People v. Smith (155 Cal. App. 3d 1103, 1984)

Opinion

DRUMMOND, J.

C. Arnholt Smith (defendant) appeals his conviction in May 1979, after a 118-day trial of two counts of tax fraud for the year 1971 (counts 1 and 2; Rev. & Tax. Code, §§ 19405 and 19406, respectively), two counts of tax fraud for the year 1973 (counts 3 and 4; Rev. & Tax. Code, §§ 19405 and 19406, respectively) and one count of theft in 1973 (count 5; Pen. Code, § 487, subd. 1). This already lengthy opinion will not be protracted by stating the facts twice; the relevant facts are presented below in connection with the arguments involving them.

First, the law regarding the defense of discriminatory prosecution is considered with particular attention to the proper standard of proof. Second, we consider what type of theft it may be when the beneficial owner of a corporation obtains payment from the corporation in exchange for assets which are never delivered to the corporation. Finally, we address the state tax crimes.

I

Discriminatory Prosecution

No finding of discriminatory prosecution has ever barred a conviction in a California criminal proceeding, although claims of discriminatory prosecution have led to grants of discovery motions to support the defense. The success that has been achieved by raising this defense, other than by obtaining discovery, post -Murgia, has occurred in People v. Serna (1977) 71 Cal.App.3d 229 [139 Cal.Rptr. 426], and People v. Hertz (1980) 103 Cal.App.3d 770 [163 Cal.Rptr. 233). In Serna, the convictions of defendants for a criminal violation of the Education Code for wilfully refusing to send their children to public schools were reversed because the trial court failed to grant requested discovery as to how many other violators there were in the school district (71 Cal.App.3d at pp. 233-235). In Hertz, a Penal Code section 995 motion was granted, in part, because the magistrate at the preliminary hearing had denied a defendant the opportunity to develop evidence of discriminatory enforcement by cross-examination of police officer witnesses (103 Cal.App.3d at pp. 775-777). More important to that ruling as to that defendant and the others involved in Hertz appears to be the holding 995 motions were granted properly because the magistrate conducted an extension in camera review of documents to determine whether they were privileged from discovery under Evidence Code section 1040 without creating a reviewable record of the in camera proceedings (103 Cal.App.3d at pp. 777-780).

In our case, the trial court, pursuant to Murgia, supra, 15 Cal.3d 286, as interpreted by Bortin, supra, 64 Cal.App.3d 873 (then the most recent governing case), heard arguments and evidence on a pretrial motion to dismiss the prosecution on the basis of discriminatory enforcement over the course of 10 days between March 1 and March 16, 1977. Defendant does not contend he was denied an opportunity to conduct sufficient discovery, but he does disagree with the court’s finding of no discriminatory prosecution and contends the finding followed from imposition of the wrong burden of proof.

Burden of Proof

“It is presumed that official duty has been regularly performed. ” (Evid. Code, § 664.) This rebuttable presumption affects the burden of proof (§ 660). “The effect of a presumption affecting the burden of proof is to impose upon the party against whom it operates the burden of proof as to the nonexistence of the presumed fact.” (§ 606.)

This presumption is employed in assessing the defense of discriminatory prosecution to impose the burden of proof on the defendant. (Murgia, supra, 15 Cal,3d 286, 305; Hartway, supra, 19 Cal.3d 338, 348; Sperl, supra, 54 Cal.App.3d 640, 657; Street, supra, 89 Cal.App.3d 739, 748; see In re Elizabeth G., supra, 53 Cal.App.3d 725, 733; Lyons, supra, 75 Cal.App.3d 829, 844; Battin, supra, 77 Cal.App.3d 635, 666.) People v. Gray (1967) 254 Cal.App.2d 256, at page 265 [63 Cal.Rptr. 211], appears to have been the first case to observe the impact of section 664 on establishing the defense of discriminatory prosecution and it has been cited as imposing the burden of proof on the defendant. (Murgia, supra, 15 Cal.3d at p. 305; Hartway, supra, 19 Cal.3d at p. 348; Sperl, supra, 54 Cal.App.3d at p. 657; Lyons, supra, 75 Cal.App.3d at p. 844; Street, supra, 89 Cal.App.3d at p. 748.)

Interestingly, none of the cases which followed Gray (254 Cal.App.2d 256) in evaluating a discriminatory prosecution claim in light of section 664 have elaborated on what is the standard of proof. Perhaps this is because the defense should be raised on a pretrial motion to dismiss (Murgia, supra, 15 Cal.3d 286, 293-294, fh. 4; Hartway, supra, 19 Cal.3d 338, 348; Sperl, supra, 54 Cal.App.3d 640, 656-657; cf. Hertz, supra, 103 Cal.App.3d 770, 774), and the trial court need not instruct itself on the law to be applied. The burden has been characterized as a “heavy” one. (Battin, supra, 77 Cal.App.3d 635, 668; Milano, supra, 89 Cal.App.3d 153, 156.) We assume this characterization is employed only because the defense has been a difficult one to establish (see Gray, supra, 254 Cal.App.2d 256, 265-266).

Gray, supra, 254 Cal.App.2d 256, at pages 265 to 267, established the standard of proof is not the high one of “clear and convincing,” but the lesser one of proof “by a preponderance of the evidence.” We have no hesitation in reaffirming that analysis for the reasons given there and for other reasons. The Attorney General argues Gray was wrong and the higher standard is applicable in order to effectuate the policy behind section 664. It is true the presumption of official regularity has been “established to implement some public policy other than to facilitate the determination of the particular action in which the presumption is applied” (§ 605). Similarly, it is true the policy served is to relieve governmental officials from having to justify their conduct whenever it is called into question. The Attorney General seems to assume that unless a very high standard of proof is imposed, it will be too easy to show the governmental officials are not doing their jobs properly. This contention is without merit, particularly when the policy served by section 664 is weighed against the constitutional concern for equal protection which has given rise to the defense of discriminatory prosecution. (See Gray, supra, 254 Cal.App.2d 256, 266.)

Section 115 explains: “ ‘Burden of proof’ means the obligation of a party to establish by evidence a requisite degree of belief concerning a fact in the mind of the trier of fact or the court. The burden of proof may require a party to raise a reasonable doubt concerning the existence or nonexistence of a fact or that he establish the existence or nonexistence of a fact by a preponderance of the evidence, by clear and convincing proof, or by proof beyond a reasonable doubt.

“Except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence.”

