Opinion
No. 340663
05-15-2018
PEOPLE OF THE STATE OF MICHIGAN, Plaintiff-Appellee, v. DANIEL OGDEN KERBER, Defendant-Appellant.
UNPUBLISHED Wayne Circuit Court
LC No. 17-006319-01-FH Before: CAMERON, P.J., and FORT HOOD and GLEICHER, JJ. PER CURIAM.
In this interlocutory criminal appeal, defendant appeals by leave granted an order denying his motion to quash the bindover on the charges of six counts of larceny by conversion (property valued at $20,000 or more), MCL 750.362; MCL 750.356(2)(a), and five alternative counts of larceny (property valued at $20,000 or more), MCL 750.356(2)(a). We reverse and remand for dismissal of the charges.
People v Kerber, unpublished order of the Court of Appeals, entered December 21, 2017 (Docket No. 340663).
Defendant had a long career working as a Wayne County employee. When he was originally hired, he opted into a defined benefit retirement plan called Plan 1. In 1981, he left and cashed out his Plan 1 assets. However, in 1985, he returned as a county employee and opted back into Plan 1. In order to join Plan 1, he was instructed by the County to pay back the money he withdrew. Later in his career, defendant converted the Plan 1 pension into a 401(k) defined contribution plan called Plan 4. Eventually, he opted out of Plan 4 and into a hybrid retirement plan that contained both a defined contribution and defined benefit component, known as Plan 5. At that time, defendant transferred his own 401(k) contributions from Plan 4 into Plan 5. Defendant was a member of Plan 5 at the time of his retirement.
In an opinion ordering the dismissal of charges in a prior criminal case against defendant related to the same underlying facts, this Court explained the factual background as it concerns the events after retirement:
Pursuant to a provision in a 2009 severance agreement between defendant and the Wayne County Airport Authority, defendant was given the option to transfer his defined contribution assets, which were in [Plan 5], to a straight defined benefit retirement plan - Plan 1. Defendant elected Plan 1 in 2009 and began receiving monthly defined benefit payments (hereafter "pension" payments); however, he did not transfer the defined contribution assets from Plan 5 and actually withdrew those funds for his own use in 2011, while continuing to receive the same monthly pension payments. [People v Kerber, unpublished per curiam opinion of the Court of Appeals, issued April 27, 2017 (Docket No. 334516), p 1.]
When defendant opted back into Plan 1, the defined benefit assets from Plan 5, which totaled nearly a half million dollars, were automatically transferred into Plan 1. The defined contribution assets from Plan 5 remained in an account with Prudential. In 2011—two years after defendant executed the severance agreement—the defined contribution funds remained undisturbed. At that time, defendant submitted a request to Prudential to withdraw the assets, which after taxes totaled $270,133. Before defendant received the assets, Prudential submitted the request to the Wayne County Employee Retirement System (the Retirement System), which administered all aspects of Wayne County employee retirement benefits. Kenneth Motley, a clerical specialist with the Retirement System, reviewed the file, determined there were no holds, and finalized the approval for the release of the assets from Plan 5. In 2015, the Retirement System discovered through an audit that defendant withdrew the defined contribution assets from Plan 5 and did not transfer the money in accordance with the severance agreement. However, from 2009 to 2015, the Retirement System did not send a single notification to defendant stating that he needed to transfer the defined contribution assets from Plan 5 to Plan 1. In fact, the record evidence showed that defined contribution assets from Plan 5 could not be transferred into Plan 1 because one involved contributions from a 401(k) while the other was a pure pension plan. The Retirement System stopped making the monthly pension payments, and defendant has not been paid any retirement since. We provided the following procedural history in our prior opinion:
The prosecution construed the severance agreement as requiring defendant to release, surrender, or transfer the defined contribution assets in Plan 5 should he decide to elect, as defendant did, the Plan 1 pension option. Defendant, on the other hand, interpreted the severance agreement as allowing him to retain and withdraw the defined contribution assets at his discretion. It does appear undisputed that defendant's monthly pension payments were significantly greater under Plan 1.
