People v. Christenson
| Decision Date | 01 October 1980 |
| Docket Number | Docket Nos. 63672,63674 |
| Citation | 412 Mich. 81,312 N.W.2d 618 |
| Parties | PEOPLE of the State of Michigan, Plaintiff-Appellee, v. Bernhardt D. CHRISTENSON, Defendant-Appellant. , |
| Court | Michigan Supreme Court |
William F. Delhey, Pros. Atty., Washtenaw County by James S. Sexsmith, Sr. Asst. Pros. Atty., Ann Arbor, Kevin Kraushaar, Law Student Intern, for plaintiff-appellee.
O'Hagan & Conlin, P. C. by Terrence J. O'Hagan, Ann Arbor, for defendant-appellant.
Defendant was convicted of three counts of larceny by conversion, M.C.L. § 750.362; M.S.A. § 28.594, as a result of his use of progress payments made by complainants for modular homes erected by defendant's company.
Defendant owned and operated Washtenaw Active Homes, Inc., which sold and erected modular or prefabricated homes. Washtenaw Active Homes purchased the modular homes from the manufacturer, Active Homes of Marlette, and then sold the homes to purchasers who qualified for financing by the Farmers Home Administration.
Each of the three complainants entered into sales agreements and construction contracts with defendant's company after qualifying for FHA financing. Under the FHA program, a bank account containing the loan money was set up by the FHA and the complainants were given a checkbook. Each check required the signatures of the complainants and of Mr. Kominek of the FHA.
Under the terms of the construction contract, partial payments not to exceed 60% of the value of the work in place were to be made to defendant as he required them. Defendant would submit a statement to the purchaser listing the amount owed for materials and labor. The purchaser, if satisfied that the work was done, would make out a check for up to 60% of the bill and forward it to Kominek. Kominek would then inspect the property to insure that the work listed on the bill was done, at his option, request a waiver of lien, and cosign the check.
During the course of constructing complainants' houses and after certain progress payments had been made, defendant ceased work on the houses because he was experiencing financial difficulties. He subsequently filed for bankruptcy and was adjudicated bankrupt. Because certain progress payments of complainants had not been specifically forwarded to Active Homes of Marlette, but rather had been used to pay other debts, the defendant was charged with larceny by conversion of these progress payments. 1
The sole issue on appeal is whether the trial court properly denied defendant's motion for directed verdict in which defendant contended that he was not guilty of larceny by conversion as a matter of law.
Larceny by conversion is "one of the crimes provided by statute law to occupy the no-man's land surrounding the offenses against property at common law". People v. Doe, alias Meyer, 264 Mich. 475, 250 N.W. 270 (1933). 2 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 with lawful intent, but subsequently converts the other's property to his own use. 3
As with common-law larceny, larceny by conversion is a crime against possession and not against title; one cannot convert his own funds. People v. Martin, 116 Mich. 446, 74 N.W. 653 (1898); People v. Long, 409 Mich. 346, 294 N.W.2d 197 (1980). Thus, if an owner intends to part with title as well as possession, there can be no crime of larceny. 4
In the instant case, it must first be determined whether title as well as possession of the progress payments passed to defendant. Under the terms of the construction contract, defendant was entitled to progress payments for up to 60% of the value of work in place. The borrower was charged under the contract with the responsibility of making on-site development inspections as the work progressed. Another clause of the contract provided that acceptance of completed work and payment by the owner to the contractor did not relieve the contractor of his obligation to the owner to discharge any and all liens for the benefit of subcontractors, materialmen or any other laborers.
At trial, complainants did not testify that the items listed on defendant's statements, approved by them and approved by Kominek, were not properly payable as work in place. There is no testimony that there was not sufficient work in place, as listed on defendant's statements, to justify the amount of the progress payments.
Although the FHA provided Active Homes of Marlette with a letter of commitment requiring it to remit sums directly to Active Homes of Marlette, the payments were made to defendant. There is no testimony that defendant represented that the checks would go directly to Active Homes of Marlette rather than Washtenaw Active Homes. Moreover, defendant is not charged with conversion of funds belonging to Active Homes of Marlette. See People v. Bayer, 352 Mich. 564, 90 N.W.2d 656 (1958).
Of the three progress payment checks involved here, and the waivers of lien accompanying them, two were made out to Washtenaw Active Homes and only one was made out to "Active Homes". Although Kominek may have been acting under the misconception that Washtenaw Active Homes was an agent of Active Homes of Marlette, it is clear from Kominek's testimony that this misconception was never conveyed to Kominek by defendant. In any event, there is no testimony that the complainants misunderstood the status of defendant's company vis-a-vis Active Homes of Marlette. They knew that payments were being made to Washtenaw Active Homes and there is no evidence that complainants intended to retain any title to the progress payments.
Thus, we conclude that title and possession of the progress payments passed to defendant and, accordingly, there can be no crime of larceny by conversion on these facts.
Even if we were to accept the argument that defendant was not the intended owner of the progress payments and that he was merely a trustee of the funds, 5 we do not find that the element of conversion has been established. The prosecutor contends that conversion is established by the fact that the complainants gave the money to defendant for a specific purpose, i. e., to pay for the home or for site preparation, but defendant did not use it for that purpose. 6
In People v. Bayer, supra, in reversing defendant's conviction of larceny by conversion, this Court stated:
" 352 Mich. 595, 90 N.W.2d 656. See, also, People v. Chapman, 305 Mich. 516, 9 N.W.2d 697 (1943).
It is clear in this case that defendant used partial payments for work in place to pay debts that were not the specific debts incurred in construction of the work in place. He subsequently was unable to pay the latter debts because of his impending bankruptcy. However, there was no agreement that defendant apply the specific funds he received from complainants for particular work to pay the laborers and materialmen responsible for that work. There was no requirement that defendant establish a separate trust account for each complainant in which he would deposit that particular complainant's funds.
It is beyond dispute that defendant had the contractual obligation to pay the debts of the work in place for which he received progress payments from the complainants. However, there was nothing to preclude defendant from paying for those debts with funds other than the identical moneys he received from complainants. The fact that defendant's bankruptcy intervened to preclude such payment does not render defendant guilty of larceny by conversion.
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