Coleman v. State

ARRIE W. DAVIS (Retired, Specially Assigned), J. Leon Thomas Coleman, Jr., appellant, was charged with fifty-seven counts of theft, failure to hold money in an escrow account and other charges arising out of transactions relating to a construction project known as Kings Grant Court in Prince George’s County. A jury trial was held in the Circuit Court for Prince George’s County on June 8, 9, 10, 11 and 15, 2009. Several counts were nolle prossed and the trial judge granted judgments of acquittal as to others. Ultimately, the jury considered eight counts of theft over $500, in violation of § 7-104 of the Criminal Law Article and eight counts of failure to deposit money in an escrow account, in violation of § 10-301(a) of the Real Property Article.

The jury found appellant guilty of all sixteen counts. Appellant was sentenced to fifteen years’ incarceration, with all but eighteen months suspended, for each count, and was given credit for time served. The trial judge ordered that the sentences for the two crimes against each victim run concurrently, and those eight concurrent sentences were to run consecutively, for a total period of twelve years’ incarceration. The court also ordered restitution as to each victim, totaling $502,178.43.

Issues Presented Appellant presents three issues 1 for our consideration, which we have divided, rephrased and reordered as follows: ⁶³⁷ I. Whether the circuit court erred in denying appellant’s motion for judgment of acquittal on the charge of failure to escrow funds received; II. Whether appellant was improperly prosecuted for theft by deception when the more specific criminal provisions of the Deposits on New Homes statutes were operative; III. Whether the circuit court erred in denying appellant’s motion for judgment of acquittal on the charge of theft by deception; IV. Whether the circuit court abused its discretion in admitting in evidence the testimony of an Assistant Attorney General regarding administrative proceedings; and, V. Whether the circuit court’s order of restitution was supported by a preponderance of the evidence.

For the reasons set forth below, we shall reverse. Procedural and Factual Background Opportunities Investment Group (OIG), a corporation formed by appellant and his wife, acquired the right to purchase a plot of land in Prince George’s County known as Kings Grant Court. Kings Grant Court had been subdivided into eleven lots in 1978. A plat from that time indicated that some of the lots were in a flood plain.

The State elicited testimony that obtaining permits from various county offices required surveys and submission of plans before commencement of actual construction on the lots, and that this process could take twelve to eighteen months and cost at least $100,000. From mid-February through mid-June of 2004, appellant, on behalf of OIG, contracted with ten buyers to build homes on ten of the lots in Kings Grant Court and he assured them that he had only a small number of lots. Eight of the purchasers testified at trial and all gave similar testimony about their transactions. Appellant met with each of the lot purchasers; he claimed to have been building homes for years and that he had only a small number of lots remaining in the Bangs Grant development.

Appellant accompanied some of the purchasers, and directed others, to see other homes that ⁶³⁸ he either claimed to be building or gave the purchasers the impression that he was building. Appellant showed the purchasers drawings and floor plans. He also told some of the purchasers that they could expect their homes to be built within six or nine months. Appellant did not tell any of the purchasers that there were any problems that might cause a delay in construction, nor did he indicate that there were any difficulties in obtaining required permits, nor say anything about flood plains, although he told one purchaser that the flood plain would have to be filled in.

He told some of the purchasers that he had already applied for some permits and would receive them within two months. Each buyer executed a contract obligating OIG to convey a lot to the buyer and construct a house on it. Almost all of the contracts identified the cost of the lot and some indicated that the lot was not owned by appellant, but by an individual named Taro Gehani. 2 All of the buyers paid between $2,250 and $3,500 for blueprints and some made down payments or remitted deposits for their lots. The deposit of $2,500 remitted by Rana Harris was placed in OIG’s escrow account, but the funds received for blueprints and the deposits of the other buyers were placed in OIG’s operating account.

With respect to financing, appellant encouraged the buyers to secure preferential financing from Worldwide Financial Resources and he also volunteered to pay closing costs. Each of the buyers obtained a construction loan from First Mariner Bank or Washington Savings Bank in amounts ranging from $256,000 to $381,000 to cover the purchase of the lots, construction of the homes, closing costs, and interest payments. At the time of settlement, the borrowers received an initial advance on the loan. William Brenner, a senior vice president at First Mariner Bank, testified that the initial advances were made for the purchase of each lot so that the borrowers could ⁶³⁹ receive the deeds to the land and become the owners of the property.

After the initial advance was made, the bank held the remaining funds in a construction escrow account. OIG was to be paid pursuant to a draw schedule as construction progressed. According to Brenner, builders are not paid in advance, but are always reimbursed for their work. As a result, builders typically pull the permits and “start building right away so they get paid right away.” Brenner described the Kings Grant Court transactions as “highly unusual” because, after the initial advances were made, time passed without any requests for first draws under the construction draw schedules.