The prosecution charged defendant with the crimes of false pretenses and larceny by conversion, operating under the theory that he committed the offenses by withdrawing and converting for his own use the defined contribution assets. The charges were analyzed by both the district court and the circuit court under this theory, which focused on the defined contribution assets as being the stolen property. The prosecution did not proffer a theory that the monthly pension payments served as the money or property that defendant was illegally obtaining by employment of false pretenses or through larcenous conversion. The district
court dismissed the charge of larceny by conversion, but it bound defendant over on the charge of false pretenses. The circuit court denied defendant's motion to quash the charge of false pretenses, and it agreed with the prosecutor that the charge of larceny by conversion should be reinstated. . . . [T]his Court granted defendant's application for leave to appeal. [Id. at 1-2.]In his brief on appeal in Docket No. 334516, the prosecutor made the following concession:
The People concede one point up front: defendant is correct that he cannot steal what is already his, and so cannot be convicted of theft regarding the defined contribution funds that were in his own account. As such, although defendant still committed larceny by stealing the County's defined benefit [pension] payments, the People's theory advanced below is not viable in light of the fact that the defined contribution funds that defendant withdrew from the Prudential account belonged to him, not [the Retirement System]. Nevertheless, it is still proper to have bound defendant over for trial on felony theft charges; it's just that the information must be amended pursuant to MCR 6.112(H) to remove false pretenses and add larceny over $20,000 to the already charged larceny by conversion. [Id. at 2, quoting the prosecutor's brief on appeal in Docket No. 334516 (brackets in this Court's prior opinion).]
This Court concluded that the charges against defendant must be dismissed but that the prosecutor could recharge defendant; this Court explained its reasoning as follows:
The prosecution has effectively conceded that the charge of false pretenses is not viable, so we order that the charge be dismissed on remand. The prosecution argues that the charge of larceny by conversion can remain intact and go forward, but that charge was pursued on the basis that defendant unlawfully converted the defined contribution assets, not the pension payments. Again, the lower courts never examined that larceny charge as now framed by the prosecutor. The prosecution has conceded that the charge of larceny by conversion is not viable in the context of a purported theft of the defined contribution assets. Therefore, we hold that the charge of larceny by conversion, as brought by the prosecution, must also be dismissed. The prosecution is free to recharge defendant under whatever new or different charges or theories it may wish to pursue, subject to any valid defenses raised by defendant. [Id. at 2-3.]
The prosecutor then initiated the present case, charging defendant with six counts of larceny by conversion and five alternative counts of larceny, all related to defendant's purported embezzlement or theft of his monthly pension payments. At the preliminary examination in this case, the parties stipulated to admit the preliminary examination transcripts from the prior case against defendant; no additional testimony was taken at the preliminary examination in this case. The district court bound over defendant for trial on all charges. In the circuit court, defendant moved to quash the bindover on the charges, and the circuit court denied the motion. This appeal ensued.
Defendant advances numerous arguments on appeal challenging the circuit court's denial of his motion to quash and the district court's decision to bind over defendant on the charges. A district court's decision whether to bind over a defendant is reviewed for an abuse of discretion. People v Hudson, 241 Mich App 268, 276; 615 NW2d 784 (2000). An abuse of discretion occurs when the district court's decision falls outside the range of reasonable and principled outcomes. People v Waterstone, 296 Mich App 121, 131-132; 818 NW2d 432 (2012).
A circuit court's decision with respect to a motion to quash a bindover order is not entitled to deference because this Court applies the same standard of review to this issue as the circuit court. This Court therefore essentially sits in the same position as the circuit court when determining whether the district court abused its discretion. . . . Thus, in simple terms, we review the district court's original exercise of discretion. [Hudson, 241 Mich App at 276.]Some of defendant's arguments concern the interpretation of his severance agreement. The interpretation of a contract presents a question of law and is reviewed de novo. Kloian v Domino's Pizza, LLC, 273 Mich App 449, 452; 733 NW2d 766 (2006).
In interpreting a contract, this Court's obligation is to determine the intent of the [contracting] parties. This Court must examine the language of the contract and accord the words their ordinary and plain meanings, if such meanings are apparent. If the contractual language is unambiguous, courts must interpret and enforce the contract as written. Thus, an unambiguous contractual provision is reflective of the parties' intent as a matter of law. [In re Smith Trust, 274 Mich App 283, 285; 731 NW2d 810 (2007), aff'd 480 Mich 19 (2008) (quotation marks and citations omitted).]
