Opinion
I. INTRODUCTION
This is a driving under the influence with injury case (Veh. Code, § 23153) in which the .trial judge’s conscientious and painstaking calculation of a restitution award failed to take into account the time value of money. When the court computed the value of the victim’s $246.50 per month in pension benefits, it multiplied that monthly benefit by a calculated likely lifespan and ordered a payment of $70,000. Defense counsel did not object, and defendant was hit with a restitution order that overstates the victim’s actual economic loss by,thousands of dollars.
We now hold:
(1) It is an abuse of discretion not to account for the time value of money in determining a victim’s economic loss based on a diminished or lost stream of future payments.
(2) The failure on defense counsel’s part to raise the issue of the time value of money in this case was ineffective assistance of counsel.
(3) No satisfactory explanation is available to excuse counsel’s failure.
We therefore reverse the restitution order for a new hearing, so that a new restitution order may be made which does account for the time value of money. In that regard we further hold:
(4) Defendant will not be entitled to a jury trial at the new hearing.
II. FACTS
Rommel Pangan was convicted of causing great bodily injury while driving under the influence. (See Pen. Code, § 12022.7.) He was sentenced to six
Pangan had no car insurance. The case returned for a restitution hearing in mid-December 2011.
Muniz requested restitution in four specific particulars: First, he asked for $12,000 for replacement of his vehicle, a 2001 Chevy Silverado. Second, he asked for $15,000, which represented what he expected to earn, as boxer Josh Burnett’s coach, had Muniz been able to show up at a boxing match in which Burnett was fighting on the night of the accident. Third, Muniz sought reimbursement of his unpaid medical bills of $8,390.67. And, finally, he asked for restitution for the $246.50 monthly decrease in his pension payments occasioned by his immediate forced retirement from his job as a grocery store warehouse clerk due to his injuries.
For some reason—and the record is completely silent on this point—Muniz did not request restitution of his lost wages for the 23 months plus from January 23, 2009, to December 31, 2010.
Prior to the hearing the trial judge wrote a tentative opinion to help clarify his thinking on the decreased pension issue.
Immediately after the submission by the defense on the tentative opinion the trial court made its order. The requests regarding the loss of the Silverado
The other two of Muniz’s requests became part of the restitution order. The medical bills were an easy matter. The trial judge simply included the $8,390.67 figure in the award.
But the pension issue was more complicated. The original tentative opinion had purported to include 23 months of $246.50 in decreased pension payments for the period February 1, 2009, through December 31, 2010 (the total would have been $5,669.50), in the calculation. After submission, though, the judge changed his mind, given Muniz’s ineligibility to receive any pension payments at all in the years 2009 and 2010. Accordingly, he deducted the $5,669.50 from the initial total of $85,052.17 for the years 2009 and 2010. The final lost pension payment total was $70,992.
ra. DISCUSSION
A. Abuse of Discretion
1. Basic Principles from the Case Law
Most criminal law restitution cases have not addressed the problem of valuing a stream of payments to be received in the future as against a single lump-sum payment, but one Supreme Court case, People v. Giordano (2007)
Like the case before us, Giordano arose out of an accident caused by an inebriated driver. There, though, the motorcyclist victim was killed, so the motorcyclist’s widow sought restitution for her deceased husband’s lost
The high court determined the widow was indeed entitled to compensation for prospective economic loss, reasoning it is simply a loss sustained after the occurrence of the crime, and restitution for it was necessary to “restore the economic status quo” prior to the crime. (Giordano, supra, 42 Cal.4th at pp. 657-658.) The court specifically noted the analogy to civil wrongful death actions on the point of whether the widow had “personally” suffered an economic loss. (Id. at p. 658.)
Turning to the issue of “how a trial court should measure” such an economic loss, the Giordano court made the point that, even reviewed under an abuse of discretion standard, the trial court must still “employ a method that is rationally designed to determine the surviving victim’s economic loss.” (Giordano, supra, 42 Cal.4th at pp. 663-664.) Thus a trial court, in order to facilitate appellate review, “must take care to make a record of the restitution hearing, analyze the evidence presented, and make a clear statement of the calculation method used and how that method justifies the amount ordered.” (Giordano, supra, 42 Cal.4th at pp. 663-664.)
