People v. Bell

• Decision Date: 21 May 1996
• Docket Number: No. D019480,D019480
• Citation: 45 Cal.App.4th 1030,53 Cal.Rptr.2d 156
• Parties: , 96 Cal. Daily Op. Serv. 3660, 96 Daily Journal D.A.R. 5887 The PEOPLE, Plaintiff and Respondent, v. Robert BELL et al., Defendants and Appellants.
• Court: California Court of Appeals

Page 156

53 Cal.Rptr.2d 156

45 Cal.App.4th 1030, 96 Cal. Daily Op. Serv. 3660,

96 Daily Journal D.A.R. 5887

The PEOPLE, Plaintiff and Respondent, v.Robert BELL et al., Defendants and Appellants.

No. D019480.

Court of Appeal, Fourth District, Division 1, California.

May 21, 1996.

As Modified on Denial of Rehearing June 12, 1996.

Review Denied Aug. 28, 1996.

Martin Nebrida Buchanan and Anthony J. Dain and Dain & Li, under appointment by the Court of Appeal, San Diego, for Defendants and Appellants.

Daniel E. Lungren, Attorney General, George Williamson, Chief Assistant Attorney General, Gary W. Schons, Senior Assistant Attorney General, Robert M. Foster and Lilia E. Garcia, Deputy Attorneys General, for Plaintiff and Respondent.

BENKE, Associate Justice.

AppellantRobert Bell(Robert) was convicted of 10 counts of rent skimming, 1 count of attempted rent skimming, 13 counts of forgery, 14 counts of filing a false instrument and sentenced to a term of four years.AppellantCathleen Bell(Cathleen) was found guilty of eight counts of rent skimming, one count of filing a false instrument, one count of forgery and was granted probation.They appeal, raising various claims concerning the statute of limitations, instructions to the jury, suppression motions, the constitutionality of criminal rent skimming statutes and sentencing.

In this opinion we conclude California's criminal rent skimming statute is constitutional.While rejecting numerous other claims of error, we find the jury was prejudicially misinstructed concerning the statute of limitations with regard to certain of the charges against Robert for forgery and the filing of false or forged documents.In addition we conclude the statute of limitations bars conviction for all but one count of rent skimming as to both Robert and Cathleen.

FACTS

Appellants ran a rent skimming operation.Rent skimming occurs when, in the first year after acquiring residential real property, rent received for such property is used without first applying it to the payment due on mortgages and deeds of trust encumbering that property.Rent skimming is a crime when a person engages in such conduct with regard to five or more parcels within a two-year period.(CIV.CODE, §§ 890¹-894.)

Appellants established post office boxes, opened bank accounts and filed articles of incorporation using various names.Using legal notices in newspapers, they identified residential real property going into foreclosure.Robert approached the homeowners and explained that if the owners conveyed the property to him, he could assume the obligation on their deed of trust and they could walk away with their credit intact.The homeowners signed one or more grant deeds conveying their interest to one of appellants' fictitious business entities or signed a blank deed.

In some cases the homeowner remained in the residence and paid rent; in the other cases, the owner moved out and appellants rented the property to others.Appellants then applied for bankruptcy in the name of the entity to which the subject real property had been conveyed and foreclosure was automatically stayed.The stay delayed foreclosure and extended the period during which appellants could collect rents.In some cases when stays were lifted, appellants filed subsequent applications for bankruptcy on the same parcel.In every case after filing for bankruptcy, appellants took no further action on the petitions, as required to move the matters to discharge, and the petitions were dismissed by the bankruptcy court.Appellants applied none of the rent monies to the deeds of trust encumbering the property.

The forgery and filing of false instruments charges were based on the forgery and filing of petitions for bankruptcy or grant deeds.

DISCUSSION

A.Constitutionality of Rent Skimming Statutes

Appellants argue section 892, criminalizing rent skimming, is unconstitutional.They contend the section denies due process and equal protection, violates the supremacy clause of the federal Constitution and conflicts with California's constitutional prohibition against punishment for failure to pay a debt.

1.Background

a. Rent Skimming Statutes

Sections 890,892and893 define perhaps one of the most unique schemes of criminalization of which this court is aware.²Section 890, subdivision (a), defines "rent skimming" as "using revenue received from the rental of a parcel of residential real property at any time during the first year period after acquiring that property without first applying the revenue or an equivalent amount to the payments due on all mortgages and deeds of trust encumbering that property."

