Rooney v. Commonwealth

COURT OF APPEALS OF VIRGINIA

Present: Judges Coleman, Willis and Annunziata
Argued at Salem, Virginia

PATRICK D. ROONEY, III, a/k/a
FRANCIS PATRICK ROONEY, III
OPINION BY
v. Record No. 1402-97-3 JUDGE SAM W. COLEMAN III
JUNE 30, 1998
COMMONWEALTH OF VIRGINIA

FROM THE CIRCUIT COURT OF PITTSYLVANIA COUNTY
William N. Alexander, II, Judge
H. Victor Millner, Jr., (Charles J.
Strauss; H. Victor Millner, Jr., P.C., on
brief), for appellant.

Donald E. Jeffrey, III, Assistant Attorney
General (Mark L. Earley, Attorney General, on
brief), for appellee.

Code §§ 57-35.15 and 57-35.21 require that a cemetery

company deposit into a trust account certain percentages of

receipts from the sale of preneed and perpetual care burial

property and services. 1 Failure of a cemetery company to deposit

receipts into the preneed and perpetual care trust accounts is a

Class 1 misdemeanor. Code § 57-35.35.
1
Code § 57-35.15 provides that "[e]ach cemetery company
shall deposit a minimum of ten percent of the receipts from the
sale of graves and above-ground crypts and niches . . . in [a]
perpetual care trust fund within thirty days after the close of
the month in which such receipts are paid to it."
Code § 57-35.21 provides that a cemetery company "deposit
into a trust fund forty percent of the receipts from the sale of
property or services pursuant to a preneed burial contract, when
the delivery thereof will be delayed more than 120 days." Code
§ 57-35.11 defines "preneed burial contracts" as agreements
pertaining to burial property or services that are contracted for
at any time other than the time of death or while death is
imminent.
 Rooney Enterprises, Inc. (corporation) operated a cemetery

in Franklin County. Upon receiving payments pursuant to preneed

and perpetual care burial contracts, the corporation failed to

make deposits into the preneed and perpetual care trust accounts.

Based upon the corporation's inaction, the president of the

corporation, Patrick D. Rooney, III, was convicted under Code

§ 57-35.35 for the corporation's failure to make deposits into

trust accounts in accordance with Code §§ 57-35.15 and 57-35.21,

and for embezzlement in violation of Code § 18.2-111. We hold

that Rooney is not personally criminally liable for the

corporation's failure to make the mandatory trust deposits and

that the evidence is insufficient to support the embezzlement

conviction. Accordingly, we reverse the convictions and dismiss

the indictments.

BACKGROUND

The parties entered into a stipulation of facts, which

stated that the corporation operated several cemeteries in

Virginia and West Virginia. Rooney was the president of the

corporation. On November 10, 1990, the corporation purchased

Cedar Lawn Burial Park, Inc., a cemetery company which operated a

Franklin County cemetery. The corporation operated the cemetery

until May 6, 1991, when the Franklin County Circuit Court placed

the corporation in receivership pending dissolution.

The corporation's accounting sheets, submitted by Rooney in

his defense, indicated that the corporation received payments for

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preneed and perpetual care burial property and services during

the time period in question. 2 The parties stipulated that the

corporation made no deposits into the cemetery's preneed and

perpetual care trust accounts during its entire period of

operation. They further stipulated that the corporation

deposited all receipts into its central corporate account and

used them to pay routine business expenses and salaries. Rooney

testified that he was unaware of the statutory trust

requirements.
On this evidence, the trial court convicted Rooney for

violating Code §§ 57-35.15 and 57-35.21 by failing to deposit

receipts into the preneed and perpetual care trust accounts and

for embezzlement of the amounts withheld from the trust accounts.

FAILURE TO MAKE PRENEED AND PERPETUAL CARE TRUST DEPOSITS

Rooney contends the trial court erred by convicting him for

the corporation's failure to deposit the requisite receipts in

trust. He reasons that the statute does not impose strict

criminal liability on a corporate officer for the corporation's

2
The trial court held that the Commonwealth was
"time-barred" from prosecuting Rooney for receipts that should
have been placed in the trust accounts before April 28, 1991.
Because the corporation was in receivership on May 6, 1991, the
court's ruling relegated the Commonwealth to prosecuting Rooney
for the corporation's failure to deposit receipts into the trust
accounts on April 30, 1991 with respect to preneed and perpetual
care payments received in March 1991. See Code §§ 57-35.15 and
57-35.21 (requiring trust deposits to be made "within thirty days
after the close of the month in which such receipts are paid" to
the cemetery company).

