{ "id": 11467788, "name": "STATE OF NORTH CAROLINA v. FRANCIS M. KENNEDY", "name_abbreviation": "State v. Kennedy", "decision_date": "1998-08-04", "docket_number": "No. COA97-853", "first_page": "399", "last_page": "408", "citations": [ { "type": "official", "cite": "130 N.C. App. 399" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "389 S.E.2d 48", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1990, "pin_cites": [ { "page": "54" } ], "opinion_index": 0 }, { "cite": "326 N.C. 268", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 5306215 ], "year": 1990, "pin_cites": [ { "page": "278-79" } ], "opinion_index": 0, "case_paths": [ "/nc/326/0268-01" ] }, { "cite": "N.Y. Tax Law \u00a7 1145", "category": "laws:leg_act", "reporter": "N.Y.", "pin_cites": [ { "page": "(d)", "parenthetical": "McKinney Supp. 1984-1985" } ], "opinion_index": 0 }, { "cite": "457 N.E.2d 748", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "year": 1983, "pin_cites": [ { "page": "751-52" } ], "opinion_index": 0 }, { "cite": "8 ALR 4th 1068", "category": "reporters:specialty", "reporter": "A.L.R. 4th", "year": 1981, "opinion_index": 0 }, { "cite": "265 N.W. 210", "category": "reporters:state_regional", "reporter": "N.W.", "year": 1936, "pin_cites": [ { "page": "212" } ], "opinion_index": 0 }, { "cite": "299 N.W. 235", "category": "reporters:state_regional", "reporter": "N.W.", "case_ids": [ 8516302 ], "year": 1941, "opinion_index": 0, "case_paths": [ "/sd/68/0127-01" ] }, { "cite": "193 N.E. 516", "category": "reporters:state_regional", "reporter": "N.E.", "year": 1934, "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-236.1", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-236", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 2, "pin_cites": [ { "page": "(7)" } ], "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-471", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "year": 1997, "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-164.7", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "year": 1997, "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 14-92", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 2, "year": 1993, "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 14-91", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 2, "year": 1993, "opinion_index": 0 }, { "cite": "203 S.E.2d 63", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1974, "pin_cites": [ { "page": "65" }, { "page": "64-65" } ], "opinion_index": 1 }, { "cite": "21 N.C. App. 48", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8553855 ], "weight": 2, "year": 1974, "pin_cites": [ { "page": "50" }, { "page": "50" } ], "opinion_index": 1, "case_paths": [ "/nc-app/21/0048-01" ] }, { "cite": "129 S.E. 808", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1925, "pin_cites": [ { "page": "809" } ], "opinion_index": 1 }, { "cite": "190 N.C. 332", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8601948 ], "year": 1925, "pin_cites": [ { "page": "334" } ], "opinion_index": 1, "case_paths": [ "/nc/190/0332-01" ] }, { "cite": "130 S.E. 743", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1925, "pin_cites": [ { "page": "745" } ], "opinion_index": 1 }, { "cite": "190 N.C. 638", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8611629 ], "year": 1925, "pin_cites": [ { "page": "641" } ], "opinion_index": 1, "case_paths": [ "/nc/190/0638-01" ] }, { "cite": "99 S.E. 372", "category": "reporters:state_regional", "reporter": "S.E.", "weight": 2, "year": 1919, "pin_cites": [ { "page": "372" }, { "page": "372" } ], "opinion_index": 1 }, { "cite": "177 N.C. 490", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8654745 ], "weight": 2, "year": 1919, "pin_cites": [ { "page": "491" }, { "page": "491" } ], "opinion_index": 1, "case_paths": [ "/nc/177/0490-01" ] }, { "cite": "110 S.E.2d 324", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1959, "pin_cites": [ { "page": "328", "parenthetical": "\"[W]hen dealings between two persons create a relation of debtor and creditor, a failure of one of the parties to pay over money does not constitute the crime of embezzlement.\"" } ], "opinion_index": 1 }, { "cite": "250 N.C. 707", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8625952 ], "year": 1959, "pin_cites": [ { "page": "712", "parenthetical": "\"[W]hen dealings between two persons create a relation of debtor and creditor, a failure of one of the parties to pay over money does not constitute the crime of embezzlement.