State v. Kinneman, 76051-9.

• Citation: 119 P.3d 350,155 Wn.2d 272
• Decision Date: 08 September 2005
• Docket Number: No. 76051-9.,76051-9.
• Court: United States State Supreme Court of Washington
• Parties: STATE of Washington, Respondent, v. Zachary A. KINNEMAN, Petitioner.

119 P.3d 350

155 Wn.2d 272

STATE of Washington, Respondent, v. Zachary A. KINNEMAN, Petitioner.

No. 76051-9.

Supreme Court of Washington, En Banc.

Argued June 30, 2005.

Decided September 8, 2005.

Nancy P. Collins, Seattle, for Zachary A. Kinneman.

John Christopher Carver, Seattle, for State of Washington.

MADSEN, J.

¶ 1 Zachary Kinneman, an attorney, was convicted of 67 counts of theft in connection with real estate transactions that he handled for a client. Kinneman raises several challenges to an order of restitution, including the question whether Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000) and Blakely v. Washington, 542 U.S. 296, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004), apply to restitution under RCW 9.94A.753.¹ We conclude that Apprendi and Blakely do not apply and affirm the Court of Appeals' decision on the remaining issues.

FACTS

¶ 2 Mr. Kinneman was a Washington licensed attorney who was hired in June 1997 to act as the escrow and closing agent for five separate real estate refinance transactions involving five properties in Seattle. The borrower in these transactions was Rodney E. Brown and the lender was Option One Mortgage Company (Option One). Brown (who was in prison for unrelated offenses) had executed a power of attorney enabling his brother William Michael Brown (W.M.Brown) to handle his financial matters. W.M. Brown applied for the loans from Option One in his brother's name,² and arranged with a mortgage broker for Kinneman to serve as escrow agent. In June 1997, Option One transferred $499,506.96 to Kinneman's trust account.

¶ 3 Kinneman did not carry out Option One's escrow/closing instructions. He failed to record deeds of trust. And although he purchased title insurance for four of the properties, he did not for the fifth (the Columbia Street property). Initially he also failed to pay off the prior lienholders on all of the properties, although he eventually paid the prior lienholders on two properties in order to avoid looming foreclosure proceedings. He never paid the prior lienholders on the other three properties. Kinneman paid W.M. Brown about $92,000.00, approximately $8,000.00 more than he had been instructed to pay to the borrower.

¶ 4 Between June 17, 1997, when the first of the loan proceeds were transferred to the account, and October 22, 1998, Kinneman made nearly 70 unauthorized withdrawals from his trust account that were not related to the escrow/closing instructions. In all, Kinneman diverted over $200,000.00 to his own use.

¶ 5 On December 30, 1998, Kinneman disclosed in an interview with FBI (Federal Bureau of Investigation) agents that he used the Option One funds because of financial difficulties related to his divorce. On June 20, 2000, the State charged Kinneman with 77 counts of theft (30 counts of first degree theft and 47 counts of second degree theft)—some of these counts were later dismissed on the State's motion. Kinneman was convicted of 67 counts of theft.³

¶ 6 When Kinneman was sentenced on February 8, 2002, he tendered a $208,713.10 check as restitution. On September 20, 2002, a restitution hearing was held.⁴ The court ordered restitution of $206,770.10 to Rodney Brown, the amount of the Option One funds that Kinneman stole,⁵ plus $40,000.00 in interest, a total of $246,770.10.⁶ Clerk's Paper's (CP) at 16. The court also ordered restitution of $308,616.73 to Old Republic Title Insurance Company (Old Republic). Id. Old Republic was Option One's title insurance company on the two properties that Kinneman had purchased title insurance for but on which he failed to pay the prior lienholders (the 25th Avenue and Brandon Street properties). Old Republic paid the senior lienholders on these properties in order to put Option One in first priority position. The restitution to Old Republic included $263,616.73 for paying off the liens, plus interest.⁷ The court declined to order restitution for attorney fees and costs that Old Republic claimed were causally related to Kinneman's thefts. The court directed that restitution to Rodney Brown was to be satisfied before any restitution was to be paid to Old Republic.

¶ 7 Kinneman appealed the restitution order. The State cross-appealed. The Court of Appeals affirmed in part and reversed in part. State v. Kinneman, 122 Wash.App. 850, 95 P.3d 1277 (2004), review granted, 154 Wash.2d 1001, 113 P.3d 482 (2005). The Court of Appeals held that the State was entitled to appeal the restitution order, that the superior court abused its discretion in ordering restitution to Rodney Brown in the total amount that Kinneman stole, and that the order of restitution to Old Republic was not an abuse of discretion. The Court of Appeals remanded for an evidentiary hearing to determine Brown's loss and to determine restitution in the amount, if any, of restitution for the attorney fees and costs incurred by Brown, Old Republic, and Option One that were causally related to Kinneman's crimes.

