FT - Stuart v. Schleicher (7/11/2002)

[Riser Adkisson LLP]

In re Petition of John M. Stuart v. Roger L. Schleicher
646 N.W.2d 520 (Minn. 07/11/2002)

C7-01-1824

SUPREME COURT OF MINNESOTA

646 N.W.2d 520

July 11, 2002, Filed

PRIOR HISTORY: [*1] Court of Appeals Office of Appellate Courts.

DISPOSITION: Court of appeals decision reversed and writ of mandamus issued. Case remanded to
district court for further inquiry.

JUDGES: Blatz, C.J.

OPINIONBY: Blatz

OPINION:

Heard, considered, and decided by the court en banc.

BLATZ, Chief Justice.

Respondent Roger Schleicher was indicted for first-degree murder and initially appeared in court
on this matter without counsel. A public defender was appointed to act as advisory or standby
counsel, and later as counsel for Schleicher. The public defender brought a motion for discharge
from representation based on the public defender's belief that Schleicher was not financially
eligible given his ownership of an unencumbered home and receipt of a monthly pension. The
district court denied [*2] the motion to discharge the public defender on the basis that real
estate could not be considered a liquid asset available to pay an attorney. The State Public
Defender (SPD) brought a petition for writ of mandamus in the court of appeals, seeking an order
requiring discharge of the public defender. The court of appeals denied the petition. We reverse
and by writ of mandamus order the district court to consider Schleicher's assets including his
real property in determining his eligibility for public defense services.

Schleicher was indicted for first-degree murder in Steele County in connection with a shooting
death that occurred at his residence on December 29, 2000. Schleicher initially appeared in court
without counsel, and refused to fill out the financial eligibility application for public
defender services. The court appointed a public defender to act as advisory or standby counsel,
and in this capacity appointed counsel requested a Rule 20 evaluation of Schleicher's competency.
See Minn. R. Crim. P. 20.01.

The district court conducted a Rule 20 competency hearing. During that hearing appointed counsel
brought to the court's attention financial information Schleicher had [*3] disclosed during a
psychological evaluation, in which Schleicher estimated his assets at $ 350,000, including a
home, a 1997 Chevrolet Tahoe, and a monthly disability income of $ 2,000. Schleicher was required
to pay $ 630 monthly in child support for three children, then aged 20, 17 and 15. Based on the
information provided to the district court, appointed counsel asked that he be relieved of his
duty as advisory counsel. The court denied the request, stating that Schleicher was not competent
to waive counsel and that he needed representation. The court then modified the appointment from
advisory counsel for Schleicher to an appointment for full representation. After this hearing,
Schleicher was found to be mentally ill and incompetent and was committed to the Minnesota
Security Hospital.

Based on a new psychological evaluation completed several months later, the court declared
Schleicher competent to proceed in the criminal case. Appointed counsel brought a second motion
to discharge the public defender's office from representing Schleicher, arguing that Schleicher's
refusal to execute a financial statement in an application constituted waiver of his right to the
appointment of [*4] a public defender. Appointed counsel further argued that Schleicher was
financially able to obtain counsel. In support, appointed counsel submitted real estate records
that showed that Schleicher was the sole owner of unencumbered real property with an assessed
market value of approximately $ 104,000. Evidence was also presented indicating that on June 1,
2001, the day after he was found competent to stand trial, Schleicher filed a quit claim deed
transferring ownership of his home to his son for consideration of "$ 500 or less."

Appointed counsel also informed the court that one month prior to the murder indictment,
Schleicher applied for and was denied public defender representation on an unrelated criminal
charge in another county. In that application Schleicher disclosed a gross annual income of $
25,000, with monthly expenses including child support of $ 1,425. Schleicher also reported owning
a house valued at $ 100,000, a truck valued at $ 20,000, a boat and snowmobile worth $ 7,000, and
$ 7,000 in cash on hand.

At the hearing on the motion to discharge the public defender in this case, Schleicher finally
filled out an application for public defender services, disclosing a [*5] net annual income of $
12,000 from railroad retirement, $ 400 in a savings account, and a car valued at $ 22,000 that
was currently impounded. Schleicher further disclosed that he owned no boats or snowmobiles, no
real property of any sort, and no other property of value. Upon examination, Schleicher admitted
that he gave his home away without consideration to his son, and that it had an assessed value
for tax purposes of $ 104,000. Schleicher explained that he gave his son the house because he did
not want the state to take it as compensation for the cost of his care at the state facility to
which he was committed.

