by felony complaint with one count of grand theft from her employer (Pen.Code, §§ 484, 487, subd. (b)(3)).1 The complaint further alleged that defendant took more than $50,000. (§ 12022.6, subd. (a).) Defendant entered a negotiated plea of no contest on condition the excessive taking enhancement be stricken. On August 29, 1994, the court suspended imposition of sentence and placed defendant on five years probation on condition she serve one year in county jail. A restitution hearing was then set for October 13.
Following the restitution hearing, the court ordered defendant to pay $60,824.97 to the victims as a condition of probation. A further restitution hearing was held on October 31, 1994. Following that hearing, the court reduced the previous restitution order by $10,000, but then ordered defendant to pay $10,000 to the victims' insurance company. Defendant filed a timely notice of appeal pursuant to California Rules of Court, rule 31(d).
Defendant argues the trial court erred in ordering restitution to the victims for time spent auditing the amount of their loss. Defendant further argues the court erred in ordering restitution paid to the insurance company.
FACTS AND PROCEDURAL HISTORY
On April 10, 1994, Dr. Joseph Gali and his wife Janice contacted the San Jose Police Department to report the embezzlement by defendant of funds from Gali's dental practice. Defendant had been hired as Gali's bookkeeper on January 7, 1992, and processed accounts receivable as part of her duties. Between January 1993 and April 1994, defendant had forged Gali's signature on numerous incoming checks from various insurance companies then deposited the checks into her own bank accounts.
At the restitution hearing on October 21, the Galis requested restitution in the amount of $50,297.76 as reimbursement for their lost income. Janice testified that she arrived at the figure by comparing monthly computer records of amounts posted to various accounts with monthly statements of actual bank deposits. The differences would be as much as $3,300. She then had to review records from 300 different insurance companies to determine which checks were stolen. This included obtaining a list of every check the companies had sent to Gali during the months involved, then obtaining copies from the companies of checks defendant was suspected of taking, and checking the verification of the endorsement on those checks.
Janice testified she spent about 246 hours getting the information together to determine the loss. The Galis requested the restitution order also include payment for the time spent on the audit at $100 per hour, or $24,650. They further requested reimbursement for telephone and copying expenses. When the court asked what statute gave it the authority to include these amounts, the prosecutor answered that section 1203.04, subdivision (d), included these amounts under the definition of restitution. Defense counsel argued, however, that he did not believe that audit hours were covered under the definition of restitution. The following then occurred:
“THE COURT: Well, loss of—do you agree that loss of wages or loss of income as a result of, one, being a victim of a crime, and in order to establish what the loss is, loss of income, or loss of wages, are recoverable items? That's always been my understanding. [¶] In other words, if somebody comes to court and testifies as a victim and loses wages, they are entitled to restitution for that.
“[DEFENSE COUNSEL]: I think the court [sic ] specifically covers court time. Or there is case law that specifically says, the time in court. I don't think it covers the actual time that they spend auditing. If they have a profession—
“THE COURT: I think the purpose of the statute is to make the victims whole. And in order to establish what their loss is, if they incur loss of wages or income as a result of inability to engage in other gainful employment, then that time ought to be compensable.
“[DEFENSE COUNSEL]: But that's not what they are alleging here. They're just saying they spent this time. Not at the expense of their normal jobs.
“DR. GALI: No, no, no.
“[DEFENSE COUNSEL]: I'm just saying, there's no documentation here; there is not any kind of documentation that says, hey, we did this at the expense of the medical practice. These are the hours we didn't spend. [¶] So I don't quite understand that․ [¶] And also, I should state that there is a—well, two things. One is, after contacting the insurance company, insurance company that held a bond for Ms. Nilsen, they indicate to me that they paid ten thousand dollars.
“DR. GALI: Yes, Your Honor. We did receive it. But that's irrelevant. I paid premiums. Will they reimburse me for my premiums that I paid for the insurance company to get ten thousand dollars?
