State v. Wooten

Owens, J.

¶19 (dissenting) — David Wooten purchased a house from Dennis Kohl through a real estate contract in May 2005. Wooten and his family began living in the house in 2005 and started remodeling in 2007 to add a bedroom and remove black mold. Wooten kept current on his payments throughout this period. But unbeknownst to Wooten, Kohl had improperly taken out a second mortgage on the house after the sale. When the Wooten family returned to the house after the holidays that year, they found a default notice on the front gate as a result of Kohl’s failure to make payments on the second mortgage. Rather than pay double the sale price to keep the house, Wooten allowed the house to undergo foreclosure and he and his family moved out.

¶20 A few months later Kohl visited the house and discovered that it was badly damaged. Wooten was subsequently prosecuted for malicious mischief. I believe this prosecution was erroneous. Former RCW 9A.48.070(l)(a) (1983) defines “malicious mischief” as “knowingly and maliciously” causing “physical damage to the property of another in an amount exceeding [$1,500].” Wooten’s actions do not fit this definition. The house was not the “property of another” because Kohl had sold it to Wooten. While Kohl may have retained a security interest in the house, a security interest cannot be physically damaged. By holding that it can be, the majority has adopted an unworkable definition of “physical damage” that will subject Washington homeowners to confusion and potential criminal sanction for standard home repair projects.

¶21 Respectfully, I dissent.

ANALYSIS

¶22 A person commits malicious mischief when he or she “knowingly and maliciously ... [clauses physical damage to the property of another in an amount exceeding [$1,500].” Id. I argue that the majority has misapplied the statute to the facts at hand and, consequently, brought harm and confusion to Washington homeowners with an unworkable standard.

I. The Majority Misapplied the Statute to This Case

¶23 In applying the malicious mischief statute to these facts, the two main concerns are whether the house Wooten damaged — and lived in at the time — was the “property of another” and whether Kohl’s interest in the property was “physically damaged.” The majority is incorrect about both.

A. The House Was Not the Property of Another for Malicious Mischief Purposes

¶24 The Revised Code of Washington defines “property of another” as that “in which the actor possesses anything less than exclusive ownership.” RCW 9A.48.010(l)(c). The legislature’s choice of the word “ownership,” rather than the broader term “interest,” reveals a desire to define “malicious mischief” narrowly. This court has listed the “chief incidents” of ownership as the right to possess, use, enjoy, and sell property. Wasser & Winters Co. v. Jefferson County, 84 Wn.2d 597, 599, 528 P.2d 471 (1974).

¶25 Kohl had no such ownership interests. He did not retain rights essential to ownership such as “ ‘the right to possession of the land’ ” or “ ‘the right to control the land.’ ” Tomlinson v. Clarke, 118 Wn.2d 498, 507, 825 P.2d 706 (1992) (quoting Cascade Sec. Bank v. Butler, 88 Wn.2d 777, 782, 567 P.2d 631 (1977)). Nor did he even maintain the right to manage or enjoy the property. Wasser, 84 Wn.2d at 599. If Kohl wanted to move into the house and enjoy it as if it were his own, he could not legally do so. He could not dictate to Wooten how to combat the black mold found in the bathroom or assert any other physical control over the property. He certainly could not sell the property out from under its current occupant and give a different buyer the right to use and possess the house. In sum, as long as Wooten continued to make payments, Kohl’s interest in the property could not accurately be described as one of “ownership.”

¶26 Instead of viewing Kohl’s interest as ownership, Washington treats the seller’s interest in a real estate contract as a lien/mortgage-type security interest in real property. Tomlinson, 118 Wn.2d at 509. As a vendee, Wooten “possesses the beneficial interest and real ownership in the land,” while the vendor, Kohl, “retains only a security under the contract which is looked upon as personal property rather than as an interest in the land.” Comm. of Protesting Citizens v. Val Vue Sewer Dist., 14 Wn. App. 838, 842, 545 P.2d 42 (1976); see In re Estate of Eilermann, 179 Wash. 15, 18, 35 P.2d 763 (1934) (vendor’s interest is personal property, not realty, for purposes of probate administration); Meltzer v. Wendell-West, 7 Wn. App. 90, 94-95, 497 P.2d 1348 (1972) (vendor’s interest is personal property, not realty, under community property law).

