State v. Kalinowski

• Decision Date: 19 December 2019
• Docket Number: No. A-1-CA-36403,A-1-CA-36403
• Citation: 460 P.3d 79
• Parties: STATE of New Mexico, Plaintiff-Appellee, v. William KALINOWSKI, Defendant-Appellant.
• Court: Court of Appeals of New Mexico

460 P.3d 79

STATE of New Mexico, Plaintiff-Appellee,

v.William KALINOWSKI, Defendant-Appellant.

No. A-1-CA-36403

Court of Appeals of New Mexico.

Filing Date: December 19, 2019

Certiorari Denied, February 24, 2020, No. S-1-SC-38102

VARGAS, Judge

{1} Defendant William Kalinowski appeals his convictions for six counts of embezzlement, contrary to NMSA 1978, Section 30-16-8 (2007), and three counts of fraud, contrary to NMSA 1978, Section 30-16-6 (2006). Defendant argues that the district court erred in (1) refusing to allow his expert to testify regarding the effects of the "great recession" on local home builders; (2) limiting the testimony of his other experts; (3) admitting evidence of other uncharged incidents in contravention of Rule 11-404(B) and Rule 11-403 NMRA ; and (4) failing to dismiss the case for violation of Defendant’s right to effective assistance of counsel. Finding no error, we affirm the district court on the grounds raised by Defendant.

{2} In addition, this Court has raised sua sponte a question regarding the sufficiency of the evidence supporting Counts 1 and 3 relating to the embezzlement of customer deposits paid to Defendant. See State v . Clemonts , 2006-NMCA-031, ¶ 10, 139 N.M. 147, 130 P.3d 208 (raising sufficiency of the evidence sua sponte); State v. Maes , 2003-NMCA-054, ¶ 5, 133 N.M. 536, 65 P.3d 584 (same). After reviewing the supplemental briefing, we conclude that Counts 1 and 3 are not supported by sufficient evidence and thus reverse the corresponding embezzlement convictions. We remand to the district court to vacate Defendant’s convictions on Counts 1 and 3 and enter an amended judgment and sentence.

BACKGROUND

{3} Defendant, operating through several business entities, began building homes in Santa Fe in the late 1990s under the moniker Barranca Builders. Defendant’s business grew and he was eventually hired to build homes in Las Campanas luxury golf community in Santa Fe. To fund these construction projects, Defendant relied on substantial down payments from purchasers (deposits) and construction loans obtained either by purchasers or by one of his business entities. Importantly, Defendant did not strictly apply deposit funds, or funds advanced under the construction loans, to the particular projects with which they were associated. Instead, he pooled all the funds together in a single account and used them to pay all the bills of Defendant’s business entities.

{4} Defendant contracted to build a home in Las Campanas for Robert and Janice Sostrin on October 3, 2007. Under the terms of the agreement and addendum, the Sostrins paid an initial deposit of $213,750 to Defendant. Though Robert Sostrin testified that he assumed the deposit would be used toward construction costs on his home, neither the terms of the agreement nor any conversations between Defendant and the Sostrins specified the particular purpose for which the money was to be used. Defendant ultimately failed to complete the home, liens were filed by unpaid subcontractors, and the Sostrins were forced to pay an extra $250,000 to another builder to finish the construction. These events gave rise to the crime charged in Count 1 of the indictment.

{5} Defendant also contracted to build three homes for Howard Hawks, doing business as Hawks Holdings, LLC (Hawks Holdings). The contract required Hawks Holdings to pay Defendant an initial deposit of $363,943. Hawks testified at trial that the deposit funds were "to get the job going[,]" though he did not point to any actual agreement between himself and Defendant as to the specific purpose for the deposit money. Defendant was unable to finish building the homes for Hawks Holdings, liens were filed against the property by various subcontractors, and Hawks Holdings eventually had the project completed for approximately one million dollars over the original contract price. These events gave rise to the crime charged in Count 3 of the indictment.

{6} Based on these and similar incidents, Defendant was charged with six counts of embezzlement and three counts of fraud for his failure to finish several construction projects. At trial, Defendant was convicted on all of the charges. Defendant appeals those convictions, asserting various claims of error. This Court ordered the parties to submit supplemental briefing regarding the sufficiency of the evidence to support Defendant’s embezzlement convictions related to the deposits paid to Defendant by the Sostrins and Hawks Holdings as charged in Counts 1 and 3. We begin our analysis with the sufficiency of the evidence supporting those counts and develop additional facts as necessary to the remaining issues in the body of the opinion that follows.

