THE PEOPLE, Plaintiff and Respondent, V

THE PEOPLE, Plaintiff and Respondent, v. LEO SHAW, Defendant and Appellant.

No. D014008

COURT OF APPEAL OF CALIFORNIA, FOURTH APPELLATE DISTRICT, DIVISION ONE.

10 Cal. App. 4th 969; 12 Cal. Rptr. 2d 665; 1992 Cal. App. LEXIS 1256; 92 Cal. Daily Op. Service 8837; 92 Daily Journal DAR 14555

October 27, 1992, Decided

NOT CITABLE - ORDERED NOT PUBLISHED
: Review Denied February 11, 1993 and Reporter of Decisions directed not to publish this opn. in the Official Reports (Cal. Const., art. VI § 14; rule 976, Cal. Rules of Ct.), Reported at 1993 Cal. LEXIS 746. Mosk, J. is the opinion the petition should be granted.
Superior Court of San Diego County, No. CR114312, Norbert Ehrenfreund, Judge.
The judgment is affirmed.
David L. Kelly, under appointment by the Court of Appeal, for Defendant and Appellant.
Daniel E. Lungren, Attorney General, George Williamson, Chief Assistant Attorney General, Gary W. Schons, Assistant Attorney General, Rudolf Corona, Jr., and Barry J. T. Carlton, Deputy Attorneys General, for Plaintiff and Respondent.
Opinion by Huffman, J., with Kremer, P. J., concurring. Separate concurring and dissenting opinion by Wiener, J.
HUFFMAN, J.
[**666] Leo Shaw was found guilty at court trial of one count of embezzlement of funds from a partnership (Pen. Code, n1 § 487, subd. 1), and was sentenced to three years' probation, including work furlough and community service terms. On appeal, he contends the trial court erroneously denied him his right to present evidence that he intended to restore the embezzled funds and actually did so in a manner that, under section 512, [*972] should constitute a defense to the charge of embezzlement. He also claims he was improperly[***2] precluded from presenting this evidence of repayment as circumstantial evidence that he never had the necessary specific fraudulent intent to deprive the partnership, of which he was a member at the time that the funds were taken, of its property.
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n1 All statutory references are to the Penal Code unless otherwise specified.
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Although we have found no authority expressly recognizing an exception to the statutory rule that "[t]he fact that the accused intended to restore the property embezzled, is no ground of defense" (§ 512; see, e.g., People v. Talbot (1934) 220 Cal. 3 [28 P.2d 1057]), the plain language of the statute goes on to create such an exception. Section 512 contains conditional language indicating that such a defense may be brought under certain circumstances, i.e., where there was an intent to restore and where actual restoration of property was made before criminal charges are brought.
We shall first discuss the basis of this statutory defense, together [***3] with Shaw's circumstantial evidence argument, and then address the issue of timeliness of any restoration made. Finding the trial court's evidentiary ruling was correct, albeit for a different reason than the court stated, we shall affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In 1979, Shaw entered into a partnership agreement (the agreement) with Leland Featherman and two other persons to build and operate an office building primarily designed for law offices. Both Shaw and Featherman were lawyers who had previously shared office space. The partnership was named "Olive Bay Associates" and the agreement was put into writing in 1983. From the outset, it was agreed that Shaw's role was to manage the operation of the building, including leasing the premises, collecting the receipts, paying the bills, and supervising the operation of the building. Under the agreement, Shaw was not to be compensated for his management activities; his management of the property was to be his contribution, in lieu of capital, to the partnership. The agreement also provided that no partner was entitled to withdraw any portion of partnership capital without express written consent of the other[***4] partners. Shaw's partners had never given him any such consent to withdraw capital. During the course of the partnership, there were no profits to distribute, as it operated at a loss, and capital contributions were occasionally required to cover such losses.
[**667] Pursuant to his management duties, Shaw had control over the partnership checking account. In 1984, Featherman learned that the loan on the property was in default. When he inquired, Shaw told him and the other partners that [*973] Shaw had had to put his own money into the building and then pay himself back. Although Featherman was concerned, he was satisfied nothing improper had occurred. The partners told Shaw that if such an event happened again, he should tell them so that they could all contribute any necessary funds. From 1984 through 1989, at Featherman's request, he and Shaw had a monthly meeting at which Shaw presented an accounting of income versus expenses.
