Opinion
18-P-78
12-05-2019
COMMONWEALTH v. Jerry DAWSON.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Following a jury trial, the defendant, Jerry Dawson, was convicted of publishing a false statement concerning a financial condition, uttering a false writing, forging a document, and two counts of larceny in excess of $250. On appeal, he argues that (1) the judge erred by not instructing the jury on the defense of an honest but mistaken belief as to one of the two larceny counts of which he was convicted, and (2) the evidence was insufficient to convict him of publishing a false statement concerning the financial condition of a limited liability company. We reverse the judgment as to the charge of publishing a false statement concerning a financial condition, and affirm the remaining judgments.
The jury found the defendant guilty on an additional four counts of larceny in excess of $250. However, the judge dismissed those counts as duplicative. The jury found the defendant not guilty on an additional three counts of larceny in excess of $250. The Commonwealth entered a nolle prosequi on the indictment charging obtaining a signature to a written instrument by false pretenses, and on another count of larceny in excess of $250. The defendant was sentenced to three and one-half to four years in State prison for his conviction on one of the larceny in excess of $250 counts. On the other four convictions, the defendant received concurrent five-year probation sentences to run consecutively from the State prison sentence.
Background. We summarize the evidence presented at trial in the light most favorable to the Commonwealth. The defendant and John Lamar met in 2004 or 2005 and together pursued a number of construction development projects in Massachusetts. In these projects, Lamar, who lived in Virginia, provided financing and the defendant managed the day-to-day operations of building residential houses.
In 2007, the defendant approached Lamar with a proposal to acquire a horse farm in Hamilton (town) and operate it as a business for profit, with the contingency of ultimately developing the property for senior housing or otherwise selling it for profit. Lamar agreed and on August 17, 2007, Lamar and the defendant entered into an operating agreement and filed a certificate of organization with the Secretary of the Commonwealth to establish Canter Brook Equestrian Center, LLC (Canter Brook). Lamar and the defendant each contributed $250,000 to fund Canter Brook, and each took a fifty percent ownership interest.
Using these capital investments and a $2.2 million mortgage, Canter Brook purchased the subject property, including various pieces of equipment located on the property necessary to operate the horse farm. Consistent with the prior construction projects, the defendant ran the day-to-day operations of the horse farm and Lamar provided additional funding as required to meet Canter Brook's operating expenses. Based on the defendant's reports of Canter Brook's operational needs, Lamar wrote checks collectively totaling $1.1 million to Canter Brook between 2011 and 2014. It was agreed that the defendant would not draw a salary, wages, or otherwise be compensated or permitted to draw on monies from Canter Brook until the farm was sold. Upon the sale of the farm, Lamar and the defendant would divide any profits evenly.
The defendant was permitted to store his own horses at the farm without paying any fee.
In 2008, the defendant reported that he needed his money back but wanted to continue the work of the business. Lamar agreed to purchase the defendant's interest in Canter Brook in exchange for $250,000 (i.e., the amount the defendant had initially paid for his interest). The defendant also received a right of first refusal to buy back his interest at a later date. Despite this change in circumstance, the defendant was still not entitled to salary, wages, compensation, or to draw on Canter Brook's funds in exchange for managing day-to-day operations of the business.
The right of first refusal was initially valid for eighteen months, and was later amended to continue for thirty months. In 2010, Lamar agreed to sell the defendant a forty-eight percent interest in Canter Brook in exchange for a $50,000 down payment and an interest-only note of $200,000 for a period of five years. The defendant paid Lamar $50,000 on March 22, 2010, and later made some, but not all, of the payments required under the note between 2010 and 2015.
The defendant was permitted to continue to store his horses at the farm without paying any fee.
In 2014, Lamar determined that operating the Canter Brook farm was unsustainable and directed the defendant to shut it down. In March 2015, as a result of an offer to purchase the farm, an attorney alerted Lamar that the farm was encumbered by a second mortgage in the amount of $100,000 held by WJYE Corporation. The mortgage appeared to be signed by both Lamar and his wife and was purportedly notarized, although Lamar and his wife denied signing it. Lamar confronted the defendant about the mortgage, and the defendant admitted that he had taken it out to cover personal expenses. Canter Brook never realized anything of value in exchange for the mortgage.
During this time period, Lamar and the defendant were working to obtain permits from the town to convert the farm to senior housing.
The notary public who purportedly notarized the document testified at trial and denied doing so.
Lamar then directed an investigation of Canter Brook's finances. Through this investigation he learned that the defendant had written several checks drawn on Canter Brook's Beverly Cooperative account to himself or to cash. Lamar also learned that the defendant had opened a second bank account with Bank of America in the name of Canter Brook. This account was used to deposit several checks from Lamar that were intended by him to fund Canter Brook's operational expenses. Funds from Canter Brook's Bank of America account were repeatedly transferred into accounts in the name of the defendant's other construction businesses and also withdrawn as cash.