As this Court has explained:
The primary function of the preliminary examination is to determine whether a crime has been committed and, if so, whether there is probable cause to believe that the defendant committed it. Probable cause that the defendant has committed a crime is established by evidence sufficient to cause a person of ordinary prudence and caution to conscientiously entertain a reasonable belief of the defendant's guilt. To establish that a crime has been committed, a prosecutor need not prove each element beyond a reasonable doubt, but must present some evidence of each element. Circumstantial evidence and reasonable inferences from the evidence can be sufficient. If the evidence conflicts or raises a reasonable doubt, the defendant should be bound over for trial, where the questions can be resolved by the trier of fact. [People v Henderson, 282 Mich App 307, 312; 765 NW2d 619 (2009) (citations omitted).]If there is credible evidence presented both supporting and negating the existence of an element of the crime, then a factual question exists that should be left for the trier of fact. People v Reigle, 223 Mich App 34, 37; 566 NW2d 21 (1997).
Defendant argues that the district court abused its discretion in binding over defendant on 6 counts of larceny by conversion. We agree.
The larceny by conversion statute, MCL 750.362, provides:
Any person to whom any money, goods or other property, which may be the subject of larceny, shall have been delivered, who shall embezzle or fraudulently convert to his own use, or shall secrete with the intent to embezzle, or fraudulently use such goods, money or other property, or any part thereof, shall be deemed by so doing to have committed the crime of larceny and shall be punished as provided in [MCL 750.356].MCL 750.356(2)(a) provides:
(2) If any of the following apply, the person is guilty of a felony punishable by imprisonment for not more than 10 years or a fine of not more than $15,000.00 or 3 times the value of the property stolen, whichever is greater, or both imprisonment and a fine:The elements of larceny by conversion are:
(a) The property stolen has a value of $20,000.00 or more.
(1) the property at issue must have some value, (2) the property belonged to someone other than the defendant, (3) someone delivered the property to the defendant, irrespective of whether that delivery was by legal or illegal means, (4) the defendant embezzled, converted to his own use, or hid the property with the intent to embezzle or fraudulently use it, and (5) at the time the property was embezzled, converted, or hidden, the defendant intended to defraud or cheat the owner permanently of that property. Stated more simply, larceny by conversion occurs where a person obtains possession of another's property with lawful intent, but subsequently converts the other's property to his own use. [People v Mason, 247 Mich App 64, 72; 634 NW2d 382 (2001) (quotation marks and citations omitted).]In addition, this Court has stated that the embezzlement, conversion, or hiding must have been done without the owner's consent. See People v McIntosh, 103 Mich App 11, 17; 302 NW2d 321 (1981), citing People v Scott, 72 Mich App 16, 19; 248 NW2d 693 (1976).
"The purpose of the larceny by conversion statute is to cover one of the situations left unaccounted for by common-law larceny, that is, where a person obtains possession of another's proprty [sic] with lawful intent, but subsequently converts the other's property to his own use." People v Christenson, 412 Mich 81, 86; 312 NW2d 618 (1981); see also People v Spencer, 320 Mich App 692, 700-701; 909 NW2d 17 (2017) (citing Christenson for this proposition). "Larceny by conversion constitutes 'a crime against possession and not against title; one cannot convert his own funds.' " Spencer, 320 Mich App at 701, quoting Christenson, 412 Mich at 87. Hence, "when an owner intends to part with his or her title to property as well as possession, a charge of larceny by conversion is not viable." Spencer, 320 Mich App at 701, citing Christenson, 412 Mich at 87.
"If the owner is induced to part with both possession and right to ownership by fraudulent representations of one who receives the property with felonious intent, the proper charge is false pretenses." Christenson, 412 Mich at 87 n 4. Defendant is not charged with false pretenses in this case (although he was charged with false pretenses in the prior case that was dismissed).
Despite the extensive briefing by the parties, the resolution of this case is very simple. As explained, a person cannot convert his own property. Christenson, 412 Mich at 87; Spencer, 320 Mich App at 701. The prosecutor's theory here is that defendant converted the monthly pension funds he had received from the Retirement System because he never turned over the defined contribution funds held in his Prudential account. In particular, the felony information charged that defendant "did, being a person to whom defined benefit pension payments had been delivered, embezzle or fraudulently convert to his/her own use that property, which belonged to Wayne County Employee Retirement System . . . ." The fundamental problem with the prosecutor's theory is that both title and possession of the monthly pension funds were transferred to defendant when the Retirement System made the monthly payments. A charge of larceny by conversion thus is not viable because the Retirement System parted with both title and possession of the funds transferred in the monthly pension payments. See Spencer, 320 Mich App at 701, citing Christenson, 412 Mich at 87.
