PEOPLE v. TURNER (1999)

Jack R. Turner appeals a judgment convicting him of seven counts of embezzlement (Pen.Code,1 § 506).   He admitted the loss to victims exceeded $50,000 ² (§ 12022.6, subd. (a)).   In exchange, the court dismissed all remaining charges with a Harvey Waiver.³  Turner contends the trial court was not authorized to order restitution be paid to the California State Bar Association (State Bar) for amounts it had compensated his victims.   He also contends that taking advantage of a position of trust is an element of embezzlement which cannot be used to support imposing an upper term.   We conclude his contentions are without merit and affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Turner was an attorney licensed by the State Bar. Between 1989 and 1994, he defrauded a number of his clients by obtaining settlements on their behalf and not notifying them.   These and other funds were diverted to Turner's own personal use.

On August 9, 1996, an information charged Turner with eight counts of embezzlement (§ 506), five counts of forgery (§ 470, subd. (a)), five counts of possessing a completed check with the intent to defraud (§ 475a), and one count of unauthorized practice of law (Bus. & Prof.Code, § 6126, subd. (b)) with an allegation of loss in excess of $50,000 (§ 12022.6).   As part of a plea bargain, Turner pleaded guilty to seven counts of embezzlement, admitted the victims' loss was in excess of $50,000, and had the remaining charges dismissed with a Harvey Waiver.

The court sentenced Turner to the upper term of three years on one count of embezzlement with a consecutive one-year term for the enhancement.   All remaining counts were set at the upper term of three years and ordered to run concurrently.   The court further ordered Turner to pay $200 in a restitution fine;  $868.70 in restitution to victim John Caucis, $8,000 to Marilyn Short, $5,000 to Leslie Griffith, $600 to Rome Sims, $4,875 to Jaime Workman;  and $42,033.30 to the State Bar representing the amount it expended in compensating the victims.

THE TRIAL COURT WAS AUTHORIZED TO ORDER RESTITUTION BE PAID TO THE STATE BAR

 Turner argues the State Bar is not a “direct victim” as required by section 1202.4, subdivision (k),⁴ governing victim restitution.   He argues the State Bar is not entitled to restitution any more than an insurer which has contractually indemnified its insureds for losses caused by criminal acts.   Insurers have been denied restitution on the theory they are not direct crime victims.  (People v. Sexton (1995) 33 Cal.App.4th 64, 39 Cal.Rptr.2d 242.) ⁵  The issue of whether insurers, whose subrogation rights to payments received by their policyholders from third parties arises from contract, are entitled to restitution directly from criminals is currently being reviewed by the Supreme Court.⁶  In any event, the State Bar does not operate like a contractual indemnitor.

Like the Restitution Fund (Gov.Code, § 13959 et seq.), the State Bar Client Security Fund (Bus. & Prof.Code, § 6140.5) ⁷ is created by statute.   The California Constitution mandates restitution for all persons incurring losses as a result of crime.⁸  The Legislature established the Restitution Fund to provide financial assistance to crime victims who suffer physical or emotional injury, or death.   Printed application forms are provided to victims affording them the opportunity to request relief within a given date of the injury and requiring them to describe the circumstances of the crime under penalty of perjury.   Within 90 days of application, a review board determines whether a preponderance of the evidence suggests ⁹ a compensable injury exists and approves or denies applications accordingly.   Once payment is made, the State of California is subrogated, by statute, to the rights of the victim to the extent of that payment.

The State Bar Client Security Fund is managed by the State Bar and services that subset of victims incurring monetary or property loss as the result of attorney misconduct.   Preprinted forms are available for applicants to describe the circumstances surrounding the loss, executed under penalty of perjury, and contain a subrogation and assignment clause in the name of the State Bar should any payment be made.   If a reimbursable loss is found by a preponderance of the evidence,¹⁰ the victim is awarded payment from the Client Security Fund. Significantly, the State Bar is statutorily subrogated to the extent of payment to the rights of a victim against the person or persons who caused the pecuniary loss.  (Bus. & Prof.Code, § 6140.5, subd. (b).)  Thus, both the Restitution Fund and the State Bar Client Security Fund serve the same function and each is statutorily subrogated to the rights of the victims who receive its financial assistance.

