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People v. Gratiano

Court of Appeals of California, Fourth District, Division Two.
Nov 3, 2003
No. E033358 (Cal. Ct. App. Nov. 3, 2003)

Opinion

E033358.

11-3-2003

THE PEOPLE, Plaintiff and Respondent, v. DONALD ANTHONY GRATIANO, Defendant and Appellant.

Maureen J. Shanahan, under appointment by the Court of Appeal, for Defendant and Appellant. Bill Lockyer, Attorney General, Robert R. Anderson, Chief Assistant Attorney General, Gary W. Schons, Senior Assistant Attorney General, Gil P. Gonzalez, Supervising Deputy Attorney General, and Tami Falkenstein Hennick, Deputy Attorney General, for Plaintiff and Respondent.


Defendant challenges the restitution order imposed as a condition of his probation. (Pen. Code, §§ 1202.4, subd.(a)(1), 1203.1, subd. (b).) As discussed below, we will order it modified.

FACTUAL AND PROCEDURAL BACKGROUND

From August 1999 through May 2000, defendant had a general contractor license under the Home Improvement Certification Program, H.I.C. which was in force with a bond. He did not have the C53 specialty license of a swimming pool contractor. A general contractor under the H.I.C. program can add, alter, or remodel a swimming pool so long as there is an existing dwelling. (Bus. & Prof. Code, § 7151.) However, defendant advertised in the telephone book Yellow Pages as Paradise Custom Pools and Homes and his business cards stated he had a C53 swimming pool license.

California Code of Regulations, title 16, section 832.53 provides: "A swimming pool contractor constructs swimming pools, spas or hot tubs, including installation of solar heating equipment using those trades or skills necessary for such construction."

All statutory references are to the Business and Professions Code unless otherwise indicated.
Section 7151 provides in pertinent part: "`Home improvement means the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property and shall include, but not be limited to, the construction, erection, replacement, or improvement of driveways, swimming pools, including spas and hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements of the structures or land which is adjacent to a dwelling house. . . ."

In November 1999, defendant contracted with Richard Hull, an 87-year-old retired corporate and real estate attorney, to build a swimming pool. Mr. Hull paid defendant $ 7,700, but defendant did not complete the pool. One of the subcontractors hired by defendant called Mr. Hull to complain that he had not been paid and he threatened to file a lien against Mr. Hulls home. Mr. Hull paid Vacation Pools $9,000 to complete his pool and he received $5,365.55 from defendants bonding company.

John Yost also contracted with defendant to build a swimming pool and paid him $20,000. Defendant failed to complete the work and to pay the subcontractors for their work. Mr. Yost paid $7,855.57 to have his pool completed.

On February 2, 2000, Ricky Gaddis contracted with defendant to remodel a pool and build a fire pit and bar. Mr. Gaddis paid defendant $4,546, but defendant did not complete the work. Mr. Gaddis paid another company $5,400 to finish the job, but that did not include the fire pit or bar. Mr. Gaddis received $2,500 from defendants bonding company.

Rancho Mobile Home Park contracted with defendant to remodel an existing pool. Rancho Mobile Home Park paid defendant $22,694 and paid another company $48,000 to complete the job.

The State Contractors License Board considered the matters, made a civil finding regarding restitution, and defendants bonding company made payments to some of the victims. The State Contractors License Board can order restitution only as to licensed contractors.

An information charged defendant with 15 counts of grand theft of personal property (Pen. Code, § 487, subd. (a)) from 13 separate victims. The information also charged him with 12 counts of diversion of construction funds (Pen. Code, § 484b) and with one count of theft from an elder (Pen. Code, § 368, subd. (d)). Also, the information alleged that as to 28 counts, defendant took, damaged and destroyed property. (Pen. Code, § 12022.6, subd. (a).) The information also charged defendant with misdemeanor violations of the Business and Professions Code, namely, contracting without a license and unlawfully advertising construction work for which he was not licensed. (§§ 7028, 7027.1, subd. (a).)

Pursuant to a plea agreement, defendant pled no contest to one count of theft from an elder, Richard Hull (Pen. Code, § 368, subd. (d)) and to one misdemeanor count of false advertising (§ 7027.1, subd. (a)). He signed a Harvey waiver, agreeing that all counts could be considered for purposes of determining the amount of restitution to be awarded in a subsequent restitution hearing. The court placed him on supervised probation for five years with terms and conditions, including payment of victim restitution and credit for 1335 days in custody.

