The defendants Pierce and Morse were convicted, by the court sitting without a jury, on six counts of grand theft and one of conspiracy to commit those crimes. A motion in arrest of judgment and a motion for a new trial were made and denied. Judgment was not pronounced but proceedings were suspended and defendants were placed on probation. They have appealed from the order denying a new trial and have purportedly appealed from the order denying the motion in arrest of judgment, and also from the nonexistent judgment and sentence.
In 1946 one William M. Schultze, Jr., a distributor for a prefabricating company, was in need of a bookkeeper. He contacted Pierce and Morse, who operated a bookkeeping service. A short time later the three men discussed the prefabricated home business and decided to go into the manufacture and sale of such homes. Ultimately a partnership agreement was entered into and they started operations under the name "Pre-Bilt Homes Company." Three or four months later Schultze hired defendant Rhylick as office manager. Some time thereafter it appeared advantagous to form a construction concern to erect the houses and the Great Western and Southern Construction Company was formed and articles of incorporation were filed in which the three defendants, Schultze, and one Smedley were the incorporators. During the operation of these ventures a scarcity of gypsum products, specifically plaster and button board, was encountered. They began a search for gypsum deposits. Properties containing such deposits were located and leases taken thereon. One such lease covered a claim near Taft, California, the lease being executed by the five men. A corporation known as Gypsum, Inc., was formed by these same individuals to mine and process the gypsum. A grinding plant near Rosamond was purchased and attempts were made to convert it to the production of plaster. Smedley assisted as engineer to get the plant into operation but the resulting product was not of a consistent quality and only a small amount of usable material was produced. The gypsum used in this operation was not obtained from any of the leased mining claims but was shipped in from a firm in Nevada. Schultze was principally concerned with Pre-Bilt's lumber supply. Neither he nor Smedley became involved in the financing of the gypsum enterprise.
Defendants Rhylick, Pierce and Morse developed a plan to market that portion of the output which was not needed in the construction of their prefabricated houses. To that end
The first grand theft count (Count 3) involves the transaction with Charles F. Hoffar, who was a dealer for the Pre-Bilt Homes Company. He was contacted by Pierce in November, 1946, and was told about the shortage of plaster. Pierce explained that defendants were entering this field and offered him a distributorship; he was told that he could obtain all the plaster he wanted up to 5,000 bags a month, but that a bond for faithful performance of the contract would be required. Hoffar thought the premium on such a bond would be about $30. He also talked to Rhylick about the proposal. The next day Pierce called Hoffar in and showed him a form contract and told him that he "would have to put in a $5,000 cash surety instead of a bond." Hoffar was surprised at the cash requirement and replied that $5,000 was a lot of money to put up. He was informed his money was to be put into a bank or reserve and not used; that he was to get it back at any time after giving a 30-day written notice. While he knew he was to be paid four per cent interest, he did not intend to invest the money and he did not know defendants intended to use the money in the business. He was also told his money was to go into a reserve so that if he did not pay for the plaster delivered to him "they could take the money out of my $5,000...." No discussion was had as to where the defendants would deposit the money. Hoffar later delivered his check for $5,000 to Pierce, payable to Gypsum, Inc., in accordance with Pierce's instructions. It was on this occasion that Hoffar signed the standard distributor contract which had been prepared by defendants. It was signed by Pierce on behalf of Gypsum, Inc. It contained, among others, the following provision: "It is further agreed that the party of the second part [the distributor] shall place with the party of the first part [Gypsum, Inc.] $5,000, to be held by said party as a bond of faithful performance; said amount shall draw interest at the rate of four per cent (4%) per annum, and shall be returnable to the party of the second part thirty days after the
The transaction with Mr. Griffin and Mr. Kuebler of the Palomar Lumber Company is the basis for count four. They were told by Rhylick that it would be necessary to post a deposit as a bond to be held for faithful performance on their part in ordering plaster and button board, and it would be returned according to the terms of the contract. Rhylick further stated "it would be kept in trust as a deposit." The contract, after certain revisions, was signed by Pierce and Rhylick for Gypsum, Inc. The lumber company made the $5,000 deposit. Shortly thereafter Griffin ordered 10 carloads of plaster products but none was delivered. Demand was then made upon the company to refund the deposit of $5,000. The money was never returned.