“THE COURT: It's a collateral source, is what they're saying, I assume, on the fiduciary bond. Is that what we're talking about?
“[DEFENSE COUNSEL]: It is a bond.
“THE COURT: It is a collateral source.
“[DEFENSE COUNSEL]: And second of all, ․ [¶] ․ how do you set up an amount on, let's say, Mrs. Gali's time? I don't see how the court—
“DR. GALI: It's my time, too.
“[DEFENSE COUNSEL]: But there's no breakdown as far as whose time it was and when it was spent. You know, who spent this time when․”
After further argument, the court ordered restitution as follows: $50,297.76 as the principal amount of the loss, $10,000 as an audit expense, $225.38 for telephone costs, $207.83 for copies and supplies, and $94 for express mailing expenses, for a total of $60,824.97. The court stated the sum would have interest accruing from that date at the rate of ten percent per annum until paid in full. The court then stated it was not including the insurance payment as a collateral source, as the Galis had paid the insurance premiums. However, at the hearing on October 31, the court expressed concern about ordering restitution to the Galis in an amount that included the amount paid on the fidelity bond. The prosecutor stated that the court could, in its discretion, award restitution to the insurance company in lieu of the Galis. The court agreed. It then reduced the sum previously ordered paid to the Galis by $10,000, and ordered $10,000 to be paid to the insurance company that had made the $10,000 payment.
Sections 1203 et seq. grant trial courts “broad discretion in the sentencing process, including the determination as to whether probation is appropriate and, if so, the conditions thereof.” (People v. Lent (1975) 15 Cal.3d 481, 486, 124 Cal.Rptr. 905, 541 P.2d 545.) Section 1203.1 authorizes the trial court to impose reasonable conditions of probation. “The court may impose and require any or all of the above-mentioned terms of imprisonment, fine, and conditions, and other reasonable conditions, as it may determine are fitting and proper to the end that justice may be done, that amends may be made to society for the breach of the law, for any injury done to any person resulting from that breach, and generally and specifically for the reformation and rehabilitation of the probationer, ․” (§ 1203.1, subd. (j).) The trial court's broad discretion under section 1203.1 “is not boundless; the authority is wholly statutory, and the statute furnishes and limits the measure of authority which the court may exercise.” (People v. Cervantes (1984) 154 Cal.App.3d 353, 356, 201 Cal.Rptr. 187.)
“In every case where a person is convicted of a crime and is granted probation, the court shall require, as a condition of probation, that the person make restitution as follows: (1) To the victim, if the crime involved a victim․” (Former § 1203.04, subd. (a), see Stats.1992, ch. 682, § 5, p. 2558.) 2 “For purposes of paragraph (1) of subdivision (a), ‘restitution’ means full or partial payment for the value of stolen or damaged property, medical expenses, and wages or profits lost due to injury or to time spent as a witness or in assisting the police or prosecution, which losses were caused by the defendant as a result of committing the crime for which he or she was convicted. The value of stolen or damaged property shall be the replacement cost of like property, or the actual cost of repairing the property when repair is possible.” (Former § 1203.04, subd. (d).)
Defendant first argues, citing People v. Friscia (1993) 18 Cal.App.4th 834, 22 Cal.Rptr.2d 656, that no statutory authority exists for payment for time spent which does not result in lost wages or profits. The court in Friscia held that (now former) section 1203.04 did not authorize payment for time spent auditing the amount of the loss, absent a showing that the time spent resulted in a loss of wages or profits. (Id. at p. 837–838, 22 Cal.Rptr.2d 656.) The defendant in that case pleaded guilty to embezzlement from her employer, a small pre-school/kindergarten owned by two partners. (Id. at p. 835, 22 Cal.Rptr.2d 656.) The trial court included in the restitution order an amount based on the time the partners personally spent putting the case together for the sheriff's department. (Id. at p. 836, 22 Cal.Rptr.2d 656.) The appellate court struck this portion of the restitution order, observing that “[w]hile the considerable time spent on the accounting took away from [the partners'] duties at the school, there is no evidence in the record that it reduced their salary or profit.” (Ibid.) “The evidence thus fails to show the loss of wages or profits. While expenditure of one's time is no small matter, the Legislature has failed to provide for compensation for such by way of a restitution order as a condition of probation.” (Id. at p. 838, 22 Cal.Rptr.2d 656.)