¶27 Washington’s perception of real estate purchasers like Wooten as property owners, and sellers like Kohl as holders of a security interest, manifests in other areas of the law as well. Purchasers are treated as real property owners for purposes of attachment; the judgment lien statute, Cascade Sec. Bank, 88 Wn.2d at 782; and for determining superior interest under the bona fide purchaser doctrine, Tomlinson, 118 Wn.2d at 503. This treatment also extends to the remedies available to the parties. “The remedies provided to the seller in the case of breach or nonperformance are those of a secured creditor.” In re McDaniel, 89 B.R. 861, 869 (Bankr. E.D. Wash. 1988). These remedies consist mainly of foreclosure under U.C.C. § 9-610 or obtaining a judgment under U.C.C. § 9-601(a)(l) to satisfy the debt.

¶28 The contract between Wooten and Kohl gave Wooten all of the requisites for ownership mentioned above. It did not give Kohl these rights, one of which is the right to mortgage the property, Tomlinson, 118 Wn.2d at 507, but Kohl did so anyway and started himself and Wooten down the path that led to this court and Wooten’s conviction. Instead, it should have been Wooten’s actions that determined the future rights of both parties. Wooten’s timely payments dictated the continuance of his ownership of the house, to the exclusion of all others. The contract shows that if Wooten made all the payments, there would be nothing Kohl could do to prevent him from attaining formal title to the house. Wooten’s exclusive physical control over the house and its fate made him the sole owner of the property.

¶29 The majority relies on Tomlinson to rebut this proposition. See majority at 895. Legal title in a real estate transaction, as the majority points out, does not pass to the buyer until the purchase price is paid in full. Tomlinson, 118 Wn.2d at 504. This may be, but legal title and ownership are not the same thing. “[B]are legal title” can be separated from an ownership interest, even in the context of intangible property like stock shares in a company. O’Steen v. Estate of Wineberg, 30 Wn. App. 923, 932-33, 640 P.2d 28 (1982). Thus, legal title is not required to maintain an ownership interest in property; it is merely evidence of such an interest. In this case, Kohl’s title points to a security interest. In Tomlinson, this court also treated legal title as distinct from an ownership interest, explaining that “[t]here is no valid reason to distinguish between those cases in which legal title is conveyed to secure the payment of a debt and those cases in which legal title is retained to secure the payment of a debt.” 118 Wn.2d at 509-10. Regardless of whether the formal legal title passes at the beginning or the end of the transaction, the buyer obtains an exclusive ownership interest in the property, while the seller’s interest is treated as a lien/mortgage-type security interest. Id. at 509. Consequently, Tomlinson directly contradicts the argument made by the majority that exclusive ownership requires legal title.

¶30 Despite this precedent to the contrary, the majority still insists that sellers in real estate contracts maintain ownership of the properties after they have been sold. In support of this proposition, they cite this court’s decision in State v. Coria, 146 Wn.2d 631, 48 P.3d 980 (2002), where the defendant damaged community property owned concurrently with his wife. Despite this ownership interest in the damaged property, he was still convicted. Id. at 633, 643. But Coria established only that community property could be considered “property of another.” Id. at 636. Both Mr. and Mrs. Coria had a possessory, ownership-type interest in the items damaged. Either could exert exclusive physical control over the jointly owned property. This type of exclusive, possessory interest is different from Kohl’s security interest, which essentially consists of the right to collect payments from Wooten. Because Coria addresses only the former, it has no application to cases involving security interests like the one at issue here.

¶31 The State admitted at oral argument that if Kohl’s interest in the property were only a security interest, it was not proved to be damaged. Wash. Supreme Court oral argument, State v. Wooten, No. 87855-2 (May 21, 2013), at 20 min., 0 sec., audio recording by TVW, Washington State’s Public Affairs Network, available at http://www.tvw.org. As I have shown above, Kohl had no more than a security interest in the property. Wooten was the exclusive owner of the house, thus he did not damage the “property of another” and cannot be found guilty of malicious mischief.