The Attorney General contends section 115 does not apply at all, because section 664 creates a rebuttable presumption affecting the burden of proof. Our understanding, however, is if there is a preponderance of evidence demonstrating the nonexistence of official regularity, the presumption of section 664 is rebutted. The Assembly Committee comment on section 606 explains: “In the ordinary case, the party against whom it is invoked will have the burden of proving the nonexistence of the presumed fact by a preponderance of the evidence. Certain presumptions affecting the burden of proof may be overcome only by clear and convincing proof.” The presumption created by section 662 is an example of a presumption which is rebutted only by a clear and convincing showing, while section 664 is not (Gray, supra, 254 Cal.App.2d 256, 266, fn. 12).

Accepting this standard of proof for the defense of discriminatory prosecution, the next question is whether the trial court imposed the wrong burden. Apparently pursuant to an agreement among the court and the parties, the trial court ruled orally at the conclusion of the many pretrial motions on the understanding that the rulings would be memorialized later. Thus, the court ruled orally on March 16, 1977, denying the motion to dismiss for discriminatory prosecution, while the written ruling followed on May 30, 1978.

The written ruling states pertinently: “The burden the defendant bears in making such claim is not made clear by the cases, but the court holds it must be a relatively substantial showing, perhaps a showing by clear and convincing evidence.” The oral ruling was not as specific in identifying the standard of proof. The court stated: “Now, I’m not just sure what standard of proof there is on this motion by the defendants to dismiss, but it seems to me . . . we’re talking about a relatively substantial showing or a showing which produces a substantial amount of comfort in the finder of fact.”

Defendant relies on the recital in the court’s minutes of March 16, 1977, that the motion was denied due to the court “finding no clear and convincing evidence of invidious prosecution.” There is a conflict between the reporter’s and clerk’s transcripts which we resolve in favor of the reporter’s transcript. (See People v. Smith (1983) 33 Cal.3d 596, 599 [189 Cal.Rptr. 862, 659 P.2d 1152]; People v. Ritchie (1971) 17 Cal.App.3d 1098, 1103-1104 [95 Cal.Rptr. 462].) The reporter’s transcript shows the trial court did refer to a burden of clear and convincing evidence in the course of the oral ruling, but it was in the context that this was the burden on a plaintiff to show “several,” presumably intended to be “civil,” fraud. The court suggested the burden on defendant here was analogous, not identical. While the burden imposed by the trial court is not clearly identified, the indications are it was erroneously high.

Effect of Error in Imposing Burden of Proof

Not every trial court error justifies reversal of a conviction. The California Constitution article VI, section 13, states: “No judgment shall be set aside, or new trial granted, in any cause, on the ground of misdirection of the jury, or of the improper admission or rejection of evidence, or for any error as to any matter of pleading, or for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.”

As recently reiterated in People v. Taylor (1982) 31 Cal.3d 488, at page 499 [183 Cal.Rptr. 64, 645 P.2d 115]: “The traditional test of harmless error is whether it is ‘reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.’ (People v. Watson (1956) 46 Cal.2d 818, 836 ....)... Some constitutional rights are deemed so basic to a fair trial that their violation requires automatic reversal. [Citations.] However, not all constitutional errors amounting to a violation of due process necessitate reversal per se. [Citations.] Where federal constitutional error is involved, the test to be applied is that laid down by the Supreme Court in Chapman v. California (1967) 386 U.S. 18 ... . Chapman requires that ‘before a federal constitutional error can be held harmless, the court must be able to declare a belief that it was harmless beyond a reasonable doubt. ’ (Chapman, supra, 386 U.S. at p. 24 . . . .)”

No California case has addressed whether imposing the wrong standard of proof on a defendant seeking to establish a discriminatory prosecution claim is a federal constitutional error. The error involved here is not like that in Sema, supra, 71 Cal.App.3d 229. There, the trial court improperly limited discovery intended to support a discriminatory prosecution defense. In that situation, the remedy might be a remand to permit additional discovery. (See People v. Coyer (1983) 142 Cal.App.3d 839, 843-845 [191 Cal.Rptr. 376].)

Neither party argues that the imposition of the wrong burden of proof is a federal constitutional error. It may be complete nonrecognition of this defense would be a federal constitutional error because it does emanate from the equal protection clause of the federal Constitution (e.g., Murgia, supra, 15 Cal.3d 286, 290). But to measure the defense by the wrong standard is not the same sort of error. Gray, supra, 254 Cal.App.2d 256, at page 266, does suggest equal protection concerns are better served by utilizing the burden of proof of a preponderance of the evidence. But the reasoning above shows the burden of proof chosen by Gray derives from section 115, as well as the relative disability of the defendant to gather evidence “buried in the consciences and files of the law enforcement agencies” (ibid.). Federal courts have not imposed the same burden of proof on defendants attempting to show discriminatory enforcement prohibited by the federal equal projection clause. For example, in United States v. Falk (7th Cir. 1973) 479 F.2d 616 (one of the federal cases which Murgia, supra, 15 Cal.3d 286, 300, at fn. 9, recognized as considering this defense), the court stated (at pp. 620-621): “The presumption is always that a prosecution for violation of a criminal law is undertaken in good faith and in nondiscriminatory fashion for the purpose of fulfilling a duty to bring violators to justice. However, when a defendant alleges intentional purposeful discrimination and presents facts sufficient to raise a reasonable doubt about the prosecutor’s purpose, we think a different question is raised.” The court went on to hold that upon such a showing, the burden of proof shifts to the government to show nondiscriminatory enforcement (at p. 621). The error of imposing the wrong standard of proof on the defendant in a discriminatory prosecution motion must be measured by the harmless error test of People v. Watson (1956) 46 Cal.2d 818 [299 P.2d 243], (See People v. Jiminez (1978) 21 Cal.3d 595, 609 [147 Cal.Rptr. 172, 580 P.2d 672].)

The Attorney General invites us to review the evidence and determine the trial court’s ruling was correct, although it employed the wrong standard of proof. Defendant contends we cannot, for the reasons given in Gray, supra, 254 Cal.App.2d 256, at pages 267 to 268. Gray does not explain its conclusion in terms of finding prejudicial error, although the court stated it declined to independently review the'evidence (ibid.). Defendant argues if the trial court had employed the proper standard of proof, it would have resolved conflicts in the evidence in favor of a finding of discriminatory prosecution. Implicit in this argument is the assumption that if the proper standard of proof were applied, an otherwise close call would have resulted in the finding of discriminatory prosecution.

