State v. Mills

• Decision Date: 22 October 1964
• Docket Number: No. 1351,1351
• Citation: 96 Ariz. 377,396 P.2d 5
• Parties: STATE of Arizona, Appellee, v. William W. MILLS and Winifred I. Mills, Appellants.
• Court: Arizona Supreme Court

Page 5

396 P.2d 5

96 Ariz. 377

STATE of Arizona, Appellee, v. William W. MILLS and Winifred I. Mills, Appellants.

No. 1351.

Supreme Court of Arizona, In Banc.

Oct. 22, 1964.

Robert W. Pickrell, Atty. Gen., Phoenix, Norman E. Green, County Atty. of Pima County, Carl Waag, Deputy County Atty., Tucson, for appellee.

Norman S. Fenton, Tucson, for appellants.

LOCKWOOD, Vice Chief Justice:

Defendants appeal from a conviction on two counts of obtaining money by false pretenses in violation of A.R.S. §§ 13-661.A.3. and 13-663.A.1. ¹

The material facts, viewed '* * * in the light most favorable to sustaining the conviction,' State v. Evans, 88 Ariz. 364, 366, 356 P.2d 1106, 1107 (1960) are as follows: Defendant William Mills was a builder and owned approximately 150 homes in Tucson in December, 1960. Mills conducted his business in his home. In 1960 defendant Winifred Mills, his wife, participated in the business generally by answering the telephone, typing, and receiving clients who came to the office.

In December 1960, Mills showed the complaint, Nathan Pivowar, a house at 1155 Knox Drive and another at 1210 Easy Street, and asked Pivowar if he would loan money on the Knox Drive house. Pivowar did not indicate at that time whether the would agree to such a transaction. Later in the same month Nathan Pivowar told the defendants that he and his brother, Joe Pivowar, would loan $5,000 and $4,000 on the two houses. Three or four days later Mrs. Mills, at Pivowar's request, showed him these homes again.

Mills had prepared two typed mortgages for Pivowar. Pivowar objected to the wording, so in Mills' office Mrs. Mills retyped the mortgages under Pivowar's dictation. After the mortgages had been recorded on December 31, 1960, Pivowar gave Mills a bank check for $5,791.87, some cash, and a second mortgage formerly obtained from Mills in the approximate sum of $3,000. In exchange Mills gave Pivowar two personal notes in the sums of $5,250.00 and $4,200.00 and the two mortgages as security for the loan.

Although the due date for Mills' personal notes passed without payment being made, the complainant did not present the notes for payment, did not demand that they be paid, and did not sue upon them. In 1962 the complaint learned that the mortgages which he had taken as security in the transaction were not first mortgages on the Knox Drive and Easy Street properties. These mortgages actually covered two vacant lots on which there were outstanding senior mortgages. On learning this, Pivowar signed a complaint charging the defendants with the crime of theft by false pretenses.

On appeal defendants contend that the trial court erred in denying their motion to dismiss the information. They urge that a permanent taking of property must be proved in order to establish the crime of theft by false pretenses. Since the complainant had the right to sue on the defendants' notes, the defendants assert that complainant cannot be said to have been deprived of his property permanently.

Defendants misconceive the elements of the crime of theft by false pretenses Stated in a different form, their argument is that although the complainant has parted with his cash, a bank check, and a second mortgage, the defendants intend to repay the loan.

Defendants admit that the proposition of law which they assert is a novel one in this jurisdiction. Respectable authority in other states persuades us that their contention is without merit. A creditor has a right to determine for himself whether he wishes to be a secured or an unsecured creditor. In the former case, he has a right to know about the security. If he extends credit in reliance upon security which is falsely represented to be adequate, he has been defrauded even if the debtor intends to repay the debt. His position is now that of an unsecured creditor; at the very least, an unreasonable risk of loss has been forced upon him by reason of the deceit. This risk which he did not intend to assume has been imposed upon him by the intentional act of the debtor, and such action constitutes an intent to defraud. ²

In People v. Wieger, 100 Cal. 352, 34 P. 826 (1893), the defendant obtained goods representing that he had a capital of $12,000 cash and owed nothing, whereas he had at most not more than $4,500 and owed $10,000. The California court held that it is no defense to the charge of obtaining goods by false pretenses that the defendant intented to pay for the goods he obtained. See also People v. Hand, 127 Cal.App. 484, 16 P.2d 156 (1932); Odom v. State, 130 Miss. 643, 94 So. 233 (1922). In Odom the defendant had obtained $575 in goods and money. To secure the payment of the goods and money he gave a deed of trust on a lot of exen and log wagons which he represented that he owned. The defendant knew at that time that he did not own the oxen and wagons, but he did intend to pay for the money and property which he received and had paid back a large portion of it when he was indicted. The Mississippi court held that '* * * the intent to cheat or defraud referred to in the statute has no reference whatever to the question whether defendant intended to repay the debt.' 130 Miss. at 647, 94 So. at 234.