Appellant contracted with Michelle Barnes of MDB Design Group, LLC (MDB), to convert conceptual drawings into blueprints. According to Barnes, MDB provided architectural drawings and permit processing, although neither she nor her partner was a licensed architect or engineer. MDB would typically prepare architectural drawings and then work with a registered architect who would review the drawings and stamp them. Appellant gave Barnes floor plans that were drawn by someone else and Barnes used them to prepare architectural drawings.

Appellant paid MDB $8,000 for the architectural drawings. On June 30, 2004, appellant also retained MDB to “hire someone to provide engineering services for him.” MDB’s work was [t]o prepare design and construction drawing, including site plans/civil, architectural, environment/erosion/sediment control, structural, medical, HVAC & plumbing, electrical, water and sewer plans, street construction, street grade establishment, storm water management application, flood plain studies, driveway entrances, paving plans, lot stakeouts, house location plans, final report certificates and fire safety. In addition, MDB was to hold meetings with the developer and “obtain approvals of the Prince George’s County building permits.” The total contract price was $70,000. Appellant ⁶⁴⁰ paid MDB a deposit of $7,000 and later an additional payment of $7,000.

Barnes testified that, prior to the Kings Grant subdivision, she had never been involved with the development of a subdivision. She stated that appellant did not want to deal with engineers directly, so she retained an engineering group to work on the project. According to Barnes, the engineering group she retained submitted, through MDB, an application for a storm water management plan, but the plan was never approved by Prince George’s County. Barnes testified that she never heard from appellant that MDB’s services were terminated, but she did not receive any payment from him after the second payment of $7,000.

On June 30, 2004, appellant notified the purchasers that home construction was “moving right along” and that he had “initiated water and sewer permits, preconstruction and individual site plans for the Kings Grant Court subdivision.” The only filing made by MDB on behalf of OIG, however, was the application to Prince George’s County for approval of a storm water management concept plan, filed in September 2004, that was never approved. On July 26, 2004, appellant sent another letter to the purchasers, stating that the required site plans had been completed, but he could not continue to pay interest on the purchasers’ loans. He requested that the purchasers pay their own interest and that he would reimburse them later for interest payments they made. In November 2004, appellant met with James Reid, CEO of Civtech Designs, an engineering and surveying firm with experience in developing subdivisions.

Reid told appellant that it would cost approximately $100,000 to do the civil engineering design and surveying services for the development of Kings Grant Court and that the process would take at least one year. On November 16, 2004, appellant paid Civtech Designs half of a $10,000 retainer for site work planning. Thereafter, appellant made no more payments to Civtech. ⁶⁴¹ On December 3, 2004, appellant notified the buyers that he had fired MDB and hired Civtech to ensure issuance of a grading permit. As a result of a “good financial plan,” he wrote, the cost of their homes would not increase.

Later that same month, First Mariner Bank notified its borrowers that no funds had been disbursed from their construction loans, aside from payments made at settlement, and that no draws would be allowed after the maturity date, sometime in early 2005. At that time, the loans would be considered immediately due and payable. Troubled by this advisement, the buyers, in late 2004, met to discuss the situation. They decided to hire Steve Gaskins, a consultant, to conduct a feasibility study and advise them as to how to proceed.

After receiving Gaskins’s feasibility study, most of the purchasers concluded that their homes could not be constructed unless “a lot of [remediation] work” was done. Of the eight purchasers who testified at trial, four had their property foreclosed upon, and three refinanced their loans as lot loans and owned their lots at the time of trial, although one of those owners had defaulted on his loan and one couple filed for bankruptcy. Discussion I Appellant first contends that the evidence was insufficient to sustain his convictions for failing to deposit funds in an escrow account, as required by the Deposits on New Homes subtitle, § 10-301 et seq. of the Real Property Article (RP). Appellant argues that, to the extent that he had any obligation to escrow funds received from the purchasers, that obligation was extinguished when he deeded the properties to the buyers and did not continue until he completed construction of the improvements.

Appellant further argues that the evidence was insufficient to establish beyond a reasonable doubt that OIG did not refund the monies it received from the purchasers. The State counters that appellant’s escrow obligation under the Deposits on New Homes subtitle was extinguished only upon the “granting of a deed to the property on which the residential unit is located,” and not upon the granting of the ⁶⁴² deed to the lot alone. The State further contends that the risk that appellant would take a purchaser’s money and not use it for the construction of a home continued after the deeds to the lots were transferred to the purchasers and throughout the period of construction. The State urges us to construe RP § 10-301 as requiring a builder to hold in escrow any sums of money received from a purchaser, including the deposit, until completion of the house.