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violations of the trust provisions. 3

Criminal statutes are strictly construed against the

Commonwealth and applied only to the classes of persons or

entities which the legislature clearly intended to be within the

statute's ambit. See King v. Commonwealth, 6 Va. App. 351,

354-55, 368 S.E.2d 704, 706 (1988). Because Code § 57-35.35,

making it a Class 1 misdemeanor to breach Code § 57-35.15 or

57-35.21, is criminal in nature, it must be strictly construed,

and any ambiguity or reasonable doubt as to its meaning or scope

shall be resolved in favor of the defendant. See Mason v.

Commonwealth, 16 Va. App. 260, 262, 430 S.E.2d 543, 543-44

(1993); Ansell v. Commonwealth, 219 Va. 759, 761, 250 S.E.2d 760,

761 (1979).

We find that Code §§ 57-35.15 and 57-35.21 do not clearly

specify that a corporate officer shall be criminally responsible

for the corporation's failure to make deposits into the trust

accounts. Those statutes place the responsibility of making the

deposits on a "cemetery company." Code 57-35.11 defines a

"cemetery company" as "any person engaged in the business of"

selling certain burial property or services. The statutes are

3
Rooney also argues that the evidence failed to prove that
funds were received during the time period for which the
corporation was required to make deposits into the trust
accounts. Our review of the record indicates that Rooney failed
to raise this issue to the trial court in arguing his motion to
strike the evidence or his motion to dismiss. Thus, Rule 5A:18
precludes our review of whether the corporation was required to
make the deposits in the first instance.

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clear that a corporation, individual or individuals operating as

a cemetery company are strictly liable for failing to make the

required trust deposits as a "person" engaged in the business of

selling burial plots and services. See Landmark Communications,

Inc. v. Commonwealth, 217 Va. 699, 702-03, 233 S.E.2d 120, 123

(1977) (corporation may be "person" within meaning of criminal

statute). It does not follow, however, that a corporate officer

may be held personally liable under the statutes when the

corporation is the "person" who violates the trust provisions.
Cf. Code § 18.2-232 (imposing liability for criminal

misrepresentation upon "[a]ny person, firm, association or

corporation or officer, agent or employee thereof") (emphasis

added); Code § 18.2-348 (proscribing "[a]ny person or any

officer, employee or agent of any firm, association or

corporation" from aiding prostitution or illicit sexual

intercourse) (emphasis added). Accordingly, we hold that the

statutes do not make corporate officers criminally liable for the

corporation's failure to make the statutory trust deposits.

The Commonwealth argues that even if the statute does not

provide for personal liability for corporate officers, the

"responsible corporate officer" doctrine should apply to uphold

the trial court's ruling that Rooney failed to make the requisite

trust deposits. See United States v. Park, 421 U.S. 658 (1975);

United States v. Dotterweich, 320 U.S. 277 (1943). In
Dotterweich, the United States Supreme Court held that a

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corporate officer may be held personally liable for the

corporation's violation of strict liability provisions of the

Federal Food, Drug and Cosmetic Act because the officer had a

"responsible share in furtherance of the transaction which the

statute outlaws." 320 U.S. at 284. In so holding, the Court

found that the purposes of the FDCA "touch the lives and health

of people which, in circumstances of modern industrialism, are

largely beyond self-protection." Id. at 280. The Court also

noted that the statute "dispenses with the conventional

requirement for criminal conduct -- awareness of some

wrongdoing." Id. at 281. Recognizing that "the only way a

corporation can act is through the individuals who act on its

behalf," the Court held that "[i]n the interest of the larger

good [the FDCA] puts the burden of acting at hazard upon a person

otherwise innocent but standing in a responsible relation to a

public danger." Id. (emphasis added). Reaffirming Dotterweich,

the Court in Park elaborated on Dotterweich's "responsible

relation" test and held that strict liability under the FDCA may

be imputed to a corporate officer who "had, by reason of his

position in the corporation, responsibility and authority either

to prevent in the first instance, or promptly to correct, the
4
violation complained of, and that he failed to do so." Park,
4
The "responsible relation" standard of corporate officer
liability developed in Dotterweich and Park has become commonly
referred to as the "responsible corporate officer doctrine."
See, e.g., United States v. MacDonald & Watson Waste Oil Co., 933
F.2d 35, 50 (1st Cir. 1991); In Re Dougherty, 482 N.W.2d 485,
489-90 (Minn. Ct. App. 1992).