Penal Code section 368, subdivision (d) provides: "(d) Any person who is not a caretaker who violates any provision of law proscribing theft or embezzlement, with respect to the property of an elder or a dependent adult, and who knows or reasonably should know that the victim is an elder or a dependent adult, is punishable by imprisonment in a county jail not exceeding one year, or in the state prison for two, three, or four years, when the money, labor, or real or personal property taken is of a value exceeding four hundred dollars ($400); and by a fine not exceeding one thousand dollars ($ 1,000), by imprisonment in a county jail not exceeding one year, or by both that fine and imprisonment, when the money, labor, or real or personal property taken is of a value not exceeding four hundred dollars ($400)."

People v. Harvey (1979) 25 Cal.3d 754.

The trial court denied defendants requests for release on his own recognizance and he remained in custody from the date of his arrest until he was placed on probation.

Following a restitution hearing, the court ordered him to pay $127,501 in victim restitution as follows:

John Yost $27,855 Richard Hull $16,700 Rancho Mobile Home $70,000 Ricky Gaddis $ 9,946 Casasola $ 3,000 (pursuant to the parties stipulation)

DISCUSSION

Defendant appeals, contending the trial court abused its discretion in not allowing offsets for work performed by him and for the amounts paid on his behalf by his bonding company. He also argues the restitution order is not narrowly tailored to the purposes of probation and is not supported by substantial evidence. As discussed below, we reject his arguments with the exception that we agree he is entitled, pursuant to People v. Bernal (2002) 101 Cal.App.4th 155, to an offset for the payments made by his bonding company.

In granting probation, courts have broad discretion to impose conditions to foster rehabilitation and to protect public safety. Nevertheless, the trial courts broad discretion is not without limits. As with any exercise of discretion, the sentencing court violates this standard when its determination is arbitrary or capricious, all of the circumstances being considered. (People v. Carbajal (1995) 10 Cal.4th 1114, 1120-1121.)

Restitution has long been considered a valid condition of probation. "Under certain circumstances, restitution has been found proper where the loss was caused by related conduct not resulting in a conviction [citation], by conduct underlying dismissed and uncharged counts [citation], and by conduct resulting in an acquittal [citation]. There is no requirement the restitution order be limited to the exact amount of the loss in which the defendant is actually found culpable, nor is there any requirement the order reflect the amount of damages that might be recoverable in a civil action. [Citation.]" (People v. Carbajal, supra, 10 Cal.4th at p. 1121.)

Defendant argues the trial courts failure to offset the restitution award for the work he had performed unjustly enriched the victims by giving them a free swimming pool. However, in light of the clear statutory policy of deterring unlicensed contract work, the Supreme Court has steadfastly held that unlicensed contractors are not only barred from pursuing breach of contract actions, but may not urge equitable theories of recovery, such as unjust enrichment or fraud based on a false promise to pay for unlicensed construction work. (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 997-1002.)

In Hydrotech, an unlicensed out-of-state contractor attempted to collect money allegedly owed under a contract. The Supreme Court held that section 7031 precluded a person from suing in California to recover compensation for any act or contract that requires a California contractors license unless he can prove that he was duly licensed at all times during the performance of the contract. (Hydrotech Systems, Ltd. v. Oasis Waterpark, supra, 52 Cal.3d 988, 991, 997, 1002.) The Supreme Court reasoned that any other result would circumvent the clear statutory policy of deterring unlicensed contract work. (Id. at p. 992.) "`Section 7031 represents a legislative determination that the importance of deterring unlicensed persons from engaging in the contracting business outweighs any harshness between the parties, and that such deterrence can best be realized by denying violators the right to maintain any action for compensation in the courts of this state. [Citation.] . . ." (Hydrotech Systems, Ltd., at p. 995.)

While the issues in Hydrotech are factually different, the rationale of the holding is applicable to the case before us. Under the unequivocal language of section 7031, the unlicensed contractor in Hydrotech could not recover for illegal unlicensed contract work and defendant should not be permitted to benefit by an offset for the work he performed because he did not possess the C53 specialty license as he advertised. Thus, the trial court did not abuse its discretion in determining defendant was not entitled to an offset for the work he performed.

