State v. Kinneman

• Decision Date: 16 August 2004
• Docket Number: No. 51400-8-I.,51400-8-I.
• Citation: 122 Wn. App. 850,122 Wash. App. 850,95 P.3d 1277
• Court: Washington Court of Appeals
• Parties: STATE of Washington, Respondent/Cross-Appellant, v. Zachary A. KINNEMAN, Appellant/Cross-Respondent.

95 P.3d 1277

122 Wn. App. 850

122 Wash. App. 850

STATE of Washington, Respondent/Cross-Appellant, v. Zachary A. KINNEMAN, Appellant/Cross-Respondent.

No. 51400-8-I.

Court of Appeals of Washington, Division 1.

August 16, 2004.

Gregory Charles Link, Nancy P. Collins, Washington Appellate Project, Seattle, WA, for Appellant.

John Christopher Carver, King County Prosecuting Attorney, Ofc/Fraud Division, Seattle, WA, for Respondent.

APPELWICK, J.

Zachary Kinneman, an attorney, made multiple unauthorized withdrawals from his Interest on Lawyer Trust Account (IOLTA) over 16 months. He was convicted of 28 counts of first degree theft and 39 counts of second degree theft. After a restitution hearing, the trial court ordered that he pay one victim $246,770.10, and a second victim, $308,616.73 in restitution. Kinneman appeals the trial court's order, alleging that the record contained insufficient evidence to support portions of the award, and that some of the individuals to whom the court awarded restitution were not "victims" under former RCW 9.94A.142. The State cross-appeals the court's restitution award to one of the alleged victims, its denial of restitution to another victim, and the court's denial of attorney fees and costs as part of restitution. We affirm in part, reverse in part and remand.

FACTS

I. Underlying Theft

In June 1997, Zachary Kinneman, an attorney licensed to practice in the state of Washington, was hired to act as an escrow and closing agent for five separate real estate refinancings. The borrower for all five transactions was Rodney R. Brown (Brown), and the lender was Option One Mortgage Company (Option One) of California. The five properties were all located in Seattle, Washington.

Prior to the refinancing transactions, Brown, who was serving time in prison, had executed an attorney-in-fact agreement with his brother William Michael Brown (W.M.Brown). Working with a mortgage broker named James Cunningham (Cunningham), W.M. Brown applied for the five loans from Option One in his brother's name. W.M. Brown did not notify Option One of his identity and his position as attorney-in-fact; instead, he simply wrote and signed his brother's name on the loan documents. Option One approved the loans. Cunningham suggested that Kinneman be used as the escrow agent.

In four separate wire transfers on June 17, 1997, and one wire transfer on June 27, 1997, Option One transferred a total of $499,506.96 to Kinneman's IOLTA account at Washington Mutual Bank. In its closing instructions, Option One directed Kinneman to obtain a title insurance policy for each of the five properties, have the borrower sign all the necessary paperwork, record the deeds of trust, and pay off all prior lienholders on the properties and other intended disbursees, such as the loan broker. Shortly after the funds were deposited in his IOLTA account, Kinneman falsely notified Option One that he had complied with all of its escrow and closing instructions. At the time Kinneman made those representations to Option One, he had not in fact paid off any of the prior lienholders, and had failed to purchase title insurance on one property, the Columbia Street property, as dictated in the escrow and closing instructions. Kinneman also paid approximately $92,000 to W.M. Brown.¹

Between June 17, 1997, and October 22, 1998, Kinneman made 67 separate unauthorized withdrawals from his IOLTA account, diverting over $200,000 to his own use. These unauthorized uses of escrow funds consisted of cash withdrawals, checks made payable to Kinneman, checks payable to Kinneman's other clients, and checks made payable to other individuals unrelated to the transactions for which Kinneman received the funds. Kinneman did not pay off any of the prior lienholders for the five properties in July 1997, as he had informed Option One, but, he eventually paid two of the lienholders as originally instructed. In February 1998, Kinneman removed $69,850 from the IOLTA to pay off a prior lienholder for the 27th Avenue property shortly before a scheduled foreclosure. In July 1998, he removed $56,489.67 from the account to pay off a prior lienholder for the Courtland Place property just prior to its scheduled foreclosure. Kinneman never paid off the pre-existing loans on the remaining three properties.

Federal Bureau of Investigation (FBI) agents interviewed Kinneman on December 30, 1998. Kinneman told the agents that because of financial difficulties related to his divorce, he was unable to pay his bills, and used the Option One funds deposited in his IOLTA account to pay some of them. The trial court found Kinneman guilty of 28 counts of first degree theft, and 39 counts of second degree theft as charged. Kinneman had paid $208,703.10 in restitution into the Court Registry by the date of his sentencing hearing.

