State v. Cerasani , 373 Mont. 192 ( 2014 )

January 7 2014
DA 13-0059
IN THE SUPREME COURT OF THE STATE OF MONTANA
2014 MT 2STATE OF MONTANA,
Plaintiff and Appellee,
v.
ANTHONY MICHAEL CERASANI,
Defendant and Appellant.
APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DC-10-171
Honorable John W. Larson, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Peter F. Lacny, Datsopoulos, MacDonald & Lind, P.C.,
Missoula, Montana
For Appellee:
Timothy C. Fox, Montana Attorney General, Mardell Ployhar, Assistant
Attorney General, Helena, Montana
Fred R. Van Valkenburg, Missoula County Attorney, Jennifer Clark,
Deputy County Attorney, Missoula, Montana
Submitted on Briefs: October 30, 2013
Decided: January 7, 2014
Filed:
__________________________________________
Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 Anthony Cerasani appeals from the District Court’s judgment dated November 27,
2012, imposing a restitution obligation of $164,851.27 as a condition of a deferred
sentence for the offense of felony theft. We affirm in part and reverse in part.
¶2 The issue on appeal is whether the District Court properly included restitution for
the victims’ tax liability as part of the amount Cerasani is required to repay.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 In 2007 Linda and Gerald Cintron hired Cerasani to build a house for them and the
cost exceeded their original budget by $100,000. In January 2008 Cerasani proposed that
the Cintrons invest in a subdivision project that he said could double their investment and
also allow them to pay off their debt on the new house. Cerasani proposed that they buy
three 5-acre lots from him for a total of $480,000, with a down payment of $180,000.
According to Cerasani’s own expert who testified at the restitution hearing, Cerasani
represented to the Cintrons that they “could make a 50% return in a short time” by
re-selling the lots. The Cintrons decided to accept the deal based upon Cerasani’s
projections of large profits. Cerasani also represented that he owned the land and showed
the Cintrons a warranty deed that transferred the property to him.
¶4 The Cintrons raised the $180,000 down payment by cashing out all of their life
savings retirement accounts that they had paid into for 25 years. While the Cintrons
knew there would be tax consequences for them as a result of cashing out their retirement
accounts, Cerasani’s promises of large profits assured them that they could cover any tax
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liability. Because of the early-withdrawal tax consequences, they had to cash out
substantially more from their retirement accounts than the $180,000 they gave to
Cerasani in order to net the $180,000 for the land deal. In addition to income tax on the
withdrawals, the Cintrons had to pay a federal excise tax on the “early distribution” that
Cerasani’s expert calculated to be $21,366. The financial institutions withheld this
amount from the distribution that the Cintrons took.
¶5 The Cintrons gave Cerasani $180,000 and a promissory note for the balance of the
purchase price. The Cintrons never received title to the land, and after investigation
determined that Cerasani had title to the lots only briefly and had transferred title to a
third party within minutes of when the property had been deeded to him. When
confronted with the facts Cerasani made various excuses and claimed that he had deeded
their property to a third person as a matter of routine real estate practices. The Cintrons
told Cerasani that they needed either their money or the property to pay the substantial
tax bill that arose from cashing out their retirement accounts. Despite promises to the
contrary, Cerasani did not refund the Cintrons’ money or transfer any property to them.
¶6 In early 2009 the Cintrons reported the incident to law enforcement, and in April
2010 the State charged Cerasani with felony theft by deception. After the theft charge
was filed Cerasani returned $50,000 of the Cintrons’ $180,000 investment. Cerasani and
the State then entered a deferred prosecution agreement in which he promised to pay the
Cintrons an additional $75,000 immediately, and to make additional payments totaling
slightly over $145,000 within 15 months. He paid the $75,000 but did not pay the
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remaining $145,000.1 Because Cerasani failed to complete the deferred prosecution
agreement, the State re-opened the felony theft case. In June 2012 Cerasani signed a plea
agreement. He agreed to enter a no contest plea to the felony theft charge in return for a
six-year deferred sentence and a restitution obligation to be determined by the District
Court.
¶7 The District Court held the restitution hearing in October 2012. Linda Cintron
testified that they would never have withdrawn their retirement money if Cerasani had
not shown them deeds to the lots, represented that he owned the property, and told them
that they would make a substantial profit. She testified that they had to pay a penalty for
withdrawing the retirement money before they were old enough to do so, and then had to
pay taxes on the retirement money as ordinary income. The Cintrons acknowledged that
they were aware of the tax consequences of cashing out their retirement accounts but
believed that they could make more than enough profit on the land deal to cover the tax
liability. The Cintrons had a total tax liability in 2008 of $96,000, largely due to using
the retirement funds to participate in Cerasani’s land deal.
