Monday, April 25, 2011

What You Could Infer, If I Were a Carpenter


State v. Rounds, 2011 VT 39

A friend of mine once told me a story that falls in line with today’s case.  After finding a good contractor who did a great job repairing sheathing on the side of his house, he asked them to bid on a bathroom renovation job.  The bid came in low, and the crew started right away.  The problem is that they never went away, and while work progressed slowly, costs rose quickly.  When my friend inquired what was taking so long and costing so much, the foreman answered honestly.  They were going slow until the winter weather broke for their next job, and he admitted, they probably could have done the job cheaper, but they hadn’t done a bathroom renovation before and were teaching themselves as they went along. 

If you think my friend asked for a refund or that one was offered, then you really do not know much about construction practices in Vermont.


The Complainants in today’s case certainly do (at least by now).  Both are New York residents who bought a second home together in Andover, Vermont in 2005 and contracted with Defendant to build a two bedroom addition and large deck on the house.  Defendant won the job by offering the low bid of $68,000 for the entire job (including labor and materials).  Owners thought this was a “very good” price and gave Defendant a $7000 advance at the signing.  This would turn out to set a pattern between the parties: Owners would come to the site from their home in New York; Defendant would show them some nominal progress, and then Owners, at Defendant’s request, would cut a sizable check. 

Construction on the addition formally began in May 2007.  Owners visited the site each month for a progress review.  By summer, Defendant had laid the foundation for the addition and framed the addition.  By September, Defendant had, following several requests by Owners, done the initial installation on the roof.  But the roof was not actually completed until late October. 

In October, Defendant asked for a $7500 payment, which Owners made using a check from their credit card company.  Defendant complained that this would take ten days to clear and asked for a replacement check.  Owners complied, and Defendant cashed both.  In November, Owners received an invoice for $600 for French doors that they had already given Defendant $2000 to purchase.  In December, Defendant stopped taking their calls or appearing at the work site.  By this point, Owners had paid Defendant $70,000 to construct the shell of an addition that was not tied to the house, and still lacked insulation, sheetrock, interior doors, and the deck.  Owners, frustrated, then spent another $30,000 on another contractor who undid portions of Defendant’s work and completed much, if not all, of the project. 

In January 2008, Owners notified Defendant that they were cancelling their contract and would no longer require his services.  Defendant, perhaps offended at the implication of this notice, sued Owners for breach of contract—seeking damages for lost revenue he would have received if he had been allowed to continue building the house.  Owners, making things explicit, countersued and reported Defendant to the Attorney General’s Office who brought the immediate criminal case against Defendant. 

The State charged Defendant with one count of home improvement fraud and two counts of false pretenses.  The latter two were for the above-described double payments Owners made in October and November of 2007.  A jury found Defendant guilty on all three counts.  On appeal to the SCOV, Defendant seeks only to overturn his Home Improvement Fraud conviction, accepting the judgment of his peers on the other two counts. 

On appeal, Defendant raises three issues.  First he argues that there was not enough evidence to convict him of home improvement fraud because there was no evidence that he intended to defraud the Owners at the time the contract was formed.  The element here is whether Defendant “knowingly promised performance that he knew would not be performed, in whole or in part.”  The SCOV reviews this question of acquittal as a matter of law by a very high standard by looking at the State’s evidence in the most generous light possible.  The policy being that, to avoid undermining the constitutional role of the jury, neither the SCOV nor the trial court should take an issue from a jury unless there is absolutely no basis for the jury to have made findings on the critical elements. 

No dice for Defendant in this case.  The evidence showed that he worked slowly from the start and was taking double payments on false pretenses up to the last month of his work.  The SCOV rejects Defendant’s contention that his substantial performance (framing and roofing) of the agreement provides an absolute defense.  That is an issue for the jury to weigh and not a get-out-of-jail-free card.  Since there is more than enough circumstantial evidence, the SCOV rejects Defendant’s argument and lets the verdict stand.

