State v. Hawkins

• Citation: 366 P.3d 884
• Decision Date: 22 January 2016
• Docket Number: No. 20130468–CA.,20130468–CA.
• Parties: STATE of Utah, Appellee, v. Clair Rulon HAWKINS, Appellant.
• Court: Court of Appeals of Utah

366 P.3d 884

STATE of Utah, Appellee,

v.Clair Rulon HAWKINS, Appellant.

No. 20130468–CA.

Court of Appeals of Utah.

Jan. 22, 2016.

Marcus R. Mumford and Joshua S. Ostler, for Appellant.

Sean D. Reyes and Karen A. Klucznik, Salt Lake City, for Appellee.

Judge J. FREDERIC VOROS JR. authored this Opinion, in which Judge MICHELE M. CHRISTIANSEN and Senior Judge JAMES Z. DAVIS concurred.¹

Opinion

VOROS, Judge:

¶ 1 This appeal arises from a fraud scheme related to real property near Park City, Utah. Appellant Clair Rulon Hawkins was originally charged as one of the perpetrators of the scheme with three counts of communications fraud and one count of engaging in a pattern of unlawful activity. Sandra Chapple and Kimberly Bowen were also charged in relation to the scheme. Hawkins was ultimately tried separately on two counts of communications fraud, both second degree felonies. A jury acquitted Hawkins on the first count of communications fraud but convicted him on the second count. Hawkins appeals. We affirm.

BACKGROUND²

¶ 2 Empire Custom Homes (Empire Homes) was a limited liability company, registered in October 2006. It was managed by another Utah company, of which Bowen and Chapple served as directors and as president and vice president. In addition to the Empire entities, Bowen and Chapple operated several related companies.³ Hawkins began working for Empire Homes in November 2007.

¶ 3 The State charged Hawkins with two alleged fraudulent schemes. The first promised a return of $300,000 on an investor's refundable deposit of $40,000. The jury acquitted Hawkins of this charge. The facts underlying the second scheme, discussed below, formed the basis for the second count of communications fraud, of which Hawkins was convicted.

¶ 4 In April 2008, Empire Homes entered into an agreement to purchase lots in the Deer Canyon Development from a development company called DPC. DPC owned 87 lots in the Deer Canyon Development. However, DPC lacked the funds to complete the utility infrastructure for the lots, such as natural gas, power, and a booster station for water delivery. Thus, the agreement provided that for every lot Empire Homes re-sold, DPC would receive $50,000 from the sale proceeds to complete the infrastructure. But DPC needed more than sporadic $50,000 payments; it needed a total of at least $650,000. Thus, closing on 13 lots within the given time frame would give DPC enough money to complete the infrastructure in that phase of the development. Accordingly, Empire Homes agreed, among other things, to close on 13 of the 87 lots by June 12, 2008, to raise enough money to complete the infrastructure in that phase of the development.

¶ 5 Despite this agreement, Empire Homes did not close on any lots. To assuage DPC, Chapple put DPC into contact with Hawkins, whom she represented would handle all financing necessary to close on the lots. Hawkins represented to DPC that he had access to $70 to $80 million held in a private trust that would provide funding for the project. However, none of the promised funding materialized. Consequently, Empire Homes and DPC failed to close on enough lots, DPC defaulted on its loan on the properties it owned in the Deer Canyon Development, and DPC's lenders foreclosed. But before the foreclosure, Empire Homes closed on lots 39 and 41. Both were purchased by the victim in this case.

¶ 6 The victim had owned a business in Colorado. He sold the business, realizing almost $1 million in profit. He intended to invest some or all of this money in a real property purchase known as a "1031 exchange."⁴ The victim's brother-in-law, a realtor licensed in Colorado, found Empire Homes through its website.

¶ 7 In March 2008, the victim contacted Empire Homes. His first contact with Empire Homes occurred when he spoke with Chapple over the phone. The victim and Chapple set a date for him to come to Utah. Once in Utah, the victim and his brother-in-law met with Chapple and Hawkins at Empire Homes' office. Then the victim, his brother-in-law, Chapple, and Hawkins all went to look at the Deer Canyon Development. The victim toured seven or eight multi-million dollar homes that another developer had built in Deer Canyon. The victim expressed interest in purchasing one of these existing homes. But Chapple and Hawkins told him that the existing homes were worth $2.5 to $3 million and had "to be paid for right then and there," and the victim did not have enough money to do that. While touring the development, the victim's brother-in-law asked Hawkins "about utilities, [he] asked him about water and all those kinds of services and if utilities and water [were] available to all the properties." Hawkins affirmatively represented that "utilities were not a problem and ... that water was not a problem."