DISCUSSION

I. Sufficiency of the Evidence

{7} Questions of sufficiency that require us to engage in statutory interpretation "present[ ] a question of law which is reviewed de novo on appeal." State v. Chavez , 2009-NMSC-035, ¶ 10, 146 N.M. 434, 211 P.3d 891. "In interpreting a statute, our primary objective is to give effect to the Legislature’s intent." State v. Trujillo , 2009-NMSC-012, ¶ 11, 146 N.M. 14, 206 P.3d 125. "In discerning legislative intent, we look first to the language used and the plain meaning of that language." Id. "[W]hen a statute contains clear and unambiguous language, we will heed that language and refrain from further statutory interpretation." Id.

{8} "After reviewing the statutory standard, we apply a substantial evidence standard to review the sufficiency of the evidence at trial." Chavez , 2009-NMSC-035, ¶ 11, 146 N.M. 434, 211 P.3d 891. In reviewing the sufficiency of the evidence to support Defendant’s convictions for embezzlement, "we must determine whether substantial evidence, either direct or circumstantial, exists to support a guilty verdict beyond a reasonable doubt for every essential element of the crimes at issue." State v. Mercer , 2005-NMCA-023, ¶ 13, 137 N.M. 36, 106 P.3d 1283. "We must view the evidence in the light most favorable to the guilty verdict, indulging all reasonable inferences and resolving all conflicts in the evidence in favor of the verdict." State v. Holt , 2016-NMSC-011, ¶ 20, 368 P.3d 409 (internal quotation marks and citation omitted). "The jury instructions become the law of the case against which the sufficiency of the evidence is to be measured." Id. (alterations, internal quotation marks, and citation omitted).

{9} "Embezzlement consists of a person embezzling or converting to the person’s own use anything of value, with which the person has been entrusted, with fraudulent intent to deprive the owner thereof." Section 30-16-8(A). In relevant part, the jury instructions for Counts 1 and 3 required the State to prove beyond a reasonable doubt:

1. [D]efendant was entrusted with over $20,000;

2. [D]efendant converted this money to [D]efendant’s own use. "Converting something to one’s own use" means keeping another’s property rather than returning it, or using another’s property for one’s own purpose rather than the purpose authorized by the owner;

3. The money belonged to Robert and Janice Sostrin [as charged in Count 1 and Hawks Holdings as charged in Count 3];

4. At the time [D]efendant converted the money to his own use, [D]efendant fraudulently intended to deprive the owner of the owner’s property.

"Fraudulently intended" means intended to deceive or cheat[.]

See UJI 14-1641 NMRA; see also Section 30-16-8(A), (F).

{10} At issue here is whether the deposits "belonged to" the Sostrins and Hawks Holdings such that Defendant was "entrusted" with the deposits paid to him, or whether that money became his property upon payment, precluding a finding of entrustment. "One cannot be guilty of embezzlement if he converts his own property; the property converted must be that ‘of another.’ " 3 Wayne R. LaFave, Substantive Criminal Law § 19.6(d), at 130 (3d ed. 2018) ; see State v. Earp , 2014-NMCA-059, ¶ 15, 326 P.3d 491 ("[E]mbezzlement necessarily requires the conversion of the property of another[.]").

{11} A survey of cases from other states considering embezzlement in similar contexts have almost universally found that contractors cannot be convicted of embezzlement of down payment funds upon a failure to complete a project because the deposit money is legally the property of the contractor at the time it is paid. As explained by the Supreme Court of Iowa, "[o]nce the money changes hands, both title and possession vest in the contractor." State v. Galbreath , 525 N.W.2d 424, 426 (Iowa 1994) ; see also Crawford v. State , 453 So. 2d 1139, 1142 (Fla. Dist. Ct. App. 1984) (holding that a down payment to contractor does not retain its character as property belonging to the homeowner and vacating the defendant’s embezzlement conviction); State v. Marshall , 541 N.W.2d 330, 332-33 (Minn. Ct. App. 1995) (holding that a security company who accepted advance payments could not be guilty of taking "property of another" when the company failed to perform); Shelley v. State , 447 So. 2d 124, 126 (Miss. 1984) (concluding even in a case of "fast talk" by a "known crook," once the owner gave money to the contractor, "it belonged to him" and as such, the defendant’s conviction for embezzlement required reversal); Commonwealth v. Austin , 258 Pa.Super. 461, 393 A.2d 36, 39 (1978) (concluding that ownership and title of the money received under a construction contract passed to the defendant when paid, requiring reversal of the defendant’s theft conviction); State v. Amanns , 2 S.W.3d 241, 245 (Tenn. Crim. App. 1999) (stating that the homeowner relinquished all interest in her down payment at the time she paid it to the defendant under a contract for home improvement); cf. State v. Coleman , 423 Md. 666, 33 A.3d 468, 473 (2011) ("When a defendant has a right to receive money or property, he cannot be guilty of stealing it.").

{12} The facts of Shelly are instructive. 447 So. 2d at 124-25. In Shelly , the homeowners purchased a lot for purposes of...