False pretenses is a crime of obtaining ownership of property of another by making untrue representations of fact with intent to defraud. What were the untrue representations of fact made by Mills?Con

State v. Mills

96 Ariz. 377, 396 P.2d 5 (Ariz. 1964)

LOCKWOOD, VICE CHIEF JUSTICE

Defendants appeal from a convictio n on two counts of obtaining money by false pretenses in violation

of AR.S. §§ 13 -661.A3. and 13 -663.A1. The material facts, viewed “…in the light most favorable to

sustaining the conviction,” are as follows: Defendant William Mills was a builder and owned

approximately 150 homes in Tucson in December, 1960. Mills conducted his business in his home. In

1960 defendant Winifred Mills, his wife, participated in the business generally by answering the

telephone, typing, and receiving clients who came to the off ice.

In December 1960, Mills showed the complainant, Nathan Pivowar, a house at 1155 Knox Drive and

another at 1210 Easy Street, and asked Pivowar if he would loan money on the Knox Drive house.

Pivowar did not indicate at that time whether he would agree to such a transaction. Later in the same

month Nathan Pivowar told the defendants that he and his brother, Joe Pivowar, would loan $5,000 and

$4,000 on the two houses. Three or four days later Mrs. Mills, at Pivowar’s request, showed him these

homes again.

Mills had prepared two typed mortgages for Pivowar. Pivowar objected to the wording, so in Mills’

office Mrs. Mills retyped the mortgages under Pivowar’s dictation. After the mortgages had been

recorded on December 31, 1960, Pivowar gave Mills a bank chec k for $5,791.87, some cash, and a

second mortgage formerly obtained from Mills in the approximate sum of $3,000. In exchange Mills

gave Pivowar two personal notes in the sums of $5,250.00 and $4,200.00 and the two mortgages as

security for the loan.

Althou gh the due date for Mills’ personal notes passed without payment being made, the complainant

did not present the notes for payment, did not demand that they be paid, and did not sue upon them. In

1962 the complainant learned that the mortgages which he had taken as security in the transaction

were not first mortgages on the Knox Drive and Easy Street properties. These mortgages actually

covered two vacant lots on which there were outstanding senior mortgages. On learning this, Pivowar

signed a complaint cha rging the defendants with the crime of theft by false pretenses.

On appeal defendants contend that the trial court erred in denying their motion to dismiss the

information. They urge that a permanent taking of property must be proved in order to establish the

crime of theft. Since the complainant had the right to sue on the defendants’ notes, the defendants

assert that complainant cannot be said to have been deprived of his property permanently. Defendants

misconceive the elements of the crime of theft by f alse pretenses. Stated in a different form, their

argument is that although the complainant has parted with his cash, a bank check, and a second

mortgage, the defendants intend to repay the loan.

Defendants admit that the proposition of law which they asse rt is a novel one in this jurisdiction.

Respectable authority in other states persuades us that their contention is without merit. A creditor has

a right to determine for himself whether he wishes to be a secured or an unsecured creditor. In the

former cas e, he has a right to know about the security. If he extends credit in reliance upon security which is falsely represented to be adequate, he has been defrauded even if the debtor intends to repay

the debt. His position is now that of an unsecured creditor. At the very least, an unreasonable risk of loss

has been forced upon him by reason of the deceit. This risk which he did not intend to assume has been

imposed upon him by the intentional act of the debtor, and such action constitutes an intent to defraud.

* * *

The cases cited by defendants in support of their contention are distinguishable from the instant case in

that they involved theft by larceny. Since the crime of larceny is designed to protect a person’s

possessory interest in property whereas the crime of false pretenses protects one’s title interest, the

requirement of a permanent deprivation is appropriate to the former. Accordingly, we hold that an

intent to repay a loan obtained on the basis of a false representation of the security for the loan is no

defense.

* * *

Affirmed in part, reversed in part, and remanded for resentencing.