¶8 Other tax consequences arose. After it became clear that they would suffer a loss
of their down payment money, the Cintrons consulted a tax attorney who advised them to
claim a $180,000 loss due to theft. They filed an amended 2008 tax return claiming a
theft loss, and instead of owing substantial taxes for that year, they received a refund.
1
In the deferred prosecution agreement Cerasani agreed to pay the Cintrons slightly over
$270,000, including the $50,000 he paid them when he was initially charged, but that agreement
was abrogated by Cerasani’s failure to comply with the payment requirements.
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After Cerasani paid back $50,000 and then $75,000 they paid taxes on those amounts as
ordinary income.
¶9 At the restitution hearing Cerasani presented the expert testimony of an accountant
who opined that Cerasani should not be liable for any of the tax consequences that arose
from the Cintrons’ use of their retirement accounts. He testified that “reasonable
investing standards don’t contemplate where the money comes from.” He asserted that
the Cintrons should bear the full tax burden of their decision to use their retirement
money, and Cerasani should be liable only to return the $180,000 he actually received
from them, plus interest. Cerasani’s expert agreed, however, that the Cintrons would not
have owed the taxes that arose from the withdrawal of their retirement accounts but for
Cerasani’s land deal.
¶10 The District Court ordered that Cerasani repay the $180,000 investment, less the
$125,000 he had already repaid. The District Court also ordered that Cerasani pay
interest of $17,617.27 on the investment money; that he pay $3,280 in attorney fees the
Cintrons incurred in addressing their tax liability; and that he pay a net of $88,964
representing the Cintrons’ tax liability arising from their use of the retirement accounts,
including the excise tax. The total restitution amount was set at $164,861.27. Cerasani
appeals.
STANDARD OF REVIEW
¶11 When considering the requirement of restitution to a crime victim who has
suffered pecuniary loss the sentencing judge applies the statutes to the facts of the case.
State v. Jent, 2013 MT 93, ¶ 9, 369 Mont. 468, 299 P.3d 332. Upon appeal, we review
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such mixed questions of law and fact de novo. State v. Warclub, 2005 MT 149, ¶ 21, 327
Mont. 352, 114 P.3d 254. A district court’s findings of fact will be upheld unless they
are clearly erroneous, and the issue of whether the facts meet the applicable legal
standard is reviewed de novo to determine whether it was correct. Jent, ¶ 10.
DISCUSSION
¶12 Under Montana law a sentencing court “shall, as part of the sentence, require
payment of full restitution to the victim.” Section 46-18-201(5), MCA. An offender
must “make full restitution to any victim who has sustained pecuniary loss, including a
person suffering an economic loss.” Section 46-18-241(1), MCA. In addition, district
courts have broad discretion in fashioning criminal sentences, and may impose any
condition reasonably related to the objectives of rehabilitation or the protection of the
victim or society. Sections 46-18-201 and -202, MCA. A condition of a sentence will be
upheld as long as there is a nexus either to the offense or to the offender. State v. Cantu,
2013 MT 40, ¶ 20, 369 Mont. 81, 296 P.3d 461.
¶13 Montana law broadly provides that a crime victim is entitled to “full” restitution
from an offender for economic loss. Section 46-18-241(1), MCA. The extent of the
restitution obligation is not limited to the defined elements of the offense and is not
limited to losses that arise as a “direct” result of the offense. State v. LaTray, 2000 MT
262, ¶¶ 12-14, 302 Mont. 11, 11 P.3d 116. Restitution is not limited to the amount by
which an offender enriched himself at the victim’s expense, but includes all economic
loss that resulted from the crime. LaTray, ¶ 21. Recoverable loss also includes the “full
replacement cost of property taken, destroyed, harmed or otherwise devalued as a result
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of the offender’s criminal conduct.” Section 46-18-243(1)(b), MCA. Recoverable
pecuniary loss includes “all special damages” that a person could recover against the
offender in a civil action, § 46-18-243(1)(a), MCA, and a causal relationship between the
offender’s conduct and the victim’s loss is the “touchstone” for determining the
entitlement to restitution. Jent, ¶ 13.
¶14 In numerous cases this Court has upheld a restitution obligation where there is a
causal connection between the offense and another person’s expense or loss. Jent, ¶ 22
(defendant convicted of aggravated assault required to pay for medical expenses arising
from victim’s later suicide attempt); State v. Ness, 2009 MT 300, ¶ 21, 352 Mont. 317,
216 P.3d 773 (defendant convicted of tampering with evidence required to pay for funeral
expenses of person who died in the underlying accident); State v. Perkins, 2009 MT 150,
¶¶ 11-12, 350 Mont. 387, 208 P.3d 386 (defendant convicted of felony criminal
endangerment required to pay for day care expenses that arose because the child victim
was removed from the mother’s home and placed with an aunt); and State v. Grindheim,
2004 MT 311, ¶¶ 55-56, 323 Mont. 519, 101 P.3d 267 (defendant convicted of sexual
intercourse without consent required to pay victim’s future counseling costs).