If the evidence may be reasonably characterized as supporting such a finding under the proper standard of proof, it is not our role to resolve conflicts in the evidence or evaluate the credibility of the witnesses. It would be an abdication of our constitutional duty under California Constitution article VI, section 13, to not examine the evidence to determine whether the trial court’s ruling was right for the wrong reason. It is certainly possible for an appellate court to determine that the preponderance of the evidence points to a different conclusion than that drawn by the trial court (e.g., People v. Belton (1979) 23 Cal.3d 516, 523-527 [153 Cal.Rptr. 195, 591 P.2d 485]). We are not disabled from examining the evidence because the trial court may have weighed it improperly. Even the Gray court was able to review the evidence to determine whether as a matter of law discriminatory prosecution was shown (254 Cal.App.2d 256, 268-270).

Elements of Defense of Discriminatory Prosecution

Murgia, supra, 15 Cal.3d 286, stated the elements of the defense of discriminatory prosecution in several ways (at pp. 290, 298). Hart-way, supra, 19 Cal.3d 338, at page 348 helpfully paraphrased Murgia: “To establish the defense, the defendant must prove: (1) ‘that he has been deliberately singled out for prosecution on the basis of some invidious criterion;’ and (2) that ‘the prosecution would not have been pursued except for the discriminatory design of the prosecuting authorities.’” In other words, a criminal prosecution which results from the prosecutor’s intent to punish a defendant for belonging to a class or exercising rights protected by the equal protection clause cannot be sustained.

Causality

As one element of the defense, the defendant must show “except for” the discrimination there would be no prosecution (Murgia, supra, 15 Cal.3d 286, 290, 298). This element appears to be unique to California among those states recognizing this defense (Annot., 95 A.L.R.3d 280, 287). Despite the linguistic similarity, we do not think the causal connection intended by Murgia is the “but for” test discussed in negligence law. (E.g., Johnson v. Union Furniture Co. (1939) 31 Cal.App.2d 234, 237-238 [87 P.2d 917]; Godwin v. LaTurco (1969) 272 Cal.App.2d 475, 479 [77 Cal.Rptr. 305].) That is, there must be somewhat more of a connection to establish the defense than that a prosecutor is improperly biased. The bias must be operating in the instant prosecution as an important factor in order to support a finding of causality. On the other hand, the defendant need not establish that the only reason for the prosecution is an improper one. Typically, there will also be evidence of the defendant’s wrongdoing, which the prosecution will argue is its basis for pursuing the proceedings (cf. Hart-way, supra, 19 Cal.3d 338, 351). In short, the prosecutorial bias must be an important cause of the proceedings, but not the only one, in order to make out the required causal connection (Murgia, supra, 15 Cal.3d at p. 298, fin. 6).

Improper Selectivity

Murgia, supra, 15 Cal.3d 286, appears to make the “singling out” of a defendant an element of the defense of discriminatory prosecution. It is not every exercise of prosecutorial selectivity which violates the equal protection clauses, however, but only that selectivity founded on an invidious basis (pp. 296-297, 299-300). Thus, the fact not every violator of the same law is prosecuted by itself only suggests, but does not establish, improper selectivity. (Hartway, supra, 19 Cal.3d 338, 349-351; Serrata, supra, 62 Cal.App.3d 9, 24-25; Garner, supra, 72 Cal.App.3d 214, 217-218; Lyons, supra, 75 Cal.App.3d 829, 844-845; Battin, supra, 77 Cal.App.3d 635, 667; Ala Carte Catering Co., supra, 98 Cal.App.3d Supp. 1, 10.) Serrata, supra, 62 Cal.App.3d 9, at pages 24 to 25, and Milano, supra, 89 Cal.App.3d 153, at page 163, dramatically illustrate the defense is not established by a showing the penal statute has not been enforced against anyone else. This result is obviously correct, or the first violator of a law could always claim discriminatory enforcement.

On the other hand, if the basis of prosecutorial selection is improper, it should not matter in establishing discriminatory prosecution that other violators of the same law are also prosecuted. This implication may be drawn from Murgia, supra, 15 Cal.3d 286, 291, at footnote 2, where the defendants were charged with a variety of minor offenses, some as common as reckless driving and malicious mischief. While at one point the court stated (p. 290), “the issue here is whether the prosecution is constitutionally free to select only these defendants and prosecute them only because they are members of a certain class,” there does not appear to have been an argument in that case that no other reckless drivers were being prosecuted. The defense may be established so long as it can be said an important factor in the selection of the defendant for prosecution is the invidious one, regardless of whether other violators from other classes are also prosecuted. Therefore, the fact of statistical uniqueness of a prosecution alone will rarely establish discriminatory prosecution, though it may suggest it. (See Griffin, supra, 20 Cal.3d 300, 307-308.)

Invidious Basis

At the heart of the defense of discriminatory prosecution is a showing that the main reason, or at least an important reason, for the prosecution is an “invidious” one. Murgia, supra, 15 Cal.3d 286, offered a variety of definitions and synonyms and illustrations to clarify this term. “Unjustifiable” was one synonym (p. 300). “Arbitrary” appears to be another one (p. 302). One definition is it bears “no rational relationship to legitimate law enforcement interests” (p. 302). Illustrations of an unjustifiably arbitrary standard for prosecution given in Murgia were race (pp. 290, 294-296) and religion (pp. 290, 300, fn. 8). Murgia also held the exercise of a worker’s right to associate with others in a union was an invidious basis to select him for prosecution (pp. 290, 302).

Murgia did not attempt to circumscribe (p. 302) “the entire range of classifications that may be ‘arbitrary’ in this context.” Sex is another invidious basis (Hartway, supra, 19 Cal.3d 338, 348). Gamer, supra, 72 Cal.App.3d 214, at page 217, elaborated somewhat on Murgia in recognizing that federal cases have held the exercise of free speech and other First Amendment rights is also an invidious basis for a criminal prosecution. Perakis, supra, 99 Cal.App.3d 730, at page 734, suggests in dictum that perhaps even the class of neighborhood bars might be protected. Halford v. Alexis (1981) 126 Cal.App.3d 1022, at pages 1030 to 1032 [179 Cal.Rptr. 486], contains a detailed examination of when legislation has been characterized as invidious or a violation of equal protection.

It is not appropriate to recite here the entire range of classifications which have been found to be protected from unequal enforcement of the laws. (See Annots., 95 A.L.R.3d 280, § 8, pp. 302-308; 45 A.L.R. Fed. 732, § 7, pp. 746-750.) A criminal prosecution should not, of course, be initiated because the defendant belongs to a particular political party or is active in that party. This is implicit in Murgia, supra, (15 Cal.3d 286, 302), Bortin, supra, (64 Cal.App.3d 873, 875-876), Battin, supra, (77 Cal.App.3d 635, 667-668) and Hertz, supra, (103 Cal.App.3d 770, 776). A defendant’s social prominence, however, should not insulate him from prosecutorial interest (United States v. Ojala (8th Cir. 1976) 544 F.2d 940, 944-945). Indeed, prosecutions which involve prominent individuals arguably have the biggest deterrent impact on others who contemplate similar violations of the law.

