PEOPLE v. GILL (1987)

OPINION

Judgment was entered in favor of Gregory Benjamin Gill after the court sustained, without leave to amend, his demurrer to the prosecution's first amended information alleging multiple counts of grand theft and securities violations.   Gill contended the amended information failed to allege facts to toll the three-year statute of limitations and justify delayed discovery of the crimes by each of the 23 victims.   On appeal, the prosecution argues (1) it is not required to plead specific facts justifying delayed discovery for each of the 23 victims and the pleading is therefore sufficient;  or (2) in the alternative, if the pleading is found to be insufficient, the court abused its discretion by denying leave to amend.   Gill asserts each count must stand alone and thus specific facts establishing late discovery for each victim are required;  and denying leave to amend was not an abuse of discretion because the transcript of the preliminary hearing shows it would be futile.

Three of the counts are sufficient on the face of the pleading and the judgment of dismissal is reversed as to them.   The pleading is insufficient as to the remaining counts under People v. Zamora (1976) 18 Cal.3d 538, 134 Cal.Rptr. 784, 557 P.2d 75 and the evidence at the preliminary hearing does not support granting leave to amend;  thus, the remaining portion of the judgment is affirmed.

I

A warrant for Gill's arrest was issued on October 9, 1984.   Evidence at the preliminary hearing established Gill was president of Diversified Financial Consultants, Inc. (DFC)  During 1980 and 1981, DFC received money from investors as a loan broker.   The funds were to be held in an interest-bearing trust account pending investment in trust deeds.   During September and October of 1981, interest checks sent to some investors were returned for insufficient funds;  other investors became concerned when they received neither interest from their investments nor trust deeds as security.   By letters dated September 16, 1981, DFC assured investors the returned interest checks were the result of a clerical error and urged them to redeposit or ask for a new check.   On October 8, 1981, DFC sent another letter explaining it was necessary to change banks and the opening of new accounts was causing the delay;  it again assured investors their checks would be forthcoming.

DFC filed a Chapter 11 bankruptcy proceeding on October 22, 1981 and so notified its investors by letters dated October 21 and 28, 1981.   In December 1981, a preliminary creditors' meeting was held, and the bankruptcy trustee informed the creditors that DFC's trust funds were insufficient to repay investments.   In April 1982, three DFC investors who were also police officers talked to Detective Arthur Droz of the Huntington Beach Police Department, who then began an investigation.

The prosecution filed an information alleging one count of grand theft (Pen.Code, § 487, subd. 1) and two counts of securities violations (Corp.Code, §§ 25401, 25110) for each of the 23 DFC investors.   For 22 of the investors, the information alleges the wrongful acts took place at various times between September 1, 1980 and September 30, 1981.   For one investor (counts 43, 44 and 45), the information alleges the acts took place between July 1 and October 31, 1981.   Other than names and dates, all sets of the three count allegations are identical.

Gill filed a demurrer asserting the face of the information revealed all counts were barred by the statute of limitations because the offenses were committed more than three years prior to the issuance of the arrest warrant and there were insufficient facts alleged to justify tolling the statute until the offenses were discovered.   The demurrer was sustained.   The prosecution filed an amended information and Gill demurred again.   The court sustained the second demurrer without leave to amend and dismissed the case pursuant to Penal Code section 1008.¹

II

 At the outset, the judgment of dismissal as to counts 43, 44 and 45 must be reversed.   Because they were timely on the face of the information, the demurrer was improperly sustained and no amendment is necessary.

The remainder of the counts pled require a more extensive discussion.   To avoid the bar of the statute of limitations on charges of grand theft and securities violations, an arrest warrant must be issued within three years after the discovery of the unlawful acts.  (Former Pen.Code, §§ 800, subd. (c), 802.5.) ²  If the offenses were committed prior to that three-year period, the prosecution must prove by a preponderance of the evidence that reasonable diligence would not have led to earlier discovery.  “The crucial determination is whether law enforcement authorities or the victim had actual notice of circumstances sufficient to make them suspicious of fraud thereby leading them to make inquiries which might have revealed the fraud.”  (People v. Zamora, supra, 18 Cal.3d at pp. 571–572, 134 Cal.Rptr. 784, 557 P.2d 75.)

The Zamora case sets forth the standards for pleading delayed discovery.   The Supreme Court expressly disapproved the language in People v. Swinney (1975) 46 Cal.App.3d 332, 120 Cal.Rptr. 148 upholding generalized pleading.   Swinney held, “[t]o satisfy the demands of Penal Code section 800, it is enough to allege that the theft was not discovered until a date within the three-year period;  relative to the element of reasonable diligence, it is enough to allege in general terms that in the exercise of reasonable diligence the theft could not have been discovered at an earlier date.”  (Id., at p. 344, 120 Cal.Rptr. 148.)   The Zamora court reasoned more specific pleading of the delayed discovery allegations would, inter alia, help the committing magistrate determine whether the evidence at the preliminary hearing showed probable cause to believe the statute of limitations was not a bar to prosecution.  “Such specificity will certainly serve to clarify the task of determining whether any diligence has been shown, particularly because the People bear the burden of proving a negative proposition, i.e., that knowledge of the offense could not have been obtained at an earlier time.   With the basic facts on the ‘discovery’ issue set forth in the pleading it will be much easier to then consider the People's additional proof on the issue which will be presented ․ before the magistrate.”  (People v. Zamora, supra, 18 Cal.3d at p. 565, fn. 26, 134 Cal.Rptr. 784, 557 P.2d 75.)