Defendant has more luck with his second argument, in which he contends the trial court improperly allowed the jury to consider the inferential language of 13 V.S.A. § 2029.  This argument forces the SCOV into a fairly abstract discussion about the nature of inferences, Rule of Evidence 303, and our Constitution’s criminal standard of proof, which requires evidence beyond a reasonable doubt.  The issue here revolves around the word “knowingly.”  The State must prove beyond a reasonable doubt that a defendant “knowingly promised performance” in order to convict him on home improvement fraud.  Since few suspects willingly confess their plans to defraud a homeowner, the law allows the State to prove this element by inference.  Instead of proving directly that a defendant “knew,” the State can establish guilt by putting on evidence that shows:

1)         that the defendant failed to perform a contract;

2)         that the complaining owner requested the defendant to perform the rest of the contract or tender a refund; and

3)         that the defendant failed to either complete the contract or tender a refund.

The problem for the State in this case is that Owners never asked Defendant to perform the rest of the contract or refund the money.  “That’s okay,” says the State, “the SCOV can infer it from the evidence.”  “Not so fast,” says the SCOV, “you are asking us to double-stack inferences, and unlike pancakes, this cannot be done.

As an aside, let me offer this primer on inference as a logical concept.  Basic logic begins with a deduction, which moves from the general to the specific.  All men are mortal.  Socrates is a man.  Therefore, Socrates is mortal.  Deductive thinking is safe.  As long as you do it right, your conclusions will always be sound.  If all men really are mortal and if Socrates really is a man, then it simply follows that Socrates will die.  Inductive thinking goes the opposite way.  From specific examples we infer the general.  For example, all of our ancestors were people.  All of our ancestors were mortal.  Therefore all people are mortal.  See the problem?  We cannot know that the conclusion necessarily follows.  We are pretty sure that this is true, but unlike deductive logic, we cannot be absolutely sure, even if the first two sentences are absolutely true.  An inference, in other words, is our best guess.  They range from the most secure bets like “the sun will rise tomorrow” to more attenuated conclusions like he “knowingly promised performance that he knew he could not provide.”  Inferences are bit like bets.  We build them on the best evidence and the best inferences are practically sure things, as good as deductions for all practical purposes, because our evidence and data is so thorough. 

Heady stuff, but turning back to the legal case at hand, it breaks down to this.  The law will allow the State to prove the “knowingly” element of the fraud crime by inference (that is without direct or circumstantial evidence) but the basis for that inference must rest on basic facts established through the testimony of witnesses or evidence.  Here, the State had to establish the three basic facts of the inference through evidence:  Defendant did not complete the contract, Owners requested either completion of the contract or a refund, and Defendant failed to comply.  The State did not have any direct or circumstantial evidence showing that Owners made the required request, and the SCOV holds that the trial court should not then have allowed the jury to infer that the Owners made such a request.  Otherwise, the jury could start a domino chain of inductive reasoning that would be below the threshold of “beyond a reasonable doubt” (not to mention logically unsound). 

Since the State did not establish the elements of the inference, it was not entitled to a jury instruction on this element.  The question then pivots to whether this error was a “plain error” or whether it was a minor defect that does not alter the basic justice done.  Plain error is a term of art and means that the error was obvious, that it affected substantial rights and resulted in prejudice to the defendant, and that it seriously affected “the fairness, integrity or public reputation of judicial proceedings.”  Not an easy standard to meet, but as you can guess, the SCOV does not come this far to turn back.  Given the serious implications of the error, SCOV concludes that it is plain error, and it vacates the conviction and remands for either re-trial or dismissal. 

Much is going on in this decision.  Apart from the colorful facts, the SCOV appears to be sending direction to the trial courts to tighten up the standard for inferences and raising the bar of proof for the State. 

For Contractors, though, the message is equally clear.  Diligent work is not only its own reward but it is likely the best way to avoid prosecution.  

4 comments:

  1. You wrote: “Not so fast,” says the SCOV, “you are asking us to double-stack inferences, and unlike pancakes, this cannot be done.

    I do not believe this is correct. This case is not about inferences on inferences; it is about the standard of proof for the basic facts. The Court has held that it is permissible to stack an inference on an inference, in State v. Godfrey:

    ¶ 22. The only special test for inferences is that they must be reasonable. See Olds, 141 Vt. at 26, 443 A.2d at 445 (holding that facts may be proved by “reasonable inferences”). While we recognize that inferences are more likely to be unreasonable when they are based upon other inferences-which in some instances could lead to such evidence being excluded under Vermont Rule of Evidence 403 or another evidentiary rule-this does not warrant the outright ban that defendant requests here.