With exceptions not relevant here, section 7031, subdivision (a), provides in pertinent part that "no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract, regardless of the merits of the cause of action brought . . . ."

Citing Arya v. Group, Inc. v. Cher (2000) 77 Cal.App.4th 610, defendant argues that an unlicensed contractor may seek to enforce a contract claim where the homeowner would be unjustly enriched from a failure to compensate the contractor for the reasonable value of his work. However, Arya concerned the very narrow question whether, as a matter of law, Arya was precluded under section 7164 from pursuing a breach of contract claim as a result of its failure to secure a signed written contract for the construction of a residence. (Arya, at p. 613.) As, the Arya court observed "the unequivocal language of section 7031 differs markedly from that of section 7164." (Id. at p. 617.) Thus, Arya has no application to this case.

Defendant argues the fact that he was unlicensed should not have been a part of the restitution hearing because he did not plead guilty to a charge of contracting without a license. However, defendant did not assert that argument in the court below.

Defendant also argues the trial court abused its discretion in failing to deduct the payments made by his bonding company. The People respond, as they argued below, that pursuant to People v. Birkett (1999) 21 Cal.4th 226 and People v. Hove (1999) 76 Cal.App.4th 1266, the victim restitution order should be in an amount to fully reimburse the victims regardless of the victims reimbursement from other sources.

In People v. Birkett, supra, 21 Cal.4th 226, the Supreme Court held the statutory scheme governing restitution as a condition of adult probation gave only direct crime victims a right to restitution from probationers and insurers did not become such direct victims by reimbursing insured victims under the terms of their policies. (Id. at p. 229.)

In People v. Hove, supra, 76 Cal.App.4th 1266, this court concluded the fact that all of the victims medical bills were paid by Medicare and Medi-Cal should not shield the defendant from a restitution order which required him to pay the full amount of the loss caused by his crime. (Id. at p. 1272.)

However, in both Birkett and Hove, the victims received payment from sources that were completely distinct and independent from the defendants. The payments from such sources were simply fortuitous events from which the defendants should not benefit. Furthermore, the payments were subject to reimbursement. In Birkett, the victims insurers had subrogation rights. (16 Couch on Insurance (3d ed. 2000) § 222:8, p. 222-30 ["Stated simply, subrogation traditionally was a creature of equity having for its purpose the working out of an equitable adjustment between the parties by securing the ultimate discharge of a debt by the person who in equity and good conscience ought to pay it." (Fn. omitted.)].) In Hove, the payments were subject to a Medi-Cal reimbursement claim. (People v. Hove, supra, 76 Cal.App.4th at p. 1272, fn. 5.) Thus, the reimbursement claims precluded a windfall recovery by the victims by reimbursing the third party and equitable principles placed the loss on the wrongdoing defendant.

In contrast, in this case and in People v. Bernal, supra, 101 Cal.App.4th 155, the defendants own insurance companies made the payments to the victims on behalf of the wrongdoing defendants pursuant to contractual obligations to do so and the carriers have no recourse against the defendants. (Truck Ins. Exchange v. County of Los Angeles (2002) 95 Cal.App.4th 13, 21 ["An insurer has no right of equitable subrogation against its own insured with respect to a loss or liability for which the insured is covered under the policy . . . ."].)

In Bernal, the defendant was convicted of driving under the influence of alcohol (Veh. Code, § 23153, subd. (a)) and causing great bodily injury (Pen. Code, § 12022.7, subd. (a)). (People v. Bernal, supra, 101 Cal.App.4th at p. 158.) The trial court placed him on probation and he moved for "an order determining that his restitution obligation had been satisfied because his insurance company `completed payment in full . . . ." (Ibid.) The prosecutor claimed restitution had not been fully paid because the victim reported that a large portion of the insurance settlement was paid to her attorney and she had outstanding medical bills as well as lost wages. (Id. at p. 160.) The trial court declined to set a hearing and the People appealed. (Id. at pp. 158, 160.)

The Bernal court explained: "While section 1202.4 mandates that the victim receive payments `directly from the defendant (§ 1202.4, subd. (a)(1)), neither its language nor its legislative history clarifies what is meant by that phrase. We conclude that it includes payments by an insurance company insuring the defendant. The defendants own insurance company is different than other sources of victim reimbursement, in that (1) the defendant procured the insurance, and unlike the other third party sources, its payments to the victim are not fortuitous but precisely what the defendant bargained for; (2) the defendant paid premiums to maintain the policy in force; (3) the defendant has a contractual right to have the payments made by his insurance company to the victim, on his behalf; and (4) the defendants insurance company has no right of indemnity or subrogation against the defendant. In sum, the relationship between the defendant and its insurer is that payments by the insurer to the victim are `directly from the defendant." (People v. Bernal, supra, 101 Cal.App.4th at pp. 167-168.)

