Court Opinion

ID: 9674873
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:36:45.078736+00
Date Added: 2024-06-11T18:16:30.015364
License: Public Domain

GUILLOT, Justice,
dissenting.
I respectfully dissent from the majority and the concurrence.
The first basic fallacy in the majority’s reasoning is that it overlooks the very purpose of TEX.REV.CIV.STAT.ANN. art. 5472e (Vernon Supp. 1982-1983) which is to make the general contractors of this state trustees—involuntary trustees, but trustees nevertheless. As a result of the statute, the general contractors owe a fiduciary duty to their subcontractors and suppliers and must act towards them with good faith. See Tucker v. Dougherty Roofing Co., 137 S.W.2d 884, 887 (Tex.Civ.App.—Dallas 1940, writ dism’d).
The second basic fallacy in the majority’s reasoning is that it requires the State to trace the proceeds of checks issued by the general contractor in order to establish that the payees of the checks received the proceeds rather than cashed the checks. This is necessary, it says, to show intent to defraud. But the statute doesn’t require tracing of checks in order to prove intent. What is required is simply to show a disbursement, use, retention, misapplication, or other diversion of trust funds with the intent to defraud. Intent is most often proven circumstantially. Proof of similar schemes emerging from extraneous offenses is most often the method used. See Crawley v. State, 513 S.W.2d 62 (Tex.Cr.App.1974); Albrecht v. State, 486 S.W.2d 97 (Tex.Cr.App.1972). To demonstrate the fallacy of the majority’s reasoning, consider the sheer folly of the district attorney’s investigator asking someone at General Telephone if the checks for $228.13 or $118.74 were cashed by them for appellant or if they were payment for a phone bill.
The third basic fallacy in the majority’s reasoning is its analysis of intent to defraud and what the State must prove in order to establish it. The most difficult problem in interpreting the statute is the *870meaning of “intent to defraud.” Does it mean that the trustee, at the time of each separate misapplication, must necessarily intend not to pay his workers and suppliers? If so, the statute has little meaning and no practical effect because under that interpretation the statute would permit him to divert the funds if he expects to borrow the money, or to get money from another job to pay his bills for labor and materials on the job in question. The language of the statute shows that it was intended to make each contractor a trustee of the funds received from each job and to require him to keep those funds intact, except for payments to workers and suppliers, until all his workers and suppliers are paid. Clearly, the legislative purpose was to stop the practice of some contractors to use funds from one construction job to pay bills due for another or to pay the contractor’s own living expenses before all workers and suppliers have been paid. “Intent to defraud,” therefore, must mean intent to impair the fund which must be kept for the benefit of the workers and suppliers. A trustee who misapplies or diverts trust funds may not be excused on the ground that he really did not intend to cause his beneficiary any loss. Consequently, the State, in proving intent to defraud, need not establish that the trustee, at the time of diverting the funds, had no intention to pay his workmen from some other source. The intent to divert, with knowledge of impairment of the fund, is sufficient intent to defraud.
If this intent is not shown by the evidence concerning appellant’s diversion of funds from the Cox job, that intent is clear enough when this evidence is considered along with the evidence of appellant’s handling of the job at Wesley-Rankin Community Center at about the same time. The evidence shows that on the Wesley-Rankin job appellant’s conduct followed a similar pattern: diversion of funds to other purposes, poor workmanship, failure to complete the work, and failure to pay expenses incurred on the job. The theory of this extraneous proof is that, if one instance does not establish intent, the pattern of similar conduct shown by two or more instances is enough to do so. Albrecht v. State, 486 S.W.2d 97, 100 (Tex.Cr.App.1972).
I conclude that the evidence is sufficient to convince a rational trier of fact that beyond a reasonable doubt the appellant misapplied and diverted trust funds with intent to defraud in that he did not intend to keep the trust funds intact for the benefit of his workers and suppliers on this job.
