State v. Kuhn
178 Wis. 2d 428, 504 N.W.2d 405, 1993 Wisc. App. LEXIS 927 (1993)
Rule of Law:
An individual corporate officer, particularly a controlling one, can be held personally liable for criminal acts, such as theft by bailee, committed in the corporation's name, and the definition of 'bailee' for criminal statutes is broader than specialized civil code definitions like the UCC's.
Facts:
- Janice J. Kuhn purchased Milwaukee Auction Galleries, Ltd. (MAG), a Wisconsin corporation, in 1977 and served as its president, treasurer, sole director, and sole shareholder.
- MAG was in the business of selling consigned property at auction, taking a commission ranging from 10% to 25% of the sales price, and maintained two bank accounts: a 'trust account' for gross sales proceeds and a general operating account for commissions and business expenses.
- MAG's typical consignment contracts required it to remit net sales proceeds to consignors within thirty-five days of the auction sale.
- During 1988, MAG became delinquent in its payments to consignors, resulting in some consignors receiving checks returned for insufficient funds and others receiving no payment at all.
- MAG began experiencing financial difficulties sometime in the mid-1980s, leading to money above and beyond MAG's earned commissions (including consignors' funds) being used to cover overhead costs to keep the business running.
- Decisions on which consignors would receive payments were made solely by Kuhn, who was the only person authorized to sign corporate checks.
- Kuhn sometimes directed her employees to bypass the 'trust account' and deposit total auction sale proceeds directly into the general operating account to cover business expenses.
- Kuhn admitted that accounts showed deficiencies and that MAG had a 'leak in the bucket,' but claimed she couldn't find the leak.
Procedural Posture:
- Janice J. Kuhn was charged with four counts of theft by bailee in violation of Wis. Stat. § 943.20(1)(b) and (3)(c).
- Following a bench trial, Kuhn was convicted of four counts of theft.
- Kuhn appealed the judgment of conviction to the Wisconsin Court of Appeals.
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Issue:
Does a corporate officer, acting on behalf of a corporation that served as a bailee for consigned goods, bear individual criminal liability for theft by bailee under Wis. Stat. § 943.20(1)(b), and is the definition of 'bailee' under this statute limited by the Uniform Commercial Code's definition?
Opinions:
Majority - Sullivan, J.
Yes, a corporate officer can be held personally responsible for criminal theft by bailee committed in the name of the corporation, and the criminal statute's definition of 'bailee' is not limited by the UCC's definition. The court affirmed Janice J. Kuhn's conviction for theft by bailee. The court first rejected Kuhn's argument that she could not be charged as an individual, citing State v. Lunz, which holds that individual officers are personally responsible for criminal acts committed in the name of the corporation, particularly if they are in control and knowingly acquiesce. Acknowledging that civil corporate veil-piercing standards are generally inapplicable to criminal liability, the court affirmed that 'persons in control of a corporation and who knowingly acquiesce to the corporation's [criminal act] may be personally prosecuted for the criminal act.' Second, the court held that the Uniform Commercial Code's (UCC) definition of 'bailee' (sec. 407.102(1), Stats.) is irrelevant to the criminal theft statute (sec. 943.20(1)(b), Stats.). Instead, it adopted the common law definition of a 'bailment for sale,' where a consignee sells property for a consignor and remits the price, or returns unsold property. MAG's contracts with consignors fit this definition, establishing it as a bailee. Third, the court found sufficient evidence to prove Kuhn's intent and conversion. Testimony revealed that MAG used consignors' funds beyond its commissions to pay overhead during financial difficulties, that Kuhn, as the sole check signatory and decision-maker, directed these actions, and sometimes ordered bypassing the trust account. This demonstrated intentional use of money without consent, contrary to authority, and with intent to convert. The court also rejected the argument that commingled funds lost their identity, reaffirming that the proceeds remained subject to the bailment. Lastly, the court found any errors regarding the admission of exhibits to be harmless, as they did not impact the trial's outcome, and dismissed Kuhn's claims of ineffective assistance of counsel and requests for a new trial due to lack of merit or reliance on evidence outside the appellate record.
Analysis:
This case is significant for clarifying the scope of individual criminal liability for corporate officers, establishing that the corporate form does not shield individuals who actively participate in or direct criminal acts undertaken by the corporation. It distinctly separates criminal law's interpretation of terms like 'bailee' from their definitions in civil codes like the UCC, reinforcing that criminal statutes often rely on broader common law understandings unless specified otherwise. This decision underscores that individuals in positions of control within a corporation can be held personally accountable for criminal offenses like theft by bailee, particularly when they knowingly divert funds that are held in trust for others, rather than treating such actions as mere contractual defaults.