ANALYSIS

¶ 8 Kinneman argues that under the Sixth Amendment he is entitled to a jury determination of the facts essential to restitution.

¶ 9 In Apprendi, the United States Supreme Court held that "[o]ther than the fact of a prior conviction, any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury, and proved beyond a reasonable doubt." Apprendi, 530 U.S. at 490, 120 S.Ct. 2348; see Ring v. Arizona, 536 U.S. 584, 602, 122 S.Ct. 2428, 153 L.Ed.2d 556 (2002) ("[i]f a State makes an increase in a defendant's authorized punishment contingent on the finding of a fact, that fact—no matter how the State labels it—must be found by a jury beyond a reasonable doubt"). In Blakely, the Court explained that "`statutory maximum'" means "the maximum sentence a judge may impose solely on the basis of the facts reflected in the jury verdict or admitted by the defendant." Blakely, 124 S.Ct. at 2537 (emphasis omitted). It is "not the maximum sentence a judge may impose after finding additional facts, but the maximum he may impose without any additional findings." Id. (emphasis omitted). In Blakely, the Court held that the right to a jury trial was violated by imposition of an exceptional sentence upward where, under Washington's Sentencing Reform Act, chapter 9.94A RCW (SRA), a judge was authorized to impose an exceptional sentence only upon finding some additional fact beyond the jury's verdict. Blakely, 124 S.Ct. at 2537-38.⁸

¶ 10 The first question is whether, as Kinneman argues, punishment for purposes of Apprendi and Blakely includes punishments other than prison sentences. The State maintains that Apprendi and Blakely do not apply to restitution because they deal solely with imprisonment, which is purely punitive. Punishment includes both imprisonment and other criminal sanctions. See United States v. Nachtigal, 507 U.S. 1, 3, 113 S.Ct. 1072, 122 L.Ed.2d 374 (1993) ("the word `penalty' refers both to the term of imprisonment and other statutory penalties"). We do not understand Apprendi and Blakely to apply only to punishment in the form of prison sentences; both cases refer to punishment and neither limits its analysis to imprisonment.

¶ 11 The State next says that not all punishments are within the scope of the Sixth Amendment guaranty to trial by jury, and that there is a distinction between imprisonment and other components of a criminal's sentence that shows that the Court did not intend Blakely to apply to restitution. The State relies on Blanton v. City of North Las Vegas, Nevada, 489 U.S. 538, 542, 109 S.Ct. 1289, 103 L.Ed.2d 550 (1989) and Nachtigal, 507 U.S. 1, 113 S.Ct. 1072 (applying Blanton).

¶ 12 In Blanton, the Court was asked whether there was a right to a jury trial for an offense punishable by a maximum term of six months' imprisonment. The Court noted that it had long been settled that petty crimes or offenses were not within the scope of the Sixth Amendment right to a jury trial. In determining whether an offense is a petty offense, the most relevant criterion is the maximum authorized penalty, with the primary emphasis on the length of the prison term. Blanton, 489 U.S. at 541-42, 109 S.Ct. 1289.

¶ 13 Blanton does not support the State's argument that Apprendi and Blakely do not apply to restitution. While Blanton says the length of imprisonment is the most important criterion, it also explains that if the punishment is a prison term of less than six months the crime is presumed petty, but a defendant is nevertheless entitled to a jury trial if he can show that additional statutory penalties, in conjunction with the maximum authorized period of incarceration, are so severe that they show legislative intent to treat the offense as a serious one. Id. at 543, 109 S.Ct. 1289. Thus, all of the punishment imposed may be considered when deciding whether the defendant has overcome the presumption that an offense punishable by a prison term of six months or less is a petty offense. Punishment other than a prison sentence may tip the scales and require a jury trial. See also Nachtigal, 507 U.S. at 3, 113 S.Ct. 1072. We do not agree that the only punishment falling within Apprendi and Blakely is a prison term.

¶ 14 The next question is whether restitution is punishment. In Washington restitution is both punitive and compensatory. E.g., State v. Moen, 129 Wash.2d 535, 539 n. 1, 919 P.2d 69 (1996); State v. Barr, 99 Wash.2d 75, 79, 658 P.2d 1247 (1983); State v. Ewing 102 Wash.App. 349, 352-53, 7 P.3d 835 (2000) (restitution is primarily punitive).⁹ The State agrees that restitution is a "hybrid" that is both punitive and compensatory. The State argues, however, that restitution is not sufficiently punitive to bring it within the ambit of Apprendi and Blakely. The State relies on State v. Shultz, 138 Wash.2d 638, 980 P.2d 1265 (1999), where we addressed an ex post facto challenge to amendments to former RCW 9.94A.142 that extended trial courts'...