Opinion
No. 3-529 / 02-1589
Filed August 13, 2003
Appeal from the Iowa District Court forPolk County, Michael D. Huppert, Judge.
Charles Paxton appeals the modified restitution order entered following his guilty plea to third-degree theft. AFFIRMED.
Patrick W. O'Bryan, Des Moines, for appellant.
Thomas J. Miller, Attorney General, Martha E. Boesen, Assistant Attorney General, John P. Sarcone, County Attorney, and Steve Foritano, Assistant County Attorney, for appellee.
Considered by Vogel, P.J., and Mahan and Zimmer, JJ.
Following a referral from the Iowa Securities Board, the State charged Charles Paxton with one count of first-degree theft. Paxton later pleaded guilty to third-degree theft, in violation of Iowa Code sections 714.1(1) and 714.2(3) (1999). The court sentenced him to an indeterminate term of imprisonment not to exceed two years, suspended the sentence, and placed him on probation. The court also ordered him to pay $165,000 in victim restitution.
Paxton subsequently filed an application to modify the restitution order claiming the district court failed to credit him for $69,000 paid to the victim from various additional sources. Following a judgment debtor's examination and hearing in which the victim and an attorney with the Iowa Securities Bureau testified, the court actually increased Paxton's restitution obligation to $267,798. The court based its order on an additional award for the victim's loss of profits from the transaction with Paxton. Paxton appeals from this order.
The district court ruling refers to the victim's request to enlarge the obligation.
Scope of Review . We review Paxton's appeal from the restitution order for errors at law. State v. Bonstetter, 637 N.W.2d 161, 165 (Iowa 2001). The court's findings of fact have the effect of a special verdict. Iowa R.App.P. 6.4. When reviewing the restitution order, we determine whether the court's findings lack substantial evidentiary support, or whether the court has properly applied the law . Christensen v. Iowa Dist. Ct., 578 N.W.2d 675, 678 (Iowa 1998). Evidence is substantial when a reasonable mind would accept it as adequate to reach a conclusion. Hasselman v. Hasselman, 596 N.W.2d 541, 545 (Iowa 1999).
Calculating the Restitution. In Iowa, restitution shall be ordered in all criminal cases in which the defendant pleads guilty or is found guilty. See Iowa Code § 910.2 (1999). Our restitution statute provides, "[r]estitution means payment of pecuniary damages to a victim in an amount and in the manner provided by the offender's plan of restitution." Iowa Code § 910.1(4). Pecuniary damages are "all damages to the extent not paid by an insurer, which a victim could recover against the offender in a civil action arising out of the same facts or event, except punitive damages . . . ." Iowa Code § 910.1(3).
The nature of Paxton's criminal offense demands brief mention. Prior to the events of this case, Charles Paxton was a friend of and a stockbroker for attorney Robert Clauss and his wife, Marilyn. In early 1995, Paxton contacted Clauss about purchasing shares of stock in a company called Diacrin, Incorporated, a company in which Clauss already owned some shares of stock. Clauss agreed to loan Paxton $300,000 for the purchase of convertible shares of Diacrin stock. Pursuant to an agreement handwritten by Clauss, the parties agreed Clauss would be entitled to fifteen percent of all profits generated from the stock acquired from Paxton's purchase, not to exceed $425,000.
From the money Paxton borrowed from Clauss, Paxton purchased, in his name, the Diacrin convertible note for a total of $270,000. With the remaining $30,000, Paxton paid various personal expenses. The note was converted into 108,000 shares of Diacrin stock and on June 2, 1997, Paxton cashed out the shares for $1,147,500. Shortly thereafter Paxton paid Clauss $134,000. However, Paxton failed to pay Clauss his full share of the profits. Instead, Paxton sold the shares and used the additional proceeds for his personal use. Based on this series of events, Paxton pleaded guilty to third-degree theft and the restitution order was entered.
On appeal, Paxton claims substantial evidence does not support the court's restitution award. In particular, he argues Clauss could never have recovered the damages in a civil action because (1) the exact terms of the parties' agreement was unclear, (2) there was no evidence as to the price of the stock when the note was purchased, (3) there is no showing that, had he received the stock, Clauss would have sold it on that day, (4) Clauss' recovery in a civil action would be limited to the $28,297 he was awarded in Paxton's bankruptcy, and (5) Clauss' arbitration award of $40,000 from Paxton's employer would be a credit to any civil liability owed by Paxton. We disagree on all counts and conclude the district court's restitution award is supported by substantial evidence.
Here, the restitution order rests on a causal connection between the criminal act and the victim's injuries. See State v. Ihde, 532 N.W.2d 827, 829 (Iowa Ct.App. 1995). We find no error with the court's decision to order restitution based on Paxton's actions which directly impacted Clauss' loss of expected profits. Moreover, in restitution matters, like civil matters, Iowa courts deny recovery for lost profits only when the loss is speculative, contingent, conjectural, or uncertain. See Ihde, 532 N.W.2d at 830 (citing Shinrone, Inc. v. Tasco, Inc., 283 N.W.2d 280, 286 (Iowa 1979)). Substantial evidence supports that Clauss' loss of profits was neither speculative, contingent, conjectural nor uncertain but was evident and determined with a fairly straight forward calculation.
The district court found, and we agree, the written agreement between the parties was the best evidence of the intended transaction. Under those terms, it is undisputed that $270,000 out of the $300,000 loaned by Clauss to Paxton was used to eventually purchase 108,000 shares of stock. Robert Koppin, an attorney for the Iowa Securities Bureau, testified that the price per share would have been $2.50. After Paxton converted the note into shares, it is also undisputed he sold the shares for $1,147,500, with a value of the Diacrin stock at $10.625 per share. Accordingly, Paxton realized a profit of $877,500 on the transaction, of which Clauss' agreed-upon fifteen percent was $131,625. Thus when considered in addition to Clauss' original investment of $300,000, the district court's finding of a total of $431,625 owed to Clauss is supported by substantial evidence. From that $431,625 figure, the district court subtracted payments of $134,900 already made by Paxton to Clauss as well as the $28,297 in proceeds Clauss received from Paxton's bankruptcy estate to arrive at $267,798 still owed to Clauss. We find no flaw in this calculation.
In affirming the district court, we reject Paxton's contention the restitution amount should be limited to the amount paid to Clauss from the bankruptcy estate. See State v. Myers, 653 N.W.2d 574, 581 (Iowa 2002) (rejecting a challenge to the portion of Iowa's victim-restitution statute that provides restitution awards are not dischargeable in bankruptcy). In addition, we reject Paxton's argument he should receive a credit for a $40,000 arbitration award paid by his former employer, Everen Securities, to Clauss. There was no evidence to support Paxton's assertion that this award was made by an insurer, see Iowa Code § 910.1(3), but was rather part of a settlement to which Paxton was not a party.
Paxton also asserts Clauss should not be entitled to any restitution in that their contract was illegal. He claims Clauss knew they were engaging in an illegal transaction and Iowa's restitution law should not provide recovery for such a transaction. On our review of the record, we find Paxton did not raise this claim before the district court and consequently the court did not address it in its order. In general, matters not raised in the trial court will not be considered for the first time on appeal. State v. Morehouse, 316 N.W.2d 884, 886 (Iowa 1982). Thus we do not address it.
Koppin testified the transaction was made outside of Paxton's normal broker-dealer channel.
Accordingly, we affirm the district court's restitution award. In doing so, we reject each of Paxton's arguments whether specifically addressed or not.