The cases cited by defendants in support of their contention are distinguishable from the instant case in that they involved theft by larceny, (e. g. People v. Bartges, 126 Cal.App.2d 763, 273 P.2d 49 (1954)). Since the crime of larceny is designed to protect a person's possessory interest in property whereas the crime of false pretenses protects one's title interest, the requirement of a permanent deprivation is appropriate to the former. Cf. State v. Marsin, 82 Ariz. 1, 307 P.2d 607 (1957). ³ Accordingly, we hold that an intent to repay a loan obtained on the basis of a false representation of the security for the loan is no defense.

Defendants next contend that the State must prove that there has been some pecuniary loss to the complaint before the State has established their guilt of theft by false pretenses. They argue that no loss can be shown because their notes are still held by the complainant. Defendants raise the same point when they contend that where actual consideration is exchanged, there can be no crime of obtaining money by false pretenses. Although there is authority for the proposition that an actual financial loss is necessary to constitute the crime of theft by false pretenses, see Daniel v. State, 63 Ga.App. 12, 10 S.E.2d 80 (1940); McGee v. State, 97 Ga. 199, 22 S.E. 589 (1895), we think the better rule is that there is no requirement that the victim suffer a pecuniary loss so long as he has parted with his property. Nelson v. United States, 97 U.S.App.D.C. 6, 227 F.2d 21, 53 A.L.R.2d 1206, (D.C.Cir.1955), cert. denied 351 U.S. 910, 76 S.Ct. 700, 100 L.Ed. 1445 (1956); People v. Talbott, 65 Cal.App.2d 654, 151 P.2d 317 (1944); United States v. Rowe, 56 F.2d 747 (2d Cir.1932). The defendants focus on the wrong part of the transaction. They direct attention to what the victim obtains. The gist of the offense, however, is concerned with what the defrauder obtains. Once the victim has parted with his property in reliance on a false representation, it is immaterial whether whatever he got in return is equal in exchange value to that with which he parted. Judge Learned Hand put it as follows:

'A man is none the less cheated out of his property, when he is induced to part with it by fraud, because he gets a quird pro quo of equal value. It may be impossible to measure his loss by the gross scales available to a court, but he has suffered a wrong; he has lost his chance to bargain with the facts before him. That is the evil against which the statute is directed.' United States v. Rowe, supra at 749.

An argument similar to defendants' was advanced in Talbott, supra. In that case the defendant had obtained loans from various individuals. He executed bills of sale and chattel mortgages on various items of machinery in connection with the loans. He falsely represented that he as seller owned the machinery free from liens and encumbrances. The court held that financial loss is not a necessary element of the crime. In response to defendant's argument that part of the machinery was free and clear and of sufficient value to protect the loan, the court said:

'It was contended that notwithstanding proof of encumbrances as to part, the balance was of sufficient value to protect the loan. Such argument was then, and is now, beside the issue. If all of the property was fraudulently represented as unencumbered, the fact that part of it was actually free and clear and sufficiently valuable to protect the loan, is no defense.' 65 Cal.App.2d at 659, 151 P.2d at 320.

Similarly, in Nelson, supra, the defendant offered to give a chattel mortgage on his car as security to obtain appliances for resale and to cover his delinquent account. He represented himself as the owner, but failed to disclose the full amount of an outstanding prior indebtedness secured by a chattel mortgage. The court held that the fact that the car had an equity of between $900 and $1000, roughly five times the value of the household appliances, was immaterial.

Defendants' next proposition is that the State failed to show any false representation by the defendants to the victim. On the contrary, the evidence is that both the defendants showed Pivowar the homes at 1155 Knox Drive and 1210 Easy Street; that defendant Mills obtained fire insurance policies on these homes for Pivowar; and that the words 'This is a first mortgage.' were typed on the instrument. These facts were sufficient for the jury to determine that the defendants represented to Pivowar that he would get first mortgages on these homes.

Defendants' next assertion of error is that the State has failed to show a specific criminal intent to defraud. We think otherwise. In view of all the evidence there were ample circumstances from which the jury could...