A determination of whether RP § 10-301 et seq. required appellant to escrow funds until he completed construction pursuant to the contracts requires an examination of the plain language of the Deposits on New Homes subtitle. The cardinal rule of statutory construction is to ascertain and effectuate legislative intention. State v. Green, 367 Md. 61, 81 , 785 A.2d 1275 (2001) (and cases cited therein). Our “ ‘quest to discover and give effect to the objectives of the legislature begins with the text of the statute.’ ” Adamson v. Correctional Medical Svcs., Inc., 359 Md. 238, 251 , 753 A.2d 501 (2000) (quoting Huffman v. State, 356 Md. 622, 628 , 741 A.2d 1088 (1999)). “ ‘[I]f the plain meaning of the statutory language is clear and unambiguous, and consistent with both the broad purposes of the legislation, and the specific purpose of the provision being interpreted, our inquiry is at an end.’” Thomas v. Dep’t of Labor, Licensing, and Regulation, 170 Md.App. 650, 659 , 908 A.2d 99 (2006) (quoting Breitenbach v. N.B. Handy Co., 366 Md. 467, 473 , 784 A.2d 569 (2001)).

See also Adamson, 359 Md. at 251 , 753 A.2d 501 (and cases cited therein)(if legislature’s intentions are evident from text of statute, inquiry will cease and plain meaning of statute will govern). “Where the statutory language is plain and unambiguous, a court may neither add nor delete language so as to ‘reflect an intent not evidenced in that language.’ ” Chesapeake & Potomac Telephone Co. v. Director of Finance for Mayor and City Council of Baltimore, 343 Md. 567, 579 , 683 A.2d 512 (1995) (quoting Condon v. State, 332 Md. 481, 491 , 632 A.2d 753 (1993)). We will avoid constructions that are “illogical, unreasonable, or inconsistent with common sense.” Frost v. State, 336 Md. 125, 137 , 647 A.2d 106 (1994). Moreover, we will not ⁶⁴³ engage “ ‘in a forced or subtle interpretation in an attempt to extend or limit the statute’s meaning.’ ” Nesbit v. GEICO, 382 Md. 65, 76 , 854 A.2d 879 (2004) (quoting Taylor v. Nations-Bank, 365 Md. 166, 181 , 776 A.2d 645 (2001)). “We bear in mind, however, that the plain meaning rule is elastic, rather than cast in stone.” Adamson, 359 Md. at 251 , 753 A.2d 501 (citing Kaczorowski v. Mayor of Baltimore, 309 Md. 505, 513 , 525 A.2d 628 (1987)). “If persuasive evidence exists outside the plain text of the statute, we do not turn a blind eye to it.” Id. We may consider the context in which the statute appears, related statutes, legislative history and other sources for a more complete understanding of what the General Assembly intended when it enacted particular legislation.

Id.; Ridge Heating, Air Conditioning & Plumbing v. Brennen, 366 Md. 336, 350-51 , 783 A.2d 691 (2001). “We may also consider the particular problem or problems the legislature was addressing, and the objective it sought to attain.” Sinai Hosp. of Baltimore, Inc. v. Dep’t of Employment and Training, 309 Md. 28, 40 , 522 A.2d 382 (1987). “This enables us to put the statute in controversy in its proper context and thereby avoid unreasonable or illogical results that defy common sense.” Adamson, 359 Md. at 252 , 753 A.2d 501 . We begin our analysis with the statutory language of RP § 10-301, which provides: (a) When required. — If in connection with the sale and purchase of a new single-family residential unit which is not completed at the time of contracting the sale, the vendor or builder obligates the purchaser to pay and the vender or builder receives any sum of money before completion of the unit and grant of the realty to the purchaser, the builder or vendor shall: (1) Deposit or hold the sum in an escrow account segregated from all other funds of the vendor or builder to assure the return of the sum to the purchaser in the event the purchaser becomes entitled to a return of the sum; (2) Obtain and maintain a corporate surety bond in the form and in the amounts set forth in § 10-302 of this ⁶⁴⁴ subtitle, conditioned on the return of the sum to the purchaser in the event the purchaser becomes entitled to the return of the money; or (3) Obtain and maintain an irrevocable letter of credit issued by a Maryland bank in the form and in the amounts set forth in § 10-303 of this subtitle. (b) Maintenance until certain events. — The vendor or builder shall maintain the escrow account, surety bond, or irrevocable letter of credit until the happening of the earlier of: (1) The granting of a deed to the property oh which the residential unit is located to the purchaser; (2) The return of the sum of money to the purchaser; or (3) The forfeiture of the sum by the purchaser, under the terms of the contract of sale relating to the purchase of the residential unit. The plain language of the statute clearly shows that the legislature intended to protect purchasers in certain transactions involving new residential units from unscrupulous vendors and builders who might take payments, such as deposits, made prior to a conveyance.