\"" } ], "opinion_index": 1, "case_paths": [ "/nc/250/0707-01" ] }, { "cite": "69 S.E.2d 505", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1952, "pin_cites": [ { "page": "511" } ], "opinion_index": 1 }, { "cite": "235 N.C. 203", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8622519 ], "year": 1952, "pin_cites": [ { "page": "210" } ], "opinion_index": 1, "case_paths": [ "/nc/235/0203-01" ] }, { "cite": "241 S.E.2d 324", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1978, "pin_cites": [ { "page": "329", "parenthetical": "\"In construing statutes courts normally adopt an interpretation which will avoid absurd or bizarre consequences, the presumption being that the legislature acted in accordance with reason and common sense and did not intend untoward results.\"" } ], "opinion_index": 1 }, { "cite": "294 N.C. 60", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8570860 ], "year": 1978, "pin_cites": [ { "page": "68", "parenthetical": "\"In construing statutes courts normally adopt an interpretation which will avoid absurd or bizarre consequences, the presumption being that the legislature acted in accordance with reason and common sense and did not intend untoward results.\"" } ], "opinion_index": 1, "case_paths": [ "/nc/294/0060-01" ] }, { "cite": "244 S.E.2d 386", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1978, "pin_cites": [ { "page": "389" } ], "opinion_index": 1 }, { "cite": "295 N.C. 236", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8562180 ], "year": 1978, "pin_cites": [ { "page": "240" } ], "opinion_index": 1, "case_paths": [ "/nc/295/0236-01" ] }, { "cite": "196 S.E.2d 770", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1973, "pin_cites": [ { "page": "774" } ], "opinion_index": 1 }, { "cite": "283 N.C. 494", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8559260 ], "year": 1973, "pin_cites": [ { "page": "500" } ], "opinion_index": 1, "case_paths": [ "/nc/283/0494-01" ] }, { "cite": "66 S.E.2d 693", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1951, "pin_cites": [ { "page": "695" } ], "opinion_index": 1 }, { "cite": "234 N.C. 126", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8619057 ], "year": 1951, "pin_cites": [ { "page": "129" } ], "opinion_index": 1, "case_paths": [ "/nc/234/0126-01" ] }, { "cite": "48 S.E.2d 61", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1948, "pin_cites": [ { "page": "65" } ], "opinion_index": 1 }, { "cite": "229 N.C. 73", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 12164708 ], "year": 1948, "pin_cites": [ { "page": "77" } ], "opinion_index": 1, "case_paths": [ "/nc/229/0073-01" ] }, { "cite": "240 S.E.2d 367", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1978, "pin_cites": [ { "page": "372", "parenthetical": "emphasis omitted" }, { "page": "371-72" } ], "opinion_index": 1 }, { "cite": "294 N.C. 90", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8570942 ], "weight": 2, "year": 1978, "pin_cites": [ { "page": "97", "parenthetical": "emphasis omitted" }, { "page": "95-96" } ], "opinion_index": 1, "case_paths": [ "/nc/294/0090-01" ] }, { "cite": "213 S.E.2d 291", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1975, "pin_cites": [ { "page": "294" } ], "opinion_index": 1 }, { "cite": "287 N.C. 76", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8561054 ], "year": 1975, "pin_cites": [ { "page": "80" } ], "opinion_index": 1, "case_paths": [ "/nc/287/0076-01" ] }, { "cite": "439 S.E.2d 153", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1993, "opinion_index": 1 }, { "cite": "335 N.C. 240", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2530500, 2527691, 2526830, 2530292, 2528541 ], "year": 1993, "opinion_index": 1, "case_paths": [ "/nc/335/0240-03", "/nc/335/0240-04", "/nc/335/0240-02", "/nc/335/0240-05", "/nc/335/0240-01" ] }, { "cite": "433 S.E.2d 748", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1993, "pin_cites": [ { "page": "750" } ], "opinion_index": 1 }, { "cite": "111 N.C. App. 569", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8522953 ], "year": 1993, "pin_cites": [ { "page": "572" } ], "opinion_index": 1, "case_paths": [ "/nc-app/111/0569-01" ] }, { "cite": "190 S.E.2d 422", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1972, "pin_cites": [ { "page": "424" } ], "opinion_index": 1 }, { "cite": "15 N.C. App. 515", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8551890 ], "year": 1972, "pin_cites": [ { "page": "518" } ], "opinion_index": 1, "case_paths": [ "/nc-app/15/0515-01" ] }, { "cite": "28 S.E.2d 499", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1944, "pin_cites": [ { "page": "501" } ], "opinion_index": 1 }, { "cite": "223 N.C. 828", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8618889 ], "year": 1944, "pin_cites": [ { "page": "830" } ], "opinion_index": 