Opinion
13-P-713
07-01-2015
COMMONWEALTH v. EDWARD W. PEPYNE, JR.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
A Superior Court jury convicted the defendant, Edward W. Pepyne, Jr., of one count of larceny over $250 from two persons over sixty years of age, relating to the theft of approximately $185,000, from settlement proceeds the defendant had received as the victims' lawyer. The defendant appeals, arguing that error in the jury instructions and improper admission of bad acts and character require a new trial. We affirm.
Facts. The jury could have found the following facts. On January 15, 2006, Roger and Marion Pearce were involved in a serious motor vehicle accident and sustained significant injuries. At the time of the accident, Marion was approximately seventy-two years old and Roger was approximately seventy-seven years old. The defendant, an attorney in Franklin County who primarily handled personal injury cases, contacted Roger Pearce. He had known Roger for many years and Roger considered him a friend. Shortly thereafter, Roger agreed to have the defendant represent him in the personal injury action related to the accident and signed a contingency fee agreement on February 9, 2006. The agreement provided that the defendant would receive one-third of any settlement. Apparently on the same day, the defendant also visited Roger's wife, Marion, at the rehabilitation center where she was recuperating from her injuries and she too signed the contingency fee agreement.
The Pearces' pickup truck was struck by a milk truck. Roger lost consciousness and broke his hip. Marion sustained a laceration to her head, broke several ribs, and fractured her spine.
The defendant has subsequently been disbarred.
On March 28, 2006, approximately seven weeks after taking on the Pearces as clients, the defendant sent a demand letter to Zurich American Insurance Company (Zurich), the company that insured the responsible party, seeking over $1 million in damages. In early April, the defendant reached a settlement with Zurich that provided compensation in the amount of $225,000 to Roger and $437,500 to Marion, for a total of $662,500. The defendant obtained a release from each client on April 18, and provided them to Zurich. Zurich, however, would not issue the settlement check until it received two additional releases from Medicare for liens for medical bills paid on behalf of each victim totaling $5,523.08. Zurich paid this sum and upon obtaining the release of liens, issued two checks for the balance of the settlement to each victim, totaling approximately $657,000. The defendant deposited both checks in his IOLTA (interest on lawyers' trust) account on June 8.
The demand letter sought $825,606.60 for Marion and $329,986.44 for Roger and included medical bills in the amounts of $137, $601.10, and $65,497.74.
The first lien was in the amount of $2,530.89 and reflected payment for the medical bills incurred by Roger; the second was in the amount of $2,992.19 and reflected payment for medical bills incurred by Marion.
On June 15, 2006, the defendant met with Roger, Marion, and their adult daughter at the Pearces' home to discuss the disbursement of the settlement funds. The defendant took out a piece of notebook paper and wrote at the top, "Rough Numbers." Beneath that title, he wrote the number "662," explaining that this was the settlement amount; below "662" he wrote the number "220," and said this was his fee, with the difference noted by the number "442," which he also wrote on the paper. The defendant explained that there were additional medical bills that totaled $202,000 and wrote the number "202" directly below "442," to represent those bills. Next to that number he made a notation, "doctors and hospitals 4-19-2006," and he then wrote the number "240," explaining that the latter figure was the balance of the settlement after legal and medical bills were paid. Under this balance the defendant wrote, "up to $250 quarter of a million and lawyer and medical providers fight over the rest."
The prosecutor appears to have mistakenly believed that the meeting took place on April 19, 2006, as he twice asked Roger Pearce to affirm that this meeting took place on that date, to which Roger responded, "I suppose so" and "I think that's right." However, the defendant made clear in his testimony that the date of April 19, 2006, on the paper denoted what the defendant represented were the outstanding medical bills as of that date. The defendant made clear that he met with the victims on June 15, 2006, after discussing the liens with Medicare, and that he left the meeting and returned the same day with the settlement check dated June 15, 2006.
According to Roger and his daughter, this document outlined how the settlement proceeds would be used, and summarized the following conversation with the defendant. Because it was clear from the figures on the paper that if the victims received $250,000, only $192,000 would be left to cover medical bills purportedly totaling $202,000, the defendant explained that he would "negotiate the hospital bill down a little" and that "he was going to use [the remainder] to pay hospital bills, doctor bills, or medical bills of any kind." Roger testified that from this conversation he understood that the defendant would give them $250,000 as their settlement. The daughter testified that the defendant said "there wasn't going to be money left" because the amount remaining "would hopefully cover all of the medical bills," an understanding her father shared. She also testified that the defendant said that he would take a portion of his fee if necessary in order to insure that the victims would get $250,000.
After this discussion, the victims agreed to the settlement figure of $250,000 written on the paper and the defendant had both victims initial it. Both Roger and his daughter testified that they believed the paper was an explanation of where the money was going, not an amendment or change to the original contingency fee agreement. The defendant went from this meeting to his office to retrieve the settlement check, and returned the same day and gave the Pearces a check for $250,000.