B. Wooten Did Not Physically Damage Kohl’s Interest

f 32 In addition to erring on the question of whether the house was “property of another,” the majority errs on the question of whether Wooten physically damaged Kohl’s interest because (1) a security interest cannot be physically damaged and (2) Kohl’s interest was not damaged at all.

1. Kohl’s Interest Cannot Be Physically Damaged

¶33 First, even if Kohl’s interest were defined as ownership, Wooten’s actions do not meet the second requirement for a malicious mischief prosecution: that the interest be physically damaged. Former RCW 9A.48.100(1) (1984) lists two definitions of “physical damage”: the first is its “ordinary meaning” and the second is, among other data-related definitions that are not relevant in this case, “any diminution in the value of any property as the consequence of an act.” The ordinary meaning of the phrase “physical damage” requires the thing being damaged to be physical itself. We have previously held that physical damage requires a physical invasion of the property that either destroys it or injures it so that it does not function properly. State v. Nordskog, 76 Wash. 472, 474, 136 P. 694 (1913). For example, in Nordskog the defendant’s conviction for willfully and maliciously damaging property by attaching a wiretap to a telephone call box was overturned because his actions did not involve a “physical invasion” of the property such that the property was damaged. Id. A similar standard was used in a malicious mischief context in State v. Gardner, 104 Wn. App. 541, 16 P.3d 699 (2001). There the defendant keyed the microphone on a police radio, causing disruptive clicking sounds on the officers’ radio frequency. Id. at 543. This was considered physical damage because it interrupted and interfered with the function of regular transmissions in a harmful way. Id. at 544. Despite this, the majority claims the second definition of “malicious mischief” (any diminution in the value of any property as the consequence of an act) allows nonphysical things to be physically damaged. This interpretation, however, is not only contrary to Nordskog and Gardner but illogical as well. It would not make sense to claim that one’s right to free speech was physically damaged by censorship or that the stock market was physically damaged by a sluggish economy. Yet both of these scenarios entail a diminution in the value of interests that could accurately be described as property.

¶34 A more reasonable interpretation of the second definition of “physical damage” is that it was meant to cover situations where an actor reduced the value of physical property in a manner that could not be described as ordinary “physical damage.” For instance, if a graffiti artist spray-painted an image onto a building, the building could still function properly, support the weight of its occupants, and endure the elements as before (perhaps even better now that it has an extra layer of paint). The walls were not smashed; the windows were not broken. Nonetheless, the owner has suffered a loss. If the owner desires to sell the building, she or he must either pay to have the image painted over or accept lower than market price. Or, imagine a car collector with a brand new Ferrari that has never been driven. Without the owner’s permission, a friend takes the car and, with malicious intent, drives it to the store and back. Despite the still pristine condition of the car and the fact that no physical damage has been done, the owner has suffered a loss: the Ferrari is not worth as much as it was when the odometer read “zero.” In both instances, the items were physically altered but not physically damaged. Consequently these situations would not have been considered malicious mischief under the ordinary meaning of “physical damage,” but they would be under the second, expansive definition. The logical purpose of the expansive definition was likely to cover possible loopholes like these in the ordinary meaning definition. This reading of the statute, unlike that adopted by the majority, is logical, workable, and comports with the statute’s plain meaning. I would adopt the more logical interpretation: that in order for property to be physically damaged under RCW 9 A. 48-.100(1), the property itself must be physical.

¶35 In the Court of Appeals opinion in this case, the majority cites State v. Newcomb, 160 Wn. App. 184, 246 P.3d 1286, review denied, 172 Wn.2d 1005 (2011), as evidence that Washington has broadly defined “physical damage” in the malicious mischief context. State v. Wooten, noted at 169 Wn. App. 1029, 2012 WL 3011730 at *3, 2012 Wash. App. LEXIS 1746, at *8-9, review granted, 176 Wn.2d 1001 (2013). There the defendant dug up and obstructed the gravel path constituting his neighbor’s ingress-egress easement, causing $7,000 worth of damage and making the easement impassable. Newcomb, 160 Wn. App. at 187-88. But there the value of the property interest in the easement was considered physically damaged because it could no longer be used. The value of an easement interest is inseparable from the ability to physically use it, while the value of Kohl’s security interest in the house is different from the value of the house itself. Consequently this reliance on Newcomb is misplaced. Newcomb does not demonstrate that a security interest can be physically damaged, only that because of their unique physicality, easements can be. See id. at 190. Similarly, other cases cited by the Court of Appeals have no application to this case because they involve damage to physical property, not a security interest. State v. VanValkenburgh, 70 Wn. App. 812, 814, 856 P.2d 407 (1993) (noting that the defendant was convicted of malicious mischief for breaking windows); State v. Schaffer, 120 Wn.2d 616, 618-19, 845 P.2d 281 (1993) (noting that the defendant was convicted of malicious mischief for slashing tires). Thus, the Court of Appeals’ legal authority does not support its proposition that Washington has defined “physical damage” in a way that could be applied to nonphysical property. See Wooten, 2012 WL 3011730 at *3, 2012 Wash. App. LEXIS 1746, at *8-9.

