Court Opinion

ID: 9747972
Source: CourtListenerOpinion
Date Created: 2023-08-27 15:46:39.536426+00
Date Added: 2024-06-11T07:25:29.775825
License: Public Domain

STONE (S. J.), P. J.
I respectfully dissent.
Appellant represented that payment was sought for supervision of the project by Gary Johnson, a licensed contractor, when in fact the money was ultimately paid to appellant’s firm because appellant supervised the project himself. There is no dispute that the money received was a reasonable fee for supervision of the project. Neither is it contended that appellant’s supervision caused the project to fail. Essentially, appellant was convicted because he lied. His “lack of candor,” to use appellant’s euphemism, was perhaps immoral and dishonest. But was it a crime?
A position letter by the Attorney General to the Governor dated July 6, 1965, supporting the enactment of Penal Code1 sections 484b and 484c stated that Senate Bill No. 722 was designed to meet the urgent problem created by the misapplication of construction funds and “to deter the major malefactor who by his breach of trust injures a homeowner or a financial institution. . . .” Who was injured here? The only reason this “crime” came to light was because of the district attorney’s investigation into an unrelated matter. The “victim” did not feel harmed enough to complain about it. My *1851reluctance to join in the majority opinion, however, is based upon the majority’s conclusion that the instructional error is harmless. It was not.
The crime of diversion of construction funds under section 484b is committed by receiving money for the purpose of obtaining or paying for service, labor, materials or equipment and willfully failing to apply such money for these purposes either by failure to complete improvements for which the funds were provided or by willfully failing to pay for service, labor, materials or equipment incident to the construction, and wrongfully diverting the funds to a use other than that for which they were provided. (People v. Thompson (1995) 36 Cal.App.4th 843, 851 [42 Cal.Rptr.2d 798].) The purpose of section 484b is to punish fraudulent conversion, and so long as construction funds are used on bona fide costs of the project, there is no conversion. (People v. Butcher (1986) 185 Cal.App.3d 929, 938 [229 Cal.Rptr. 910].)
In Butcher, the reviewing court gave meaning to the conjunction “and” in what it considered an ambiguous phrase: “ ‘willfully fail[] to complete the improvements for which funds were provided or willfully fail[] to pay for services, labor, materials or equipment provided incident to such construction, and wrongfully divertí] the funds to a use other than that for which the funds were received . . . .’ ” (185 Cal.App.3d at pp. 939-940.) The Butcher court resolved the ambiguity by concluding that section 484b is not violated unless the wrongful diversion is a cause of the failure to complete the project or defray its expenses. (185 Cal.App.3d at p. 940.)
I agree with the majority that sections 484b and 484c must be directed to different wrongs or else there would have been no purpose in the Legislature’s enacting both sections. I do not agree with the majority’s analysis of section 484c. Section 484c contains two elements: 1) the use of a false voucher to procure funds, and 2) use of the funds procured by that voucher for a purpose other than that “for which the claim was submitted.” Here the majority holds that “[w]here, as here, the author of the voucher falsely states that a named payee actually has performed or will perform work, Penal Code section 484c is violated.” (Maj. opn., ante, at pp. 1847-1848.) Apparently, the majority considers redundant or surplusage the rest of the statute, “and does not use the funds for the purpose for which the claim was submitted
Appellant did not receive the money from Community Group Funding, Inc. (CGF). Johnson received it and wrote his own check which was deposited to the Darrik-Marten Company account from which appellant subsequently wrote a check to himself for $5,000. The majority states that *1852had the claim been submitted for the stated purpose of paying for supervision, the result might have been different. In other words, appellant is guilty because he lied and listed the wrong payee even though the funds were obtained for the same purpose, i.e., supervision of the project.