1, "case_paths": [ "/nc/223/0828-01" ] }, { "cite": "472 S.E.2d 763", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1996, "pin_cites": [ { "page": "766", "parenthetical": "noting that a motion to dismiss should be granted where the State fails to present substantial evidence of each essential element of the charged offense" } ], "opinion_index": 1 }, { "cite": "344 N.C. 121", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 867648 ], "year": 1996, "pin_cites": [ { "page": "126", "parenthetical": "noting that a motion to dismiss should be granted where the State fails to present substantial evidence of each essential element of the charged offense" } ], "opinion_index": 1, "case_paths": [ "/nc/344/0121-01" ] }, { "cite": "66 L. Ed. 2d 29", "category": "reporters:federal", "reporter": "L. Ed. 2d", "year": 1980, "opinion_index": 1 }, { "cite": "449 U.S. 826", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11726951, 11726443, 11726894, 11726552, 11726706, 11726643, 11726616, 11726778, 11726491, 11726845, 11726399 ], "year": 1980, "opinion_index": 1, "case_paths": [ "/us/449/0826-11", "/us/449/0826-02", "/us/449/0826-10", "/us/449/0826-04", "/us/449/0826-07", "/us/449/0826-06", "/us/449/0826-05", "/us/449/0826-08", "/us/449/0826-03", "/us/449/0826-09", "/us/449/0826-01" ] }, { "cite": "265 S.E.2d 401", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1980, "opinion_index": 1 }, { "cite": "299 N.C. 333", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8574988, 8574959, 8575024, 8574971, 8575005 ], "year": 1980, "opinion_index": 1, "case_paths": [ "/nc/299/0333-03", "/nc/299/0333-01", "/nc/299/0333-05", "/nc/299/0333-02", "/nc/299/0333-04" ] }, { "cite": "260 S.E.2d 786", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1979, "pin_cites": [ { "page": "789-90" } ], "opinion_index": 1 }, { "cite": "44 N.C. App. 301", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8552405 ], "year": 1979, "pin_cites": [ { "page": "307" } ], "opinion_index": 1, "case_paths": [ "/nc-app/44/0301-01" ] }, { "cite": "377 S.E.2d 227", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1989, "opinion_index": 1 }, { "cite": "323 N.C. 705", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2563841, 2560451, 2560934, 2561031, 2564623 ], "year": 1989, "opinion_index": 1, "case_paths": [ "/nc/323/0705-04", "/nc/323/0705-03", "/nc/323/0705-01", "/nc/323/0705-02", "/nc/323/0705-05" ] }, { "cite": "326 S.E.2d 881", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1985, "pin_cites": [ { "page": "897" } ], "opinion_index": 1 }, { "cite": "313 N.C. 1", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4725898 ], "year": 1985, "pin_cites": [ { "page": "22" } ], "opinion_index": 1, "case_paths": [ "/nc/313/0001-01" ] }, { "cite": "371 S.E.2d 773", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1988, "pin_cites": [ { "page": "774", "parenthetical": "quoting State v. Kornegay, 313 N.C. 1, 22, 326 S.E.2d 881, 897 (1985)" } ], "opinion_index": 1 }, { "cite": "91 N.C. App. 424", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8525845 ], "year": 1988, "pin_cites": [ { "page": "426", "parenthetical": "quoting State v. Kornegay, 313 N.C. 1, 22, 326 S.E.2d 881, 897 (1985)" } ], "opinion_index": 1, "case_paths": [ "/nc-app/91/0424-01" ] } ], "analysis": { "cardinality": 1019, "char_count": 23066, "ocr_confidence": 0.776, "pagerank": { "raw": 2.2793900805956067e-07, "percentile": 0.7849847616598497 }, "sha256": "d802576b43e492cf9a11fcdef9a2f9cf658a6cd0370f1caea19479a982800abd", "simhash": "1:83a9706a2734297a", "word_count": 3845 }, "last_updated": "2023-07-14T19:24:27.441929+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judge LEWIS concurs.", "Judge GREENE dissents." ], "parties": [ "STATE OF NORTH CAROLINA v. FRANCIS M. KENNEDY" ], "opinions": [ { "text": "HORTON, Judge.\nIn 1990, defendant Francis M. Kennedy was president and treasurer of Old Colony Group, Inc. (\u201cOld Colony\u201d), a Massachusetts corporation, which was in the business of arranging equipment financing. During that year, Carolina Freight Corporation (\u201cCarolina Freight\u201d) entered into a lease with Old Colony for the use of a mainframe computer. Pursuant to the lease, Carolina Freight forwarded the sum of $176,064.98 each month to an Illinois bank. In addition, Old Colony invoiced Carolina Freight monthly in the sums of $5,281.95 for North Carolina sales tax and $3,521.30 for county sales tax, a total of $8,803.25. On 29 January 1991, Old Colony registered with the North Carolina Department of Revenue to collect sales and use taxes. The State\u2019s evidence tended to show that Carolina Freight paid the invoiced taxes of $8,803.25 to Old Colony in Massachusetts from March 1991 through September 1994. The State\u2019s evidence further tended to show that the tax payments were deposited in the Bank of Boston each month, that Old Colony paid none of the taxes to the North Carolina Department of Revenue, and that Old Colony had a balance of $4,245.40 in the Bank of Boston in September \u00cd994.