Respondent argues Friscia was wrongly decided, citing People v. Tucker (1995) 37 Cal.App.4th 1, 44 Cal.Rptr.2d 1. In Tucker, the defendant pleaded no contest to charges of embezzlement by a trustee and forgery after improperly withdrawing shares from a mutual fund. The trial court ordered the defendant to make restitution as a condition of probation in an amount equal to the appreciated value of the assets embezzled. (Id. at p. 3, 44 Cal.Rptr.2d 1.) The appellate court affirmed the order, finding that the trial court is vested with broad discretion in setting the amount of restitution and that it may properly use any rational method which is reasonably calculated to make the victim whole. (Id. at p. 6, 44 Cal.Rptr.2d 1) The court noted the record included evidence of what “[the] shares would have been worth absent embezzlement by defendant. Pursuant to former section 1203.04, subdivision (d), the testimony reflected the ‘replacement cost of like property.’ ” (Ibid.)
Although Tucker is distinguishable on its facts, we find the court's analysis instructive. Trial courts are granted broad discretion in determining the conditions of probation, and may properly use any rational method of determining the amount of restitution which is reasonably calculated to make the victim whole. The restitution order at issue here served the purpose of compensating the crime victims by making them whole. Had Dr. Gali spent the hours required to verify the amount of his monetary loss at the expense of his dental practice, there is no question that the trial court would have been required to order defendant to reimburse Dr. Gali for all the hours he spent. That Dr. Gali and his wife were able to verify the monetary loss without losing any additional income from the dental practice does not make the restitution order invalid. The victims spent considerable valuable time verifying their loss as a result of defendant's criminal conduct. The restitution order was a reasonable attempt to compensate them for that lost time. The restitution order was valid and was within the court's broad discretion under section 1203.1.
Defendant also argues the trial court erred in ordering restitution paid to the insurance company that had paid on the $10,000 bond. Defendant admits that the case law is divided on the question of whether a sentencing court can order a defendant to pay restitution to a victim's insurer. (See People v. Sexton (1995) 33 Cal.App.4th 64, 70–71, 39 Cal.Rptr.2d 242 and cases cited therein.) However, she argues that the amendment to section 1203.04, subdivision (j),3 which became effective September 29, 1994, removed the uncertainty by indicating restitution can only be ordered paid to a direct victim, and she is entitled to the ameliorative benefit of the change in legislation that occurred before her case became final. (Ibid.)
In Sexton, the court held that “an insurer who has incurred expenses solely by virtue of a contractual duty to indemnify the direct victim is not itself an ‘object’ of the crime and hence not a direct victim. It cannot, therefore, be the recipient of a section 1203.04 restitution order unless it is itself a direct victim of criminal conduct.” (33 Cal.App.4th at p. 71, 39 Cal.Rptr.2d 242.)
But the court went on to conclude that “[a] trial court, in its discretion, may still order the restitution paid to the victim and leave it to the insurer and the victim-insured to work out repayment under the terms of their insurance contract․ [¶] Alternatively, the trial court may conclude it is appropriate to impose a restitution fine commensurate with the amount of Allstate's payment under Penal Code section 1202.4, subdivision (a)(3)(A). [Citations.]” (Id. at p. 72, 39 Cal.Rptr.2d 242.)
Respondent argues that Sexton was wrongly decided, and that section 1203.04 does not limit a trial court's discretion to order a defendant to pay restitution to all victims who suffer a loss as a result of his or her crime. We agree with respondent.