With a typically charitable pen, Justice Moreno, writing for the Giordano majority, stated the trial court’s “method of calculation was not carefully designed to establish” the widow’s loss of support. (Giordano, supra,
In that regard Justice Kennard cited a Seventh Circuit case from the early 1980’s, U.S. v. Fountain (7th. Cir. 1985)
Victim restitution awards have become more complex, as catalogued in People v. Chappelone (2010)
The Attorney General’s characterization of the trial court’s methodology as a “rational mathematical formula” to calculate Muniz’s loss is untenable. While the trial court’s math was fine, it did not take into account the time value of money. The court’s computation failed to account for the value of a lump-sum payment over a series of fractional payments spread out over decades. The actual economic value of $246.50 a month for 24 years does not approach a $70,000 lump-sum payment. (See Chappelone, supra,
Suppose, for example, Muniz had taken his right to $246.50 for the rest of his life and tried to get a lump-sum payment for it.* *
The Giordano court cited with approval (as “useful”) Canavin v. Pacific Southwest Airlines (1983)
Of course, the need to account for the time value of money regularly surfaces in civil cases involving streams of future payments. In Roden v. AmerisourceBergen Corp. (2010)
In fine, there is no escaping the time value of money. The trial court erred here in not accounting for the fact possession of money now, as distinct from the future, is worth something, and that something must be accounted for in order to arrive at the actual value of an economic loss.
B. Ineffective Assistance of Counsel
There is no question Pangan’s trial counsel waived the issue of the time value of money by failing to object to the award the trial court made. (E.g., People v. Foster (1993)
The elements of ineffective assistance are (1) counsel failed to act in a reasonably competent manner and (2) it was reasonably probable a more favorable determination would have ensued but for counsel’s failing. (Foster, supra,
1. Reasonable Competence
To be sure, most people’s eyes—including those of this opinion’s author—glaze over on the topic of “present value,” which is “accountant-speak” for recognizing the time value of money. Even so, California’s statutory restitution pegs restitution awards to “economic loss” (Pen. Code, § 1202.4, subd. (a)(1))
Moreover, the concept of present value, i.e., the time value of money, is just not all that hard. (See In re Milspec, Inc. (Bankr. E.D.Va. 1988)
The next consideration as far as ineffective assistance is concerned is the problem of whether the omission had any adverse impact on the client. Here it did.
In accounting for the time value of money, the trial judge would necessarily have had to arrive at a reasonable discount rate. The judge might have used a very low discount rate as a reflection of the relatively low rates of inflation and mortgage interest rates since 2008-and of course a low rate would have resulted in a higher “present value” of Muniz’s lost payments. Or he might have chosen a higher rate based on other market metrics. But either way, a full value award was too high.
The Attorney General’s office suggests that Pangan’s defense counsel might have submitted on the tentative because the tentative represented “a good deal,” given that the tentative disregarded Muniz’s claim for $15,000 from the unattended prize fight. But there is nothing in the record to suggest that exclusion was an oversight or that the court would punish Pangan for bringing it up. We see no way in which Pangan’s trial attorney had anything to lose by raising the need to discount the $70,000 to present value, and the Attorney General is unable to articulate one that is convincing.
C. Jury Trial
The case must thus be reversed for another hearing.
Southern Union involved a restitution fine of $50,000 a day for each day of a putative 762-day-long environmental law violation. The United States Supreme Court struck the fine down because the very fact which determined the “maximum fine” the corporate defendant faced—the number of days the violation continued—was not determined by the jury. (See Southern Union, supra, 567 U.S. at p..__ [
Apprendi held that any fact which increases a defendant’s sentence beyond the “statutory maximum” must go to the jury. (Apprendi, supra,
But neither Southern Union, Apprendi nor Blakely have any application to direct victim restitution, because direct victim restitution is not a criminal penalty. As explained in U.S. v. Behrman (7th Cir. 2000)
Federal courts have also rejected Apprendi challenges to victim restitution statutes because those statutes, like the one before us, carry no prescribed statutory maximum. (U.S. v. Wooten (10th Cir. 2004)
So on remand there will be no Southern Union-Apprendi-Blakely right to a jury trial.