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421 U.S. at 673.

Assuming, without deciding, that the "responsible corporate

officer" doctrine is applicable, as the Attorney General argues,

to the preneed and perpetual care trust requirements of Code

§§ 57-35.15 and 57-35.21, 5 we find the evidence, viewed in the

light most favorable to the Commonwealth, see Higginbotham v.

Commonwealth, 216 Va. 349, 352, 218 S.E.2d 534, 537 (1975),

failed to prove that Rooney had a "responsible relation" to the

corporation's obligation and failure to make the trust deposits.

Although a corporate president has overall responsibility for

the duties and obligations of the corporation and the

responsibility to ensure compliance with legal requirements, the

responsible corporate officer doctrine imposes criminal

responsibility only upon the officer or officers who are directly

responsible or accountable for the corporation's compliance.

Whether a corporate officer has a direct responsibility to

fulfill or comply with a legal obligation "depends 'on the

5
See United States v. Cordoba-Hancapie, 825 F. Supp. 485,
508 (1993) ("In cases involving matters traditionally within the
public-welfare realm -- dangerous food, misbranded
pharmaceuticals, toxic substances and the like -- the strong
public interests in enforcing the regulations at issue may
arguably be viewed as justifying imposition of a strict duty of
supervision and control upon corporate officers [as in Park and
Dotterweich]."); Dougherty, 482 N.W.2d at 489-90 (applying
responsible corporate officer doctrine to state hazardous waste
laws that "pervasively affect activities which threaten human
health and safety"). See also Norman Arbams, Criminal Liability
of Corporate Officers for Strict Liability Offenses -- A Comment
on Dotterweich and Park, 28 UCLA L. Rev. 463, 475-77 (1981)
(discussing implications of Dotterweich and Park).

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evidence produced at trial and its submission -- assuming the

evidence warrants it -- to the jury under appropriate guidance.'"

Park, 421 at 669 (quoting Dotterweich, 320 U.S. at 284). Here,

the stipulation of

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facts stated only that Rooney was the president of the

corporation. However, the Supreme Court made clear that an

officer's direct responsibility to fulfill a legal duty may not

be predicated solely on the basis of the officer's title or

position in the corporation. See Park, 421 U.S. at 674

(upholding jury instruction which "did not permit the jury to

find guilt solely on the basis of respondent's positions in the

corporation [but rather] fairly advised the jury to find guilt it

must find respondent had a responsible relationship to the

situation"); Dotterweich, 320 U.S. at 285 (declining to "define
or even to indicate by way of illustration the class of employees

which stands in . . . a responsible relation" to a corporation's

misconduct). The Commonwealth produced no evidence describing

Rooney's duties, powers, and responsibilities as president of the

corporation, or that he had an accounting responsibility or

direct corporate responsibility for withholding or depositing the

funds in trust. Compare United States v. New England Grocers
Supply Co., 488 F. Supp. 230, 233-34 (D. Mass. 1980) (government

failed to prove responsible relation where evidence merely showed

that accused was chief executive officer of corporation), with

Park, 421 U.S. at 663 n.7, 664 (relying upon description of

president's duties and powers in corporation's bylaws and

defendant's concession that conduct in question was something

that he was "responsible for in the entire operation of the

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company"), and United States v. Acri Wholesale Grocery Co., 409

F. Supp. 529, 535 (S.D. Iowa 1976) (officers' testimony and

statements to inspectors regarding responsibility and authority

established responsible relation to corporation's misconduct).