The type of conveyance covered by the statute, however, is ambiguous. In the transactions involved in the instant case, the new single-family residential units were not completed at the time the sales were contracted and, therefore, the transactions arguably fall within the statutory provisions. However, the statute’s reference to a new single-family residential unit which is not completed at the time of contracting the sale and, to a purchaser’s payment of money “before completion of the unit and grant of the realty,” arguably suggests that the statute applies to instances where construction of the unit has, in some way, begun at the time the parties enter into the contract. In addition, the statute’s mandate that the escrow account be maintained until the “granting of the deed to the property on which the residential unit is located” suggests that the statute anticipates a transaction where the deed to the land is conveyed after the residen ⁶⁴⁵ tial unit is constructed, and that the land and the residential unit would be conveyed simultaneously to a purchaser.

That interpretation is supported by the fact that the Deposits on New Homes subtitle does not address the payments for labor and materials that are made in accordance with a draw schedule in construction loan transactions such as those at issue in the instant case. In addition, we note that RP § 10-304 provides an exemption from the provisions of the Deposits on New Homes subtitle for a sale by or through a licensed real estate broker in connection with which all sums of money in the nature of deposits, escrow money, or binder money are paid to a broker to be held in the escrow account of the broker. This exemption makes sense because, when money in the nature of deposits, escrow money, or binder money are paid to a licensed real estate broker, the risk that an unscrupulous vendor or builder might take it is eliminated. Noticeably absent from this provision, however, is any reference to construction loan situations, where construction loan amounts might be available to a builder through a draw schedule.

Such issues were specifically addressed by the legislature when, in 1986, it enacted the Maryland Custom Home Protection Act (MCHPA), RP § 10-501 et seq. The MCHPA requires, with certain exceptions, that all consideration received by a custom home builder from a buyer in connection with the performance of a custom home contract be placed into an escrow account, “to the extent that the consideration is a payment in advance of the completion of the labor or the receipt of the materials for which the consideration is paid.” RP § 10 — 504(a)(1). Section 10-504(b) specifically details the circumstances under which a custom home builder may make withdrawals from an escrow account and § 10-504(e) further provides that the escrow account requirements do not apply in the following transaction: (1) A custom home contract financed by a mortgage loan issued by a federally chartered financial institution or a ⁶⁴⁶ financial institution regulated under the Financial Institutions Article; and (2) A sale by or through a licensed real estate broker in connection with which all sums of money in the nature of deposits, escrow money, or binder money are paid to a broker to be held in the escrow account of the broker. As with the Deposits on New Homes subtitle, the intent of the legislature in enacting the MCHPA was clearly to protect custom home purchasers from unscrupulous custom home contractors.

See Schwartz v. State, 103 Md.App. 378 , 653 A.2d 958 (1995), cert. denied, 339 Md. 168 , 661 A.2d 701 (1995) (the MCHPA provides a specific remedy for custom home owners dealing with impecunious contractors). Nevertheless, as we have already noted, a custom home builder is only obligated to deposit funds in an escrow account “to the extent that the consideration is a payment in advance of the completion of the labor or the receipt of the materials for which the consideration is paid” because that is, obviously, the money that the statute was designed to protect. That is also why the escrow requirements do not apply to custom home contracts financed by a mortgage loan issued by a federally chartered financial institution or a financial institution regulated under the Financial Institutions Article, or to sales by or through a licensed real estate broker in connection with which all sums of money in the nature of deposits, escrow money, or binder money are paid to a broker to be held in the escrow account of the broker. In those instances, the funds of the custom home purchaser are already protected.

In the case before us, the transactions at issue did not involve situations in which the land and a new single-family residential unit would be conveyed simultaneously to each purchaser, such as was contemplated by the legislature in RP § 10-301. Rather, the contracts specifically identified the portion of the purchase price allocated to the purchase of the lot and, at the settlement on the construction loans, each purchaser received the deed to his or her lot, with construction of the homes in the subdivision to occur at a later date. In the underlying transactions, once the land was conveyed to ⁶⁴⁷ the purchasers, they were not in need of the protections afforded by an escrow account maintained by the vendor or builder because each purchaser had obtained a construction loan that provided for a construction escrow and draw schedule. As no construction work was ever done, no draws were made against any of the purchasers’ construction escrow accounts.

It would seem a logical assumption that, if construction work had been done and OIG received a draw from the construction escrow, it would have been able to use those funds to pay its subcontractors, suppliers and the like. But such provisions are not included in the Deposits on New Homes subtitle because it does not contemplate such a situation. The statute simply was not designed to address a transaction involving the sale of a single-family residential unit and a lot that are not conveyed simultaneously. The case before us involves considerable evidence of underlying contracts and breaches thereof.

It is important to remember, however, that this is a criminal