People v. Chesler

• Citation: 71 A.D.2d 792,418 N.Y.S.2d 962
• Parties: PEOPLE of the State of New York, Respondent, v. Lawrence D. CHESLER, Appellant.
• Decision Date: 06 July 1979
• Court: New York Supreme Court Appellate Division

Page 962

418 N.Y.S.2d 962

71 A.D.2d 792

PEOPLE of the State of New York, Respondent, v. Lawrence D. CHESLER, Appellant.

Supreme Court, Appellate Division, Fourth Department.

July 6, 1979.

Herald P. Fahringer, Buffalo, for appellant.

Ralph W. Smith, Jr., Acting Deputy Atty. Gen., Albany (John P. Mansour, Rochester, of counsel), for respondent.

Lawrence T. Kurlander, Dist. Atty., Rochester by Melvin Bressler, Rochester.

Before SIMONS, J. P., and SCHNEPP, CALLAHAN, WITMER and MOULE, JJ.

MEMORANDUM:

Defendant has been convicted upon sufficient evidence of the crimes of grand larceny, second degree, for violating the trust provisions of Article 3-A of the Lien Law (Penal Law, § 155.35 and Lien Law, § 79-a), and criminal facilitation, second degree (Penal Law, § 115.00).

Before the judgments of conviction, defendant was a practicing attorney and the charges arise out of his conduct in representing Barber's Realty & Holding Company in the financing and construction of an apartment complex. Funds received to finance the project were transmitted to him by the lender and deposited in his attorney's trust account. He was charged with violating the provisions of Lien Law, § 79-a by disbursing the trust funds from this account for his own benefit and the benefit of his associates, Vincent J. Rallo and Vincent Verrone. On a prior appeal (see People v. Rallo, 46 A.D.2d 518, 363 N.Y.S.2d 851, affd. 39 N.Y.2d 217, 383 N.Y.S.2d 271, 347 N.E.2d 633), the principal issue was the jurisdiction of the Assistant Attorney General, acting for the Organized Crime Task Force to obtain this and other indictments. Defendant also challenged the sufficiency of the indictment. Regrettably, dicta contained in the opinion deciding that appeal precipitated an error in the judge's charge at the time of trial which requires that we reverse the judgments of conviction. In our prior opinion, responding to defendant's argument that his disbursements were repayments of prior advances and that the fact that they were such repayments was a complete defense to the criminal charges, we first noted first that evidence before the Grand Jury did not establish that the transfers were repayments. We added, however, that repayment was an affirmative defense to be proved by the defendant upon trial (see People v. Rallo, supra, 528, 363 N.Y.S.2d 860). The Trial Court charged accordingly, and inasmuch as we hold that neither section 73 nor subdivision 2 of section 79-a establishes an affirmative defense to a criminal charge of larceny, we reverse.

Larceny is defined by section 155.05 of the Penal Law. Subdivision 2(a) of that section enumerates embezzlement, i. e., the intentional misappropriation of money or property of another by one who has possession as a bailee, agent or custodian of the owner (see People v. Meadows, 199 N.Y. 1, 92 N.E. 128; Jhirad v. Ferrandina, 536 F.2d 478 (2d Cir.) cert. den. 429 U.S. 833, 97 S.Ct. 97, 50 L.Ed.2d 98), as a form of larceny. Article 3-A of the Lien Law creates a statutory crime by declaring that borrowed construction moneys constitute a trust fund which must be applied by the trustee to the cost of the improvement (see Lien Law §§ 70, 71), and section 79-a provides that misappropriation of such funds is a crime. Section 79-a expressly incorporates the provisions of the Penal Law into the Lien Law.

Section 25.00 of the Penal Law provides that all defenses must be disproved by the prosecution beyond a reasonable doubt except those declared by statute to be an affirmative defense. Defendant has the burden of proving an affirmative defense by a preponderance of the evidence (Penal Law, § 25.00(2)). Prior to the 1965 revision of the Penal Law, no affirmative defense existed in New York (see Hechtman, Practice Commentaries, McKinney's Cons.Laws of N.Y., Book 39, Penal Law, § 25.00, p. 62; 7 Zett, New York Criminal Practice, § 63.1(1), pp. 63-64; Rothblatt, The Revised Penal Law Criminal Law of New York, § 444, pp. 382-383; Comment, Affirmative Defenses under New York's New York Penal Law, 19 Syr.L.Rev. 44 (1967)). Lien Law, § 79-a was enacted prior to the 1965 revision of the Penal Law as Penal Law, § 1302-c (L.1959, ch. 696, § 9). The purpose of its subdivision 2 was to provide a defense to the crime of diversion of trust assets (5 New York Legislative Documents, 1959, Leg.Doc. 65F, pp. 224-225), but at the time it was originally enacted, New York did not recognize affirmative defenses in which defendants bore the burden of proof. Manifestly, the legislature could not have intended Penal Law, § 1302-c to be an affirmative defense since at the time it was enacted, affirmative defenses had not yet been created.

In 1965 Penal Law, § 1302-c was transferred to the Lien Law as § 79-a without alteration in an effort by the Legislature to streamline and consolidate specialized offenses under the areas of law to which they relate (L.1965, C. 1031, § 140; 1 New York Legislative Documents, 1964, Leg.Doc. 14, p. 27). Although in other instances involving larceny statutes, the legislature chose to denominate affirmative defenses where prior to the revision the defenses had been "mere" defenses (see Penal Law, § 155.15, subd. 1 and comments thereto; Comment, 19 Syr.L.Rev. at 63, supra), it did not denominate Lien Law, § 79-a, subd. 2 as an affirmative defense as required by Penal Law, § 25.00 and it did not indicate that the burden of proof was to be shifted to the defendant (see e. g., People v. Strong, 47 A.D.2d 798, 365 N.Y.S.2d 310). In our prior decision, we expressed the opinion that repayment was an affirmative defense, shifting the burden of proof on that issue to defendant, because the legislature so denominated it in section 73 of the Lien Law. That section, however, refers to civil remedies. The criminal defense is contained in Lien Law, § 79-a, subd. 2 and it is not an affirmative defense.

Furthermore, the charge may not be reconciled as a paraphrase of the affirmative defense of good faith contained in section 155.15 of the Penal Law. The court charged the jury that before defendant's claim could be established, he had the burden of proving that (1) any payment made for a purpose other than a trust purpose was to repay advances by other persons of funds to Barber's Realty & Holding Corporation as trustee, (2) that the advances to the corporation were actually applied to pay for the cost of the improvement and (3) that the funds paid equaled in amount the funds advanced. This, of course, is a different and more substantial showing than that provided in the Penal Law, that the appropriation was made in a good faith (but perhaps erroneous) claim of right (see People v. Jones, 142 App.Div. 180, 183, 126 N.Y.S. 1085, 1087; People v. Watson, 154 Misc. 667, 278 N.Y.S. 759, affd. 245 App.Div. 838, 282 N.Y.S. 235).

Neither, as the People contend, does the doctrine of law of the case conclude defendant on this issue in a criminal proceeding (see People v. Blake, 35 N.Y.2d 331, 334, 361 N.Y.S.2d 881, 885, 320 N.E.2d 625, 628). Sinc...