At the time of the June 15 meeting, however, when the defendant represented that there were $202,000 in outstanding medical bills, the evidence shows that virtually all of the bills he was aware of had been paid in full or otherwise satisfied. For example, Medicare had already provided releases, and the largest medical bill for Marion from Baystate Medical Center (over $117,000) showed a zero balance. Nor was any evidence adduced that the defendant had received other insurer liens or subrogation requests, or that he was aware of any.
After the defendant issued the settlement check, he paid one medical bill for approximately $952 and over the next five weeks took the more than $400,000 that remained for himself. The Pearces also received several additional small medical bills totaling between $2,000 and $3,000 after the case had been settled, but, as Roger testified, he paid them because he "didn't think there was enough in escrow to pay all the bills."
The defense was presented primarily through the defendant's testimony. He claimed that the victims wanted to settle the case quickly and in exchange for increasing the amount of their settlement by $10,000, the defendant assumed the risk of paying all of the outstanding medical bills. He explained that under this agreement if the bills exceeded the amount in escrow he would pay them from his fee, and if they were less than the escrow he would keep the extra money. The defendant did not dispute that he took virtually the entire remaining balance for his personal use, but maintained that he was entitled to it because the notations on the paper initialed by the victims constituted an amendment to the original contingency fee agreement under which he assumed the risk of paying any and all additional medical bills in exchange for the right to keep any outstanding balance.
Discussion. 1. Jury instruction. The defendant argues that a portion of the judge's larceny instruction -- concerning the requirement that the property at issue must belong to another -- impermissibly shifted the burden of proof to him. Generally speaking, larceny requires proof that the defendant unlawfully took and carried away "the personal property of another with the specific intent to deprive the person of the property permanently." Commonwealth v. Johnson, 379 Mass. 177, 181 (1979). Commonwealth v. St. Hilaire, 470 Mass. 338, 343 (2015). In this case, the defendant acknowledged that he took the property at issue, but raised a defense that he had the authority to do so, or, alternatively, that he had an honest but mistaken belief that he had a right to take the property. Commonwealth v. O'Connell, 438 Mass. 658, 664 (2003). Commonwealth v. St. Hilaire, 470 Mass. at 348.
In addition, the Commonwealth was required to prove two additional elements that are not in dispute on appeal, nor were they at trial, namely, that the larceny of the property was from persons sixty years of age or older and that the value of the property exceeded $250.
When the judge gave the following instruction on larceny he took into account the defense theory.
"The first element of [larceny,] taking and carrying away[,] is accomplished if the defendant physically transfers the property from the other person's control or possession to his own possession or control. It does not matter if the transfer involves only slight movement or if it only lasts for a short time. In this case it is alleged by the Commonwealth that funds were transferred from the client trust fund account to the firm's business account and later disbursed by the defendant.
"This transfer of the funds from the client trust fund account, also known as the IOLTA account, to the fund's [sic] business account may be considered by you as a taking and carrying away of the funds.
"The second element. The second element the Commonwealth must prove beyond a reasonable doubt is that the property was owned or possessed by a
person authorized to possess such property; in this case, Roger Pearce and/or Marion Pearce.
"As a matter of law, the remaining funds in the client trust fund account, after payment of the attorney's fees as described in the original contingency fee agreement, and for payment of any outstanding medical bills are the property of Roger and Marion Pearce.
"The third element. The third element that the Commonwealth must prove beyond a reasonable doubt is that the defendant had no right or authorization to take the property from Roger Pearce and/or Marion Pearce. If the defendant had an honest but mistaken belief that he was entitled to take the balance of the funds in the client trust fund account, he must be found not guilty. In other words, the Commonwealth has to prove that the defendant was aware that he was not entitled to take the money but did so without any right or authority.
"The fourth element. The fourth element that the Commonwealth must prove beyond a reasonable doubt is that the defendant intended to deprive the owner of the property permanently." (Emphasis added.)
The defendant argues that the emphasized portion of the instruction regarding proof of possession was wrong. The defendant did not object at trial, but contends now that it improperly informed the jury that the "'attorney fee' at issue was 'by law' the property of Roger and Marion Pearce." The defendant adds, somewhat confusingly, that the effect of this instruction was to "relieve[] the Commonwealth of having to prove that the property at issue did not belong to [the defendant]" and improperly shifted the burden to the defendant to prove that the original contingency fee agreement was modified, that the property did not belong to the Pearces, and that he was lawfully entitled to the money.