It must be remembered the purpose of recognizing this defense of discriminatory prosecution is to ensure that penal laws fair on their faces are not transformed by their enforcers into unconstitutionally discriminatory laws (Murgia, supra, 15 Cal.3d 286, 294-297). An approach to evaluating a defense is to rewrite the law as it is applied and to ask if it now denies equal protection to its subjects. Courts have been able to recognize statutes which violate equal protection principles, and when enforcement of a penal statute rewrites its terms, a court will not hesitate to determine whether the enforcement has an invidious basis.

Improper Intent

Murgia also requires there be a “deliberate” character to the discrimination before the defense is established (15 Cal.3d 286, 290, 297-298, 300). Synonyms are “purposeful” or “intentional” (id., at p. 300). The opinion repeatedly indicates it is the deliberate singling out on an invidious basis which is impermissible. If it is helpful, this emphasis appears to be made in Murgia in order to ensure the defense of discriminatory enforcement succeeds only when the prosecutor has the proscribed “specific,” rather than “general,” intent. (See, e.g., People v. Daniels (1975) 14 Cal.3d 857, 860-862 [122 Cal.Rptr. 872, 537 P.2d 1232].) It would not be enough to show, for example, that more women than men were being arrested for prostitution (see Hartway, supra, 19 Cal.3d 338; In re Elizabeth G., supra, 53 Cal.App.3d 725; Street, supra, 89 Cal.App.3d 739). When the consequences of law enforcement produce a pattern of unequal treatment of similarly situated classes, the defense of discriminatory enforcement is not established. The requisite intent is that the prosecutor desired those consequences. The defense is established only when it appears an important factor in the prosecutor’s selection of the defendant is the prosecutor wants to punish the defendant for membership in a protected class or exercise of protected rights.

Evidence of Discriminatory Prosecution

In light of the above discussion of the elements of the defense of discriminatory prosecution, it is difficult to review the evidence produced at the motion to dismiss based on this defense and imagine how the trial court could have come to a different conclusion, even applying the proper standard of proof. Defendant was able to establish the district attorney took a personal interest in his prosecution, perhaps even an unusual amount of interest for the unusual case that it was. The district attorney initiated the investigation of defendant by personally calling the Franchise Tax Board on the day he learned through a newspaper article that the federal Justice Department had declined to pursue an Internal Revenue Service (IRS) recommendation that defendant be criminally prosecuted for tax fraud. The IRS investigation of defendant had been initiated some three years earlier and had continued, resulting in a jeopardy assessment against defendant as well as the recommendation for criminal prosecution.

About two weeks after the phone call, there was a meeting among high officials of the Franchise Tax Board and the district attorney’s office in which he personally participated. The district attorney promised to prosecute if violations were uncovered and promised staff support for the investigation. Almost a year later, defendant received a sentence in a federal court matter which the district attorney felt was “manifestly unjust,” and which reaffirmed his interest in prosecuting defendant. He personally appeared before the indicting grand jury as a witness. Other evidence need not be recited which indicates the district attorney was personally interested in having defendant prosecuted.

The fatal flaw in defendant’s presentation is there is virtually no evidence the district attorney’s interest had an invidious basis. He argues he was a prosecutorial target based on his membership in the Republican Party, while the district attorney was a Democrat. The only evidence supporting this contention is that some four years before making the phone call to the Franchise Tax Board, one of the major issues in his successful campaign to become district attorney was he would break defendant’s stranglehold on San Diego politics. Defendant was a financial backer of his opponent in that campaign, although he also contributed to the district attorney. Defendant apparently was a prominent Republican fund-raiser. Juxtaposed to this is evidence an investigator for the district attorney recommended investigation of defendant in the same year the district attorney took office, which the district attorney declined. There is no other evidence showing the district attorney had a dislike for defendant because he was a Republican. There is no evidence, for example, the district attorney prosecuted a disproportionate number of Republicans compared to members of other political parties (cf. Battin, supra, 77 Cal.App.3d 635, 667). In fact, there was evidence the district attorney attended a luncheon with defendant and two other persons after taking office, defendant attended a fund-raiser for the district attorney, and defendant consulted him for some legal advice. It is hard to detect in this conduct antipathy for Republicans in general or defendant in particular.

Defendant argues alternatively it is enough to sustain this defense that the prosecution is founded on the prosecutor’s bad feelings for the defendant. Indeed, Battin, supra, 77 Cal.App.3d 635, at page 668, appears to indicate the equal protection clause is a shield from prosecutorial bad faith or vindictiveness. (See also United States v. Bourque (1st Cir. 1976) 541 F.2d 290, 293.)

There are two responses to this contention. One is that it is the due process clause which protects a criminal defendant against a prosecutor’s improper personal involvement in a prosecution (People v. Superior Court (Greer) (1977) 19 Cal.3d 255, 266-268 [137 Cal.Rptr. 476, 561 P.2d 1164]; Twiggs v. Superior Court (1983) 34 Cal.3d 360, 374, fn. 6 [194 Cal.Rptr. 152, 667 P.2d 1165]). The other is that we cannot conclude it is reasonably probable the trial court would have found this was the basis for the prosecution if it had applied the proper standard of proof. Preceding the district attorney’s instigation of the investigation of defendant was an IRS investigation for tax fraud which recommended his criminal prosecution, a jeopardy assessment,'the collapse of his bank, United States National Bank of San Diego, a federal investigation of the bank failure and all the attendant publicity. If the district attorney had never been aware of defendant prior to these occurrences, certainly his curiosity would have been aroused by them. Moreover, it appears the newspaper article which prompted his call implied the federal prosecution for tax fraud had been declined for reasons other than the merits of the case. Whether this was accurate or not, we cannot say it is reasonably probable the trial court would have concluded the prosecution had an invidious basis if it had applied the proper standard of proof to defendant’s evidence of discriminatory prosecution. The error was harmless.