This is not a case in which the complainant parted with possession but retained title. A charge of larceny by conversion may be pursued when the owner of the funds transfers possession for a specific and limited purpose, thereby retaining title. As this Court has stated,
the offense of larceny by conversion may be committed when a defendant fails to use money delivered by a complainant for an agreed-upon designated purpose in the context of the complainant's purchase of goods or property, with the defendant also failing to refund the money to the complainant. [Spencer, 320 Mich App at 702.]In Spencer, 320 Mich App at 702-703, there was evidence that the complainant intended to retain legal title to loan proceeds, although not possession of the funds, until the loan proceeds were used to pay for the acquisition and rehabilitation of six identified properties. In other words, "the loan was specifically conditioned on the agreement that it would be used to acquire and rehabilitate the six identified properties. Therefore, title would not have passed unless and until the loan was used for its intended purpose." Id. at 705. There was evidence that some of the loaned funds were not used as directed by the loan agreement and that the defendant converted certain of the funds to his own use in contravention of the loan agreement. Id. This Court therefore ordered the reinstatement of the charge of larceny by conversion. Id. at 705-706. By contrast, in the present case, there is no evidence that the Retirement System intended to retain title to the pension funds that it paid to defendant each month. These were monthly pension payments, not a loan or other transfer of funds that was made for a specific and limited purpose. Because there is no evidence that the Retirement System retained title to the pension funds after those funds were voluntarily paid to defendant each month, the prosecutor's charging theory that defendant committed larceny by conversion in his use of the monthly pension payments is not viable.
The prosecutor asserts that "[t]he severance agreement provides that title to the pension payments would only pass if defendant relinquished title to his Prudential account, a contractual obligation that he not only failed to do, but effectively rendered impossible." The severance agreement says no such thing. Paragraph 3 of the severance agreement states, in relevant part: "Except in the event of revocation by Employee under paragraph 7 of this Agreement, the Authority agrees to allow Employee to transfer his Plan 5 defined contribution pension assets to Plan 1, and elect Plan 1 as his retirement plan." This language merely provides that defendant may transfer his Plan 5 defined contribution funds to Plan 1 and elect Plan 1 as his retirement plan. Kelly Tapper, the division director for information services at the Retirement System, testified that there is no way to send defined contribution funds from Plan 5 to Plan 1. Tapper understood the severance agreement to require defendant to send the defined contribution funds to the Retirement System itself in order to get a Plan 1 pension. The severance agreement does not, however, state that defendant must transfer his defined contribution funds to the Retirement System itself; it provides for transferring the funds to Plan 1, which Tapper testified there is no way to do. But even if the severance agreement is understood to create a contractual obligation on the part of defendant to transfer his Plan 5 defined contribution funds to the Retirement System itself, there is no language indicating that the Retirement System retains title to any monthly pension benefits that it pays until defendant transfers the Plan 5 assets. The severance agreement contains no language prescribing the timing or method of transferring the Plan 5 funds. For unknown reasons, the Retirement System—which had access to the severance agreement and all the same information that defendant had—made monthly pension payments to defendant without having received the Plan 5 defined contribution funds. The record is devoid of evidence that title to the monthly pension funds was not transferred when the Retirement System made the monthly payments to defendant.
Defendant further argues that the district court abused its discretion in binding over defendant on 5 alternative counts of larceny. We agree.
The elements of larceny are "(a) a trespassory taking and (b) the carrying away (c) of the personal property (d) of another (e) with intent to steal that property." People v March, 499 Mich 389, 401; 886 NW2d 396 (2016).
