People v. Howard

• Decision Date: 17 March 1969
• Docket Number: Cr. 12408
• Citation: 75 Cal.Rptr. 761,70 Cal.2d 618,451 P.2d 401
• Court: California Supreme Court
• Parties: , 451 P.2d 401 The PEOPLE, Plaintiff and Respondent, v. William HOWARD, Defendant and Appellant. . In Bank

Page 761

75 Cal.Rptr. 761

70 Cal.2d 618, 451 P.2d 401

The PEOPLE, Plaintiff and Respondent, v. William HOWARD, Defendant and Appellant.

Cr. 12408.

Supreme Court of California In Bank.

March 17, 1969.

Robert N. Chargin, Public Defender, Frank A. Grande and Ann M. Chargin, Deputy Public Defenders, for defendant and appellant.

Thomas C. Lynch, Atty. Gen., Doris H. Maier, Asst. Atty. Gen., Roger E. Venturi, Jon A. Shoenberger, Daniel J. Kremer and Edward A. Hinz, Jr., Deputy Attys. Gen., for plaintiff and respondent.

BURKE, Justice.

On this appeal from a nonjury municipal court conviction of seven misdemeanor violations ¹ of Penal Code section 484b, we have determined that contrary to defendant's contentions the statute is not subject to constitutional infirmities, and that the evidence supports the conviction. Accordingly, the judgment will be affirmed.

Penal Code section 484b was enacted in 1965. ² It appears to be directed generally at persons in the construction and building improvement field who fail to use construction funds for the payment of laborers and materialmen on the project.

The prosecution evidence disclosed a substantially repeated pattern with respect to the seven individual transactions here involved. Defendant contracted for the performance of home improvement jobs, at times as the sales representative of a contractor, at other times for a corporation he had organized himself. The individual projects ranged in price from $1,852 to $6,680. The homeowners made down payments and progress payments to defendant, which he placed in the general bank accounts of the contractor or of the corporation, as the case might be. The jobs came to a halt before completion, and the owners faced unpaid construction bills and completion costs which substantially exceeded the unpaid contract balances. In most cases unpaid suppliers had filed liens against the properties by the time defendant came to trial. Additional liens were threatened. Although defendant had used some of the project payments for project costs, the evidence established that he and an associate had a practice of anticipating expected profits and of paying themselves commissions and 'supervision' fees, thus stripping their venture of funds to complete the projects.

Defendant contends that section 484b is unconstitutionally vague and also offends the constitutional ban on imprisonment for debt. He further claims that his conviction was based on insufficient evidence.

1. Constitutional Prohibition Against Imprisonment for Debt.

Defendant cites People v. Holder (1921) 53 Cal.App. 45, 199 P. 832, which held that as applied to the defendant contractor there involved certain provisions of section 506 of the Penal Code, ³ which are somewhat similar to section 484b, violated section 15 of article I of the California Constitution, which prohibits imprisonment for debt except in cases of fraud. ⁴ However, the statute considered in Holder differed in at least two material respects from section 484b: first, wilfulness was not an element of the crime and, second, no showing was required of injury to the persons who provided the diverted funds.

As noted in In re Trombley (1948) 31 Cal.2d 801, 804, 193 P.2d 734(1), it has been held that the constitutional prohibition against imprisonment for debt applies in a criminal proceeding where legislation under which the accused is charged constitutes an attempt to make the mere act of failing to pay a debt a crime. However, the constitutional prohibition is expressly subject to the exception 'unless in case of fraud.'

