Kirschner v. State

Citations: 997 S.W.2d 335; 1999 Tex. App. LEXIS 5198; 1999 WL 496131Docket: 03-97-00786-CR

Court: Court of Appeals of Texas; July 15, 1999; Texas; State Appellate Court

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Patrick Kirschner was convicted of misapplying more than $500 in trust funds related to a construction contract, receiving a ten-year prison sentence that was suspended in favor of community supervision. Kirschner raised five points of error, claiming insufficient evidence for conviction, constitutional vagueness of the statute, and denial of his right to a speedy trial. The Court of Appeals of Texas, however, overruled these contentions and upheld the district court's judgment.

The case originated when Kirschner, operating as P.K. Construction, contracted to build a house for Dale and Betty Ford for $131,074, financed by a combination of an $86,000 mortgage and the Fords' personal savings. The Fords paid Kirschner a total of $172,513, including funds from loan proceeds and personal checks for additional expenses. Disputes arose when the Fords refused to pay a subsequent bill totaling $10,552, believing they had already covered those expenses. They dismissed Kirschner and hired another contractor, incurring additional costs.

On September 26, 1991, during final arrangements for the Ford transaction, Kirschner provided a document listing expenses and payments totaling $177,509, including claims for unpaid amounts to subcontractors and vendors. This documentation was scrutinized due to concerns about unpaid vendors, impacting the lending bank's financing decision.

Kirschner provided photocopies of numerous canceled checks from December 1990 to August 1991 to support claims of payments made for the Ford project. However, these checks lacked clear indications linking them to the project, prompting Kirschner to later allocate them from memory and annotate them accordingly. Seventeen unpaid subcontractors and vendors filed liens against the Ford property, resulting in the Fords paying $21,901 to resolve these liens before closing. 

The appellate focus for both Kirschner and the State centered on whether he defrauded the Fords, a matter not directly related to the charges against him. Kirschner was indicted for violating Texas Property Code chapter 162, which designates payments and borrowed funds for property improvements as trust funds. Under this law, a contractor receiving such funds acts as a trustee, and those providing labor or materials are beneficiaries. Misapplication of trust funds exceeding $500 without settling obligations to beneficiaries constitutes a felony if done with intent to defraud.

The indictment specifically claimed that on September 27, 1991, Kirschner, operating as P.K. Construction, knowingly misapplied trust funds without paying his obligations to various subcontractors and materialmen connected to the construction. Notably, the indictment emphasized that the misapplied funds were not used to cover Kirschner’s actual construction-related expenses, impacting the State's burden of proof. Additionally, the legal framework permits trustees to use construction funds for reasonable overhead directly related to the project, which has been recognized as a potential defense in criminal cases.

In a case regarding the misapplication of construction trust funds under article 5472e, the State needed to allege and prove beyond a reasonable doubt that the defendant trustee did not use the funds for reasonable overhead expenses. The statutory language relevant to this case was incorporated into Property Code section 162.031, which was amended in 1987 to classify the use of trust funds for the trustee's actual construction-related expenses as an affirmative defense rather than an exception. This means that while the State had to prove the essential elements of the offense, the burden shifted to the defendant to prove the affirmative defense by a preponderance of the evidence.

In this instance, the indictment claimed that the defendant, Kirschner, did not use the trust funds for his actual construction expenses, which effectively negated his affirmative defense. The core legal issue was whether the State was obligated to prove this allegation or if it could be disregarded as surplusage. Generally, unnecessary allegations that do not describe essential elements of the offense need not be proven. Citing the precedent set in Upchurch v. State, the court determined that the allegations regarding Kirschner’s use of funds were not essential to defining the offense. The conduct constituting the alleged offense remained unchanged regardless of the truth of the allegation. Consequently, the court concluded that the allegation concerning the use of funds for actual expenses was surplusage, and the State was not required to prove it to secure a conviction.

When assessing the legal sufficiency of evidence supporting a conviction, the standard requires that a rational fact-finder, considering the evidence favorably towards the verdict, must conclude beyond a reasonable doubt that the essential elements of the offense are met. The court's jury charge must align with the indictment's allegations. In this case, the charge mandated the State to prove that Kirschner did not use diverted trust funds for legitimate construction expenses. However, under Malik, sufficiency is evaluated against a hypothetically correct jury charge rather than the actual charge given. The court found that the allegation regarding Kirschner's use of diverted funds was surplusage, meaning the State was not required to prove it for a conviction.

The State needed to demonstrate that Kirschner improperly retained or redirected trust funds without settling current or past due obligations to the twelve beneficiaries specified in the indictment. "Current or past due obligations" are defined as debts incurred prior to receiving trust funds, due within thirty days of receipt, according to Texas Property Code. The State failed to present evidence about ten of the twelve subcontractors’ obligations, thus lacking proof of any current or past due debts owed to them when Kirschner received the trust funds.

For the two remaining beneficiaries, Marble Masters of Texas, Inc. and Overhead Door Company of San Antonio, the State did provide evidence. Marble Masters presented four invoices totaling $8,413 for materials supplied, which were due within thirty days of delivery but went unpaid, leading to a lien filing. Overhead Door billed Kirschner $743 upon delivery of a garage door, which he later stopped payment on, necessitating a lien for collection.