Former section 1203.04 was enacted by the Legislature to implement a constitutional provision adopted by the voters. (See People v. Crow (1993) 6 Cal.4th 952, 956, 26 Cal.Rptr.2d 1, 864 P.2d 80.) The constitutional provision does not restrict restitution to the direct victims of criminal activity nor does it exclude entities which are nonnatural persons, such as an insurance company or governmental agency, from receiving restitution, but broadly mandates restitution to “all persons who suffer losses as a result of criminal activity.” (Cal. Const., art. I, § 28, subd. (b).) Thus, “[a] flexible interpretation of the term ‘victim’ best addresses the purpose of the statute.” (People v. Foster (1993) 14 Cal.App.4th 939, 953, 18 Cal.Rptr.2d 1.)
People v. Foster, supra, a case decided before the 1994 amendment to section 1203.04, directly dealt with the issue of whether an insurance company was a victim entitled to restitution. The court noted that an insurance company is not considered a victim under the Government Code provisions governing restitution when probation is denied or when probation is granted and the victim has already been reimbursed from the Restitution Fund, but an insurance company is treated as a victim under the Penal Code provisions governing restitution to a victim who has not been reimbursed from the Restitution Fund when probation is granted. (14 Cal.App.4th at 950–951, 18 Cal.Rptr.2d 1.) Foster had argued that this situation resulted in an anomaly that could not have been intended by the Legislature. (Ibid.) The court disagreed: “[E]xamples demonstrate that the Legislature deliberately intended the term ‘victim’ to have different applications under the two statutory schemes. We therefore see no anomaly in treating an insurance company differently under the two schemes. [¶] In our view, it would create a greater anomaly to apply the scheme apparently envisioned by Foster, under which a defendant's responsibility to make restitution for property he has stolen would depend upon whether the victim had obtained insurance against the loss. This result would ignore that objective of probation conditions which is to deter further criminal activity by requiring the defendant to bear the consequences of his criminal activity.” (Id. at p. 952, 18 Cal.Rptr.2d 1.)
“The different objectives of the probation statutes and the victim reimbursement provisions of the Government Code justify different applications of the term ‘victim.’ The Legislature explicitly recognized this distinction by incorporating a detailed definition of the term ‘victim’ into the Government Code, but not defining the term for purposes of section 1203. Thus, the Legislature left it open for an insurance company to be treated differently under the two statutory schemes.” (Id. at p. 953, 18 Cal.Rptr.2d 1.)
We agree with the court in Foster that it makes no sense to limit a defendant's restitution order simply because the victim had paid for insurance covering all or part of the loss. We also agree that it makes no sense to prohibit an order for restitution to be directly paid to an insurance company that has reimbursed the victim for all or part of the resulting loss. The Sexton approach, which would allow the trial court to order the restitution paid to the victim, leaving it to the insurer and the victim to work out repayment under the terms of their insurance contract would appear to permit the insurer to seek repayment before all of the restitution ordered had been paid to the victim. If the insurer did not seek repayment for any reason, this approach would permit a victim to receive more restitution than the amount to which he or she was entitled.
For all of these reasons, we conclude that the Foster analysis is the more rational analysis and holds the defendant responsible for the full extent of the injury or loss resulting from his or her criminal conduct. The term “victim” should be construed broadly to include nonnatural persons or entities, including an insurance company, since a restitution order to such a victim will further the objectives of deterring future criminal activity and thus, rehabilitating the defendant.
Accordingly, we decline to follow Sexton since its interpretation of amended section 1203.04, subdivision (j), conflicts with the broad constitutional provision providing for restitution to victims of criminal activity. The restitution order here was reasonably calculated to make the victim whole, and is therefore valid.
The judgment is affirmed.
1. Further statutory references are to the Penal Code.
2. Section 1203.04 was amended effective September 29, 1994. We assume, as have the parties, that the former section applies in this case.
3. Section 1203.04, subdivision (j) now provides, “Nothing in this section shall prevent a court from ordering restitution to any ․ legal or commercial entity when that entity is a direct victim of a crime.”
BAMATTRE–MANOUKIAN, Associate Justice.
COTTLE, P.J., and WUNDERLICH, J., concur.