If section 484c means what the majority appears to hold, it would read “any person who submits a false voucher with the intent to deceive the lender is guilty of embezzlement.” If this is what the Legislature meant in enacting section 484c, it should say so. It would not be necessary to add the rest of the statute if “dishonest practices” alone were sufficient to constitute a violation. (See, e.g., Bus. & Prof. Code, § 17200 et seq.) “' “[A] statute which either forbids or requires 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, violates the first essential of due process of law.” ’ ” (People ex rel. Smith v. Parkmerced Co. (1988) 198 Cal.App.3d 683, 691 [244 Cal.Rptr. 22].)
There appear to be no published cases interpreting section 484c, perhaps because no prosecutor has been certain enough of its meaning to charge anyone with its violation. Appellant was not prosecuted for, nor does he stand convicted of, violating an implied covenant of good faith and fair dealing allowing CGF to insist upon accurate information. In fact, Lukens admitted that the loan agreement did not give CGF the right not to deliver the funds if it did not approve that appellant, rather than Johnson or another licensed contractor, supervised the project.
The lack of further definition of what constitutes embezzlement under section 484c was compounded by the error with the embezzlement instructions given. The majority holds that this error is harmless because its effect “was to force the prosecution to carry a heightened burden of proof.” (Maj. opn., ante, at p. 1846.) Not so. In People v. Counts (1995) 31 Cal.App.4th 785 [37 Cal.Rptr.2d 425], relied upon by the respondent and the majority, the evidence supported the additional element of corroboration. It is true that in California the various common law theories of theft, including embezzlement, have been consolidated and the jury “may find upon either theory, if there is an ‘unlawful taking]’ . . . .” (Id., at p. 793.) However, whether there was an “unlawful taking” depends, in large part, upon the meaning of section 484c.
Unlike Counts, there was neither factual nor legal support in this case for the additional “evidentiary burden” of a position of trust and confidence. Unfortunately, the prosecutor argued that there was a relationship of trust. The majority acknowledges that a position of trust and confidence, as set *1853forth in the embezzlement instructions, does not legally exist in a commercial setting where there is a “hard money” loan to a commercial developer. (See Peterson Development Co. v. Torrey Pines Bank (1991) 233 Cal.App.3d 103, 119 [284 Cal.Rptr. 367]; Mitsui Manufacturers Bank v. Superior Court (1989) 212 Cal.App.3d 726, 729 [260 Cal.Rptr. 793].) The prosecutor also argued that “. . . the state of the law in California is that if you submit a false voucher you are guilty of embezzlement period.” In other words, if you lie in a voucher for construction funds, you are guilty of violating section 484c.
If the inadequacy of the instruction is legal, not merely factual, the rule of People v. Green (1980) 27 Cal.3d 1, 69 [164 Cal.Rptr. 1, 609 P.2d 468], requires reversal, absent a basis in the record to find that the verdict was actually based on a valid ground. (People v. Guiton (1993) 4 Cal.4th 1116, 1128-1129 [17 Cal.Rptr.2d 365, 847 P.2d 45].) In People v. Harris (1994) 9 Cal.4th 407, 418-419 [37 Cal.Rptr.2d 200, 886 P.2d 1193], the California Supreme Court limited its earlier holding in People v. Green to “instructional error, or a ‘legally incorrect’ theory of the case which, if relied upon by the jury, could not as a matter of law validly support a conviction of the charged offense. [Fn. omitted.]” The effect of the erroneous instructions given, the lack of any instructions clarifying embezzlement under section 484c, and the prosecution’s argument require reversal. The instruction on embezzlement was legally incorrect, as well as factually insupportable. The use of the erroneous embezzlement instruction and argument could easily have resulted in the jury convicting appellant of simply lying (which he concededly did).
If the court did not find that appellant’s proffered special instructions were correct or adequate, it still had a sua sponte duty to correctly instruct on all the elements of a charged offense. (People v. Cummings (1993) 4 Cal.4th 1233, 1311 [18 Cal.Rptr.2d 796, 850 P.2d 1].) It did not do so. It is impossible to tell which of the prosecutor’s three theories served as a basis for the jury’s verdict and we should not take the “one out of three ain’t bad” approach. Consequently, People v. Green, even as modified by People v. Harris, requires reversal.
Appellant’s petition for review by the Supreme Court was denied August 14, 1996.

All statutory references are to the Penal Code unless otherwise stated.