II

Theft

Defendant’s theft conviction under Penal Code section 487, subdivision 1, is based on a July 17, 1973, transaction whereby he received a check from Sovereign State Capital (Sovereign) for $8,930,867 in exchange for unfulfilled promises. The promises were that Sovereign would receive San Diego Padres’ surplus certificates worth $4.12 million, a promissory note worth $4.75 million and interest on the note in the amount of $60,867. Sovereign never received any benefit by payment or otherwise on these obligations. Instead, in February 1974, the San Diego Padres were sold for approximately $12 million, with the proceeds going to various creditors of defendant and his other corporations, but not to Sovereign. As stated in defendant’s opening brief: “While Mr. Smith was not formally complete owner of the Padres, it is probably more accurate to view him as such. One of his corporations advanced to Emil (Buzzy) Bavasi and Mr. Smith’s daughter, Carol Smith Shannon, the funds which represented their ownership interest. These advances were not repaid; Mr. Smith was responsible for all additional financing; Mrs. Shannon and Mr. Bavasi appear to have regarded Mr. Smith as the real owner of the Padres.” Sovereign was also created, capitalized and controlled by defendant, although at the time of this transaction it appears his daughter-in-law, Myra Jean Smith, was nominally the principal shareholder, a member of the board of directors and an officer of the corporation.

Embezzlement

In closing argument, the prosecution characterized this transaction as embezzlement. Defendant makes three arguments why it cannot be embezzlement.

1) A person cannot embezzle from himself

Defendant contends he could not have embezzled from himself and Sovereign was just another facet of himself, his alter ego. The argument is Sovereign’s separateness was a legal fiction, on which a criminal prosecution cannot be based. “[A] person can no more be guilty of embezzlement from a corporation which is his alter ego than he can embezzle from himself without the separate persona of a corporation.”

The Penal Code provides, in relevant part: “Embezzlement is the fraudulent appropriation of property by a person to whom it has been intrusted. ” (§ 503.)

“Every . . . trustee ... or agent of any . . . corporation (public or private), who fraudulently appropriates to any use or purpose not in the due and lawful execution of his trust, any property which he has in his possession or under his control by virtue of his trust, or secretes it with a fraudulent intent to appropriate it to such use or purpose, is guilty of embezzlement.” (§ 504.)

“Every trustee, . . . agent ... or person otherwise intrusted with or having in his control property for the use of any other person, who fraudulently appropriates it to any use or purpose not in the due and lawful execution of his trust, or secretes it with a fraudulent intent to appropriate it to such use or purpose ... is guilty of embezzlement ....”(§ 506.)

Defendant does not contend that in every case where the beneficial owner of a corporation employs its funds or property for his own purposes, there can be no embezzlement. People v. Schmidt (1956) 147 Cal.App.2d 222, states at page 229 [305 P.2d 215): “ ‘. . . Any diversion of funds held in trust constitutes embezzlement whether there is direct personal benefit or not as long as the owner is deprived of his money. . . .’In respect to the showing of theft from the corporation, it is sufficient.that the appellant took the money of the corporation for personal use without authorization.” There, the court upheld a theft conviction on a theory of embezzlement against the principal, if not sole, stockholder and president of a corporation, where corporate funds were expended for his residence, yacht, and a race horse, among other things.

In People v. Applegate (1949) 91 Cal.App.2d 163, pages 165 to 173 [204 P.2d 689], the defendant was convicted of grand theft by embezzlement from a corporation which he created and for which he furnished some equipment. He was never a corporate officer, although he was to receive one-third of the stock which was never issued. He received money to be paid to the new corporation and deposited it in an account of another corporation which he wholly owned and used the money for other purposes, without ever fully paying it over to the new corporation.

Defendant’s argument seems to be there is an alter ego defense to an embezzlement charge when the defendant is involved in transactions with his wholly or beneficially owned corporation. Defendant relies on Apple-gate, supra, 91 Cal.App.2d 163, page 174, where the court held since the evidence did not show the corporate entity should be disregarded, it was not erroneous to refuse to instruct that the defendant could not be guilty of embezzling from his alter ego. Implicit in this is that on different facts it might be an error to fail to instruct the jury a defendant cannot embezzle from his alter ego corporation. An alter ego claim was rejected in Schmidt, supra, 147 Cal.App.2d 222, the court stating (at p. 229): “In respect to the claim that the Corporation was defendant’s alter ego, the jury had ample evidence from which they could, and did determine that there was a distinct, formal corporate existence. However, even where the circumstances indicate that all of the capital stock of a corporation is owned or controlled by one person, this does not necessarily destroy its separate existence.”

A similar argument was more resoundingly rejected in Harris, supra, 147 Conn. 589 [164 A.2d 399] (which provoked the Annotation Criminal Responsibility for Embezzlement from Corporation by Stockholder Owning Entire Beneficial Interest, 83 A.L.R.2d 791). There, a defendant convicted of embezzlement claimed error by the court’s refusal to give a jury instruction to the effect that a person cannot embezzle funds from a corporation which he wholly owns. The court held there was no error, explaining (164 A.2d 399, 402): “The defendant chose to, and did, organize the two corporations, and he conducted his affairs through them, thereby enjoying the benefits and protection of corporate operation of his business. He cannot now, when it suits his purpose, brush aside the corporate entity and claim that the corporate funds are his own funds to do with as he pleases.”

In a different context, Aladdin Oil Corp. v. Perluss (1964) 230 Cal.App.2d 603 [41 Cal.Rptr. 239], made a pertinent observation (at p. 614): “Parties who determine to avail themselves of the right to do business by means of the establishment of a corporate entity must assume the burdens thereof as well as the privileges. The alter ego doctrine is applied to avoid inequitable results not to eliminate the consequences of corporate operations. ”

It would be a perversion of the equitable origin of the doctrine of alter ego to employ it as a defense to embezzlement, as a means of promoting fraud. As observed in People v. Jones (1950) 36 Cal.2d 373, at page 382 [224 P.2d 353], in a different context: “Defendant, having perpetrated a fraud through the device of a partnership, cannot escape criminal liability by reason of that same device. ...”

As a separate basis for rejecting this defense, it is established that a person who acts as an agent of a corporation is estopped to deny its separate corporate status (Wynn v. Treasure Co. (1956) 146 Cal.App.2d 69, 76 [303 P.2d 1067]; see People v. Leonard (1895) 106 Cal. 302, 310 [39 P. 617]).

It is worth noting the requested instruction in Applegate, supra, 91 Cal.App.2d 163, at page 174, was based on the doctrine a partner could not embezzle partnership money. That doctrine has subsequently been repudiated in California (People v. Sobiek (1973) 30 Cal.App.3d 458, 463-469 [106 Cal.Rptr. 519, 82 A.L.R.3d 804], cert. den. 414 U.S. 855 [38 L.Ed.2d 104, 94 S.Ct. 155]; People v. Pedersen (1978) 86 Cal.App.3d 987, 992-993 [150 Cal.Rptr. 577]; see Annot., Embezzlement, Larceny, False Pretenses, or Allied Criminal Fraud by a Partner, 82 A.L.R.3d 822). While the beneficial ownership of a corporation may well be relevant in an embezzlement prosecution to a defense of good faith (see Harris, supra, 164 A.2d 399, 401), it does not give the owner a license to steal from the separate entity which he created.