 Given the broad constitutional mandate to award restitution to “all persons who suffer losses,” there is no rational basis for distinguishing between two parallel mechanisms that serve that end regarding statutory subrogation.   A careful reading of section 1202.4 supports this view.   The Legislature has determined that defendants are not to receive a windfall, in the form of lower restitution, simply because their victims had the foresight to insure against the loss or otherwise receive compensation.¹¹  At the same time, it was not intended that victims obtain double recovery.¹²  This eventuality was provided for in the statute since restitution awarded directly to the victim is diverted to the Restitution Fund to the extent of their prior payment.¹³  There is no reason why payments from the State Bar, a public corporation ¹⁴ serving the same policy function,¹⁵ should not be treated in the same manner, given the Legislature has provided the State Bar statutory subrogation under Business and Professions Code section 6140.5, subdivision (b).   Although payments from the State Bar are discretionary,¹⁶ once payment has been made this distinction is of no consequence.

Consequently, the trial court properly awarded the State Bar restitution.   A reasonable reading and application of section 1202.4, so as to avoid an absurd and inconsistent result here,¹⁷ requires the State Bar be reimbursed to the extent victims of Turner's criminal activity received assistance from the Client Security Fund. Additionally, as a quasi-substitute for the Restitution Fund, awarding the State Bar restitution has the salutary effect of eliminating a further round of litigation with the victim for any double recovery.¹⁸

THE TRIAL COURT DID NOT ABUSE ITS DISCRETION IN IMPOSING AN AGGRAVATED SENTENCE

 Turner next contends the court erred in relying on California Rules of Court,19 rule 421(a)(11),²⁰ to aggravate the presumptive middle term because abuse of trust is an element of embezzlement and therefore an impermissible factor under rule 420(d).²¹  Even were we to agree that reliance on rule 421(a)(11) was improper, there would be no requirement to remand the case for resentencing.   A single valid circumstance in aggravation will support imposing the upper term.  (People v. Covino (1980) 100 Cal.App.3d 660, 670, 161 Cal.Rptr. 155.)   If the court relies on an improper factor, remand for resentencing is required only if “ ‘it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.’  [Citation.]”  (People v. Avalos (1984) 37 Cal.3d 216, 233, 207 Cal.Rptr. 549, 689 P.2d 121, quoting People v. Watson (1956) 46 Cal.2d 818, 836, 299 P.2d 243.)   The sentencing court here relied on alternative factors in imposing the upper term, including (1) Turner took advantage of a position of trust or confidence to commit the offense and (2) he was convicted of other crimes for which consecutive sentences could have been imposed but for which concurrent sentences were imposed.²²  The court specifically stated “either one in my opinion would be enough.”   The sentencing court's determination that both factors independently outweigh any mitigating factor is not shown to be an abuse of discretion on this record.

DISPOSITION

The judgment is affirmed.

FOOTNOTES

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.   Although Turner actually admitted loss in excess of $25,000 under an earlier version of section 12022.6, no prejudice results as Turner pleaded guilty to more than $50,000 in embezzled funds such that the current statutory amount is met.

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

4.   Section 1202.4, subdivision (k) provides:  “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.”  (Italics added.)

5.   Later decisions have declined to follow Sexton, indicating a strict reading of the “direct victim” language fails to capture (1) the trend in amendments towards broader restitution awards and (2) the Constitutional mandate (Cal. Const., art. 1, § 28) section 1202.4 is intended to implement which makes no distinction between direct and indirect victims.  (See Note, People v. Sexton:  Insuring an Absurd Result Through Inflexible Interpretation-The Court of Appeal Denies Criminal Restitution to a Victim's Insurance Company (1997) 31 Loy.L.A. L.Rev. 297.)

6.   People v. Birkett (1997) 54 Cal.App.4th 1438, 63 Cal.Rptr.2d 587, review granted September 3, 1997 (S062379) and People v. Sullivan (1998) 61 Cal.App.4th 337, 71 Cal.Rptr.2d 440, review granted May 13, 1998 (S068763).

7.   Business and Professions Code section 6140.5 authorizes establishment of Client Security Fund set forth in Rules of Procedure of the State Bar, Client Security Fund, rules 1-41.   Section 6140.5 provides:  “(a) The board shall establish and administer a Client Security Fund to relieve or mitigate pecuniary losses caused by the dishonest conduct of the active members of the State Bar arising from or connected with the practice of law.   Any payments from the fund shall be discretionary and shall be subject to such regulation and conditions as the board shall prescribe.   The board may delegate the administration of the fund to the State Bar Court, or to any board or committee created by the board of governors. [¶] (b) Upon making a payment to a person who has applied to the fund for payment to relieve or mitigate pecuniary losses caused by the dishonest conduct of an active member of the State Bar, the State Bar is subrogated, to the extent of that payment, to the rights of the applicant against any person or persons who, or entity that, caused the pecuniary loss.   The State Bar may bring an action to enforce those rights within three years from the date of payment to the applicant. [¶] (c) Any attorney whose actions have caused the payment of funds to a claimant from the client security fund shall reimburse the fund for all moneys paid out as a result of his or her conduct with interest, in addition to payment of the assessment for the procedural costs of processing the claim, as a condition of continued practice.   The reimbursed amount, plus applicable interest and costs, shall be added to and become a part of the membership fee of a publicly reproved or suspended member for the next calendar year.   For a member who resigns with disciplinary charges pending or a member who is suspended or disbarred, the reimbursed amount, plus applicable interest and costs, shall be paid as a condition of reinstatement of membership.”