II. Restitution

The trial court held a restitution hearing in September 2002. At the hearing, the following parties were represented:

(1) the State;

(2) Kinneman;

(3) Rodney Brown;

(4) Old Republic; [Option One's insurer]

(5) [Option One]; and (6) Island Security, [one of the parties which had received funds from Kinneman's IOLTA account and which Brown later sued to recover those funds.²]

The State does not challenge the trial court's denial of restitution to Island Security.

Brown requested the following amounts in restitution:

Amount Stolen ... [from IOLTA account]: $206,770.10 Attorney Fees and Costs: $100,000.00 Interest: $108,756.01 Estimated Total: $415,526.11

The court awarded Brown, as primary victim, $206,770.10, the amount of Kinneman's defalcations, and $40,000 in interest.

Pursuant to its title insurance policy with Option One, Old Republic Title Insurance Co. (Old Republic) paid Nationsbanc Mortgage Corporation, the senior lienholder for the 25th Avenue property, $173,233.55, and Bankers Trust, the senior lienholder for the Brandon Street property, $90,383.18 in order to place Option One in first priority position on these two properties. These were the only two of Brown's five properties for which Option One had title insurance with Old Republic. Old Republic sought a total of $423,649.90 in restitution.

The court found that Old Republic, as a secondary victim, had suffered a loss of $308.616.73, including interest, for its payments to senior lienholders on the 25th Avenue and Brandon Street properties. The court interlineated on the restitution order that "[t]he restitution obligation to Rodney Brown is to be satisfied first before payments begin to Old Republic."

Union Planters Bank, the prior lienholder for the Columbia Street property, had not been paid off as of the date of the restitution hearing. The State and Option One requested that the trial court award Union Planters Bank $54,329.96 in restitution, which would place Option One in first position on the Columbia Street property, and preserve Brown's title to the property. The trial court did not award Union Planters Bank restitution.

Option One sought $10,884.55 in restitution for attorney fees and costs it sustained in litigation related to the Columbia Street property. The trial court denied Option One's request.

On October 7, 2002, Brown filed a motion for disbursement of funds pursuant to the restitution order. On October 8, 2002, the State filed a motion to reconsider the restitution order. In its motion, the State requested that the court reconsider (1) its refusal to order that Kinneman pay restitution to Union Planters Bank, the prior lienholder on the Columbia Street property; and (2) the basis for its award to Rodney Brown. The trial court denied both Brown's motion for disbursement and the State's motion for reconsideration.

Kinneman appeals the trial court's restitution order. The State cross-appeals the trial court's award to Brown and its denial of restitution to Union Planters Bank.

ANALYSIS

I. Standard of Review

"The language of restitution statutes indicates the Legislature's intent to grant broad discretion to sentencing courts in awarding restitution." State v. Ewing, 102 Wash.App. 349, 352, 7 P.3d 835 (2000). Generally, the imposition of restitution will be upheld on appeal absent an abuse of discretion. State v. Enstone, 137 Wash.2d 675, 679-80, 974 P.2d 828 (1999). Discretion is abused only when exercised in a manifestly unreasonable manner or on untenable grounds. Enstone, 137 Wash.2d at 679-80,974 P.2d 828. "We review questions on the interpretation of the restitution statutes de novo." State v. Edelman, 97 Wash.App. 161, 165, 166, 984 P.2d 421 (1999),rev. denied, 140 Wash.2d 1003, 999 P.2d 1262 (2000).

II. State's Right to Appeal Restitution Order

Kinneman relies upon State v. A.M.R., 147 Wash.2d 91, 51 P.3d 790 (2002) to support his argument that the State has no right to appeal the trial court's restitution order.

A.M.R. does not support Kinneman's assertion that the State has no right to appeal in this case. At issue in A.M.R. was whether RCW chapter 13.40 and RCW 13.04.033(1) provide the State with the authority to appeal a juvenile restitution order. A.M.R., 147 Wash.2d at 95, 51 P.3d 790. Discussing the State's right to appeal, A.M.R. stated that "[a]dult cases focus on whether an appeal by the State is specifically allowed by statute, court rule, or case law. Those cases turn to RCW 9.94A.585(2) and RAP 2.2(b)(6) allowing appeals of sentences `outside the standard range.'" A.M.R., 147 Wash.2d at 95, 51 P.3d 790 (quoting State v. Williams, 112 Wash.App. 171, 48 P.3d 354 (2002), reversed by State v. Williams, 149 Wash.2d 143, 65 P.3d 1214 (2003)

).

RCW 9.94A.585(2) provides:

A sentence outside the standard sentence range for the offense is subject to appeal by the defendant or the state. The appeal shall be to the court of appeals in accordance with rules adopted by the supreme court.

Similarly, RAP 2.2(b)(6) provides that the State may appeal "[a] sentence in a criminal case which is outside the standard range for the...