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  2. Hey Anonymous,

    Good catch! The opinion is obviously more subtle than my summary, but the point that the SCOV is making is that while reasonable inferences are acceptable, the Constitutional standard of "beyond reasonable doubt" will limit the stacking of inferences and will require proof of basic facts when an essential element of the charge is involved. Here is what the SCOV says in State v. Rounds:

    ¶ 24. In order for the court to instruct the jury on a permissive inference, it must first determine the nature and legal effect of the presumed fact that would be found as a result of the inference. Rule 303(c) distinguishes between a presumed fact that “establishes guilt or is an element of the offense” and a fact that “has a lesser effect.” V.R.E. 303(c). Identifying this distinction enables the trial court to determine the standard of proof for submitting an instruction on the inference. The rule states that for the weightier elemental facts, such as whether defendant acted knowingly, the element at issue here, “the court may submit the question of guilt or the existence of the presumed fact to the jury, but only if a reasonable juror on the evidence as a whole, including evidence of the basic fact, could find guilt or the presumed fact beyond a reasonable doubt.” V.R.E. 303(c). The language of the rule on this issue is not the paragon of clarity, but reviewing it along with the entirety of the rule and other persuasive sources convinces us that the rule requires proof of the basic fact beyond a reasonable doubt before the court may submit a specific instruction on the permissive inference to the jury.

    The concern I see the SCOV articulating here is one of Constitutional standards. The State cannot get around its high burden of proof beyond a reasonable doubt by a series of hedges (inferences) that act as stalking horses. As you point out, it is not a ban on double stacking inferences as a rule, but it is a strong rebuke to their use in this context, albeit one that is limited to the facts of this case, the statute at issue, and the nature of the ultimate fact to be proved. What do you think?

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  3. Don't agree. The court simply stated that the basic fact must be proven beyond a reasonable doubt, and it wasn't here. I'm not even sure this case involved stacked inferences at all. Even if the witness had said, I called him and I spoke to him and I asked him to finish the job and he said no, there are many inferences theoretically in this scenario: the fact finder has to infer that the witness actually reached the defendant, and not someone impersonating him; that the witness's words were correctly heard and understood by the defendant; that the defendant's words were correctly heard by the witness, etc. Any simple fact can be sliced up into numerous inferences, this is why courts nowadays reject the whole stacked inferences analysis in favor of an over-all BRD in light of all of the evidence analysis. Again, I don't see a rebuke to stacked inferences here, just weak evidence of the basic fact.

    Also, minor quibble about your use of the term stalking horse. Wikipedia defines this as: A stalking horse is a person who tests a concept with someone or mounts a challenge against them on behalf of an anonymous third party. If the idea proves viable and/or popular, the anonymous figure can then declare their interest and advance the concept with little risk of failure. If the concept fails, the anonymous party will not be tainted by association and can either drop the idea completely or bide their time and wait until a better moment for launching an attack.

    I don't see how this concept ties in here.

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  4. Hi Anonymous,

    This may be a case where we just do not agree. I think your point has some merit, but I still see the SCOV as tackling the extended inference issue in this case, particularly in light of its extensive Rule 303 analysis.

    Your point about the smaller inference, I would call them micro-inferences, is a bit beside the point. We make such micro-inferences with nearly every statement or bit of testimony that we introduce at trial. I agree that the SCOV is not criticizing that level of inferences.

    I also agree that the State, with better evidence could have established the basic facts and avoided this entire situation. On one level, I agree that the SCOV is chiding the lack of evidence, but the State appears to have argued that it was entitled to the permissive inference charge because of the general circumstances allowed the jury to infer the elements of the permissive inference. So while the SCOV is saying that there is not enough evidence to support the charge, it is also rebutting the argument by the state that the elements of the permissive inference could themselves be inferred from the circumstances.

    At any rate, thanks for your comments. It will be interesting to see how parties use this case in future briefs.

    As to the stalking horse reference, I was using it in the original sense of the word (literally a pretend horse used to sneak up on prey) to suggest the image of the State using the bits of inferential evidence to (metaphorically) sneak up on the element. Not my most brilliant piece of rhetoric, but what is life without a few chances and flights of fancy? Sorry for the confusion.

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