2. Kohl’s Interest Was Not Damaged at All

¶36 Second, assuming, for the sake of argument, that the Revised Code of Washington provides that nonphysical items can be physically damaged, Wooten would still not be guilty of a felony because Kohl’s interest in the house was not damaged by Wooten’s actions. Indeed, the State admitted at oral argument that if Kohl’s interest in the property were only a security interest, it was not proved to be damaged. That is because the value of a security interest is not necessarily the same as the value of the secured property. Bennett v. Maloney, 63 Wn. App. 180, 185-86, 817 P.2d 868 (1991). So when Wooten damaged the house, he did not cause de facto damage to Kohl’s interest in the house. Kohl’s interest consists only of the ability to collect payments from Wooten and, upon default, to collect the amount he is owed (through repossessing the house under, selling it and garnishing the proceeds under, obtaining a judgment for the amount owed under, or other collection methods set forth in the Uniform Commercial Code). U.C.C. §§ 9-609, 9-610, 9-601(a)(l). The entity that now possesses Kohl’s interest still has the ability to collect the entirety of what it is owed by selling the house. The second mortgage taken out by Kohl was for $216,000, which is the value of the security interest. When Kohl sold the house to Wooten it was worth $295,000. The current owner of the house, then, could sell it for $276,000 ($295,000 less the roughly $19,000 required to bring the house up to code), which is still $60,000 more than the security interest is worth. That means the security interest has lost no value as a result of Wooten’s actions. Because the security interest lost no value, Wooten did not cause damage to it and thus cannot be convicted of malicious mischief. I do not understand how Wooten can be convicted of a felony for causing no financial harm.

¶37 There is further evidence, outside of RCW 9A.48-.100(1), that the legislature did not intend the diminution of a security interest to be punished in the context of malicious mischief: a different statute addresses such conduct. RCW 61.12.030 makes damaging securities or mortgage property a misdemeanor. The difference between the misdemeanor statute and the felony statute is not just that the latter requires malice. If that were the case, the felony statute would be explicit about the fact that it punishes damage done to lien-type interests as well as physical property. It is not. The felony statute, former RCW 9A.48.070(l)(a), mentions only physical damage to property, while the misdemeanor statute, RCW 61.12.030, mentions damage to security interests as well. If the legislature provides a specific definition in one statute and a general definition in another, we must assume that the legislature meant to apply the specific statute only. State v. Smeltzer, 86 Wn. App. 818, 820, 939 P.2d 1235 (1997). Thus, in addition to malice, an actor must damage a physical property interest in order to commit malicious mischief. Damaging a security interest is punishable in the criminal context only as a misdemeanor. In short, if the legislators who drafted these provisions had meant that causing $1,500 in damage to a security interest is a felony, they would have said so.

¶38 Punishing Wooten’s conduct with a malicious mischief prosecution also goes against established concepts of malicious mischief. A primary distinction between malicious mischief and theft is that malicious mischief involves property that cannot be redeemed. State v. Webb, 64 Wn. App. 480, 490, 824 P.2d 1257 (1992). It was not meant to apply to cases like this one where the property (the house) and the property interest (the security) can still be redeemed by selling the house. Simply put, this case does not belong in the “felony” category. It belongs as either a misdemeanor under RCW 61.12.030 or in a civil suit as a tort.

