People v. Zinke

• Decision Date: 03 May 1990
• Citation: 556 N.Y.S.2d 11,76 N.Y.2d 8,555 N.E.2d 263
• Parties: , 555 N.E.2d 263 The PEOPLE of the State of New York, Respondent, v. Philip Walker ZINKE, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 11

556 N.Y.S.2d 11

76 N.Y.2d 8, 555 N.E.2d 263

The PEOPLE of the State of New York, Respondent, v. Philip Walker ZINKE, Appellant.

Court of Appeals of New York.

May 3, 1990.

[76 N.Y.2d 9] Barry D. Leiwant and Philip L. Weinstein, New York City, for appellant.

Robert M. Morgenthau, Dist. Atty. (Lisa Feiner and Mark Dwyer, New York City, of counsel), for respondent.

OPINION OF THE COURT

KAYE, Judge.

The single question before us is whether the general partner in a limited partnership can be found guilty of larceny for misappropriating partnership funds. As a matter of statutory interpretation, we answer that question in the negative, leaving the subject of partnership defalcations to be addressed by any other penal provisions that may be applicable, or by civil litigation, or (if deemed appropriate) by legislative reform.

Defendant, an investment adviser for small pension and profit-sharing funds, was the sole general partner in Stonehenge Investment Notes 1, Ltd., a limited partnership; defendant himself was a significant investor in the firm. In January 1987, after the limited partners and their insurers exhausted their efforts to recoup the funds defendant had allegedly embezzled, defendant was indicted for two counts of grand larceny in the second degree. Specifically, the indictment accused defendant of stealing $1,050,000 from the partnership by writing two checks on its money market account--one for $250,000 in April 1984, the other for $800,000 three months later. Defendant, who had authority under the partnership agreement to borrow firm funds, claimed that these were partnership investments.

At trial, upon the close of the People's case, defendant moved to dismiss the indictment on the ground that, as a general partner, he was a "joint or common" owner of the partnership's property and, thus, under the Penal Law could not be prosecuted for larceny even if he had misappropriated partnership property. The court reserved decision and submitted the case to the jury, which convicted defendant of both counts of the indictment. After the verdict, Supreme Court denied defendant's motion to dismiss (137 Misc.2d 463, 520 N.Y.S.2d 703), and the Appellate Division affirmed the conviction, concluding that the general partner in a limited partnership could be prosecuted for larceny for stealing partnership property (147 A.D.2d 106, 541 N.Y.S.2d 986). We now reverse.

Larceny is committed when one wrongfully takes, obtains or withholds "property from an owner thereof" with intent to deprive the owner of it, or appropriate it to oneself or another (Penal Law § 155.05[1]. "Owner" is defined in Penal Law § 155.00(5) as one "who has a right to possession [of the property taken] superior to that of the taker, obtainer or withholder." This broad definition is immediately qualified by the declaration that "[a] joint or common owner of property shall not be deemed to have a right of possession thereto superior to that of any other joint or common owner thereof." (Penal Law § 155.00[5].)

In that partners under the Partnership Law are "co-owners" of firm property (see, Partnership Law §§ 10, 51[1], defendant contends that he cannot be charged with having committed larceny as against his limited partners, because all of the partners have an equal right of ownership. The People respond that, under Partnership Law § 51(2)(a), partners lose their status as joint owners when they divert firm property to their own purposes. Alternatively, the People contend that defendant's conviction should be sustained because his position as a general partner in a limited partnership is more akin to that of corporate officers and directors, who do commit larceny when they embezzle firm assets, than it is to general partners in other partnerships.

A useful backdrop against which to consider this issue is the historical evolution of the common-law concept of "owner" into its modern statutory form. As with other aspects of larceny, "a proper interpretation of the past can assist us in understanding the technical rules of the crime." (Fletcher, The Metamorphosis of Larceny, 89 Harv.L.Rev. 469, 474 [1976]; People v. Olivo, 52 N.Y.2d 309, 315, 438 N.Y.S.2d 242, 420 N.E.2d 40.)

At common law, no less than today, the requirement that the victim of a theft be an "owner" of the stolen property was an indispensable element of the crime of larceny. The idea behind this requirement was that the property alleged to be stolen had to "belong" to a party other than the accused (see, 2 LaFave & Scott, Substantive Criminal Law § 8.4[c], at 355 [1986]; cf., Ward v. People, 6 Hill 144 [1843] [thief in possession of property that he stole deemed to be its owner where same property was stolen from him]. If the defendant was the owner of the property and entitled to possession at the time of the taking, there could be no larceny. From this principle emerged the rule that if property was owned by two or more persons, none of the owners could commit larceny from the others. In the words of Lord Hale: "Regularly a man cannot commit felony of the goods, wherein he hath a property." (Hale, History of Pleas of the Crown, at 513 [1683].)