The Supreme Court thus held, “[We require] that the following facts be alleged in a accusatory pleading which seeks to avoid the bar of the statute of limitations by pleading the ‘discovery’ provision of section 800:  (1) the date on which the offense was ‘discovered’;  (2) how and by whom the offense was ‘discovered’;  (3) lack of knowledge, both actual or constructive, prior to the date of ‘discovery’;  (4) the reason why the offense was not ‘discovered’ earlier.”  (Ibid.)

The only allegations in the amended information regarding the delay in discovery are several paragraphs purporting to apply to all counts:  “At least one of the above-named investors, to wit, John Brauning, was present at a creditor's [sic] meeting which was held in December, 1981.   In that creditor's [sic] meeting, the trustee for the bankruptcy proceedings informed the investors who were present that there were insufficient trust funds in Diversified Financial Consultants, Inc. [sic] bank accounts.  [¶] It is further alleged that Detective Art Droz of Huntington Beach Police Department first discovered the offenses charged in counts 1 through 69 on or about April 21, 1983, when he interviewed Merle Schneblin, one of the first investors who contacted him.   Detective Droz had received no information concerning this case until he interviewed Merle Schneblin.   In that interview, and subsequent interviews and subsequent review of questionnaires filled out by the above-listed investors, Detective Droz was informed of the following:  [¶] The above-listed investors stated that they had lost moneys which they entrusted to defendant and defendant's agents for the purpose of investments secured by trust deeds.   After several of the above-listed investors failed to receive interest payments in a timely manner, defendant and defendant's agents told the above-listed investors in September and October, 1981, that Diversified Financial Consultants, Inc. was changing banks, thereby creating a temporary disruption in making interest payments.   Furthermore, in October, 1981, defendant and defendant's agents told investors that Diversified Financial Consultants, Inc. was going through reorganization procedures which were temporairly [sic] freezing all funds.   Defendant and defendant's agents repeatedly assured the above-listed investors that their funds were safe.   The above-listed investors had no means of checking bank accounts or knowing how many accounts existed for Diversified Financial Consultants, Inc. because records were kept and maintained by defendant and defendant's agents, and the above-listed investors relied on the fiduciary relationship they had with defendant.  [¶] It is further alleged that before the date of December, 1981, the above-listed investors, and before the date of April 21, 1983, Detective Droz did not have notice or knowledge, either actual or constructive, that the above alleged offenses occurred, within the meaning of Penal Code Section 800 as enacted in 1982 Statutes, Chapter 583, Section 1.”

The prosecution argues the foregoing allegations are sufficient to comply with the requirements of Zamora.   It points out that “discovery” does not mean mere awareness of the loss, but awareness that there has been a loss and it was caused by criminal means.  (People v. Swinney, supra, 46 Cal.App.3d at pp. 341–343, 120 Cal.Rptr. 148, disapproved on another point in People v. Zamora, supra, 18 Cal.3d at p. 565, fn. 26, 134 Cal.Rptr. 784, 557 P.2d 75;  CALJIC No. 4.74 (4th ed. 1979).)   The pleading alleges the grand theft was discovered by any investors who attended the creditors' meeting in December, 1981;  as to the remaining investors, the statute began to run when Detective Droz discovered it in April.

 The prosecution asserts the generalized pleading regarding late discovery is sufficient for all victims.³  However, its position is incorrect.   Under the circumstances here, the information must allege the date of discovery and the facts justifying its delay for each count.

A criminal defendant may be convicted of any number of separate offenses charged in a multiple count information (Pen.Code, § 954);  however, each count must stand on its own merits.  (People v. Codina (1947) 30 Cal.2d 356, 360–361, 181 P.2d 881;  People v. Calpito (1970) 9 Cal.App.3d 212, 219, 88 Cal.Rptr. 64.)   Furthermore, the expiration of the statute of limitations is a jurisdictional defect and precludes any further prosecution.  (People v. Chadd (1981) 28 Cal.3d 739, 756–757, 170 Cal.Rptr. 798, 621 P.2d 837;  People v. McGee (1934) 1 Cal.2d 611, 36 P.2d 378.)   Thus, where the illegal acts occurred beyond the period of the statute of limitations, the prosecution must prove the statute is not a bar as an element of its case (1 Witkin, Cal. Crimes (1963) § 236, pp. 225–226) and the pleading of delayed discovery is an integral part of each count.