The Berry deal is the foundation of the fifth count. He was told by Rhylick that if he signed the contract he would get certain quantities of hard wall and button board. It would be necessary, however, for him to put up $5,000 "to be held as a bond" to insure performance. He signed the contract and delivered his check for $5,000. Pierce and Rhylick signed for Gypsum, Inc. Berry knew he was to receive four per cent on the money but he was not interested in that feature of the transaction. He wanted to obtain material. From reading the contract it was his understanding that his specific $5,000 would be returned to him. Mrs. Berry questioned the necessity of depositing $5,000 cash as a bond and asked Rhylick "Why can't we put it in escrow and trust if it is just like a bond, you know, performance bond"? He refused to consider such an arrangement. After receiving 100 sacks of plaster that were unusable Berry demanded the return of his $5,000, or, if the defendants were unable to perform, he was willing to take a quantity of lumber or a house. At this, Pierce became angry, tore off his tie, and declared, "Give us time, give us time, you are trying to pin something on me." Morse told Berry it was impossible to give him any lumber or a house.
The Plunkett transaction is Count 7. Pierce and Rhylick told him they had a good proposition to offer him; that a bond would be required. When he was told this bond would have to be in the form of a cash deposit he expressed wonderment as to what it was for and was told the purpose of the bond was to guarantee payment in full for his allotment of materials; the regular form of contract was executed. He was able to raise only $1,000. Arrangements were made through
The transaction with John Hollenbeck is Count 8. He was told that the normal bond would be $5,000 but in his case Schultze would assume a portion of it. Hollenbeck only put up $1,000, although the signed agreement called for $10,000. He did not receive any products called for in the contract. His understanding was that he was to receive the $1,000 back, but repayment was never made. He was later employed as pilot for the company. Thereafter the dealership contract appears to have been abandoned.
Count 1 charges conspiracy to commit grand theft and alleges the receipt and acceptance by the defendants of the various sums of money referred to in the previously delineated transactions. The trial court found each of these alleged overt acts to have been committed by the defendants and found defendants Pierce and Morse guilty of the conspiracy. It was stipulated that the deposits made by the Gypsum distributors were used in the purchase of gypsum leases, the development and operation of the plant, and for salaries, materials and office expenses.
Neither defendant testified.
Defendants contend that the evidence is insufficient to sustain the conviction of grand theft on any of the counts. It is their theory that the transactions with these distributors created only a debtor-creditor relationship in which event defendants could use the funds without being guilty of a conversion. The People, however, contend a trust relationship was established as to these deposits and that their use by the defendants in the Gypsum enterprise violated the trust and constituted embezzlement and therefore grand theft under section 484 of the Penal Code, which provides that "Every person ... who shall fraudulently appropriate property which has been entrusted to him, ... is guilty of theft." The position of the People must be sustained.
"Embezzlement is the fraudulent appropriation of property by a person to whom it has been entrusted." (Pen. Code, § 503.)
A trust is either voluntary or involuntary. (Civ. Code, § 2215.) A voluntary trust arises out of the personal confidence reposed in, and voluntarily accepted by, one for the benefit of another. (Civ. Code, § 2216.) Further, a voluntary trust is created by the words and acts of the trustor and trustee, indicating with reasonable certainty the intention of the trustor to create a trust, the intention of the trustee to accept it, and the subject, purpose, and beneficiary of the trust. (Civ. Code, §§ 2221, 2222.)