Based on this evidence, the district court concluded that Schleicher qualified for public
defender services. Appointed counsel objected to his continued appointment on the basis that the
transfer of the real estate was fraudulent, and that Schleicher could obtain counsel by
liquidating his home. The district court noted that while the transfer of the homestead "is
perhaps voidable," the defendant did not appear to have the funds "immediately available" to hire
counsel. The court stated that eligibility criteria required consideration of "liquid assets,
which would be [*6] non-real estate, certainly non-homestead." In so doing, the court stated: "I
don't believe the assets * * * based on the * * * at least questionable transfer of the
defendant's homestead, is a liquid asset that [Schleicher] can have sufficient access to * * * go
out and hire counsel with." The court also stated that if the property had stayed as Schleicher's
homestead, "I don't think normally I would have looked at that as a liquid asset."

The SPD then filed a petition for a writ of mandamus in the court of appeals, seeking the
discharge of the public defender from representation of Schleicher. The court of appeals denied
the petition holding that the SPD had not shown that Schleicher's assets were "liquid assets" as
a matter of law, or that Schleicher was "clearly able" to pay the costs of a defense in a first-
degree murder prosecution. The SPD now appeals the denial of its petition for a writ of mandamus.

We have not had an opportunity to articulate a standard of review for the district court's
determination of financial eligibility for public defender services. Many courts hold that the
decision to appoint counsel is within the discretion of the district court. See, e.g., [*7]
Cooper v. State, 639 So. 2d 1320, 1325 (Miss. 1994) (holding whether defendant may proceed in
forma pauperis is committed to sound discretion of trial court); State v. Rochefort, 129 Ore.
App. 296, 878 P.2d 1111, 1112-13 (Or. App. 1994) (applying abuse-of-discretion standard); State
v. Wolverton, 193 Wis. 2d 234, 533 N.W.2d 167, 175 (Wis. 1995) (holding erroneous exercise of
discretion for trial court to rule that court is bound by indigency criteria followed by public
defender). But see State v. Vincent, 883 P.2d 278, 281 (Utah 1994) (noting "the underlying
empirical facts regarding [a] claim of indigency are reviewable for clear error; the conclusion
as to whether those facts qualify the defendant as indigent is reviewable for correctness"). We
agree that review of the district court's appointment of the public defender should be for abuse
of discretion.

This case also arises on a petition for a writ of mandamus. To obtain a writ of mandamus, a
petitioner must establish that the court had a clear and present official duty to perform a
certain act. State v. Pero, 590 N.W.2d 319, 323 (Minn. 1999). [*8] Where, as in this case, the
act the court is charged with is a discretionary one, the petitioner must establish that failure
to perform it " 'was so arbitrary and capricious as to constitute a clear abuse of discretion.' "
McIntosh v. Davis, 441 N.W.2d 115, 118 (Minn. 1989) (quoting Baker v. Connolly Cartage Corp., 239
Minn. 72, 74, 57 N.W.2d 657, 658 (1953)). A writ of mandamus may be issued to require a court to
exercise its discretion, but may not be issued to control how the court exercises its judicial
discretion. State v. Davis, 592 N.W.2d 457, 459 (Minn. 1999). The SPD identified the duty the
district court failed to perform in this case as the inquiry into the liquidity of real estate
assets to determine eligibility for public defender services.

Initially, we note that the district court properly made every effort to safeguard Schleicher's
right to counsel while his competency was in question. In particular, the court recognized that
Schleicher was not capable of waiving his right to counsel due to his mental illness. See Minn.
R. Crim. P. 20.01, subd. 1 ("A defendant shall not be permitted to waive counsel who lacks [*9]
sufficient ability to knowingly, voluntarily, and intelligently waive the constitutional right to
counsel * * *."); State ex rel. Riendeau v. Tahash, 276 Minn. 26, 29, 148 N.W.2d 557, 559-60
(1967) (holding district court erred in not appointing counsel for pretrial hearing where
competency was at issue). The court's action in this difficult procedural posture assured
adequate representation during the competency proceeding and during the time that he was
adjudicated incompetent to assist in his own defense. Once Schleicher was restored to competency,
however, the court was faced with the question of his eligibility for public defender services.