Kirschner drew a total of $4800 from the Fords' loan proceeds on June 26, 1991, followed by $5300 on July 22, and $1500 on August 16, all after the delivery of various construction materials. He also received three personal checks from the Fords totaling $24,986 during this period. These funds were classified as trust funds under Property Code Chapter 162. At the time of receipt, some invoices from Marble Masters and Overhead Door were overdue. Evidence indicates that Kirschner did not use these trust funds to settle his obligations to these vendors. For the State to establish a misapplication of trust funds under section 162.031(a), it needed to demonstrate that Kirschner retained, used, disbursed, or diverted the funds.

Kirschner's expense documentation included checks drawn on his Dripping Springs account for payments made to laborers and subcontractors for the Ford project, reflecting the use of trust funds. However, bank records revealed numerous checks written from this account, including personal expenses not related to the Ford contract. The analysis of misapplication focuses on checks from the final cost documentation dated June 26 onward, as prior obligations were not proven.

The documentation showed numerous checks written to beneficiaries for work related to the Ford project, with no evidence of misapplication regarding these payments. However, five checks totaling $710 were issued to Kirschner's wife, and two checks totaling $1475 were issued to P. K Construction, a non-beneficiary. Kirschner acknowledged that his wife did not work on the project and claimed these payments were either part of his contractual fee or for labor he provided. Thus, payments to his wife and P. K Construction effectively represented payments to himself, raising concerns about the proper use of trust funds.

Total payments amounted to $2,185. A trustee of a construction trust cannot also be a beneficiary. The trustee must justify self-payments as actual construction-related expenses. Kirschner paid himself from trust funds without settling obligations to Marble Masters and Overhead Door, indicating a misapplication of trust funds under section 162.031(a). Kirschner contends the State must trace fund flows to prove improper payments, referencing McElroy, which is inapplicable due to changes in the law that shifted the burden of proof to him to justify his actions. The evidence supports the jury's finding of misapplication exceeding $500.

To establish felony misapplication of funds, intent to defraud is necessary, defined as actions depriving beneficiaries of their funds. Kirschner argues lack of evidence for deceit; however, his actions—stopping payment to Overhead Door after realizing insufficient funds—suggest intent to deprive. Payments to his wife and P.K. Construction surpassed his debt to Overhead Door, allowing for a rational inference of intent to defraud. 

Kirschner also challenged the constitutionality of section 162.031(b) as vague, claiming the lack of definition for "actual expenses directly related to construction or repair" renders it impermissibly vague. The court overruled this motion, and Kirschner did not provide evidence at the hearing, relying instead on differing opinions about prior statutes.

Kirschner did not prove that section 162.031(b) could not be constitutionally applied, leading the district court to correctly deny his motion to quash. The court did not need to address Kirschner's potential argument regarding the statute's vagueness since the constitutionality of a statute is only considered when necessary for the case resolution. Kirschner did not request an instruction for an affirmative defense. 

Regarding his claim of a Sixth Amendment speedy trial violation, the review of the trial court's decision involves de novo evaluation of legal application against the facts, while deferring to the court's factual findings. The analysis requires balancing four factors: length of delay, reason for delay, assertion of the right, and resulting prejudice. No factor alone is sufficient to prove a violation; each must be weighed based on the case's specific circumstances.

The length of delay raised a presumption of prejudice, as Kirschner was indicted in May 1992, arrested in July 1992, and did not go to trial until August 1997. The State offered minimal justification for the delay, citing complexity and a prosecutor's family illness, but these claims lacked supporting evidence in the record. The original indictment was dismissed in February 1995, and Kirschner was reindicted in April 1995. Following this, he filed various motions, including a motion for a speedy trial, which was ultimately overruled. Kirschner's motions and the scheduling of pretrial hearings contributed to the delay, and he did not assert his right to a speedy trial again until March 1996 after initially filing in October 1994.

Testimony during the speedy trial hearing revealed that records from four subcontractors, named in the indictment as unpaid beneficiaries of the construction trust, were lost or destroyed. Kirschner also noted that some of his records were lost, and several individuals associated with him had either died or relocated since the job's completion. However, he did not specify the importance of any particular missing witness or document to his defense. 

Despite the complexity of the case regarding the misapplication of construction trust funds, the five-year delay between the initial indictment and Kirschner's trial was not justified solely by the case's complexities. Kirschner moved for a speedy trial in October 1994, claiming his defense was ready at that time. However, he later filed a motion to quash the indictment in December 1994, which led to a new indictment, and did not subsequently seek a speedy trial for that indictment. Instead, he filed for discovery and assistance from investigators, contradicting his earlier readiness claim. After a trial date was set for February 1996, Kirschner requested and received a continuance, and then a month later moved to dismiss for lack of a speedy trial. Further delays occurred due to his first attorney's withdrawal.

Overall, while there was some delay in prosecution attributable to the State, Kirschner did not actively assert his right to a speedy trial, and much of the delay was instigated by him. Although records were lost and witnesses became unavailable over the five years, Kirschner failed to demonstrate how these losses prejudiced his defense, as he did not identify any specific missing witness or piece of evidence that would have been crucial. Ultimately, it was concluded that Kirschner was not denied his Sixth Amendment right to a speedy trial, leading to the affirmation of the conviction.