Consistent with this principle was the common-law view that a partner could not be convicted of larceny for the misappropriation of partnership assets; because each partner held title to an undivided interest in the partnership, the theory was that partners could not misappropriate what was already theirs. This view has been widely recognized throughout the common-law world. ^* Even as States began codifying larceny, the common-law rule continued to flourish. In the absence of a legislative expression to the contrary, courts have ordinarily held that a partner cannot be guilty of larceny for misappropriating firm property, with any such defalcations left for resolution in the civil arena (see, Annotation, Embezzlement, Larceny, False Pretenses, or Allied Criminal Fraud by a Partner, 82 A.L.R.3d 822 [collecting cases].

Such has been the history of the law in this State: it is surely no accident that the People cite no reported New York case where a partner has been convicted of larceny for taking partnership property. Since 1881, larceny has been defined by statute in terms of a wrongful taking or withholding from the possession of the "owner" or "true owner" (compare, Penal Code § 528[1] [1881], with former Penal Law § 1290 [1942]; and present Penal Law § 155.00[5]; § 155.05[1]. For more than 80 years the Legislature made no effort to define these terms. As in other States, the courts of this State consistently regarded the common-law definition of owner as controlling, concluding that partners could not be prosecuted for stealing firm property (e.g., Holmes v. Gilman, 138 N.Y. 369, 377, 34 N.E. 205 [1893]; People v. Hart, 114 App.Div. 9, 13, 20 N.Y.Crim. 199, 99 N.Y.S. 758; People v. Dudley, 97 N.Y.S.2d 358, 359-360; People v. Dye, 134 Misc. 689, 692, 236 N.Y.S. 357; see also, People ex rel. Murphy v. Crane, 80 App.Div. 202, 205, 16 N.Y.Crim. 238, 80 N.Y.S. 408; People v. Herbert, 162 Misc. 817, 818-819, 295 N.Y.S.251).

In 1965, the Legislature put to rest all possible doubt on this score. The Model Penal Code, completed in 1962, had rejected the common-law view by defining larceny as stealing "property of another," which was in turn defined as property "in which any person other than the actor has an interest * * * regardless of the fact that the actor also has an interest in the property." (Model Penal Code § 223.0[7].) The purpose of this provision was to permit "a person ordinarily considered the owner of property * * * [to] be convicted of theft * * * Thus, a partner may be convicted of theft of partnership property." (Model Penal Code § 223.2, revised comment, at 169 [1980].) In enacting the present Penal Law in 1965, however, the New York Legislature chose to reject the Model Penal Code approach and instead codified its own existing rule. This choice was made clear when the Legislature set forth the common-law rule, in so many words, in Penal Law § 155.00(5): "[a] joint or common owner of property shall not be deemed to have a right of possession thereto superior to that of any other joint or common owner thereof."

As noted in the contemporary Practice Commentary by Judges Denzer and McQuillan--members of the Commission that drafted article 155--the purpose of this provision was to continue in force what "has long been the law of New York" that "a partner who appropriates partnership property is not guilty of larceny from his co-partners." (Denzer & McQuillan, Practice Commentary, McKinney's Cons.Laws of N.Y., Book 39, Penal Law § 155.00, at 410 [1967].) This court has previously relied upon these very Commentaries as a reliable source for ascertaining the legislative intent underlying Penal Law article 155 (see, e.g., People v. Alamo, 34 N.Y.2d 453, 459, 358 N.Y.S.2d 375, 315 N.E.2d 446; People v. Eboli, 34 N.Y.2d 281, 285-286, 357 N.Y.S.2d 435, 313 N.E.2d 746), and their conclusion as to the meaning of "owner" is consistent with all other available legislative history (see generally, Staff Notes of Temporary State Commission on Revision of Penal Law and Criminal Code, Proposed New York Penal Law, McKinney's Spec Pamph, at 351 [1964] [Penal Law § 155.00 generally designed to clarify definition of larceny; no indication intent was to expand or limit then-existing definition of "owner"]; Fourth Interim Report, Temporary State Commission on Revision of the Penal Law and Criminal Code, 1965 N.Y.Legis.Doc.No. 25, at 38 [Feb. 1, 1965] ["nothing * * * new (in) broad definition of larceny" contained in Penal Law § 155.05(1) ].

A decision not to extend the larceny statute to partnership disputes--commonly litigated in civil courts--is, moreover, consistent with the Legislature's reluctance to elevate civil wrongs to the level of criminal larceny (see, Third Interim Report, Temporary State Commission on...