2) Embezzlement cannot be found in this sale transaction.

In general, because a breach of trust is essential to finding embezzlement, when money or property is received under a contract of sale without restrictions as to its use, title passes to the recipient and there can be no embezzlement in such a transaction (People v. Goodrich (1903) 138 Cal. 472, 474-475 [71 P. 509]; People v. Holder (1921) 53 Cal.App. 45, 48-51 [199 P. 832]; People v. Bullock (1928) 92 Cal.App. 785, 789 [268 P. 1059]; People v. Petrin (1954) 122 Cal.App.2d 578, 584 [265 P.2d 149]; People v. Gould (1954) 125 Cal.App.2d 447, 449 [270 P.2d 551]). The prosecution does not contend a trust arose on our facts by virtue of a sale agreement. The prosecution’s theory is there was no sale and the trust arose by virtue of the preexisting relationship between defendant and Sovereign. The jury apparently agreed the sale was a sham. The key question thus is whether in criminal law the equitable owner of a corporation is always regarded as an agent in a trust relationship with the corporation, regardless of the form of the transaction between them.

The type of relationship essential to finding embezzlement has been variously characterized. The property or money must be received by the defendant as an agent or bailee of the true owner (People v. Borchers (1926) 199 Cal. 52, 56 [247 P. 1084]). There must be a fiduciary relationship between the parties (People v. Gordon (1901) 133 Cal. 328, 329 [65 P. 746]). The statute names several common trust relationships, but the list is not exclusive. (See Sobiek, supra, 30 Cal.App.3d 458, 464.) However, as illustrated by the sale cases above, as well as People v. Darling (1964) 230 Cal.App.2d 615, at page 621 [41 Cal.Rptr. 219], the mere receipt of property or money from another does not give rise to a trust relationship. My concern is where in this sham sale a trust arose.

In civil law it is established that a controlling stockholder is a fiduciary in relation to his corporation (Remillard Brick Co. v. Remillard-Dandini (1952) 109 Cal.App.2d 405, 420 [241 P.2d 66]; Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108-112 [81 Cal.Rptr. 592, 460 P.2d 464]). The burden in civil law is on the controlling stockholder to show his dealings with his corporation are made in good faith and are fair (Jones v. H. F. Ahmanson & Co., supra, 1 Cal.3d at pp. 108-112).

There are several problems with carrying this civil law notion over into a criminal context. Most importantly, Penal Code section 6 means “there are no common law crimes in California. ” (Keeler v. Superior Court (1970) 2 Cal.3d 619, 631 [87 Cal.Rptr. 481, 470 P.2d 617, 40 A.L.R.3d 420].) “‘Constructive crimes—crimes built up by courts with the aid of inference, implication, and strained interpretation—are repugnant to the spirit and letter of English and American criminal law.’ ” (Id., at p. 632.) This court will not strain to impose criminal liability upon a breach of trust described by the Attorney General as “an implied fiduciary duty ... to act in the best interests of the company” (referring to Sovereign).

The closest parallels in interpretation of the embezzlement statutes are Schmidt, supra, 147 Cal.App.2d 222, and Applegate, supra, 91 Cal.App.2d 163. In Schmidt, at pages 229 to 230, the only count clearly discussed in terms of embezzlement involved the defendant’s personal use of funds deposited in the corporation’s account subject to a written trust agreement between the corporation and the lender. The court noted (p. 229): “The agreement between Southwest and the defendant contained a trust clause specifying that the funds received in trust were to pay contractors, materialmen and laborers.” In Applegate, supra, at pages 166 to 167 and 172, the embezzlement was the defendant’s personal use of funds given to him to be paid over to a new association when it incorporated. While the trust agreement appears to have been oral, there was evidence at least some of the money was deposited in a trustee account. Neither of these cases supports the proposition that the controlling stockholder or beneficial owner of a corporation is regarded in criminal law as a fiduciary in all dealings with his corporation.

The Attorney General invites consideration of Leonard, supra, 106 Cal. 302, and Talbot, supra, 220 Cal. 3. In both, corporate officers took corporate funds and made personal use of them. Talbot states the rule (at p. 14): “ ‘ “An officer or agent of a corporation cannot take money of the corporation which is entrusted to him, or which comes into his possession by virtue of his office or agency, and use it even temporarily for his personal benefit and avoid criminal responsibility by calling it a loan. The law calls such a transaction a wrongful conversion, from which a fraudulent intent can be inferred.” ’ [Citations.]”

In both cases, the trust relation arose by virtue of the offices held by the defendant, although in Leonard, supra, 106 Cal. 302, at pages 310 to 312, the defendant was arguably only a de facto officer of a de facto corporation. The court there held Penal Code section 504 applies as well to de facto officers (p. 312). In neither case was an express trust agreement shown, but the trust arose by virtue of the official agency relationship between the defendants and their corporations. It requires no strained reading of the embezzlement statutes (particularly Pen. Code, § 504) to find embezzlement on the facts of either Leonard or Talbot. Similarly, in our case, if defendant had simply caused Sovereign to issue him a check for $8.9 million as its officer or agent and then used the funds for his personal benefit, then such transaction could be an embezzlement.

The problem in our case is the relationship between defendant and his corporation is not one recognized in the Penal Code sections on embezzlement as inherently a trust relationship. We are invited to designate him as a de facto agent (cf. Leonard, supra, 106 Cal. 302, 312) or perhaps as a person entrusted with the corporation’s property (cf. Sobiek, supra, 30 Cal.App.3d 458, 464) by virtue of the fact he was the equitable owner of the corporation. The embezzlement statutes cannot be read so broadly, because such a construction, along the lines of the civil law, would subject any bad deal between a corporation and its beneficial owner to a charge of embezzlement. A trust relationship might be in evidence if the corporation had entrusted defendant with its money, but a sale does not give rise to a trust. There is evidence Sovereign expressly entrusted defendant with the $8.9 million. There is no evidence of an implicit agreement that defendant was to be holding the money for Sovereign’s benefit. We require some evidence of “intrusting” before we can say a trust was breached.

