Filed 2/7/18 Lee v. Superior Court CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA



SCOTT LEE,

Petitioner,

v.

THE SUPERIOR COURT OF SAN DIEGO COUNTY,

Respondent;
D070075

(San Diego County
Super. Ct. No. SCD246838)

THE PEOPLE et al.,

Real Parties in Interest.


Petition for writ of mandate. Lorna A. Alksne, Judge. Petition denied.

Benjamin P. Lechman for Petitioner.
No appearance for Respondent.
Kathleen A. Kenealy, Acting Attorney General, Gerald A. Engler, Chief Assistant Attorney General, Julie L. Garland, Assistant Attorney General, Barry Carlton, Sharon L. Rhodes and Adrianne S. Denault, Deputy Attorneys General, for Real Party in Interest the People.
Elizabeth Garfinkle, under appointment by the Court of Appeal, for Real Party in Interest Ronald Duane Dunham.
Scott Lee, a third party claimant, is seeking to appeal the trial court's restitution order in a criminal case. We considered Lee's purported appeal together with the appeal of the criminal case, People v. Dunham (Feb. 7, 2018, D068100) [nonpub. opn.] (Dunham I)).
Prior to Ronald Dunham's trial, the court froze the bank accounts of a company that Dunham controlled—Rodan Enterprises, LLC (Rodan)—under Penal Code section 186.11 to preserve assets for victim restitution. The "Freeze and Seize Law" (§ 186.11) is designed to provide restitution to white collar crime victims from assets under the convicted criminal's control. Subsequently, a jury found Dunham guilty of 20 fraud- and embezzlement-related felony counts involving mostly elderly victims in a "Cherokee Village" investment scheme, and found a section 186.11 aggravated white collar crime enhancement allegation to be true.
In his third party claim, Lee asserted he invested $400,000 from his retirement accounts in a "Rodan Trust" and he was entitled to recover that full amount from the frozen funds. Lee was not involved in Dunham's criminal activities. The People opposed Lee's claim, arguing he had not established ownership of the funds in any frozen bank accounts. (See People v. Semaan (2007) 42 Cal.4th 79, 87 (Semaan).) The People's trial evidence showed that Dunham exclusively controlled Rodan's bank accounts, he had transferred and used Rodan's funds as his own, and he commingled his and the victims' money in various bank accounts under his control.
At the restitution hearing, the court ordered that (1) the named victims in the People's charging document would receive full restitution for their losses, and (2) any remaining funds would be paid to two individuals, one of whom was Lee.
We reach several conclusions: First, Lee has not established his right to appeal the trial court's order; nonetheless, we reach the merits by treating the appeal as a petition for writ of mandate. Second, substantial evidence supports the court's implicit finding that Lee did not establish an ownership interest in the frozen funds. Third, Lee was not entitled to an equitable share of the frozen funds as a crime victim.
BACKGROUND
In Dunham I, the San Diego County District Attorney's Office (D.A.) charged Dunham with seven counts of grand theft (§ 487, subd. (a)), six counts of elder theft (§ 368, subd. (d)), and seven counts of securities fraud (Corp. Code, §§ 25401, 25540). The operative information identified the following individuals as victims of Dunham's crimes under separate counts: Beverly D., Raymond and Caroline M., Jay and Marilyne A., David and Joyce M., James and Allison W., and Herbert T. and Elizabeth G. (collectively, the "named victims"). In addition to other enhancements, the D.A. alleged an aggravated white collar crime enhancement under section 186.11.
Under section 186.11, subdivisions (d)(5), (e)(1), and (f)(1), the D.A. sought restraining orders to preserve Dunham's assets and property for victim restitution, including several of Rodan's bank accounts. The People's section 186.11 petition was supported by a declaration from the D.A.'s investigator, Michael Brown. Investigator Brown affirmed in significant detail his probable cause for believing that Rodan's bank accounts were exclusively controlled by Dunham and that Dunham used Rodan's accounts to conduct criminal activities, including concealing assets and embezzling funds. Rodan was Dunham's investment company. The trial court granted the D.A.'s petition.