Section 890, subdivision (b), defines "multiple acts of rent skimming" as "knowingly and willfully rent skimming with respect to each of five or more parcels of residential real property acquired within any two-year period."

Section 891 defines civil rights and remedies for those victimized by rent skimming.

Section 892, subdivision (a), makes multiple acts of rent skimming punishable either as a felony or a misdemeanor.

Section 893, subdivision (a), creates affirmative defenses to civil and criminal actions brought under sections 891and892.It is a defense if rental revenue is used to make payments to health care providers for unforeseen and necessary medical treatment for the defendant, his or her spouse, parents or children.It is a defense that rental revenue was used to make payments to a licensed contractor or material supplier to correct violations of statutes, ordinances or regulations dealing with the habitability of the premises.

b. Legislative History

The rent skimming sections of the Civil Code were created in 1986 by Senate Bill1856.The Enrolled Bill Report from the Department of Consumer Affairs noted that rent skimming is a sophisticated form of fraud in which the rent skimmer purchases property, rents it to a tenant, collects a security deposit and rent but makes no mortgage, tax or insurance payments.The scheme continues until the original seller receives notice of a tax or judgment lien or the lender commences foreclosure proceedings.The report noted the existence of one such scheme involving property worth approximately $18 million.The report stated existing law did not prohibit rent skimming.

In his letter requesting the Governor sign the rent skimming legislation, Senator Seymour, author of the bill, described rent skimming as an "elaborate fraud" which victimizes sellers, lenders and tenants.

In his letter urging the Governor sign Senate Bill1856, the Attorney General, who sponsored passage of the bill, described rent skimming schemes as fraudulent.The Attorney General, however, stated: "While rent skimming as described above might be covered by traditional theft and fraud statutes, such convictions are difficult to obtain because conflicts between the parties' testimony and the written or oral representations originally made by the rent skimmer make it very difficult to prove, beyond a reasonable doubt, that the rent skimmer had the intent to defraud at the time the sale took place.

"Traditional civil foreclosure remedies are also inadequate for the seller, and the lender has no direct recourse whatsoever.Finally, tenants evicted from foreclosed premises are usually difficult to locate or have moved out of the area so that it is difficult to get ex-tenants as witnesses.

"SB1856 will now make it a felony/misdemeanor to knowingly and willfully engage in the business of rent skimming, as defined.This is consistent with federal law, which makes rent skimming involving federally financed property a felony.(See12 U.S.C. § 1709-2.)"

c. Elements of Rent Skimming

The elements of a criminal rent skimming are: (1) in a two-year period (2)the defendant must have knowingly and willfully (3) as to five parcels (4) of residential property (5) engaged in rent skimming.Rent skimming means (1) using revenue from the rental (2) of a parcel of residential real estate (3) at any time during the first year after acquiring that property (4) without first applying the revenue or an equivalent amount to the payments due on all mortgages and deeds of trust encumbering that property.

The acts which must be proved in showing a criminal rent skimming are easily discerned.The mental element is only slightly less clear.As noted, rent skimming is criminal when a person engages in "multiple acts of rent skimming."The required five acts of rent skimming must have been committed knowingly and willfully.

The terms "knowingly" and "willfully" are defined in section 7 of the Penal Code.While the rent skimming legislation is contained in the Civil Code,Penal Code definitions are persuasive in determining the intent of the Legislature in using those terms. (People v. Taylor(1992)7 Cal.App.4th 677, 692, 9 Cal.Rptr.2d 227.)

"The word 'willfully' when applied to the intent with which an act is done or omitted, implies simply a purpose or willingness to commit the act, or make the omission referred to.It does not require any intent to violate law, or to injure another, or to acquire any advantage."(Pen.Code, § 7, subd. 1.)"[I]t is well settled that the terms 'willful' or 'willfully,' when applied in a penal statute, require only that the illegal act or omission occur 'intentionally,' without regard to motive or ignorance of the act's prohibited character.[Citations.]"(Hale v. Morgan(1978)22 Cal.3d 388, 396, 149 Cal.Rptr. 375, 584 P.2d 512.)Willfully implies no evil intent; " 'it implies that the person knows what he is doing, intends to do what he is doing and is a free agent.'[Citation.]"(Castro v. Superior Court(1970)9 Cal.App.3d 675, 701-702, 88 Cal.Rptr. 500.)

"The word 'knowingly' imports only a knowledge that the facts exist which bring the act or omission within the provisions of this code.It does not require any knowledge of the unlawfulness of such act or omission."(Pen.Code, § 7,...