II. The Majority’s Unworkable Standard Will Shrink and Obscure the Rights of Washington Homeowners

¶39 Placing Wooten’s actions in the context of felony malicious mischief, as the majority has done, will have considerable negative consequences for Washington homeowners by shrinking their property rights and causing confusion as to how far those rights extend. There is no logic or reason in the possibility that they could be prosecuted for malicious mischief for doing something as ordinary as making alterations and repairs to a house they bought but have not yet received title to. They will not be able to make necessary repairs to rid their house of nuisances such as black mold without fear of criminal sanction. Worse still, they will not be protected from this prosecution even if, like Wooten, the sole reason that the “damage” caused by the alterations was discovered was a dubious second mortgage taken out on the house by the seller. Homeowners understand that the logical result of buying a home is exclusive ownership over the property, even before the mortgage is paid in full.

¶40 As long as a buyer abides by the contract and makes timely payments, the property will become his or hers. As the majority points out, if the buyer fails to make these payments, the seller may compel the buyer to forfeit the latter’s interest in the property. See majority at 895. But the possibility of future loss does not preclude a buyer who has been making timely payments from being the exclusive owner of the house. There are countless examples of property that could be taken from owners: by the government if misused or by creditors to satisfy payment. But this possibility does not prevent the owner from having exclusive ownership over his property.

¶41 For instance, if a vehicle is used as an accessory to a crime, the State may confiscate it. The prospect of forfeiture, however, does not mean all car owners automatically share ownership rights in their cars with the government. Similarly, taking out a loan raises the possibility of default and subsequent seizure of the borrower’s assets to satisfy the debt. Still, maintaining a debt, the default of which could cause a creditor to take possession of the borrower’s property, does not divest the borrower of exclusive possession of that property, despite the very real prospect of separation from it. Exclusive ownership does not require an absolute certainty that the buyer will sustain ownership of the property no matter what, only that her continued ability to lawfully exercise that ownership is within her control. Homeowners across the state of Washington who thought that they had such control over their houses have been rebuffed by the majority’s decision. Today’s ruling will cause significant confusion for average home buyers and owners struggling to understand what conduct will and will not give them exclusive ownership of their homes.

¶42 Another negative consequence of today’s decision is that the majority’s interpretation of RCW 9A.48.010 has the potential to criminalize any breach of contract done with malice, even where there is no actual damage to another party’s interest. If a person takes out a large loan from a bank, and then proceeds to purposefully gamble away all of his or her money, the resulting decrease in the value of the bank’s right to receive payments (because they are now so difficult to collect) will now be considered malicious mischief. This example fits the new definition of “physical damage” adopted by the majority: a diminution in the value of a security interest. Now all that stands between this unfortunate gambler and a malicious mischief prosecution is malice, which is not difficult to attribute to an actor in breach of his contractual obligations. “ ‘Malice’ ” is defined as “an evil intent, wish, or design to vex, annoy, or injure another person.” RCW 9A.04.110(12). Malice may even be “inferred from an act done in willful disregard of the rights of another, or an act wrongfully done without just cause or excuse, or an act or omission of duty betraying a willful disregard of social duty.” Id. Thus, any breach of contract done with “an evil wish” to “annoy another person,” or even out of a “willful disregard of a social duty,” that results in a $1,500 reduction in value of any type of interest, can hereafter be considered malicious mischief. The majority’s construction of malicious mischief stretches its definition too far. Defendants who cause infractions to nonphysical interests are now subject to felony charges, instead of having to defend themselves in civil court, which is where cases such as this one belong.

CONCLUSION

¶43 The majority’s opinion brings about the perverse result that Wooten would likely win a civil case in tort against the holder of the security interest because there was no actual damage to that entity’s interest, yet he will lose this criminal case for malicious mischief for the same actions. Today’s ruling is incompatible with the plain meaning of “physical damage,” contrary to the intent of the legislature that drafted the malicious mischief statute, and harmful to Washington homeowners. For these reasons, I cannot agree. I would reverse the Court of Appeals ruling and hold that a security interest cannot be physically damaged for purposes of the malicious mischief statute.

Reconsideration denied January 9, 2014.

¶44 I respectfully dissent.

C. Johnson, Stephens, and Gordon McCloud, JJ., concur with Owens, J.