At trial, the People adduced facts showing that Dunham defrauded and/or embezzled over a million dollars in total from the named victims, premised on an investment scheme involving properties in Cherokee Village, Arkansas. (See Dunham I.) Dunham had also set up a highly complicated web of entities, 78 bank accounts, and financial transactions to conceal his assets and divert the named victims' assets. (See ibid.) Rodan was a limited liability company controlled by Dunham; its ostensible purpose was to engage in investment activities. By 2012, Dunham named his friend, Gustavio Islas, a "manager" of Rodan and gave Islas signatory power over Rodan's bank accounts. Islas testified that (1) he did not actually manage anything, (2) Rodan was Dunham's company, and (3) Islas withdrew money from Rodan's accounts for various purposes and uses in 2012 and 2013 strictly pursuant to Dunham's instructions. The proceeds from the sale of Dunham's Laguna Beach home were wired to Rodan's bank account. Some of Rodan's funds were diverted by Dunham to another third party, who paid his personal expenses throughout 2012. In March 2013, Dunham used Rodan's funds to pay his attorney fees.
In December 2014, the jury convicted Dunham as charged and found all of the enhancements to be true.
In September 2015, Lee filed a third party claim under section 186.11, subdivision (d)(6), seeking to recover $400,000 from the frozen funds. Lee declared that, in 2006 or 2007, he transferred $200,000 from his self-directed IRA account to the "Rodan Trust." His accompanying documents do not actually show how/where the money was transferred or the existence of a "trust," but show that he held shares in Rodan. Lee further declared that, in November 2012, he transferred another $200,000 from a 401K account to the "Rodan Trust." His accompanying documents dated in 2012 show again that he invested in Rodan, e.g., asset custodians were instructed to "invest exactly $200,000" and to "BUY RODAN ENTERPRISES, LLC." According to Lee, Dunham urged him to take these actions for "tax efficiency, better control, and greater flexibility" and/or to "gain the advantages of a self-directed IRA fund[.]"
The People opposed Lee's third party claim, arguing that he had not met his burden of proving ownership of the frozen funds, including those contained in Rodan's accounts. The People conceded that Lee was not involved in any of Dunham's criminal activities, but their position was that Dunham maintained "absolute control" over Rodan's accounts and Dunham commingled funds from numerous sources in the accounts under his control. Moreover, the People argued that Lee could not obtain restitution as a "victim" since Dunham had not been convicted of any crimes against Lee.
In February 2016, the trial court held a restitution hearing. Lee informed the court that he believed his investment in Rodan had avoided any tax penalties. The People reminded the court that Dunham used Rodan's funds to pay his living expenses and attorney fees, and there was no indication that Dunham treated Rodan as Lee's retirement account. After considering the parties' arguments and evidence, the court ordered restitution be paid to the named victims using the assets seized under section 186.11. The court further ordered that if any funds remained after the named victims were paid back in full, those funds should be allocated to Lee and another third party claimant.
Lee filed a timely notice of appeal from the trial court's restitution order. About a week later, Lee filed a petition for writ of supersedeas in this court. We granted the petition and stayed the restitution order during the pendency of this appeal.
DISCUSSION
I. Right to Appeal
Lee bases his right to appeal the trial court's restitution order on section 186.11, subdivision (f)(6), which makes any petition for protective relief under section 186.11 "part of the criminal proceedings for purposes of appointment of counsel . . . ." Lee further bases his right to appeal on Code of Civil Procedure section 902, which provides an "aggrieved" party the right to an appeal "in the cases prescribed in this title," i.e., in civil actions.
" ' "It is settled that the right of appeal is statutory and that a judgment or order is not appealable unless expressly made so by statute." ' " (People v. Mena (2012) 54 Cal.4th 146, 152 (Mena).) The right to appeal in a felony case is strictly limited by statute to the parties. (§§ 1235, 1237 [defendant], 1238 [the People]; People v. Chacon (2007) 40 Cal.4th 558, 564.) A crime victim or private citizen is not a party to a criminal case. (Dix v. Superior Court (1991) 53 Cal.3d 442, 450 ["[N]either a crime victim nor any other citizen has a legally enforceable interest, public or private, in the commencement, conduct, or outcome of criminal proceedings against another."].) "Significant public policies favor limiting the parties to a criminal action to the People and the defendant." (People v. Green (2004) 125 Cal.App.4th 360, 378 (Green).)