The final basic fallacy in the majority’s reasoning is that it concludes that “reasonable overhead” constitutes an exception rather than a defense. I disagree with the majority’s characterization of evidence of “reasonable overhead” being in the nature of an inferential rebuttal. In civil actions for the misapplication of trust funds, the trustee must plead and prove that his expenses in administering the trust were reasonable and necessary. See Corpus Christi Bank & Trust v. Roberts, 587 S.W.2d 173, 182 (Tex.Civ.App.—Corpus Christi 1979), aff'd as modified, 597 S.W.2d 752 (Tex.1980). In'short, he must account for the use of the funds. The use of trust monies in administering a trust is a defense in civil law and also in criminal law. With this brief review of the basic errors in the majority and concurring opinions, I address the appellant’s grounds of error.
In his first three grounds of error, appellant contends that his conviction is void because TEX.REV.CIV.STAT.ANN. art. 5472e (Vernon Supp.1982-1983) is unconstitutionally vague and overbroad. In pertinent part, article 5472e reads as follows:
Construction payments and loan receipts declared trust funds
Section 1. All moneys or funds paid to a contractor or subcontractor or any officer, director or agent thereof, under a construction contract for the improvement of specific real property in this state, and all funds borrowed by a contractor, subcontractor, owner or any officer, director or agent thereof, for the purpose of improving such real property which are secured in whole or in part by a lien on the specific property to be improved are hereby declared to be Trust Funds for the benefit of the artisans, *871laborers, mechanics, contractors, subcontractors or materialmen who may labor or furnish labor or material for the construction or repair of any house, building or improvement whatever upon such real property; provided, however, that moneys paid to a contractor or subcontractor or borrowed by a contractor, subcontractor, or owner may be used to pay reasonable overhead of said contractor, subcontractor, or owner, directly related to such construction contract. The contractor, subcontractor, owner, or any officer, director or agent thereof, receiving such payments or funds, or having control or direction of same, is hereby made and constituted a Trustee of such funds so received or under his control or direction.
Wrongful disbursement, use or retention of trust funds
Sec. 2. Any Trustee, who shall, directly or indirectly, with intent to defraud, retain, use, disburse, misapply, or otherwise divert, any trust funds, or part thereof, as defined in Section 1 of this Act, without first fully paying and satisfying all obligations of the Trustee to all artisans, laborers, mechanics, contractors, subcontractors, or materialmen, incurred or to be incurred in connection with the construction and improvements, for which said funds were received, shall be deemed to have misapplied said Trust Funds. Misapplication of Trust Funds hereunder, under the value of $250, shall be punished by imprisonment in jail not exceeding two years and by fine not exceeding $500, or by such imprisonment without fine. Misapplication of Trust Funds hereunder, of the value of $250 or over shall be punished by confinement in the Department of Corrections for a period not exceeding ten years. [Emphasis added].
For a penal statute to be void for vagueness, it must either forbid or require the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, thus violating the fair notice requirements of due process of law. Papachristou v. City of Jacksonville, 405 U.S. 156, 92 S.Ct. 839, 31 L.Ed. 110 (1972); Connally v. General Construction Co., 269 U.S. 385, 46 S.Ct. 126, 70 L.Ed. 322 (1926).
Regulatory statutes governing business activity are to be allowed greater leeway in applying the fair notice test. Such statutes are not automatically invalidated as vague because of difficulty in determining whether marginal offenses fall within their language. See Pennington v. Singleton, 606 S.W.2d 682 (Tex.1980), and cases cited therein. Furthermore, the fact that a statute requires specific intent has been given weight by courts rejecting void for vagueness challenges. Id. at 689. In enacting a statute, it is presumed that: (1) compliance with the constitutions of this state and the United States is intended; (2) the entire statute is intended to be effective; (3) a just and reasonable result is intended; (4) a result feasible of execution is intended; and (5) public interest is favored over any private interest. TEX.REV.CIV.STAT.ANN. art. 5429b-2, § 3.01 (Vernon Supp. 1982-1983); see Parr v. State, 575 S.W.2d 522 (Tex.Cr.App.1978).
Appellant’s first ground of error is that article 5472e is unconstitutionally vague by failing to give notice of what conduct is proscribed because it does not adequately define the following terms: (1) “use, disburse, misapply, or otherwise divert”; (2) “obligations”; and (3) “reasonable overhead.” I note that a statute is not unconstitutionally vague because the words or terms are not specially defined. Koah v. State, 604 S.W.2d 156 (Tex.Cr.App.1980); Floyd v. State, 575 S.W.2d 21 (Tex.Cr.App.1978). Terms not defined in a statute are to be given their plain and ordinary meaning, and words defined in dictionaries and with meanings so well known as to be understood by a person of ordinary intelligence are not to be considered vague and indefinite. Floyd, 575 S.W.2d at 23.