The Bernal court rejected the argument that by offsetting payments made by the defendants insurance company against his restitution obligation, the rehabilitative and deterrent objectives of the restitution law would be lost. "Although some authorities have speculated that restitution `is imposed primarily for the benefit of the state to promote the states interests in rehabilitation and punishment [citation], we question the accuracy of such a characterization. First, the legislative intent, as stated in section 1202.4, subdivision (a)(1), is that the victim be made whole. Second, restitution of the victim is only ordered if the victim suffers economic loss. Without such loss, there is no restitution despite the fact that the goals of rehabilitation and deterrence are thereby frustrated. Third, section 1202.4, subdivision (b), provides for a substantial `restitution fine of $200 to $ 10,000, wholly apart from victim restitution, which serves punitive and deterrent goals of restitution. These factors suggest that the primary purpose of victim restitution is to fully reimburse the victim, which purpose is not undermined by permitting an offset for payments by the defendants insurance carrier." (People v. Bernal, supra, 101 Cal.App.4th at p. 168.)

The Bernal court concluded that payments made to the victim by the defendants insurance carrier must be an offset to his restitution obligation to the extent that those payments were for items of loss included in the restitution order. (People v. Bernal, supra, 101 Cal.App.4th at p. 168.)

In the case before us, two of defendants victims, Mr. Hull and Mr. Gaddis, testified they received compensation from defendants bonding company in an amount totaling $7,865.55. Thus, defendants $127,501 restitution order should be reduced by that amount.

Defendant argues the restitution award was not narrowly tailored to serve the purpose of probation pursuant to Penal Code section 1203.1. Penal Code section 1203.1, subdivision (j) provides a trial court may impose reasonable conditions to compensate victims, rehabilitate criminals and deter future criminal conduct. As a consequence of defendants falsely advertising that he held a C53 swimming pool contractor license, he entered into illegal contracts which he failed to perform and for which he unlawfully received payment. Restitution is appropriate to compensate his victims for their resulting expenses, to help him to appreciate the seriousness of his conduct and to deter him as well as others from similar unlawful conduct. Thus, the modified restitution order serves the purpose of probation pursuant to Penal Code section 1203.1.

Defendants substantial evidence argument is based on his claim that he was entitled to an offset for the amount of work he performed under the illegal contracts. His argument regarding his entitlement to such an offset was discussed and rejected above. His argument the evidence was insufficient to support the stipulation freely entered by the parties to the effect that Rancho Mobile Home Parks losses were $70,000 is precluded by his failure to challenge it in the court below. (People v. Gurule (2002) 28 Cal.4th 557, 623.) Furthermore, the prosecutors restitution hearing brief and the probation report provided ample notice of the amount of restitution sought and the testimony at the hearing provided sufficient evidence. (In re S. S. (1995) 37 Cal.App.4th 543, 546-548; People v. Foster (1993) 14 Cal.App.4th 939, 946-947.)

DISPOSITION

The restitution order is modified to reflect a total amount of $119,635.45, by offsetting the $7,865.55 paid by defendants bonding company, in accordance with the principles stated above. In all other respects, the judgment is affirmed. The trial court is directed to amend the abstract of judgment and its minute order so as to reflect this modification and to forward a certified copy of the amended abstract of judgment to the Director of the Department of Corrections. (Pen. Code, §§ 1213, 1216.)

We concur: WARD J., KING J.


Summaries of

People v. Gratiano

Court of Appeals of California, Fourth District, Division Two.
Nov 3, 2003
No. E033358 (Cal. Ct. App. Nov. 3, 2003)
Case details for

People v. Gratiano

Case Details

Full title:THE PEOPLE, Plaintiff and Respondent, v. DONALD ANTHONY GRATIANO…

Court:Court of Appeals of California, Fourth District, Division Two.

Date published: Nov 3, 2003

Citations

No. E033358 (Cal. Ct. App. Nov. 3, 2003)