It was the unlawful, or trespassory, taking that defined the fundamental nature of the crime: the principal factor which limited the scope of larceny was the requirement that the thief must take it from the victim's possession; larceny requires a trespass in the taking, as the matter is often stated. [Id. at 403 (quotation marks, brackets, and citation omitted).]"[I]f an owner intends to part with title as well as possession, there can be no crime of larceny." Christenson, 412 Mich at 87. The prosecutor's charging theory is that defendant "did commit the offense of larceny by stealing defined benefit pension payments, that belonged to Wayne County Employee Retirement System . . . ." But as discussed above, the evidence reflects that the Retirement System voluntarily made the monthly pension payments to defendant. There is no evidence of a trespassory taking by defendant. Defendant did not take the pension funds from the Retirement System's possession and then carry them away. Rather, the Retirement System parted with title and possession when it paid defendant each month.
The prosecutor cites foreign authorities for the proposition that a mistake in transferring funds is not consensual. Cases from foreign jurisdictions are not binding but may be persuasive. People v Campbell, 289 Mich App 533, 535; 798 NW2d 514 (2010). In Hedge v State, 89 Tex Crim 236, 238; 229 SW 862 (1921), the victim wrote a check that was mistakenly in an amount greater than what he owed the defendant. The appellate court held that the defendant was properly convicted of theft where there was evidence that he intended to deprive the victim of the excess funds and to appropriate the funds for the defendant's use and benefit. Id. at 238-241. Similarly, in Territory v Lee, 29 Hawaii 30, 31, 36-37 (1926), the defendant's larceny conviction was upheld where a bank had mistakenly paid him more than the amount written on a check and there was evidence supporting an inference that he was aware of the overpayment. This Court need not consider whether to adopt as persuasive the foreign authorities cited by the prosecutor because the record is devoid of evidence indicating that the Retirement System's monthly pension payments to defendant was mistaken.
The prosecutor cites additional out-of-state cases containing similar holdings.
The prosecutor has presented no testimony from anyone involved in the decision to pay the pension benefits that explains why the Retirement System made the monthly pension payments to defendant without having first received defendant's Plan 5 defined contribution funds. Tapper, who investigated the matter for the Retirement System, testified that the elected members of the Retirement Board must approve every retirement application. Tapper indicated that the Retirement System did not always wait for the requisite funds to come in or always verify that such funds had come in before issuing a pension check. In the context of objecting to defense counsel's cross-examination of Tapper, the prosecutor conceded that Tapper's testimony was based on her review of the file, that she did not hold her current position in the Retirement System when defendant retired, and that she could not testify about what did or did not happen when she was not in her current position in the Retirement System. Motley, the clerical specialist for the Retirement System who approved the release of the defined contribution funds to defendant, did not remember doing so and testified only on the basis of his review of documents. From the existing record, it is impossible to tell whether the decision to pay defendant his monthly pension benefits even though his defined contribution funds had not been turned over reflected (1) a mistake on the part of the Retirement System, (2) a conclusion by the persons making decisions for the Retirement System that the severance agreement did not require the transfer of the Plan 5 funds to the Retirement System before making the monthly pension payments, (3) a decision to waive any such requirement of the severance agreement, or (4) some other unknown reason. In short, there is no basis in the record to conclude that the monthly pension payments were the product of a mistake that serves to negate the Retirement System's consent to paying the pension funds.
Tapper testified that the procedure was subsequently changed so that a pension check would not be issued until the requisite funds had come in to the Retirement System.
Tapper testified that she was not working for the Retirement System when defendant retired in 2009 and that she began working in her current position in February 2012.
Defendant notes that possible reasons for any such waiver include the fact that $475,000 from the defined benefit portion of Plan 5 had already been transferred and that Tapper's testimony indicated that it was impossible to transfer defined contribution funds into a defined benefit plan.
The deficiencies in the record may be partly attributable to the fact that no new testimony was presented at the preliminary examination in this case; instead, the parties stipulated to admit the transcripts of the preliminary examination from the prior case against defendant. Notably, the preliminary examination in the prior case was focused primarily on the withdrawal of the defined contribution funds rather than the payment of the monthly pension benefits given that the charging theory in the prior case was premised on the release of the defined contribution funds. --------
Accordingly, the district court abused its discretion in binding over defendant on the charges of larceny by conversion and larceny. The circuit court thus erred in denying defendant's motion to quash the bindover. In light of our resolution of the above issues, we need not address defendant's remaining appellate arguments.
Reversed and remanded for dismissal of the charges. We do not retain jurisdiction.
/s/ Thomas C. Cameron
/s/ Karen M. Fort Hood
/s/ Elizabeth L. Gleicher