With regard to the phrase “use, disburse, misapply, or otherwise divert,” appellant argues that the statute fails to create a scheme of priorities. The alleged constitutional deficiency is that the trustee is not advised as to the order in which the differ*872ent costs of construction, e.g., material costs as opposed to wages, are to be paid. I conclude that article 5472e is not unconstitutional for this reason. The trustee is obligated to pay for both materials and wages, and the statute protects both classes of beneficiaries equally. Appellant fails to indicate why one class of beneficiaries should be accorded preferential treatment, and, further, I have not found any reason in law or logic that compels such a scheme. The statute is not vague in this respect.
Next, appellant complains that article 5472e is vague because it fails to distinguish between legal and non-legal “obligations.” His argument is that the statute is deficient because it does not exclude from criminal liability situations in which the trustee lawfully withholds payment, e.g., when an employee or subcontractor performs substandard work and is in breach of contract. I disagree. In order to obtain a conviction, the statute requires that any use or misapplication of trust funds resulting in the nonsatisfaction of such obligations be done with “intent to defraud.” When a trustee withholds payment or retains funds because of a legitimate dispute over whether payment is lawfully due, then intent to defraud is not present and a violation of the statute has not occurred. For these reasons, I would hold that the statute does in effect distinguish between legal and non-legal obligations.
Appellant’s third argument under his first ground of error is that article 5472e is vague because, in using the term “reasonable overhead,” the statute fails to adequately define the extent to which trust funds can be used to pay ongoing business costs not directly related to the particular project for which the funds are received. Again, I disagree. The statute clearly states that trust funds “may be used to pay reasonable overhead ... directly related to such construction contract.”
I agree with the construction of this phrase formulated by the court in North Texas Operating Engineers Health Benefit Fund v. Dixie Masonry, Inc., 544 F.Supp. 516 (N.D.Tex.1982). “Overhead” is a broad term generally understood to include the continuous expenses of a business without regard to a particular contract. Dixie Masonry, Inc., 544 F.Supp. at 519. The term “reasonable” was used to place a limitation on the amount of overhead expenses that could be allocated to a particular construction contract. Id. Overhead expenses that cannot be readily traced to a particular contract are directly related if the job could not have been obtained or completed without them. Id. at 520. Thus, the general administration expenses of a business can be shown to be overhead directly related to a particular construction project.
As noted by the court in Dixie Masonry, Inc. this provision and article 5472e, as a whole, were enacted to discourage contractors from paying the last job’s expenses with the next job’s financing. The requirement that overhead payments be directly related to a construction contract is to assure that funds would be nonfraudulently applied to expenses associated with ongoing construction projects. Dixie Masonry, Inc., 544 F.Supp. at 520. I conclude that the challenged phrase is not unconstitutionally vague.
Viewing the statute as a whole, I cannot say that any of the terms used are incapable of being understood by persons of common or ordinary intelligence. I conclude that the defendant would be on fair notice that the conduct proscribed was (1) the misapplication of construction trust funds (2) without first fully paying all obligations owed to the statutory beneficiaries and (3) with the intent to defraud. I would overrule appellant’s first ground of error.
In his second ground, appellant contends that article 5472e is unconstitutional because it fails to give notice of the penalty group into which the proscribed conduct will fall. Appellant argues that the penalty provision is ambiguous and can be interpreted to mean that the difference between felony and misdemeanor punishment is either the total sum of trust funds .misappropriated or the amount of each act of misappropriation or fraud. I disagree. Section 2 of article 5472e requires the trustee to first *873satisfy all obligations owed to all beneficiaries. If the trustee fails to do so, then it is a matter of proof as to the amount of funds that were received by the trustee but used for purposes other than for expenses related to the particular construction contract. In essence, the concern is with one offense involving several transactions or instances of misapplication resulting in the failure to meet payroll obligations. See McCaleb v. State, 537 S.W.2d 728 (Tex.Cr.App.1976); McClelland v. State, 390 S.W.2d 777 (Tex.Cr.App.1965), cert. denied, 382 U.S. 928, 86 S.Ct. 307, 15 L.Ed.2d 340 (1965). To determine the proper penalty range, I would hold that the total amount of funds misapplied with respect to a given construction contract is controlling.