In January 1989, after Shaw failed to make his portion of a payment to buy out a former partner (Wagner), Featherman inquired of the mortgage holder for the property and learned the loan was in default and foreclosure proceedings were imminent. Shaw, [***5] Featherman, and the remaining partner, Dr. Mohns, had a meeting about the problem. Shaw told them he had loaned himself money out of the partnership funds, but always paid it back. He claimed that the partnership actually owed him money, about $ 2,122. Featherman began an investigation and took over the partnership checkbook. He discovered many check stubs had been destroyed, and payee information was missing from others. Shaw told Featherman he would be responsible for the missing payee checks. Shaw admitted that he had destroyed all checks and check records for partnership finances before 1985. For the period 1985 to 1989, Shaw had destroyed certain checks in order to keep Featherman from finding out about them. Featherman obtained copies of the destroyed checks, about 100 in number, representing an amount of approximately $ 80,000. Shaw told Featherman he took the money because it was a compulsion over which he had no control.
After a number of heated discussions between Shaw and Featherman early in 1989, Shaw made a repayment of approximately $ 13,000 to the partnership. In May 1989 no further settlement seemed to be forthcoming. Featherman filed a civil suit against[***6] Shaw and took the matter to the police department and the State Bar. Shaw vacated the building shortly thereafter.
Police Detective Dacy interviewed Shaw in October 1989. Shaw told him that he had borrowed approximately $ 70,000 from the partnership, but had repaid over $ 58,000. He explained he had been borrowing against his "capital account" with the partnership, but had not told his partners about these loans. According to Shaw, he had been under great stress from problems with his cash flow in his law practice and from his wife's demands for money. By Detective Dacy's reckoning, Shaw had taken approximately $ 62,800.
A complaint was filed in municipal court on March 15, 1990, initiating the prosecution on theft charges under section 487, subdivision 1 (according to [*974] judicial notice of the superior court file; Evid. Code, § 459, subd. (a)). The preliminary examination took place on June 22, 1990, and Shaw was held to answer on the charge of grand theft and the "great taking" (over $ 25,000) enhancement pled. (§ 487, subd. 1, 490a, 12022.6, subd. (a).) n2 The information was then filed in superior court on July 6, 1990.
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n2 At trial, the enhancement was stricken pursuant to agreement of the parties.
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In the meantime, settlement negotiations had been proceeding on Featherman's civil suit against Shaw. According to Shaw, by January 1989 he had repaid the partnership all the funds owed except for $ 15,000. The remaining amount was repaid in full as part of a civil settlement effective April 3, 1990. Shaw gave up his partnership interest, which he estimated to be worth $ 160,000. As of early 1989, the partnership equity was estimated at $ 360,000.
Jury trial began November 9, 1990. The trial court ruled Shaw would not be allowed to bring in evidence of repayments made of the funds taken, as such repayment was irrelevant either as a defense to the substantive charge or with regard to whether he had the necessary specific intent to deprive the partners of their property.
[**668] However, the court was willing to allow Shaw to make a showing that what he had told Detective Dacy was true, concerning the repayment of $ 58,000 that he claimed had been made. After Shaw's attorney mentioned the matter in his opening statement, the jury was admonished that the offense of embezzlement was complete when diversion of the funds was made, and voluntary restoration of funds did not operate as a [***8] defense to the charge. Shaw moved for a mistrial on the grounds that he was not being allowed to present an allowable defense, and the motion was denied.
The following day, Shaw waived jury trial on certain conditions (no state prison time) and it was agreed that the matter would be submitted upon testimony presented and the preliminary hearing transcript. The court agreed that Shaw could make a record at the sentencing hearing of the evidence which he would have presented at trial if the court had allowed the evidence of repayment to go before the jury. Testimony was taken from Featherman. He reported to the court that he had said to Shaw in early 1989, in answer to Shaw's claim that he had a compulsion to take the money: "I said, 'You are an attorney, Leo, you understand that if you took the money on Friday and you got hit by a truck on Saturday and couldn't pay it back on Monday, that that constitutes the crime of embezzlement.' [P] And he said, 'Yes, I understand that.' "