¶15 Cerasani does not contest that the Cintrons are victims who have sustained
pecuniary loss and who are entitled to restitution. He contests only the amount of the
restitution.2 In this case Cerasani argues that since the Cintrons chose to use their
retirement accounts as the source of the money that he stole from them, he should not be
2
Cerasani initially argued that the Cintrons failed to mitigate their losses, but he subsequently
withdrew that contention as an issue on appeal.
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responsible for the resulting tax consequences. The Cintrons were the victims of crime
and lost a substantial amount of money as a direct result of that crime. It is clear from the
testimony at the restitution hearing that but for Cerasani’s crime the Cintrons would not
have withdrawn their retirement savings in 2008.
¶16 There is therefore sufficient connection between Cerasani’s crime and the
Cintrons’ loss to support the requirement that he pay restitution. Jent, ¶ 14 (where there
is a causal connection between the offense and a subsequent loss, then the loss was a
legal result of the offense). Moreover, that connection satisfies any requirement that
there be a “nexus or correlation” between the offense and the restitution requirement.
Jent, ¶ 19. To the extent that the restitution is measured by civil law obligations, § 46-
18-243(1), MCA, the facts here support the civil law conclusion that but for Cerasani’s
crime the Cintrons would not have suffered the loss. Perkins, ¶ 11 (a causal “but for”
connection between the crime and the loss is sufficient to demonstrate that the loss could
have been recovered in a civil action).
¶17 Cerasani contends that he should not be liable for the Cintrons’ tax liabilities
because they would have had to eventually pay taxes on the money after they began
withdrawing it for retirement income. The parties agree that the Citrons’ retirement
savings would have been taxed as ordinary income when they withdrew it for retirement
income in the future.
¶18 The Cintrons have been exposed to two tax consequences arising from withdrawal
of their retirement accounts. The first is that they are subject to pay income tax on the
withdrawn funds. While this tax obligation initially arose on their 2008 tax return, they
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filed an amended return and claimed a theft loss of the $180,000 in that year.
Consequently they avoided the large income tax liability in 2008, but will incur income
tax liability on any part of the $180,000 that they recover. That includes paying income
tax on the two restitution amounts (totaling $125,000) that Cerasani has paid so far.
When Cerasani makes additional restitution for the balance of the $180,000 the Cintrons
will be subject to income tax on that amount as well.
¶19 We agree with Cerasani that he should not be required to make restitution for the
income tax liabilities that the Cintrons have faced or will face when they receive
restitution for the $180,000 because they were subject to that tax liability with or without
Cerasani’s crime. The Cintrons would be subject to income tax on that amount whether
or not Cerasani had ever proposed the land deal. As tax-deferred contributions, the
amount was subject to taxation whenever they withdrew the money.
¶20 The second tax consequence is the excise tax that the Cintrons had to pay when
they withdrew the retirement money. According to Cerasani’s own expert, that amount
was $21,366. However, the excise tax is a liability they would not have faced but for the
early withdrawal to participate in Cerasani’s land deal. Therefore, Cerasani may be
required to pay restitution of the $21,366 excise tax.
¶21 Cerasani also contests the District Court’s consideration of the approximately
$3,000 in attorney fees that the Cintrons incurred to obtain advice about dealing with the
tax consequences of his crime. This is clearly a proper consideration for restitution.
LaTray, ¶ 21 (expenses incurred by a victim to “address and rectify” the effects of
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criminal conduct are a result of the crime and are properly the subject of a restitution
order).
¶22 It is clear from the facts that the Cintrons suffered a pecuniary loss as a direct
result of Cerasani’s crime, without which that loss would not have occurred. That loss
included the amount of money the Cintrons gave directly to Cerasani; the excise tax
consequences to the Cintrons arising from the early withdrawal of their money; and the
amount they spent on legal advice to address the consequence of the crime. The District
Court properly considered these items of loss when considering restitution. However,
Cerasani should not be liable for the Cintron’s other income tax obligations. To that
extent, the District Court is reversed and this matter is remanded for entry of a new
restitution order in conformity with this Opinion.
/S/ MIKE McGRATH
We Concur:
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ MICHAEL E WHEAT
/S/ JIM RICE
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