Other Theories of Theft

Language in many cases indicates a theft conviction will be sustained when challenged for insufficiency of the evidence so long as any one of the several types of theft is shown. (E.g., People v. Ashley (1954) 42 Cal.2d 246, 258 [267 P.2d 241] [cert. den. 348 U.S. 900 (99 L.Ed. 707, 75 S.Ct. 222)]; People v. Corenevsky (1954) 124 Cal.App.2d 19, 24 [267 P.2d 1048]; People v. Kagan (1968) 264 Cal.App.2d 648, 658 [70 Cal.Rptr. 732], cert. den. 394 U.S. 911 [22 L.Ed.2d 224, 89 S.Ct. 1027].) Presumably this rule is limited to a consideration of the theft theories which were presented to the jury (see People v. Lafka (1959) 174 Cal.App.2d 312, 316 [344 P.2d 619]). It would deprive the defendant of his right to a jury trial if an appellate court could find a theft on a theory not presented to the jury (see People v. Abbott (1933) 132 Cal.App. 109, 114 [22 P.2d 566]).

False Pretenses

The jury was also instructed as to the theory of theft by false pretenses. The Penal Code provides, in relevant part: “Every person who knowingly and designedly, by any false or fraudulent representation or pretense, defrauds any other person of money ... is punishable in the same manner and to the same extent as for larceny of the money ... so obtained.” (§ 532.)

“Upon a trial for having, with an intent to cheat or defraud another designedly, by any false pretense, obtained the signature of any person to a written instrument, or having obtained from any person any . . . money ... or valuable thing, the defendant cannot be convicted if the false pretense was expressed in language unaccompanied by a false token or writing, unless the pretense, or some note or memorandum thereof is in writing, subscribed by or in the handwriting of the defendant, or unless the pretense is proven by the testimony of two witnesses, or that of one witness and corroborating circumstances ....”(§ 1110.)

People v. Tomlinson (1894) 102 Cal. 19 [36 P. 506], explains at page 23 (italics in original): “On the facts there must often be a very narrow margin between cases of larceny, obtaining money by false pretenses, and embezzlement, because the character of the crime depends upon the secret intention of the parties, which is often difficult to ascertain; but, so far as the law is concerned, the principles ... are plain and . . . well settled .... Where one honestly receives the possession of goods upon a trust, and after receiving them fraudulently converts them to his own use, it is a case of embezzlement. If the possession has been obtained by fraud, trick, or device, and the owner of it intends to part with his title when he gives up possession, the offense, if any, is obtaining money by false pretenses.

“To support a conviction of theft for obtaining property by false pretenses, it must be shown: (1) that the defendant made a false pretense or representation, (2) that the representation was made with intent to defraud the owner of his property, and (3) that the owner was in fact defrauded in that he parted with his property in reliance upon the representation.” (Perry v. Superior Court (1962) 57 Cal.2d 276, 282-283 [19 Cal.Rptr. 1, 368 P.2d 529].)

Corroboration of the false pretense in the form prescribed by Penal Code section 1110 is essential to support a conviction of theft by false pretenses (People v. Edwards (1933) 133 Cal.App. 335, 340 [24 P.2d 183]; People v. Mason (1973) 34 Cal.App.3d 281, 288 [109 Cal.Rptr. 867]). The false pretense need not be an express oral statement, but may be implied from statements in conjunction with conduct intended to deceive CPeople v. Mace (1925) 71 Cal.App. 10, 21 [234 P. 841]; People v. Randono (1973) 32 Cal.App.3d 164, 174 [108 Cal.Rptr. 326]). “. . The rule is, moreover, that it is not necessary that the false representations be made to the person defrauded in order to convict one of obtaining money or property by false pretenses. A false representation to an agent or clerk has been held a false pretense to the principal.’” (People v. Pugh (1955) 137 Cal.App.2d 226, 234 [289 P.2d 826], app. dism. 352 U.S. 885 [1 L.Ed.2d 83, 77 S.Ct. 141].) Indeed, since a corporation acts only through agents, a theft by false pretenses from a corporation could only be committed as described by the rule just quoted (e.g., People v. Coggan (1957) 155 Cal.App.2d 42, 44 [317 P.2d 67]). The false pretense may be made through an agent who is clearly authorized by the principal to make it (People v. Green (1913) 22 Cal.App. 45, 50 [133 P. 334], criticized on other grounds in Ashley, supra, 42 Cal.2d 246, 262; People v. Moore (1927) 82 Cal.App. 739, 747-748 [256 P. 266]; People v. Robinson (1930) 107 Cal.App. 211, 227-228 [290 P. 470]).

Here, there is a false written token. (See People v. Fleshman (1915) 26 Cal.App. 788, 791-792 [148 P. 805]; People v. Pearson (1924) 69 Cal.App. 524, 531 [231 P. 612]; People v. Beilfuss (1943) 59 Cal.App.2d 83, 96 [138 P.2d 332]; People v. Allen (1962) 203 Cal.App.2d 659, 662 [21 Cal.Rptr. 789].) There was a written memorandum dated July 9, 1973, from defendant to Mr. Toft who undeniably was his agent and righthand man, which set in motion the July 17, 1973, transaction. Defendant accepted Toft’s suggestion that Sovereign pick up the Padres’ obligations from himself and instructed that with the proceeds he would pay interest owed Sovereign, and further instructed: “We can then write to the Padre organization and tell them I have sold these notes to Sovereign State Capital and endorse them over so they can change their records accordingly.”

The memo was presented by Toft to Schroeder, who was an officer and director of Sovereign, as well as comptroller or accountant for many of defendant’s other corporations. Based on the memorandum and other instructions from Toft, Schroeder worked out the form of the transaction and caused Sovereign’s check to issue to defendant through a voucher request. Based on instructions from Schroeder, Mrs. Kurz, an officer and director of Sovereign, as well as a bookkeeper for defendant, recorded the transaction as a sale to Sovereign by defendant of the Padres’ obligations on various ledgers for Sovereign. Arguably, the records of Sovereign are also false tokens, but this need not be determined. There was also corroborating testimony from Schroeder, who made notes on a conversation with Toft which clarified defendant’s intent to sell the surplus certificates to Sovereign. Through the memorandum and through Toft’s statements, defendant represented to officers of Sovereign that he would deliver to it the proceeds of the surplus certificates and a promissory note. Corroboration of the false pretense required by Penal Code section 1110 can be found in the memorandum, in Toft’s statements as an agent of defendant to Schroeder, in Schroeder’s instructions as an agent of defendant to Mrs. Kurz, and in the records of Sovereign recording the transaction.

The fraudulent intent of the defendant has been described as the essence of the offense of obtaining money or property by false pretenses (Ashley, supra, 42 Cal.2d 246, 265). “It is well established that criminal intent may be inferred from the general circumstances surrounding the transactions, and that other similar transactions carried on by a defendant are sufficient to prove guilty knowledge and criminal intent.” (People v. Ingles (1931) 117 Cal.App. 22, 27 [3 P.2d 341]; accord, Robinson, supra, 107 Cal.App. 211, 224; People v. Weitz (1954) 42 Cal.2d 338, 347 [267 Cal.Rptr. 295], cert. den. 347 U.S. 993 [98 L.Ed. 1126, 74 S.Ct. 859].)