It is a reasonable inference that defendants could not have induced the dealers to relinquish the funds without assurance that they would be kept intact. Hoffar, for instance, believed the performance bond would be in the usual form, that is, by the payment of a premium to a bonding company therefor. When he was told that the "$5,000 surety" would have to be in cash he expressed surprise as such requirement. The inference is clear that Hoffar would not have parted with his $5,000 unless he had been given to understand that his money would be held in trust. He testified that he was told his money would be paid into a bank or reserve and not used. He further testified that he did not intend to invest the money, and he did not know that defendants would use the money in their business. When he asked about the return of his $5,000 no explanation was ever made to him that his money had been used; he was repeatedly told that he could get his money back. However, it was never returned because it had been used in the business and was finally lost through the concern's bankruptcy.
The Berry transaction again reveals the understanding of the parties and throws further light on defendants' intent. While the negotiations were in progress Berry was told the $5,000 was necessary as surety to insure performance. He believed from reading the agreement that his specific $5,000 would be returned to him. While his understanding from reading the contract may have little significance, still the defendants did nothing to dispel this understanding. During the course of the negotiations an inquiry by Mrs. Berry adds clarity to defendants' intent. She asked why the money couldn't be put into an escrow in trust as a performance bond. Rhylick would not consider such a proposal and represented that the money would be held intact. The purpose of defendants and their consciousness of guilt is further revealed when, in response to Berry's demand for the return of his $5,000 or repayment in materials, defendant Pierce became angry and declared, "Give us time, give us time; you are trying to pin something on me." At this point defendant Morse informed Berry that repayment was impossible in any manner.
The same general type of representations were made both orally and contractually in the Plunkett and Hollenbeck transactions.
Defendants insist that in the Brunson and Bunch transaction there was clearly a loan of $10,000 at the outset because in a later transaction they loaned $46,000 to defendants by an instrument in which the initial $10,000 deposit was stated to be a part of that loan, making the total of $56,000. The subsequent contract is immaterial if there already was a conversion of the deposit held in trust. (People v. Braiker, 61 Cal.App.2d 406, 412 [143 P.2d 89].) At the beginning of the negotiations Bunch was told that their $10,000 would be used as a bond to guarantee their acceptance of plaster. This representation was incorporated in the contract as in all the other transactions.
Defendants place great emphasis on the provision in the dealer-contracts providing that the various amounts placed with the company by the dealers shall draw interest at the rate of four per cent per annum. In the absence of any explanation by the defendants as to its purpose, the interest provision may be considered as an inducement to the various dealers to put up a deposit. They might well have been reluctant to be deprived of the use of their money without some return thereon.
Defendants suggest that the provision in the dealer-contracts requiring 90 days' written notice of cancellation and giving the company 30 days thereafter in which to refund deposits indicates a debtor-creditor relationship since a period of 120 days would give the company time to get the funds in hand to reimburse the dealer. Again, in the absence of any explanation by the defendants, a more likely reason for such a period is to enable the company to fill orders that have been placed and adjust the accounts between the parties, and also to enable the company to find another dealer to take the place of the one who was quitting and thus keep their business moving on an even basis. This latter idea finds support in the provision in the contract giving a right of cancellation to the company on seven days' written notice for certain specified acts on the part of a dealer.
The suggestion is made that since the defendants did not personally profit from these funds, they cannot be guilty of grand theft. This proposition is not sound.
The conviction based upon a conspiracy to commit grand theft (Count 1) must also be sustained. Besides a criminal agreement, the prosecution must allege and prove some overt act done in the furtherance of the objects of the conspiracy. (Pen. Code, §§ 182, 184.)
Defendants' purported appeal from the order denying their motion in arrest of judgment is dismissed, as such an order is not appealable. (People v. McGee, 31 Cal.2d 229, 232 [187 P.2d 706]; Pen. Code, §§ 1237, 1185.)
The purported appeal from the judgment and sentence must also be dismissed since no judgment or sentence was pronounced. (People v. D'Elia, 73 Cal.App.2d 764, 766 [167 P.2d 253].)
The order denying the motion for a new trial is affirmed.
Moore, P.J., and McComb, J., concurred.
Appellants' petition for a hearing by the Supreme Court was denied May 29, 1952.