Embezzlement and attempted extortion convictions reversed

Appellant’s transfer of road maintenance funds from a segregated account to his own business account was not an embezzlement because the funds were paid to him but not entrusted to him.

Further, appellant’s notice to a property owner to pay a past-due assessment to avoid having a lien placed on his property was not attempted extortion because providing legal notice of intent to file a lien is not a wrongful threat.

Assessments

Ware, the appellant, subdivided property and recorded a road dedication and maintenance agreement, under which property owners would be assessed $200 per year to maintain the right-of-way. Ware established a bank account for the assessments in addition to his own business account. Stephen and Susan Cabiroy bought two lots as trustees of a family trust.

Lot owners described Ware’s maintenance efforts – cutting grass, weeds and small trees in the right-of-way – as “minimal.” Ware collected fees from 2007 to 2014, when he withdrew $3,000 from the maintenance account and transferred it to his business account. The commonwealth alleged this withdrawal was an embezzlement.

In 2009, Ware unilaterally increased the annual assessment from $200 to $5,000 but provided a $4,800 discount to property owners who timely paid the assessment. If a payment was more than 30 days late, the entire $5,000 plus interest and a late fee would be due. In 2014, Cariboy sent Ware an assessment check for $356.10, to reflect money he spent on gravel he put on the road. Ware returned the partial payment and claimed Cariboy now owed $10,000 for the two lots. Cariboy did not pay.

In 2015, Ware, sent a letter stating that in 10 days, he would file a memorandum of lien against Cariboy’s property. Included was an invoice for 2014’s maintenance assessment, interest and penalties, and the 2015 maintenance assessment. The invoice totaled more than $30,000. The commonwealth alleged that the letter was a threat against Cariboy’s title to property and was thus an attempted extortion.

Ware was convicted of both charges and appeals on the basis of insufficient evidence.

No entrustment

“‘To establish the statutory crime of embezzlement under Code § 18.2-111, it is necessary to prove that the accused wrongfully appropriated to [his] use or benefit, with the intent to deprive the owner thereof, the property entrusted to [him] by virtue of [his] employment or office.’ … ‘Although the Commonwealth need not establish the existence of a formal fiduciary relationship, it must prove that the defendant was entrusted with the property of another.’ …

“[T]he annual road maintenance fees were paid to Ware, but not entrusted to him. The evidence showed, and the Commonwealth conceded to this Court during oral argument, the lot owners paid the road maintenance fees to Ware and expected from Ware his future service in maintaining the road. …  Moreover, nothing in the record suggests the lot owners expected Ware to ‘return the monies or deliver them to a third person.’ …

“Thus, whether Ware deposited the fees in his business or personal account … or created a segregated account, Ware’s dominion and control over the money was not unauthorized or wrongful. … The fees paid to Ware became his property and were not ‘property of another’ for purposes of embezzlement.

“Contrary to the Commonwealth’s argument, Ware’s transfer of $3,000 from one of his bank accounts to another was not embezzlement because Ware had unrestricted dominion and control over both accounts. The question of whether the lot owners got a ‘good deal’ for their money is an issue of contract law and not embezzlement. …

“Because the road maintenance fees were not the entrusted property of another, the court erred in denying Ware’s motion to strike the embezzlement charge.”

Attempted extortion

“Ware argues there was insufficient evidence to convict him of attempted extortion because providing legal notice of intent to file a memorandum of lien was not a wrongful threat. We agree.

“‘[T]he gravamen of extortion is wrongfully obtaining a benefit through coercion.’ … Thus, a threat to exercise a lawful method of enforcement rights, without more, does not constitute extortion.

“The quintessential example of lawful and valid exercise of enforcement rights is the use of the judicial process. …

“Here, the Commonwealth alleged that Ware’s notice of intent to place a lien on Cariboy’s property was a wrongful threat that constituted extortion. The trial court agreed and denied Ware’s motion to strike, reasoning that the letter written to Cabiroy might have been an ‘improper means to slander the title to collect money.’ The court thus reasoned that Ware’s notice of intent to place a lien could be a wrongful method of collecting the money. This was error.”

Code § 55-516(C) specifies the procedure for perfecting and enforcing a lien. Ware’s letter complied with all the statutory requirement and therefore was a “was a material and relevant statement related to a judicial proceeding and thereby enjoyed absolute privilege. … To find otherwise would suggest that any creditor who says, ‘Pay me what you owe me, or I will sue you,’ is guilty of attempted extortion.”

Reversed.

Ware v. Commonwealth, Record No. 1458-18-2, Oct. 1, 2019. CAV (Petty) from New Kent Cir. Ct. (Maxfield). Anthony G. Spencer for appellant, Eugene Murphy for appellee. VLW 019-7-166, 11 pp. Unpublished.