\nDefendant offered evidence tending to show that Old Colony began to have financial difficulties in 1991, and that the tax money paid by Carolina Freight was received, deposited and spent to help keep Old Colony afloat. Defendant admitted that he avoided talking with agents of the North Carolina Department of Revenue, mistakenly treating them like other creditors, but claimed he always intended to pay the money back. Defendant also testified that Old Colony recorded the tax payments as \u201cdebt\u201d on its books rather than income.\nDefendant was convicted by a Wake County jury of the embezzlement of sales and use taxes belonging to the State of North Carolina, in violation of the provisions of N.C. Gen. Stat. \u00a7 14-91 (1993), and sales and use taxes belonging to the County of Gaston, in violation of N.C. Gen. Stat. \u00a7 14-92 (1993). Defendant contends that he did not hold the taxes \u201cin trust\u201d as required for conviction under the embezzlement statutes, and that in any event the internal civil and criminal penalties set out in the Tax Code (Chapter 105) provide an exclusive remedy for alleged nonpayment of sales and use taxes.\nN.C. Gen. Stat. \u00a7 14-91 (Cum. Supp. 1997) applies to \u201cany officer, agent, or employee of the State, or other person having or holding in trust for the same any... property and effects of the same ....\u201d N.C. Gen. Stat. \u00a7 14-92 (Cum. Supp. 1997) applies to persons \u201chaving or holding money or property in trust for ... a county . . . .\u201d Defendant argues that his receipt of the sales taxes intended for North Carolina and Gaston County did not create a traditional fiduciary/trustee relationship with those governmental entities, because there is no requirement that a retailer keep tax receipts separate from other funds; and retailers have \u201cunfettered discretion\u201d in the use of sales tax receipts, provided that they keep records of the same and remit them when due. While we agree with defendant that the collection of sales taxes by a retailer lacks some of the trappings of a traditional trust and that, by the very nature of things, sales tax receipts are often commingled with other funds of the retailer, we disagree with defendant\u2019s position based on the plain language of the relevant statutes. N.C. Gen. Stat. \u00a7 105-164.7 (1997) provides that the sales tax \u201cshall be a debt from the purchaser to the retailer until paid\u201d but when paid by the purchaser is held by the retailer \u201cas trustee for and on account of the State . . . .\u201d (Emphasis added.) Likewise, N.C. Gen. Stat. \u00a7 105-471 (1997) provides that the one percent local sales tax \u201cshall be paid by the purchaser to the retailer as trustee for and on account of the State or county wherein the tax is imposed.\u201d (Emphasis added.) Pursuant to these statutes, the trial court correctly charged the jury in this case that a purchaser pays sales taxes to a retailer as \u201ctrustee\u201d for the state and county.\nNor do we believe that the criminal and civil penalties of the Tax Code provide an exclusive remedy in this case. Defendant argues the revenue laws are a \u201ccomprehensive scheme\u201d which provide an exclusive penalty in tax cases. We note, however, that pertinent subsections of N.C. Gen. Stat. \u00a7 105-236 set out penalties for Tax Code violations, but provide that such penalties are \u201cin addition to other penalties provided by law[.]\u201d N.C. Gen. Stat. \u00a7 105-236(7), (8) and (9) (1997). We find further support for our view in a recent amendment to the Tax Code, codified as N.C. Gen. Stat. \u00a7 105-236.1:\nThe Secretary may appoint employees of the Criminal Investigations Division to serve as revenue law enforcement officers having the responsibility and subject-matter jurisdiction to enforce the felony tax violations in G.S. 105-236 and to enforce any of the following criminal offenses when they involve a tax imposed under Chapter 105 of the General Statutes: G.S. 14-91 (Embezzlement of State Property), G.S. 14-92 (Embezzlement of Funds), G.S. 14-100 (Obtaining Property by False Pretenses), G.S. 14-119 (Forgery), and G.S. 14-120 (Uttering Forged Paper).