¶ 8 The victim testified that no one from Empire Homes pitched the $40,000 investment opportunity to him, because "they knew [he] was coming in with a lot more money." Rather, Chapple and Hawkins presented the victim with various other options related to his potential investment in the Deer Canyon Development. The option the victim chose required him "to purchase the land and then they would pay [him] a monthly stipend to build a home." The victim understood that each of the homes built would cost $2.5 million "but would sell for $3.5 million."

¶ 9 Based on the representations made to him, the victim believed that he and Empire Homes "would work together in building" the homes, and "were going to split the profits." He was also led to believe that Chapple and Hawkins "were going to take care of all of the things that needed to be done." The victim described Hawkins as Chapple's partner and a promoter of the scheme:

Well, it's just that he was a partner with [Chapple] or a friend, you know, I took it that they were partners because why else would he be there other than to promote or be a part of this whole thing? ... [H]e was a promoter. [He said things like,] "She's done a great job before; I've worked with her before; she's on top of this, she's a great general contractor; it's all going to work out so good; they've got such a good game plan, the way we build our houses is like no other."

The victim also understood, from what he had been told about how Empire Homes built houses, that "everything would be set up from the digging to the teams coming in with the concrete ... everything, the plumbers, the electricians, [Chapple] knew lots and lots of people that would come in and they would put these houses up and they would get this whole project done."

¶ 10 In addition, the victim was told that Empire Homes was "going to pay [him] $8,300 a month [to lease the property] so they could start building and [the victim and Empire Homes] could work together as a team to build a house that would go into a rental pool or be sold and [they] would split the profits." And Chapple represented to the victim that "if the house didn't sell for what they said it was worth," that they had an "insurance policy [that] would make up the difference." The victim's brother-in-law testified that Hawkins made the same representation about an insurance policy to him. The document describing the supposed "insurance policy" proclaimed, "Imagine something so great, it makes all the ‘what if's' go away!"⁵

¶ 11 The victim decided to purchase two lots in the development—lots 39 and 41—and executed a real estate purchase contract for each. But before the victim signed the contracts, Hawkins called the victim's brother-in-law and explained that if the victim could sign the contracts before April 15, "there would be some favorable tax implications to the developer and that they would be willing to take [the victim] on a Disney Cruise to the Mexican Riviera," which "would be paid for by the developer." The victim signed the real estate purchase contract for lot 39 on April 11, and signed the contract for lot 41 on April 30.

¶ 12 More than two weeks after the victim signed the contract to purchase lot 39, and on the same day that he signed the contract to purchase lot 41, Empire Homes had the victim sign a "risk disclosure statement." This document provided, in relevant part, that if Empire Homes sold one of the victim's lots, "Empire will pay you, out of the sale proceeds, the full price that you originally paid for the Lot, and Empire will keep all profits"; that "Empire cannot guarantee that you or Empire will be able to obtain financing for your purchase" of the lots; that "Real estate investments are not insured by the FDIC or any other government agency"; and that "Empire, its principals, and associates do not guarantee the success of you[r] investment."

¶ 13 Hawkins took credit at trial for the creation of the risk disclosure statement. He testified that he asked an attorney for Empire Homes to draft something that "disclose[d] everything that could possibly go wrong with this type of transaction." Hawkins also testified that when the victim signed the document, he "felt very comfortable because [he] felt great relief that now [the victim] was informed and knew everything that [Hawkins] knew," and it "brought [him] great solace when [the victim] signed it."

¶ 14 In the end, the victim put approximately $423,000 down on each lot. Even though each lot cost $1.1 million, the victim understood that Chapple and Hawkins would secure the funding for the balance owed on the property. The victim testified, "It was Empire [that] was going to get the rest of the money to pay for this"; "they were coming in with the other money." Specifically, the victim testified that he "was always told" the money would come from "a family trust," that "a family trust was going to come in and buy the whole lot, [and] supply the money for the entire project." Empire Homes deposited the victim's down payment into an account created by Chapple and Bowen a few days later. The account consisted solely of the victim's investment; Chapple and/or Bowen transferred funds from the account to the...