8.   Article I, section 28, subdivision (b) of the California Constitution states:  “Restitution.   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.”  (Italics added.)

9.   Government Code section 13963 provides a hearing for initially denied applicants to establish the existence of a compensable injury by a preponderance of the evidence.

10.   Under rule 14(c) of the Rules of Procedure of the State Bar, Client Security Fund, either a denied applicant or the offending attorney can request an oral hearing or fact-finding panel to establish the existence of a compensable loss.

11.   Section 1202.4, subdivision (f)(2) states in part:  “Determination of the amount of restitution ․ shall not be affected by the indemnification or subrogation rights of any third party.”

12.   The Sexton opinion on which Turner would have us rely sidesteps this problem by “leav[ing] it to the insurer and the victim-insured to work out repayment” and possibly engendering further litigation.  (People v. Sexton, supra, 33 Cal.App.4th at p. 72, 39 Cal.Rptr.2d 242.)

13.   Section 1202.4, subdivision (f)(2) provides in part:  “Restitution payments made pursuant to this subdivision shall be made to the Restitution Fund to the extent that the victim [has received payment from the Restitution Fund].”

14.   Business and Professions Code section 6001 provides in part:  “The State Bar of California is a public corporation.”

15.   Compare Government Code section 13959 which provides:  “It is in the public interest to assist residents of the State of California in obtaining restitution for the pecuniary losses they suffer as a direct result of criminal acts․” with rule 1 of the Rules of Procedure of the State Bar, Client Security Fund, which states:  “[T]he State Bar has determined that, as part of its public service ․ it should also make a voluntary effort to alleviate, insofar as it deems practicable, injury to persons standing in a client or fiduciary relationship and who sustain pecuniary or property loss as the result of dishonest conduct of an active member of the State Bar.”

16.   Rule 2 of the Rules of Procedure of the State Bar, Client Security Fund, states in part:  “All payments from the Fund shall be a matter of grace and not of right and shall be in the sole discretion of the State Bar of California.”

17.   We are guided by the firmly established principles governing statutory interpretation:  “ ‘The fundamental purpose of statutory construction is to ascertain the intent of the lawmakers so as to effectuate the purpose of the law.  [Citations.]   In order to determine this intent, we begin by examining the language of the statute.  [Citations.]   But “[i]t is a settled principle of statutory interpretation that language of a statute should not be given a literal meaning if doing so would result in absurd consequences which the Legislature did not intend.”  [Citations.]   Thus, “[t]he intent prevails over the letter, and the letter will, if possible, be so read as to conform to the spirit of the act.”  [Citation.]   Finally, we do not construe statutes in isolation, but rather read every statute “with reference to the entire scheme of law of which it is part so that the whole may be harmonized and retain effectiveness.”  [Citation.]’ ”  (People v. Ledesma (1997) 16 Cal.4th 90, 95, 65 Cal.Rptr.2d 610, 939 P.2d 1310, quoting People v. Pieters (1991) 52 Cal.3d 894, 898-899, 276 Cal.Rptr. 918, 802 P.2d 420.)

18.   This would not raise the concern addressed in People v. Whisenand (1995) 37 Cal.App.4th 1383, 44 Cal.Rptr.2d 501, of determining civil liability by means of a restitution order as Turner does not contest the amount of restitution ordered.

FN19. All rule references are to the California Rules of Court..  FN19. All rule references are to the California Rules of Court.

20.   Rule 421 provides in part:  “Circumstances in aggravation include:  [¶] (a) ․ [¶] ․ [¶] (11) The defendant took advantage of a position of trust or confidence to commit the offense.”

21.   Rule 420(d) provides:  “A fact that is an element of the crime shall not be used to impose the upper term.”

22.   Turner concedes it was proper to rely on rule 421(a)(7) as an aggravating factor.

WORK, Acting P.J.

BENKE and MAY, JJ.,* concur.