At the outset we note that the argument appears to muddle the allocation of the burden of proof when the defense of authority or of honest but mistaken belief is claimed. The defendant bears the initial burden of production when either defense is raised; that burden is met "if any view of the evidence" would support a factual finding that the defendant had the authority or honestly believed he or she had a legal right to take property. See Commonwealth v. O'Connell, 438 Mass. at 664; Commonwealth v. Liebenow, 470 Mass. 151, 157 (2014). Once established, the burden shifts to the Commonwealth to disprove the defendant's claim of right or honest but mistaken belief. Commonwealth v. O'Connell, 438 Mass. at 664; Commonwealth v. St. Hilaire, 470 Mass. at 348. To the extent the defendant's argument suggests he has no burden of production, he is incorrect.
In any event, the challenged portion of the instruction correctly set forth the status of the funds at the time they were deposited into the defendant's IOLTA account on or about June 8, 2006 -- those settlement funds belonged to the victims. See generally Mass.R.Prof.C. 1.15, as appearing in 440 Mass. 1338 (2004). Nor was there any dispute at trial regarding the additional point in the instruction that the settlement was subject to the provisions of the original contingency fee agreement that allocated to the defendant one-third of the proceeds as a fee. See Commonwealth v. Liebenow, 470 Mass. at 156-158 (larceny requires proof of specific intent to steal which may be negated by honest but mistaken belief).
Rather, the defense claimed that a week later, on June 15, 2006, the contingency fee agreement was modified when the victims initialed the paper outlining the settlement disbursement. Because the defense hinged on the notion that the original contingency fee agreement was changed on June 15, the judge's instruction, which merely set forth the status of the funds prior to that date, did not affect the defense as presented. The instruction was consistent with the trial strategy that acknowledged the validity of the original contingency fee agreement, but maintained that the parties subsequently modified it and altered the disbursement of the proceeds. That the defendant understood the settlement proceeds belonged to the victims was also clear from his act of having them initial the paper that he claims was a modification, because it shows that he knew he needed their permission or authorization to disperse their property. There was no error.
The victims eventually received an additional $185,000 from the Client Security Board. That figure appears to approximate the settlement ($662,000), less (1) the lawyer fee ($220,000); (2) the approximate amount paid to Medicare ($500); (3) the amount the victims already received ($250,000); and (4) the medical bill paid by the defendant ($1,000).
We are bolstered in the conclusion that the instruction at issue did not shift the burden of proof where the questions posed by the jury demonstrate that they were properly focused on the defense claim. First, the jury asked, "Legal definition of a contract in Massachusetts, must it be signed?" Later, the jury asked, "If you knowingly create a fraudulent contract is that contract legally binding?" The questions make clear that the only way to sensibly consider the defense theory was to start from the premise that the property belonged to the victims and that resolution of the case turned on whether the defendant had a right to take that property.
The judge instructed the jury only on the traditional theory of larceny, and refused to give an instruction on larceny by false pretenses because he reasoned that the evidence showed only omissions of accurate statements rather than false statements on which the victims may have relied, and, therefore, the judge concluded such an instruction would confuse the jury.
2. Prior bad acts. The defendant argues that Tammy Purslow should not have been permitted to testify that the defendant had represented her in a personal injury action and had kept sixty percent of the settlement when the contingency fee agreement indicated he would receive only one-third. Specifically, Purslow testified the defendant settled her case in 2005 for $250,000. She received a settlement check from him for $100,000; he took his fee of $83,000, and told her that the remainder (about $67,000) was required to reimburse her health insurer, but then he never paid the insurer.
The judge correctly ruled that the evidence was admissible to show a unique scheme and intent. See Commonwealth v. Helfant, 398 Mass. 214, 224 (1986) (evidence of prior bad acts may be admissible to show common scheme, pattern of operation, identity, intent, or motive, as long as its probative value is not substantially outweighed by its prejudicial effect). See also Commonwealth v. Forte, 469 Mass. 469, 479 (2014). Moreover, any prejudice was ameliorated by the judge's correct limiting instructions given when the evidence was admitted, and again during his final instructions.
3. Bad character evidence. The prosecution also elicited evidence, over objection, concerning the defendant's financial difficulties that included his failure to pay his secretary, insufficient fund charges to his checking accounts, and the use of business accounts to pay his mortgages, as well as other personal expenses. Contrary to the defendant's claim on appeal, the evidence was probative of the defendant's motive to steal and, thus, properly admitted. See Commonwealth v. Anolik, 27 Mass. App. Ct. 701, 707 (1989) (evidence of increasing homeowners insurance in case alleging larceny and receiving stolen property relevant to show motive or intent related to burning of home on which insurance was obtained). See also Commonwealth v. Peakes, 231 Mass. 449, 457 (1918).
4. Ineffective assistance and cumulative error. The arguments raised above fare no better recast as claims of ineffective assistance of counsel, Commonwealth v. Randolph, 438 Mass. 290, 295-296 (2002), and, because we have concluded that none of the defendant's arguments have identified error, we need not consider the final contention of cumulative error.
Judgment affirmed.
By the Court (Cypher, Hanlon & Agnes, JJ.),
The panelists are listed in order of seniority. --------
Clerk Entered: July 1, 2015.