In his third ground of error, appellant contends that article 5472e is unconstitutionally overbroad because it authorizes conviction for lawful activity. This is essentially the same argument made with respect to the failure of article 5472e to define the term “obligations.” In this ground, appellant contends that he may be prosecuted for legally withholding payment for wages or materials. As previously discussed, the statute requires intent to defraud, and, thus, I would hold that article 5472e is not overbroad. Again, withholding payment because of a legitimate dispute over whether payment is, in fact, due does not equal fraud. I would overrule appellant’s third ground.
In two grounds of error, appellant contends that his conviction is void because it is based on: (1) a fundamentally defective indictment which fails to negate a statutory exception to the offense; and (2) evidence which fails to negate the statutory exception. Both grounds rely on the assumption that, under TEX.PENAL CODE ANN. § 2.02 (Vernon 1974), the State must plead and prove that the misapplied funds were not used to pay reasonable overhead directly related to the construction contract. The State, however, has no such burden because the language of article 5472e does not specify whether this defensive issue is an exception or a defense, and, thus, TEX.PENAL CODE ANN. § 2.03(e) (Vernon 1974) controls. Section 2.03(e) states that “[a] ground of defense in a penal law that is not plainly labeled in accordance with this chapter has the procedural and evidentiary consequences of a defense.” See Schope v. State, 647 S.W.2d 675 (Tex.App.—Houston [14th Dist.] 1982, pet. ref’d); Memet v. State, 642 S.W.2d 518 (Tex.App.—Houston [14th Dist.] 1982, pet. ref'd) (conviction reversed on other grounds). Furthermore, I would hold that all elements of the offense could be established without proof which negates the existence of the defensive issue, and, thus, it was not incumbent upon the State to plead and prove the nonexistence of the defense. Baker v. State, 132 Tex.Cr. 527, 106 S.W.2d 308 (1937); see Kirk v. State, 643 S.W.2d 190, 194 n. 8 (Tex.App.—Austin 1982, pet. ref'd).
In his next ground of error, appellant contends that the evidence is insufficient to support his conviction because appellant’s testimony at trial conclusively established, whether by defense, affirmative defense, or exception, that all of the funds received were used on reasonable overhead. Thus, appellant argues that the State has failed to prove intent to defraud. I disagree.
The record reflects that, on September 28, 1978, appellant entered into a contract which required him to remodel a home located in Farmers Branch, Texas, for a total cost of $17,437.00. Upon signing the contract, the homeowners made án initial down payment by giving appellant a check for $4,359.25. The check was deposited into appellant’s business account at Irving Bank on September 29, 1978. From this check, appellant received $3,311.25 in cash resulting in a net deposit of $1,048.00. At the time of the deposit, appellant’s account had a negative balance of $4.63. Cleared against this deposit were: (1) the negative balance of $4.63; (2) a $16.00 charge for checks written before the date of the contract and returned for insufficient funds; (3) a check to General Telephone for $517.09 dated September 27, 1978; and (4) a payroll check to Jose B. Flores in the amount of $157.69 dated September 22, 1978. The State also introduced evidence that the work on the house proceeded in an *874unsupervised and unworkmanlike manner; that after receiving a total of $15,693.30 appellant abandoned the project; that he failed to honor payroll checks made out to three employees who worked on the house; and that his actions at another jobsite under his supervision were substantially similar.
Appellant testified in his own behalf and stated that all funds received were used for materials or labor in connection with the remodeling project. He denied using any funds for purposes other than reasonable overhead directly related to the construction project. Appellant attempted to explain the shortage of funds and failure to complete the project by claiming that he under-estimated the cost. He admitted being financially unable to complete the project.
Since the reasonable overhead provision of 5472e is in the nature of a defense, appellant had the burden of producing evidence to raise the defense. Once the issue is raised, the State has the burden of persuasion and must disprove the defense. Ramos v. State, 478 S.W.2d 102 (Tex.Cr.App.1972); Sckope, 647 S.W.2d at 681. However, this does not require the State to introduce affirmative controverting evidence to rebut the defensive theory. Johnson v. State, 571 S.W.2d 170 (Tex.Cr.App.1978).