Section 186.11 provides a procedure for third parties to file claims for the release of frozen funds (§ 186.11, subd. (d)(6)), and Code of Civil Procedure section 902 limits civil appeals to aggrieved parties (Estate of Goulet (1995) 10 Cal.4th 1074, 1090). Neither of these statutes confers on third party claimants the right to appeal restitution orders in felony cases. One court has observed that the "restitution statutes seem to contemplate that the People will look after the victims' interests." (Green, supra, 125 Cal.App.4th at p. 378.)
Regardless, a reviewing court may exercise its appellate jurisdiction in an extraordinary writ proceeding. (Mena, supra, 54 Cal.4th at p. 153; Powers v. City of Richmond (1995) 10 Cal.4th 85, 93.) "The writ of mandate lies generally to compel performance of a legal duty when no plain, speedy, and adequate remedy at law is available." (Mena, at p. 153.) The denial of a third party claim under section 186.11 is reviewable by writ of mandate. (Q-Soft, Inc. v. Superior Court (2007) 157 Cal.App.4th 441, 446; see Melissa J. v. Superior Court (1987) 190 Cal.App.3d 476, 477 [victim of criminal conduct filed writ petition to challenge a ruling terminating restitution to the victim].) Although Lee did not file a petition for writ of mandate, we have the discretion to treat his appeal as a writ petition. (Olson v. Cory (1983) 35 Cal.3d 390, 400-401.)
Under the unusual circumstances here, we will treat the purported appeal as a petition for writ of mandate. The issue of appealability was far from clear in advance. Similarly situated third parties have proceeded with appeals in a handful of California cases. (E.g., Semaan, supra, 42 Cal.4th at p. 82; see People v. Hernandez (2009) 172 Cal.App.4th 715, 720.) The issues are fully briefed, and the record is adequate for purposes of writ review. The court made a final decision regarding Lee's claim, he does not possess another avenue of obtaining appellate review, and the issues should be resolved so the frozen funds may be distributed.
II. Lee's Claim of Ownership
Regarding the merits of Lee's claim, the main point of contention is whether he sufficiently established an ownership interest in the frozen funds. As we have indicated, there is no dispute that Lee was unconnected to Dunham's criminal activities.
A. Legal Principles
Section 186.11 authorizes a trial court to order preliminary relief, including "temporary restraining order[s], preliminary injunction[s], the appointment of a receiver, or any other protective relief necessary to preserve the property or assets" (§ 186.11, subd. (d)(2)) from which restitution might properly be paid. "Assets or property become subject to the court's jurisdiction on a showing that the defendant controls them. When a person has been charged under section 186.11 with an aggravated white-collar crime enhancement, 'any asset or property that is in the control of that person, and any asset or property that has been transferred by that person to a third party, subsequent to the commission of any criminal act alleged pursuant to subdivision (a), other than in a bona fide purchase, whether found within or outside the state, may be preserved by the superior court in order to pay restitution and fines pursuant to this section.' " (Semaan, supra, 42 Cal.4th at p. 86.)
"A showing that the defendant controls assets or property suffices to justify the issuance of preliminary relief because control furnishes an inference of ownership: 'A person who exercises acts of ownership over property is presumed to be the owner of it.' (Evid. Code, § 638.)" (Semaan, supra, 42 Cal.4th at p. 86.) "To assert a claim to frozen assets, as mentioned, a claimant must file 'a verified claim stating the nature and amount of his or her interest in the property or assets.' [Citation.] This plain language is reasonably interpreted as meaning simply that the claimant must show an ownership interest." (Id. at p. 87.) The burden of proof belongs to the claimant by a preponderance of the evidence. (Id. at pp. 87, 89.)
The court's finding whether a claimant possesses an ownership interest in frozen assets is a question of fact resolved on the basis of conflicting evidence. (Semaan, supra, 42 Cal.4th at p. 87.) We review the court's factual findings under the substantial evidence test. (Ibid.)
B. Analysis
Based on our review of the record, substantial evidence supports the court's implicit finding that Lee did not meet his burden of proving an ownership interest in the frozen funds. The trial court was entitled to presume, in the first instance, that Dunham owned the funds in Rodan's (and other) frozen bank accounts. (Evid. Code, § 638; Semaan, supra, 42 Cal.4th at p. 89 [defendants "completely controlled the bank account in question"].) At trial, the People showed that Rodan was Dunham's company, he maintained signatory power and control over Rodan's accounts, and he used the accounts for various legitimate and illegitimate purposes. Funds from Dunham's trust account and the proceeds from the sale of his Laguna Beach home were deposited into Rodan's bank accounts—significant indicators that Dunham treated Rodan's accounts as his own. Dunham commingled his and the named victims' funds in the numerous accounts under his control.