\n(Emphasis added.) This 1997 legislation supports the view that the legislature did not intend for the Tax Code to set out the only criminal penalties available for the nonpayment of tax funds.\nFinally, we note the decisions from our sister jurisdictions support our view. See, for example, People v. Kopman, 193 N.E. 516 (Ill. 1934); State v. Sankey, 299 N.W. 235 (S.D. 1941); Anderson v. State, 265 N.W. 210, 212 (Wis. 1936). See also Annotation, \u201cRetailer\u2019s Failure to Pay to Government Sales or Use Tax Funds as Constituting Larceny or Embezzlement,\u201d 8 ALR 4th 1068 (1981). Defendant relies on a decision from New York, People v. Valenza, 457 N.E.2d 748 (N.Y. 1983). At the time of the Vlienza decision, however, failure to pay sales taxes was not included in the criminal penalties section of the New York Tax Code. The New York court held that \u201c[t]he Legislature\u2019s structuring of [the provision] to provide substantial civil penalties for failing to pay over sales tax and to exclude this conduct from the criminal penalties section must be deemed to manifest an intent to exclude such conduct from criminal prosecution under either the Tax Law or the Penal Law . . . .\u201d Id. at 751-52. The State points out that at the next session of the New York legislature the New York Tax Code was amended to provide that \u201c[t]he penalties provided in this section shall not preclude prosecution pursuant to the penal law . . . N.Y. Tax Law \u00a7 1145(d) (McKinney Supp. 1984-1985). We also note that our Tax Code has no provision excluding the nonpayment of sales taxes from criminal prosecution.\nDefendant also contends the trial court erred in admitting over his objection extensive testimony about a tax controversy between Old Colony and the Commonwealth of Massachusetts. The evidence offered by the State tended to show that from 1988 to 1991, Old Colony did not file complete returns with Massachusetts, and that Massachusetts began an audit of Old Colony on 13 March 1991. Further, the records of Old Colony showed that Old Colony had been collecting Massachusetts sales tax, but filed tax reports stating it had no sales or use tax liability. Massachusetts assessed Old Colony $82,993.22 for the period 1986-1987 and $80,047.38 for the period 1988-1991. The State offered the evidence to show motive, intent, and absence of mistake under Rule 404(b). Later, however, the trial court limited the jury\u2019s consideration of the evidence only for the purpose of establishing motive. Rule 404(b) is \u201ca clear general rule of inclusion of relevant evidence of other crimes, wrongs or acts by a defendant, subject to but one exception requiring its exclusion if its only probative value is to show that the defendant has the propensity or disposition to commit an offense of the nature of the crime charged.\u201d State v. Coffey, 326 N.C. 268, 278-79, 389 S.E.2d 48, 54 (1990). The State argues defendant has not brought himself within the narrow exclusion established by Rule 404(b), and we agree. Defendant was assessed a large sum by Massachusetts about the time he began to receive sales tax funds from Carolina Freight, establishing a motive for defendant\u2019s retention of the funds from the North Carolina transaction. We also note that defendant himself testified that he used the North Carolina sales taxes to keep Old Colony \u201cafloat\u201d as long as possible, and paid other debts with the funds. Although the State also offered the evidence in question for other purposes under Rule 404(b), such as to show defendant\u2019s intent, the trial court exercised its discretion in defendant\u2019s favor, limiting the jury\u2019s consideration of the evidence in question only to show motive. The trial court did not abuse its discretion in admitting evidence of Old Colony\u2019s liability to Massachusetts for unpaid sales tax.\nAfter careful review of defendant\u2019s other arguments and assignments of error, we find them to be without merit. Defendant was vigorously defended by capable counsel and had a trial free from prejudicial error before an able trial judge and a jury. We decline, therefore, to disturb the jury verdicts and the judgment based thereon.\nNo error.\nJudge LEWIS concurs.\nJudge GREENE dissents.", "type": "majority", "author": "HORTON, Judge." }, { "text": "Judge Greene\ndissenting.\nI respectfully dissent from the majority opinion because I do not believe that our legislature intended for retailers holding tax funds to be bound by the type of trust relationship contemplated in our embezzlement statutes.\nThe trial court in this case instructed the jury that to find Defendant guilty of the charges against him, they first had to find that \u201c[Old Colony Group, Inc.] was a trustee of the State of North Carolina [and of Gaston County].