The information alleges one count of grand theft and two counts of securities violations for each of 23 victims;  it alleges the illegal acts took place during 23 different time periods, 22 of which were prior to the three-year limitations period.   For those 66 counts to withstand a challenge by demurrer, the prosecution must plead facts showing why each victim could not have discovered the offenses before October 9, 1981.

III

 The prosecution contends the court abused its discretion by denying it leave to amend the information.   Although the district attorney admits she cannot provide the specificity required by Zamora for all counts, she asserts some counts are “salvageable.”

The decision to grant leave to amend an accusatory pleading after the entry of a plea or after a demurrer has been sustained is within the sound discretion of the trial court.  (People v. Flowers (1971) 14 Cal.App.3d 1017, 1020, 92 Cal.Rptr. 647;  Pen.Code, §§ 1007, 1009.)   Amendments are encouraged to remedy defects at any stage of the proceedings, provided the amendment does not change the offense charged (Pen.Code, § 1009).  (People v. Crosby (1962) 58 Cal.2d 713, 722, 25 Cal.Rptr. 847, 375 P.2d 839.)   And it is established that the addition of allegations tolling the statute of limitations does not change the offense charged.  (People v. Chadd, supra, 28 Cal.3d at p. 758, 170 Cal.Rptr. 798, 621 P.2d 837;  People v. Crosby, supra, 58 Cal.2d at p. 723.)

However, a proposed amendment to an information must be supported by some evidence which was presented at the preliminary hearing.  (Pen.Code, § 1009;  People v. Abayhan (1984) 161 Cal.App.3d 324, 207 Cal.Rptr. 607.)   Although the court cannot resort to the preliminary hearing transcript to determine the sufficiency of the information when ruling on a demurrer (People v. Tolbert (1986) 176 Cal.App.3d 685, 690 fn. 2, 222 Cal.Rptr. 313), the court may consider that transcript when exercising its discretion to grant or deny leave to amend after the demurrer has been sustained.

Here, it is unclear whether the court relied on the preliminary hearing testimony in ruling on leave to amend.   Gill's points and authorities set forth selected examples of testimony showing certain investors' suspicions of wrongdoing prior to October 9, 1981;  however, the district attorney did not point out to the court any testimony supporting discovery after that date.   Neither did she ask for a continuance to do so.

Furthermore, at the hearing on the first demurrer the major focus of argument was the pleading of delayed discovery for each count.   The court then advised the district attorney that “far more specificity is required than appears in this information with respect to discovery and nondiscovery․” And at the end of the hearing, “[The court's] major problem with the whole complaint ․ [that] must be corrected or [it] cannot go forward is the pleadings regarding the statute of limitations.   And they go to every count in the complaint.”   In making its ruling, the court was undoubtedly influenced by the prosecution's apparent inability or unwillingness to plead delayed discovery for each count.   We cannot say it was an abuse of discretion to deny leave to amend under these circumstances.

However, in an abundance of caution, we have independently reviewed those portions of the preliminary hearing testimony pointed to by the prosecution in support of its position that it should be given another opportunity to amend.  We conclude the evidence at the preliminary hearing does not support granting leave to amend.

As discussed ante, the prosecution has the burden of producing evidence at the preliminary hearing establishing probable cause to believe the action is not barred by the statute of limitations.  (People v. Abayhan, supra, 161 Cal.App.3d at pp. 324, 331, 207 Cal.Rptr. 607.)   The prosecution failed to meet its burden.   The questions asked of the investors did not elicit the evidence necessary to plead the requirements of Zamora, i.e., the date and manner of discovery and the reasons for its delay.   Since the information would not survive a challenge on the sufficiency of the evidence (Pen.Code, § 995), it was proper to deny leave to amend.

The judgment is reversed as to counts 43, 44, and 45 and remanded.   As to the remaining counts, the judgment is affirmed.

FOOTNOTES

1.   One week later, the trial judge set special proceedings on her own motion to state on the record she had erred in sustaining the demurrer as to counts 43, 44 and 45 only.   She had overlooked that those counts alleged the illegal acts took place as late as October 31, 1981.   The warrant was issued October 9, 1984;  therefore, the three-year statute of limitations had not yet run.   Since judicial error cannot be corrected by amendment, she was powerless to modify the judgment of dismissal.  (Smith v. Superior Court (1981) 115 Cal.App.3d 285, 290–292, 171 Cal.Rptr. 387.)

2.   These sections were repealed in 1984 and reenacted as §§ 801, 803, subd. (c) and 804.

3.   On appeal neither party has addressed the issue of delayed discovery for the counts of corporate securities violations.   Since these allegations are completely absent from the amended information, those counts must fail without question.

WALLIN, Associate Justice.

TROTTER, P.J., and CROSBY, J., concur.