Thus, even if the "responsible corporate officer" doctrine

applies, Rooney may not personally be held criminally liable for

the corporation's violation of Code §§ 57-35.15 and 57-35.21

because the evidence failed to prove that Rooney had a

"responsible relation" to the corporation's obligation to make

preneed and perpetual care trust deposits.
EMBEZZLEMENT

Rooney next contends the evidence is insufficient to support

the embezzlement conviction. When the sufficiency of the

evidence is challenged on appeal, we determine whether the

evidence, viewed in the light most favorable to the Commonwealth,

and the reasonable inferences fairly deducible from that evidence

support each and every element of the charged offense. See Moore
v. Commonwealth, 254 Va. 184, 186, 491 S.E.2d 739, 740 (1997);

Derr v. Commonwealth, 242 Va. 413, 424, 410 S.E.2d 662, 668

(1991). Under familiar principles of appellate review, we will

not reverse the judgment of the trial court, sitting as the

finder of fact in a bench trial, unless it is plainly wrong or

without evidence to support it. See Martin v. Commonwealth, 4

Va. App. 438, 443, 358 S.E.2d 415, 418 (1987).

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 To establish the crime of embezzlement, 6 the Commonwealth

must prove that the accused wrongfully appropriated to his or her

own benefit property entrusted or delivered to the accused with

the intent to deprive the owner thereof. See Zoretic v.

Commonwealth, 13 Va. App. 241, 243, 409 S.E.2d 832, 833-34

(1991). Although the Commonwealth need not establish the

existence of a formal fiduciary relationship, it must prove that

the defendant was entrusted with the property of another. See
Chiang v. Commonwealth, 6 Va. App. 13, 17, 365 S.E.2d 778, 780

(1988). Furthermore, the Commonwealth must prove that the

defendant had the specific intent of depriving the rightful owner

of property entrusted to him or her. See Waymack v.

Commonwealth, 4 Va. App. 547, 549-50, 358 S.E.2d 765, 766 (1987).
6
Code § 18.2-111 provides, in pertinent part, that

[i]f any person wrongfully and fraudulently

use, dispose of, conceal or embezzle any

money . . . , which he shall have received

for another . . . or by virtue of his office,

trust, or employment, or which shall have

been entrusted or delivered to him by another

. . . he shall be guilty of embezzlement.

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 The evidence is insufficient to support the embezzlement

conviction in two respects. First, the evidence failed to prove

that either Rooney or the corporation was "entrusted" with the

property of another. Code §§ 57-35.15 and 57-35.21 required the

corporation to deposit certain percentages of receipts from the

sale of certain burial property and services into the preneed and

perpetual care trust accounts. The monies paid to the

corporation as consideration for preneed and perpetual care

property and services belonged to the corporation; they were not

"entrusted" to the corporation with the expectation that the

corporation would return the monies or deliver them to a third

person. Cf. Gwaltney v. Commonwealth, 19 Va. App. 468, 475-76,

452 S.E.2d 687, 691-92 (1995) (finding monies paid by customers

of convenience store to be "entrusted" to store's cashiers). The

monies were paid to the corporation as consideration for property

or services that the corporation would provide the purchaser in

the future. The statute governs the corporation's management of

its own property in order to ensure that it will have adequate

monetary resources to deliver future burial property or services.

Thus, the evidence failed to establish that receipts from the

sale of preneed and perpetual care property and services were

property that belonged to another and were "entrusted" to the

corporation or to Rooney.

Second, even assuming the corporation's failure to fund the

trust accounts constituted embezzlement, the evidence is

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insufficient to impute personal criminal liability to Rooney.
[T]he general rule is that where the crime
charged involves guilty knowledge or criminal
intent, it is essential to the criminal
liability of an officer of a corporation that
he actually and personally did the acts which
constitute the offense, or that they were
done under his direction or with his
permission.

Bourgeois v. Commonwealth, 217 Va. 268, 274, 227 S.E.2d 714, 718

(1976); see 26 Am.Jur.2d Embezzlement § 30 at 380 (1987) ("An

officer of a corporation may be held criminally liable for the

embezzlement or larceny of the property of a third person through

a corporate act, if the act is done by the individual officer, at

her direction, or with her permission."). In the present case,

the only proof of Rooney's involvement with the funds is the

stipulation that he was the corporation's president. The record

is devoid of any evidence that Rooney misappropriated the funds

for his personal use or for non-corporate purposes or that he

directed or approved such misappropriation. Cf. Compton v.

Commonwealth, 22 Va. App. 751, 756, 473 S.E.2d 95, 97 (1996).

For the foregoing reasons, we reverse the convictions and

dismiss the charges.
Reversed and dismissed.

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