Some evidence of defendant’s fraudulent intent here is that in fact the promises were never performed, i.e., Sovereign never received the proceeds of the sale of the Padres. By itself this is not sufficient evidence to sustain a finding of fraudulent intent, but it is some evidence of it (Ashley, supra, 42 Cal.2d 246, 264; People v. Otterman (1957) 154 Cal.App.2d 193, 204 [316 P.2d 85]). There was also evidence of a similar transaction in June 1971, which underlies the tax fraud convictions for that year. As more fully discussed in connection with those counts, defendant sold Sovereign some shares of his bank stock in United States National Bank of San Diego for $5,313,264. He used some of this payment, as in the July 1973, transaction, to pay off some of his obligations to Sovereign. He never delivered ownership of the stock to Sovereign, and indeed never owned some of the shares sold. This evidence is sufficient to support a finding of defendant’s fraudulent intent.

The third element of the crime is the false pretense caused the owner to part with title to the property or money (People v. Bryant (1898) 119 Cal. 595, 598-599 [51 P. 960]; People v. Haskins (1920) 49 Cal.App. 640, 643-644 [194 P. 43]; People v. Whiteside (1922) 58 Cal.App. 33, 40 [208 P. 132]). If the owner did not rely on the false pretense in parting with his property, then a conviction cannot be sustained (e.g., People v. Daniels (1923) 64 Cal.App. 514, 517-518 [222 P. 387]; People v. Frankfort (1952) 114 Cal.App.2d 680, 699 [251 P.2d 401]). The false pretense need not be the sole cause of the owner’s parting with his property (Whiteside, supra, 58 Cal.App. at p. 40), but it must have materially influenced him to do so (Ashley, supra, 42 Cal.2d 246, 259).

The express testimony of the owner is not essential to prove he relied on the false pretense, but his reliance may be inferred (People v. Hong Quin Moon (1891) 92 Cal. 41, 42 [27 P. 1096]; Schmidt, supra, 147 Cal.App.2d 222, 228). When it is a corporation which is the victim of false pretenses, the reliance may be found in the conduct of an officer who parts with corporate property or money under his control (e.g., People v. Cordish (1930) 110 Cal.App. 486, 495 [294 P. 456]; Coggan, supra, 155 Cal.App.2d 42, 44).

The prosecutor may not have determined here whether Schroeder relied on the promise of receiving the Padres’ obligations when he requested the check for $8.9 million issue to defendant. Defendant has repeatedly argued that no victim has claimed to be defrauded. Indeed, given the undisputed evidence of defendant’s control over Sovereign, it would be remarkable if an agent of Sovereign had done so. But for the same reasons given above in rejecting the alter ego defense to embezzlement, Sovereign must be treated as a separate entity capable of relying on defendant’s false pretense. A person cannot create a corporation and treat it as a separate entity when it suits his purposes, and then deny it could have relied on a promise made by him. If that person is making promises to himself alone, then there could be a problem in showing corporate reliance. But when other officers of the corporation are induced to part with its money or property, even by the beneficial owner of the corporation, then their reliance may suffice to support a conviction of theft by false pretenses. It may be inferred here the responsible officers of Sovereign were materially influenced to issue the check to defendant because he promised to deliver the Padres’ obligations to Sovereign.

Conclusion

It does appear there was sufficient evidence to support a conviction of theft by false pretenses in July 1973, although that transaction could not be an embezzlement. It has been held a superfluous instruction on embezzlement is not a prejudicial error when a case of false pretenses is made out (People v. Gordon (1945) 71 Cal.App.2d 606, 635 [163 P.2d 110]; People v. Shalhoob (1957) 147 Cal.App.2d 455, 459 [305 P.2d 264]). Unfortunately, our case is different. In Gordon, the court observed (at p. 635): “The indictment alleged only false pretense, and all of the evidence offered established that the offense came within the category of that crime.” In Shalhoob, the court noted (at p. 459): “We find upon examination of the reporter’s transcript that the People made no attempt to prove the offense of embezzlement. ”

At the close of the prosecution’s case, defendant moved for a directed judgment of acquittal under Penal Code section 1118.1. The prosecutor in response to this motion stated his theory as to the July 1973, transaction was “primarily embezzlement; but also, I think we have the argument of obtaining by false pretenses.” The court then questioned where the evidence to support each theory was and asked to point out the corroboration required by Penal Code section 1110. At the conclusion of this discussion, the prosecutor indicated he may not even argue false pretenses as to the July 1973, transaction, but only embezzlement, but that he would consider the matter further.

It is conceded by the Attorney General on appeal that “the prosecution did not rely on a false pretense theory as to counts 1-5 and expressly made this clear to the jury,” although the brief continues to argue in a cursory fashion that there was evidence of false pretenses. While it is not crystal clear from the prosecutor’s closing argument, it does appear the only theory emphasized in the closing argument as to the July 1973, transaction was embezzlement. When the prosecutor was explaining his theories of theft on each count, he stated: “In June of 1971 and July of 1973, the prosecution alleges that Mr. Smith embezzled monies from Sovereign State Capital in connection with these fraudulent sham transactions.” In describing another count, the prosecutor emphasized: “Here we encounter the form of theft known as obtaining by false pretenses.” In laying out the facts as to that count, the prosecutor emphasized the elements of false pretenses, which he did not do in connection with count five. There are other statements which confirm the prosecutor’s theory on count five was simply embezzlement.

This is one of those cases of which it must be said: “[W]hen the prosecution presents its case to the jury on alternate theories, some of which are legally correct and others legally incorrect, and the reviewing court cannot determine from the record on which theory the ensuing general verdiet of guilt rested, the conviction cannot stand.” Green, supra, 27 Cal.3d 1, 69.) In actuality, as to count five, it is fairly clear the only theory presented to the jury was legally incorrect. Despite the instructions of the court both before and after closing arguments that theft could be established on theories of embezzlement or false pretenses, the prosecutor’s closing argument in this case limited the jury to a consideration whether the July 1973, transaction was an embezzlement. The prosecutor relied on an embezzlement theory which cannot be sustained as a matter of law. As discussed above, the heart of the theory was the implicit trust relationship arising between a corporation and its beneficial owner. While this theory is well-grounded in civil law, it is an overextension of the criminal statutes defining embezzlement. I would hold the conviction of theft under count five on this theory must be reversed.

Ill

State Tax Offenses

Defendant was convicted of two counts of tax fraud for his 1971 tax return and two