\u201d The trial court then stated to the jury that \u201cthe law of North Carolina provides that sales taxes shall be paid by the purchaser to the retailer as trustee for and on account of the [S]tate . ...\u201d I believe, therefore, that the dispositive issue in Defendant\u2019s appeal is whether Chapter 105 (the Tax Code) of the North Carolina General Statutes requires sales tax receipts to be held \u201cin trust\u201d such that misapplication of these tax receipts may subject a defendant to conviction for the embezzlement of state and/or county funds.\nDefendant was charged with aiding and abetting Old Colony in the embezzlement of state sales and use tax, pursuant to section 14-91, and in the embezzlement of county sales and use tax, pursuant to section 14-92. To show that a defendant has violated sections 14-91 and/or 14-92, the State must show that the defendant has misapplied property held \u201cin trust\u201d for the State, a county, or some other enumerated entity. N.C.G.S. \u00a7\u00a7 14-91 and 14-92 (1993). \u201c[T]he requirement that defendant misapply funds which he \u2018holds in trust\u2019 expresses the requirement distinctive to embezzlement that the defendant \u2018received the property he embezzled in the course of his employment and by virtue of his fiduciary relationship with his principal.\u2019 \u201d State v. Bonner, 91 N.C. App. 424, 426, 371 S.E.2d 773, 774 (1988) (quoting State v. Kornegay, 313 N.C. 1, 22, 326 S.E.2d 881, 897 (1985)), disc. review denied, 323 N.C. 705, 377 S.E.2d 227 (1989). A fiduciary relationship exists when \u201cthere has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence,\u201d or when \u201cthere is confidence reposed on one side, and resulting domination and influence on the other.\u201d State v. Seay, 44 N.C. App. 301, 307, 260 S.E.2d 786, 789-90 (1979), disc. review denied and appeal dismissed, 299 N.C. 333, 265 S.E.2d 401, and cert. denied, 449 U.S. 826, 66 L. Ed. 2d 29 (1980).\nDefendant herein contends that he did not hold the sales and use tax collected from Carolina Freight \u201cin trust\u201d pursuant to a fiduciary relationship, and that the trial court therefore should have granted his motion to dismiss the charges brought pursuant to sections 14-91 and 14-92. See State v. Roseborough, 344 N.C. 121, 126, 472 S.E.2d 763, 766 (1996) (noting that a motion to dismiss should be granted where the State fails to present substantial evidence of each essential element of the charged offense). The State counters that the Tax Code provides that retailers hold tax receipts \u201cas trustee for and on account of the State,\u201d and, as such, hold the tax funds received \u201cin trust\u201d as a matter of law.\nStatutes levying a tax, State v. Campbell, 223 N.C. 828, 830, 28 S.E.2d 499, 501 (1944), imposing a penalty, Jones v. Georgia-Pacific Corp., 15 N.C. App. 515, 518, 190 S.E.2d 422, 424 (1972), or creating a criminal offense, State v. Clemmons, 111 N.C. App. 569, 572, 433 S.E.2d 748, 750, cert. denied, 335 N.C. 240, 439 S.E.2d 153 (1993), must be strictly construed. In strictly construing these statutes, the intent of the legislature is the controlling factor. State v. Hart, 287 N.C. 76, 80, 213 S.E.2d 291, 294 (1975). Legislative intent is \u201cusually ascertained not only from the phraseology of the statute, but also from the nature and purpose of the act and the consequences which would follow its construction one way or the other.\u201d In re Hardy, 294 N.C. 90, 97, 240 S.E.2d 367, 372 (1978) (emphasis omitted). Our courts must presume that \u201cthe legislature comprehended the import of the words employed to express its intent,\u201d State v. Baker, 229 N.C. 73, 77, 48 S.E.2d 61, 65 (1948); accordingly, technical terms must ordinarily be given their technical meaning, Henry v. Leather Co., 234 N.C. 126, 129, 66 S.E.2d 693, 695 (1951), and where the words of a statute have not acquired a technical meaning, they must be construed in accordance with their common and ordinary meaning, unless a different meaning is indicated by the context, Transportation Service v. County of Robeson, 283 N.C. 494, 500, 196 S.E.2d 770, 774 (1973).\nThe Tax Code provides that sales tax shall be:\nadd[ed] to the sales price of . . . tangible personal property . . . [and] shall constitute a part of such purchase price, [and] shall be a debt from the purchaser to the retailer until paid .... Said tax ... shall be paid by the purchaser to the retailer as trustee for and on account of the State and the retailer shall be liable for the collection thereof and for its payment to the Secretary and the retailer\u2019s failure to charge to or collect said tax from the purchaser shall not affect such liability.