Appellant’s testimony has raised a defensive issue, but, based on this record, I would hold that the State has carried its burden. The jury is the sole judge of the credibility of the witnesses and may accept or reject any part or all of the testimony given by any witness. Johnson, 571 S.W.2d at 173. The State’s evidence clearly shows that funds, in excess of $250, received for the project were used to clear checks given for the payment of obligations incurred prior to the date of the contract. The evidence also shows that appellant failed to fulfill all obligations to laborers who worked on the project. The jury was free to disbelieve defendant’s explanation of the shortage of funds, and, thus, I would overrule this ground.
Next, appellant contends that his conviction is void because it is based on a fundamentally defective indictment in that it alleges three separate and distinct offenses in a single paragraph. Appellant’s contention is that TEX.CODE CRIM.PROC.ANN. art. 21.24(b) (Vernon Supp.1982-1983), which precludes joinder, has been violated because the indictment names three workers who remain unpaid for services rendered in connection with the construction project. I disagree. The indictment alleges that, with the intent to defraud, appellant misapplied funds in excess of $250.00 received:
“under a construction contract for the improvement of specific real property, to-wit: 14260 Queens Chapel, Farmers Branch, Texas, without first fully paying and satisfying all obligations of the said Trustee to all artisans, laborers, mechanics, contractors, sub-contractors, and ma-terialmen, to-wit: Gary Saleh, James Coker, and Walter Coker, incurred in connection with construction and improvements for which said funds were received ...”
The State is not required to plead evidence relied on, and, when the indictment tracks the language of the statute, it is a rare exception that it is legally insufficient to provide notice of the charged offense. May v. State, 618 S.W.2d 333 (Tex.Cr.App.1981) (en banc), vacated, 454 U.S. 959, 102 S.Ct. 497, 70 L.Ed.2d 374 (1981), aff'd, on remand, 632 S.W.2d 751 (Tex.Cr.App. 1982); Phillips v. State, 597 S.W.2d 929 (Tex.Cr.App.1980). I would hold that the indictment tracks the language of the statute, and, in stating the names of the three laborers, it is merely pleading the evidence relied on to support the allegation that all obligations to all laborers have not been satisfied.
Appellant further contends that his conviction is void because the State failed to properly charge him with the more specific offense of theft by check, as stated in the 1978 version of TEX.PENAL CODE ANN. § 31.03 (Vernon Supp.1982-1983) and under TEX.PENAL CODE ANN. § 31.06 (Vernon 1974), or issuance of a bad check, *875TEX.PENAL CODE ANN. § 32.41 (Vernon 1974). Appellant argues that the evidence shows that he merely issued bad checks and that there was no evidence that he improperly diverted any trust funds. I disagree. As previously noted, the evidence clearly shows that appellant used funds for purposes other than for the particular construction contract. Furthermore, I believe that article 5472e specifically applies to the circumstances of this case in that appellant defrauded his laborers, the class of persons to be protected by article 5472e, by misapplying construction trust funds received in connection with the particular project on which those persons worked. See Jones v. State, 552 S.W.2d 836 (Tex.Cr.App.1977). I would overrule this contention.
Finally, appellant contends that the trial court committed reversible error in admitting evidence of an extraneous offense. He argues that the State failed to show sufficient similarity between the charged offense and the extraneous offense to justify its admission to prove scienter or state of mind. See Albrecht v. State, 486 S.W.2d 97 (Tex.Cr.App.1972). I believe, however, that the evidence shows an identical pattern of events in connection with another construction project which appellant undertook. An initial payment from the owner was deposited in appellant’s bank account and was used to satisfy obligations unrelated to the construction project. The record further shows: (1) that the work was improperly done and poorly supervised; (2) that a plumbing subcontractor remained unpaid for services rendered in connection with the project; and (3) that appellant was paid the full amount of his bid to complete the project. I would hold that the trial court did not err in admitting this evidence to show scheme, plan, or design and intent. The jury was properly charged to only consider this evidence “in determining the intent, scheme, or design of the Defend-ant_” I would overrule appellant’s final ground.
I would affirm the conviction.
GUITTARD, SPARLING, ROWE and STEWART, JJ., join in this opinion.