Trombley held that the provision of section 216 of the Labor Code that 'any person * * * is guilty of a misdemeanor, who: (a) Having the ability to pay, wilfully refuses to pay wages due and payable when demanded,' did not violate the constitutional ban on imprisonment for debt. The opinion points out (pp. 807--808(4, 5) of 31 Cal.2d, 193 P.2d 734) that the word 'wilfully' as used in criminal statutes implies a purpose or willingness to commit the act (Pen.Code, § 7, subd. 1), and although it does not require an evil intent it implies that the person knows what he is doing, intends to do what he is doing, and is a free agent. Thus subdivision (a) of Labor Code section 216, construed together with the Penal Code definition of the word 'wilful,' makes it a crime for an employer having the ability to pay, knowingly and intentionally to refuse to pay wages which he knows are due; in Davis v. Morris (1940) 37 Cal.App.2d 269, 99 P.2d 345, a similar construction was placed on section 203 of the Labor Code which imposes penalties if an employer 'wilfully fails to pay * * * wages of an employee who is discharged or who quits,' although it was recognized that a dispute in good faith as to whether any wages were due would be a defense to an action for such penalties. With respect to the provision which excepts 'cases of fraud' from the prohibition against imprisonment for debt, Trombley notes (pp. 809--810(6) of 31 Cal.2d, 193 P.2d 734) that the historical background of section 15 of article 1 and similar constitutional guaranties of other states clearly shows that the provisions were adopted to protect the poor but honest debtor who is unable to pay his debts, and were not intended to shield a dishonest man who takes an unconscionable advantage of another; that it has long been recognized that wages are not ordinary debts, that they may be preferred over other claims, and that, because of the economic position of the average worker and particularly his dependence on wages for the necessities of life for himself and his family, it is essential to the public welfare that he receive his pay when it is due. Accordingly, an employer who knows that wages are due, has ability to pay them, and still refuses to pay them, acts against good morals and fair dealing, necessarily intentionally does an act which prejudices the rights of his employee, and thereby falls within the 'case of fraud' exception to the constitutional prohibition and may be punished by statute.

Similarly in the present case, under Penal Code section 484b it must be shown that there was a wilful failure to complete improvements or to pay labor and materialmen, that the funds received for that purpose were diverted with resultant harm to the homeowner or to the lender who provided the funds. It clearly appears that a contractor guilty of such conduct has also acted against good morals and fair dealing, that his conduct has necessarily prejudiced the rights of homeowners and of those who may have provided financing, and that his acts likewise constitute a 'case of fraud' within the exception to the constitutional ban on imprisonment for debt. In Daugherty v. State (1965) 216 Tenn. 666, 393 S.W.2d 739, 741 (see also cases cited at p. 743(6)), the court in upholding a statute similar to section 484b declared that the legislative purpose of the statute was to punish for a fraudulent conversion and not for failure to comply with a contractual obligation. The same purpose would appear in the provisions of section 484b.

2. Constitutional Challenge for Vagueness.

Defendant contends that the last sentence of section 484b, which defines an element of the crime, is so vague that it does not meet the standards of definiteness required of a criminal statute by the due process clause of the Fourteenth Amendment to the Constitution of the United States.

The test to be applied to this question is that "A statute should be sufficiently certain so that a person may know what is prohibited thereby and what may be done without violating its provisions, but it cannot be held void for uncertainty if any reasonable and practical construction can be given to its language. As stated in Pacific Coast Dairy v. Police Court, 214 Cal. 668, at page 676, 8 P.2d 140, 143, 80 A.L.R. 1217, 'Mere difficulty in ascertaining its meaning, or the fact that it is susceptible of different interpretations will not render it nugatory. Doubts as to its construction will not justify us in disregarding it.' " (Lockheed Aircraft Corp. v. Superior Court, etc. (1946) 28 Cal.2d 481, 484, 171 P.2d 21, 24, 166 A.L.R. 701, see also People v. McCaughan (1957) 49 Cal.2d 409, 414, 317 P.2d 974, and cases there cited.)

The challenged last sentence of section 484b specifies that to constitute the wrongful diversion of funds which is an essential element of the crime, the diversion must result in a 'reduction of the value of the owner's equity in his property or a reduction in the value of the security for the loan which provided such construction funds.' To show diversion here the prosecution relied upon the mechanics' or materialmen's liens filed or threatened. Defendant urges that it is uncertain at what point in time a lien may be said to exist so as to effect a reduction in the equity of an owner's property, that it 'might occur when a subcontractor acquires the right to a lien; at the time notice of intent to lien is delivered; at the time a lien is recorded with the County Recorder; or at the time the...