\nN.C.G.S. \u00a7 105-164.7 (1997). Strictly construing the Tax Code, I would hold that the language that tax receipts are held by the retailer \u201cas trustee\u201d does not contemplate that tax receipts be held \u201cin trust\u201d as required for conviction under the embezzlement statutes here at issue. Indeed, although the Tax Code contemplates that sales tax be bourne by the purchaser, the retailer is responsible for payment of sales tax whether or not he charges and collects it from the purchaser. The retailer, therefore, cannot be said to hold the purchaser\u2019s funds \u201cin trust\u201d for the State.\n\u201c[W]here a literal interpretation of the language of a statute would contravene the manifest purpose of the statute, the reason and purpose of the law will be given effect and the strict letter thereof disregarded.\u201d In re Banks, 295 N.C. 236, 240, 244 S.E.2d 386, 389 (1978); accord Comr. of Insurance v. Automobile Rate Office, 294 N.C. 60, 68, 241 S.E.2d 324, 329 (1978) (\u201cIn construing statutes courts normally adopt an interpretation which will avoid absurd or bizarre consequences, the presumption being that the legislature acted in accordance with reason and common sense and did not intend untoward results.\u201d). \u201cTrustees\u201d may not commingle trust funds with their personal or business funds unless the trust instrument allows them to do so. See 76 Am. Jur. 2d Trusts \u00a7 381 (1992). I believe that our legislature could not have intended the absurd result that retailers would be liable for violating a trust relationship when they commingle the money received for the sale of an item and the sales tax collected on that item in the same cash drawer throughout the course of the business day. Indeed, the Tax Code contemplates that retailers will commingle tax receipts with their other receipts. See N.C.G.S. \u00a7 105-164.19 (1997) (allowing for an extension of time to pay taxes owed, which would be unnecessary if tax funds were segregated from other receipts).\nFurthermore, the Tax Code must be considered as a whole in determining the legislative intent behind the phrase \u201cas trustee\u201d as it appears in section 105-164.7. See Hardy, 294 N.C. at 95-96, 240 S.E.2d at 371-72 (\u201cWords and phrases of a statute may not be interpreted out of context, but individual expressions \u2018must be construed as a part of the composite whole and must be accorded only that meaning which other modifying provisions and the clear intent and purpose of the act will permit.\u2019 \u201d (quoting Watson Industries v. Shaw, Comr. of Revenue, 235 N.C. 203, 210, 69 S.E.2d 505, 511 (1952))). Section 105-238 of the Tax Code expressly provides that \u201c[e]very tax imposed by [Subchapter I, providing for the levy of taxes], and all increases, interest and penalties thereon, shall become, from the time it is due and payable, a debt from the person, firm, or corporation liable to pay the same to the State of North Carolina.\u201d N.C.G.S. \u00a7 105-238 (1997) (emphasis added).\nA debt is not a trust. ... At times, whether a debt or a trust has arisen may not be clear. In general, it is understood that when the \u201ctrustee\u201d of the funds is entitled to use them as his or her own and commingle them with his or her own money, a debtor-creditor relationship exists, not a trust.\n76 Am. Jur. 2d Trusts \u00a7 16 (1992). The Tax Code explicitly provides that it creates a debtor-creditor relationship between retailers and the State, and this explicit language, combined with the Tax Code\u2019s implicit acceptance of the fact that retailers commingle tax receipts with other funds, must override any implication that the language \u201cas trustee\u201d creates a trust relationship.\nGenerally, embezzlement charges do not arise from a debtor-creditor relationship. Gray v. Bennett, 250 N.C. 707, 712, 110 S.E.2d 324, 328 (1959) (\u201c[W]hen dealings between two persons create a relation of debtor and creditor, a failure of one of the parties to pay over money does not constitute the crime of embezzlement.\u201d).\nIn light of the foregoing, I believe that our legislature did not intend that tax receipts be held \u201cin trust\u201d by the retailer, despite the language in the Tax Code that retailers hold tax receipts \u201cas trustees.