DISPOSITION
The restitution order is reversed and remanded for recalculation to account for the time value of money. Obviously, the trial court will have to take evidence on the issue of the appropriate discount rate and calculations. We recognize this is a relatively new requirement in criminal law restitution hearings. It would be premature at this juncture to prescribe how the hearing should be conducted, or the nature of the evidence that might bear on the subject. We do note, though, that the federal bankruptcy court in In re Milspec, Inc., supra,
Moore, J., and Fybel, J., concurred.
Notes
At the time of the accident Muniz was 53 years old, was working in a Ralphs Grocery warehouse, and had been working there for about 20 years. He was covered by the Teamsters Pension Program which would allow him to retire at the end of 2010, at age 55, at the rate of $1,673.50 per month, and in fact was planning to do just that. However, the accident prevented him from working in the years 2009 and 2010, which ultimately reduced the pension he received after December 2010 to $1,427 a month.
Francis Bacon is famous for saying writing makes an “exact man.” The same can be said for judges. The trial judge’s “Opinion and Order on Restitution” has been of great benefit to this court in understanding the facts and the court’s reasoning.
The trial judge arrived at this number by finding Muniz had a life expectancy of 24 years beginning in the year 2011 when he could receive his pension payments. Muniz’s pension would have been $1,673.50 a month, but that was reduced by $246.50 because of Pangan’s driving under the influence. So the judge took $246.50 and multiplied it by 288 months (24 years) and came up with the figure of $70,992. The $70,992 for the pension combined with the $8,390.67 for the medical bills for a grand total of $79,382.67.
To its credit, the trial court did precisely that here.
The merchandise at issue in Chappelone was a large number of items embezzled from a retail chain store by an insider. When the merchandise was recovered the store simply scanned the last retail value of the item to arrive at the claimed amount, regardless of whether the item was damaged and thus could not be sold at its full retail value. The Chappelone court was not unsympathetic to the “virtual impossibility” of the task, borne by the victim, of assessing each individual item. (See Chappelone, supra,
Judging from the television advertisements providing such payments has become a cottage industry.
Penal Code section 1202.4, subdivision (f) creates a presumption victim restitution loss should be ascertained at “the time of sentencing,” subject to the trial court’s discretion to ascertain the amount of loss at another time. For purposes of this appeal, we may assume the “time of sentencing” is the time of the restitution order (Dec. 16, 2011), as distinct from the time the trial court imposed on Pangan the six-year prison sentence (June 11, 2010) from which he immediately appealed. The actual abstract of judgment, providing for both the six-year sentence and the $79,382.67 restitution order, was filed January 23, 2012. Calculating Muniz’s losses from December 16, 2011, would have meant there were 23 years of diminished pension payments requiring discounting to present value, because at the time of sentencing one year had already been lost, and therefore no discount to present value would be needed— indeed, for that lost year not only would no discount to present value be required, but interest would have to be added to it.
This case was the source of the “heresy” comment picked up in Roden.
And continues to do so after the 2012 amendments to section 1202.4, which focus on the issue of compensation. (See new Pen. Code, § 1202.4, subd. (a)(1) [“It is the intent of the Legislature that a victim of crime who incurs an economic loss as a result of the commission of a crime shall receive restitution directly from a defendant convicted of that crime.”].)
Under section 6086.7, subdivision (a)(2) of the Business and Professions Code we are required to notify the State Bar of a reversal in a judgment if it is the result of “misconduct, incompetent representation, or willful misrepresentation.” There is authority indicating that criminal law ineffective assistance of counsel comes within this statute. (See Barner v. Leeds (2000)
That done, it is our firm conviction that Pangan’s trial counsel should receive no discipline at all for not being aware of the need to raise the time value of money to the trial court. It is the nature of the common law to progress over time and be accretive (see Green v. Ralee Engineering Co. (1998)