In turn, Lee did not rebut Dunham's ownership of Rodan's accounts, trace his funds to the frozen accounts, or establish that he placed his money in a "trust." Based on ample trial evidence, the court could find Dunham had commingled funds to such an extent that identifying or tracing Lee's funds was not possible and, in any event, had not been done. Lee did not show in which account or accounts his money was initially deposited, much less trace the money's final location to a frozen account. Some of Rodan's funds were used for investments; some had recently been used to pay Dunham's attorney fees. Moreover, "[t]he existence of a trust requires a clear intention to create the trust, although no particular language is necessary to manifest that intent." (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 448; Preston & McKinnon v. Brennan (1901) 135 Cal.55, 58 [where brother and sister commingled funds and had no explicit trust agreement, entire bank account could be levied to satisfy judgment against brother; he was not her "trustee" and the two had merely a debtor/creditor relationship].) Lee did not explain what limitations, if any, were placed on Dunham's use of the money, and Dunham used Rodan's funds in a completely unrestricted manner. There is insufficient evidence regarding a claimed trust relationship. The court could reasonably find that Lee did not meet his burden of proving an ownership interest in the frozen funds.
We also reject Lee's argument that he was entitled to the frozen funds because Dunham was a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA's protections apply only to statutorily defined plans that are established or maintained by an employer, e.g., an "employee benefit plan" or "pension plan." (Charles Schwab & Co. v. Debickero (9th Cir. 2010) 593 F.3d 916, 919.) "IRAs are specifically excluded from ERISA's coverage." (Ibid.) There is no evidence that Rodan was an employee benefit plan under ERISA or that Dunham was an ERISA fiduciary.
III. Victim Restitution
Section 186.11, subdivision (i) provides an order of priority for the distribution of frozen funds. Third in order of priority is "any victim as restitution for any fraudulent or unlawful acts alleged in the accusatory pleading that were proven by the prosecuting agency as part of the pattern of fraudulent or unlawful acts." (§ 186.11, subd. (i)(3).) If the value of frozen property is insufficient to pay for victim restitution, "the court shall order an equitable sharing of the proceeds[.]" (§ 186.11, subd. (j).) Lee contends he was at least entitled to an equitable sharing of the frozen funds on par with the named victims because he was also a "victim." His argument fails.
When a defendant is sentenced to state prison, section 186.11 "authorizes restitution only for losses caused by felonies constituting the 'pattern of related felony conduct' admitted or found true as part of the section 186.11, subdivision (a) allegation." (People v. Lai (2006) 138 Cal.App.4th 1227, 1251 [restitution could not be ordered for victims of uncharged crimes].) Here, Dunham was sentenced to prison for his convicted crimes, he was not alleged in any accusatory pleading to have committed a felony against Lee, Dunham did not admit to committing a felony against Lee, and the jury did not find that Lee's losses were caused by Dunham.
In support of his position, Lee points to the definition of "victim" in the California Constitution. "Section 186.11 . . . implements the state Constitution's declaration 'that all persons who suffer losses as a result of criminal activity shall have the right to restitution from the persons convicted of the crimes for losses they suffer.' " (Semaan, supra, 42 Cal.4th at p. 86.) The California Constitution defines " 'victim' " as "a person who suffers direct or threatened physical, psychological, or financial harm as a result of the commission or attempted commission of a crime or delinquent act." (Cal. Const., art. I, § 28, subd. (e).) These provisions do not support Lee's claim. There is insufficient evidence that Dunham committed a crime against Lee or that Lee's losses resulted from a crime. Thus, the court was not required to distribute an equitable share of the frozen funds to Lee.
DISPOSITION
The petition for writ of mandate is denied. The stay of the trial court's restitution order filed on May 4, 2016, is vacated.


NARES, J.

WE CONCUR:




BENKE, Acting P. J.




AARON, J.