The Bank of America account was also used to deposit three checks from an insurance company totaling over $166,000. Lamar had no knowledge of the insurance claims.
As a result of these discoveries, Lamar visited Canter Brook on July 14, 2015. Upon his arrival, Lamar could not find or contact the defendant. While on the property, Lamar searched Canter Brook's office and found no record-keeping, such as invoices from vendors, invoices to persons boarding horses at the farm, insurance records, real estate tax documents, or other receipts.
The defendant had converted an "observation area" on the farm into an apartment, without obtaining permission or permits to do so, and had been living there with his girlfriend prior to Lamar's arrival.
The defendant was eventually arrested on September 14, 2015, in connection with a separate incident. After it was reported that a trailer had been stolen from a nearby property under the control of a bankruptcy trustee, the defendant was found in an automobile following the trailer about one-half mile away. One of the defendant's two larceny in excess of $250 convictions related to this incident.
Discussion. 1. Honest belief as a defense to larceny. The defendant argues that the judge erred by declining to give the jury an instruction about the defendant's honest but mistaken belief that he was entitled to be compensated from Canter Brook as a defense to the larceny indictment alleging that he stole Canter Brook's property by diverting Canter Brook's funds to himself. , The issue is preserved as the defendant brought it to the attention of the trial judge at the charge conference; articulated his reasons for the instruction; and, after the trial judge refused to give it, explicitly objected before the jury began its deliberations. See Mass. R. Crim. P. 24 (b), 378 Mass. 895 (1979). See also Commonwealth v. Linton, 456 Mass. 534, 552 n.13 (2010).
The judge gave an honest belief instruction only with respect to the larceny indictment that alleged theft of a trailer under the control of a bankruptcy trustee.
The defendant argues this error affected each larceny indictment. Because, he argues, indictments three, five, seven, and eleven were dismissed as duplicative, and he was found not guilty on indictments eight, nine, and ten, "the only such conviction which should now be vacated would be that of count [four]."
To sustain a conviction of larceny, the Commonwealth must "prove that a defendant took the personal property of another without the right to do so, and ‘with the specific intent to deprive the other of the property permanently.’ " Commonwealth v. Liebenow, 470 Mass. 151, 156 (2014), quoting Commonwealth v. Murray, 401 Mass. 771, 772 (1988). "Honest but mistaken belief is an affirmative defense to larceny." Commonwealth v. Ryan, 93 Mass. App. Ct. 486, 492 (2018). "To raise the defense, the defendant has the burden of production, which is satisfied if " ‘any view of the evidence" would support a factual finding that the defendant honestly believed he or she had a legal right to take [the] property.’ " Id., quoting Commonwealth v. St. Hilaire, 470 Mass. 338, 348 (2015). Once the defendant has met this burden of production, the jury must be charged with the honest belief instruction. See Commonwealth v. Vives, 447 Mass. 537, 542 (2006). The burden then shifts to the Commonwealth "to disprove the defendant's claim of right." St. Hilaire, supra at 349.
Conversely, "[a] judge need not charge on an hypothesis not supported by evidence." Commonwealth v. O'Dell, 15 Mass. App. Ct. 257, 261 (1983).
The defendant argues that an honest belief instruction should have been given based on a theory that the defendant honestly believed that he was entitled to be compensated for his participation in the business. In support of this argument, the defendant primarily relies on language in the Canter Brook operating agreement, which provided that managers had authority to take various actions to carry out the business, including the authority to provide services to and receive compensation from the business. He also argues an honest belief can be inferred based on testimony that in prior business ventures with Lamar, the defendant was entitled to be compensated.
The defendant also relies on Lamar's testimony that the defendant wrote checks from Canter Brook to himself "way too frequently" as evidence that writing himself some fewer number of checks would have been permissible. Viewed in totality with the rest of Lamar's testimony, we do not think the jury could have rationally interpreted this statement in that manner. Nor could the jury infer that the defendant honestly believed he was entitled to compensation for continuing to participate in the business after selling his interest to Lamar in 2008. At all relevant times, the defendant retained a business interest in Canter Brook either in the form of a right of first refusal or when he later entered into an agreement to repurchase an interest from Lamar.