After testimony from Detective Dacy, the matter was submitted for decision with the reservation by defendant that he still desired to present [*975] evidence of restoration of the funds taken pursuant[***9] to section 512, and also regarding his alleged lack of specific intent to deprive the partnership of its property. After reviewing the law in the area, the court found Shaw guilty beyond a reasonable doubt of count 1, with the enhancement pursuant to section 12022.6 having been previously stricken.
At the sentencing hearing, Shaw presented evidence of repayment of the funds that had been taken. The parties stipulated that a substantial amount of moneys had been repaid, and Shaw presented detailed testimony about certain items which he had repaid between 1984 and 1989. As of 1986, $ 5,147.75 remained unpaid, and as of 1987, $ 8,492 remained unpaid. Shaw testified that he never told anyone about taking the funds; he knew that to do so was a civil wrong, but believed that he had not committed any criminal wrong. He gave testimony about his financial difficulties and claimed that his mental state was that he had been borrowing from his own capital account at the partnership. As of January 1989, he estimated that $ 15,000 remained unpaid of the borrowed funds. Shaw believed he had no intent to permanently take the money. His motion to reduce the offense to a misdemeanor was denied. [***10]
Featherman made a statement at the sentencing hearing, admitting that in his opinion all money owing had been repaid by the civil settlement. Imposition of sentence was then suspended, and Shaw was placed on probation subject to various terms and conditions, including three months in local custody in a work furlough program and a community service requirement. Shaw timely appealed the judgment.
DISCUSSION
To decide whether the trial court erred in ruling that Shaw could not put on a defense showing his intent to restore the funds and actual restoration thereof, we are required to analyze section 512 together with its companion section, section 513. We first consider the extent of any defense afforded by section 512 regarding property that was timely restored. We then assess the trial court's evidentiary ruling in light of our interpretation of the time limitation for restoration of property that is set forth in section 512.
I
Before applying our interpretation of the limitations period of section 512 to these facts, it is necessary to discuss the nature of any defense created by that section, as distinguished from the references to potential mitigation of punishment in sections[***11] 512 and 513. In its entirety, section 512 provides as follows: [*976]
[**669] "Defenses; mitigation of punishment; intent to restore property; time
"The fact that the accused intended to restore the property embezzled, is no ground of defense or mitigation of punishment, if it has not been restored before an information has been laid before a magistrate, or an indictment found by a grand jury, charging the commission of the offense." (49 West's Ann. Pen. Code, § 512, p. 285 [49 West's Ann. Pen. Code (1988 ed.) § 512, p. 285], italics added.)
Section 513 provides in its entirety as follows:
"Defenses, mitigation of punishment; restoration of property or tender before indictment or information
"Whenever, prior to an information laid before a magistrate, or an indictment found by a grand jury, charging the commission of embezzlement, the person accused voluntarily and actually restores or tenders restoration of the property alleged to have been embezzled, or any part thereof, such fact is not a ground of defense, but it authorizes the court to mitigate punishment, in its discretion." (49 West's Ann. Pen. Code, § 512, supra, p. 286, italics added.) n3
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n3 Sections 512 and 513 were each enacted in 1872 and amended in 1905 by the insertion of the provision concerning an indictment found by a grand jury. No other changes have been made to the statutory language.
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In this case, Shaw sought to make a showing of his intent to restore funds, coupled with actual restoration, both as a defense under section 512, and as alleged circumstantial evidence that he never had the specific fraudulent intent to deprive the partnership of its property. As we will explain, we do not believe either theory has merit insofar as it would attempt to negate the prosecution's showing of Shaw's fraudulent intent at the time the appropriation of funds was made. However, we shall show that by enacting the conditional defense language of section 512, the Legislature must have intended to create a defense constituting an "amnesty," or window of opportunity, before criminal charges are brought, during which a defendant may escape criminal prosecution by restoring the property.