\u201d Accordingly, the charges against Defendant pursuant to the embezzlement statutes should have been dismissed by the trial court due to the State\u2019s failure to present substantial evidence that a trust relationship existed between Defendant and the State, and between Defendant and Gaston County. I would therefore reverse Defendant\u2019s conviction pursuant to sections 14-91 and 14-92. In so stating, I note that within the Tax Code, our legislature has provided severe monetary penalties, as well as the possibility of imprisonment, for any attempt to evade or defeat a tax, and for the wilful failure to file a return, supply information, or pay a tax. N.C.G.S. \u00a7 105-236 (7-9) (1997). Our legislature has also provided less severe penalties for less egregious Tax Code violations. N.C.G.S. \u00a7 105-236. The State, however, chose not to proceed against Defendant pursuant to the Tax Code\u2019s internal penalties.\n. I note that our courts have held that a tax \u201cis not a debt in the ordinary sense of the word,\u201d Commissioners v. Hall, 177 N.C. 490, 491, 99 S.E. 372, 372 (1919); accord Comrs. v. Blue, 190 N.C. 638, 641, 130 S.E. 743, 745 (1925) and New Hanover County v. Whiteman, 190 N.C. 332, 334, 129 S.E. 808, 809 (1925), and that taxes \u201cdo not constitute a debt within the meaning of the Constitution,\u201d State v. Locklear, 21 N.C. App. 48, 50, 203 S.E.2d 63, 65 (1974). These determinations, however, are not dispositive of this case. In Hall, our Supreme Court noted that a tax was not a debt \u201crest[ing] upon contract or upon the consent of taxpayers\u201d in determining that taxes me not liable to set-off by the taxpayer against monies due the taxpayer from the State. Hall, 177 N.C. at 491, 99 S.E. at 372. In Locklear, this Court determined that the legislature has the authority to impose imprisonment for the wilful failure to pay taxes without violating the constitutional provision prohibiting imprisonment for debts \u201carising out of or founded upon contract,\u201d because taxes are not debts \u201carising out of or founded upon contract.\u201d Locklear, 21 N.C. App. at 50, 203 S.E.2d at 64-65. These cases, however, did not consider whether receipt of tax funds creates a trust relationship between a retailer and the State.", "type": "dissent", "author": "Judge Greene" } ], "attorneys": [ "Attorney General Michael F. Easley, by Associate Attorney General Anne M. Middleton, for the State.", "Tharrington Smith, L.L.P., by Roger W. Smith, E. Hardy Lewis, and F. Hill Allen, for defendant appellant." ], "corrections": "", "head_matter": "STATE OF NORTH CAROLINA v. FRANCIS M. KENNEDY\nNo. COA97-853\n(Filed 4 August 1998)\n1. Taxation\u2014 sales taxes \u2014 embezzlement\u2014retailer as trustee\nThe trial court in a criminal prosecution for embezzlement of sales and use taxes correctly charged the jury that a purchaser pays sales tax to a retailer as \u201ctrustee\u201d for the State and county. While the collection of sales taxes by a retailer lacks some of the trappings of a traditional trust and while sales tax receipts are often commingled with other funds, the plain language of the relevant statutes provides that sales taxes are held by the retailer as \u201ctrustee for and on account of the State or county.\u201d N.C.G.S. \u00a7 105-164.7, N.C.G.S. \u00a7 105-471.\n2. Taxation\u2014 sales taxes \u2014 embezzlement\u2014remedy\nThe criminal and civil penalties of the Tax Code do not provide an exclusive remedy for embezzlement of sales taxes collected by the retailer.\n3. Evidence\u2014 embezzlement of sales taxes \u2014 tax controversy in another state\nThe trial court did not err in a criminal prosecution for embezzlement of sales taxes collected by a Massachusetts business by admitting extensive testimony about a tax controversy between the company and the Commonwealth of Massachusetts. Defendant was assessed a large sum by Massachusetts about the time he began to receive sales tax funds from a North Carolina lease, establishing a motive for his retention of the funds from the North Carolina transaction, and defendant himself testified that he used the North Carolina sales taxes to keep the company afloat as long as possible, paying other debts with the funds. The trial court limited the jury\u2019s consideration of the evidence to the purpose of establishing motive. N.C.G.S. \u00a7 8C-1, Rule 404(b).\nJudge Gkeene dissenting.\nAppeal by defendant from judgment entered 24 October 1996 by Judge Narley L. Cashwell in Wake County Superior Court. Heard in the Court of Appeals 1 April 1998.\nAttorney General Michael F. Easley, by Associate Attorney General Anne M. Middleton, for the State.\nTharrington Smith, L.L.P., by Roger W. Smith, E. Hardy Lewis, and F. Hill Allen, for defendant appellant." }, "file_name": "0399-01", "first_page_order": 431, "last_page_order": 440 }