While we agree that the operating agreement, viewed in abstract, might be read to authorize a manager to be compensated for rendering services to Canter Brook, there was no evidence that would permit the jury to find that the defendant, who did not testify at trial, honestly believed he had a claim of right under the operating agreement (or otherwise) to the funds he converted from Canter Brook. See Liebenow, 470 Mass. at 156. Cf. St. Hilaire, 470 Mass. at 349 (defendant's production of quitclaim deed signed by victim "would likely" have met burden of production in case where defendant was alleged to have committed larceny by taking property from elderly victim that lacked mental capacity to consent to transaction). The jury could not reasonably find such an honest belief existed from the operating agreement itself, where the defendant's actions were not consistent with following that agreement. Any authority to compensation under the operating agreement was limited to transactions that were "necessary or convenient to carry out the business," and must also be read in conjunction with the requirement under the operating agreement that a manager "keep just and true books of account with respect to the operations of the LLC" accessible to Canter Brook's members. There was no evidence that the numerous withdrawals and other takings by the defendant were made in Canter Brook's business interests. To the contrary, the evidence suggested that the defendant's actions were against those interests, as he acted to conceal his behavior by opening a second bank account without informing Lamar, wrote numerous checks to cash, and kept no records to justify or explain the extracted funds. Accordingly, the defendant did not meet his burden of production.
2. Conviction under G. L. c. 266, § 92 . General Laws c. 266, § 92, prohibits the publication of a false or willfully exaggerated statement that concerns the value of a "corporation, joint stock association, partnership or individual." The defendant argues that the evidence was insufficient to convict him under this statute because the organization at issue was a limited liability company, see G. L. c. 156C (Massachusetts Limited Liability Company Act), rather than a corporation. See Commonwealth v. Campbell, 415 Mass. 697, 702 (1993) (reversing conviction where "evidence presented in this case failed to show that the [unincorporated youth baseball league] was one of the entities covered by G. L. c. 266, § 92").
The defendant raises other arguments with respect to this conviction. In view of the result we reach, it is unnecessary to address them, and we decline to do so.
In response, the Commonwealth argues that a limited liability company falls within the ambit of G. L. c. 266, § 92, by virtue of G. L. c. 156C, § 63, which provides: "[u]nless the provisions of this chapter or the context indicate otherwise, each reference in the General Laws to a ‘person[,’] where such reference includes any partnership, ... shall be deemed to include a limited liability company." G. L. c. 156C, § 63 (a ). While G. L. c. 266, § 92, does reference the word "partnership," it does not reference the word "person." Instead, G. L. c. 266, § 92, uses the word "individual." The Supreme Judicial Court has already considered whether the Legislature's use of "individual" in G. L. c. 266, § 92, was intended to include a "person" for the purposes of expanding the scope of entities covered by the statute. See Campbell, 415 Mass. at 698 n.3. In answering that question in the negative, the court explained that if it determined that the word "individual" as used in § 92 included the word "person," then by operation of G. L. c. 4, § 7, § 92 would include statements concerning "corporations, societies, associations and partnerships" in addition to the explicitly listed entities, and would therefore be duplicative to the extent that corporations and partnerships are already listed in the statute. Campbell, 415 Mass. at 698 n.3. The Supreme Judicial Court concluded that it was "implausible that the Legislature intended such surplusage." Id. Accordingly, we do not read the term "individual" as used in G. L. c. 266, § 92, to mean "person" and thus incorporate limited liability companies by virtue of G. L. c. 156C, § 63.
Beyond the argument addressed above, the Commonwealth has not argued that a limited liability company qualifies as a "corporation," "joint stock association," or "partnership" under G. L. c. 266, § 92. Any such argument is therefore waived. See Mass. R. A. P. 16 (a) (9), as appearing in 481 Mass. 1629 (2019) ("The appellate court need not pass upon questions or issues not argued in the brief").
The question remains open whether the word "corporation" as used in G. L. c. 266, § 92, could be read to include limited liability companies. In particular, we are mindful that the limited liability company was not a legally recognized form of business association when G. L. c. 266, § 92, was last amended in 1911. See St. 1911, c. 428. Therefore, the failure to include limited liability companies in the statute cannot be understood to mean that the Legislature intended to exclude them. While in some contexts the word "corporation" has been interpreted not to include limited liability entities, the rationales for distinguishing between the two forms of business associations may not be the same in the context of proscribing certain types of criminal conduct. See Cook v. Patient Edu, LLC, 465 Mass. 548, 553-554 n.13 (2013) ("The word ‘corporation’ does not itself encompass other limited liability entities"). We also note that in interpreting the word "corporation" as used in G. L. c. 266, § 67, which defines the crime of making false entries in corporate books, the Supreme Judicial Court was guided by a nonlegal dictionary definition to hold that, under that criminal statute, the word corporation "includes a public or quasi public corporation such as Massport." Commonwealth v. Biagiotti, 451 Mass. 599, 607 (2008).
Conclusion. On the indictment charging publishing a false statement concerning a financial condition, the judgment is reversed, the verdict is set aside, and judgment shall enter for the defendant. The remaining judgments are affirmed.
So ordered.
Reversed in part; affirmed in part.