We begin our analysis with the Sixth Amendment, which guarantees that an accused in a criminal
prosecution has the right to the assistance of counsel for his defense. Gideon v. Wainwright, 372
U.S. 335, 339-45, 9 L. Ed. 2d 799, 83 S. Ct. 792, 23 Ohio Op. 2d 258 (1963) (holding Sixth
Amendment applicable to state criminal proceedings); Powell v. Alabama, 287 U.S. 45, 69, 77 L.
Ed. 158, 53 S. Ct. 55 (1932) (holding court's refusal to hear a defendant through counsel
constitutes due process violation). In accordance [*10] with this constitutional principle,
courts have long required appointment of counsel for criminal defendants who are financially
unable to obtain counsel for their defense. Gideon, 372 U.S. at 344-45. "Any person haled into
court, who is too poor to hire a lawyer, cannot be assured of a fair trial unless counsel is
provided for him." Id. at 344.

It is out of this concern for the right to counsel that we must jealously guard the resources of
the SPD, and not provide counsel to those who are able to afford an attorney. The right to
counsel necessarily encompasses the right to effective assistance of counsel, which requires time
and preparation. When an ineligible defendant is provided with services by the public defender,
those finite resources are improperly diverted from the representation of other clients of the
public defender. Almost ten years ago we recognized that state funding for the Board of Public
Defense has not kept pace with the increased workloads and responsibilities of our public
defender system. Dziubak v. Mott, 503 N.W.2d 771, 775 (Minn. 1993) ("Workload is too high in
every [public defender] district given [*11] the current level of staff.") (quoting The
Spangenberg Group, Weighted Caseload Study for the State of Minnesota Board of Public Defense 20
(1991)). The SPD asserts that not only has this situation not improved, it has perhaps gotten
worse. For these reasons, qualification of applicants is essential so that the resources of the
public defender system are not unnecessarily depleted by people who, in their own right, can
obtain legal counsel with their own resources. Therefore, courts must not appoint counsel for a
defendant who is financially capable of retaining counsel on his own but refuses to hire an
attorney. Hanson v. Passer, 13 F.3d 275, 280 (8th Cir. 1994); Spevak v. United States, 158 F.2d
594, 596 (4th Cir. 1946); State v. Zimmer, 198 Kan. 479, 426 P.2d 267, 272 (Kan. 1967).

Under the Minnesota Rules of Criminal Procedure, a defendant is "financially unable to obtain
counsel" if:

(1) The defendant, or any dependent of the defendant who resides in the same household as the
defendant, receives means-tested governmental benefits; or

(2) The defendant, through any combination of liquid assets and current income, [*12] would be
unable to pay the reasonable costs charged by private counsel in that judicial district for a
defense of a case of the nature at issue; or

(3) The defendant can demonstrate that due to insufficient funds or other assets: two members of
a defense attorney referral list maintained by the court have refused to defend the case or, if
no referral list is maintained, that two private attorneys in that judicial district have refused
to defend the case.

Minn. R. Crim. P. 5.02, subd. 3 (emphasis added). Because Schleicher does not receive a means-
tested government benefit, and because the record does not demonstrate that he has attempted to
secure private counsel and been refused, only category 2 is at issue here. n1

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n1 The legislature has provided that a criminal defendant who is "financially unable to obtain
counsel" is entitled to representation by the public defender. Minn. Stat. § 611.14 (2000).
Minnesota Statutes § 611.17 (2000) requires that each judicial district screen applicants for
public defender services, and applicants are required to disclose, among other things, the value
of any real property owned.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*13]

The SPD argues that the equity value of real property fits the definition of "liquid asset"
because it is readily convertible to cash. The district court concluded that the eligibility
criteria required consideration of "liquid assets, which would be non-real estate, certainly non-
homestead." Thus, the district court indicated its unwillingness to consider real estate as a
liquid asset under any circumstance. n2

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n2 We recognize that in Minnesota the homestead enjoys an exemption from seizure or sale upon
legal process on account of any debt, other than a lien for work or materials performed on the
homestead. See Minn. Stat. § 510.01 (2000). Protection from creditors is qualitatively distinct
from eligibility for public defender services, however. While the legislature can decide as a
policy matter to exempt homestead property from debtors, a district court is asked to determine
whether an individual property owner is so devoid of resources as to be constitutionally entitled
to appointment of counsel.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*14]

While the term "liquid asset" is susceptible to common understanding, we have previously
construed the term with specific regard to the context in which it arose. In McNiff v. Olmsted
County Welfare Dept., 287 Minn. 40, 176 N.W.2d 888 (1970), we held that the term could not be
interpreted to exclude a beneficiary's interest in a testamentary trust in light of the purpose
of the medical assistance program at issue, which was to provide medical care for those who could
not pay for such care. Id. at 44-45, 176 N.W.2d at 892. Similarly, liquid assets for purposes of
Minn. R. Crim. P. 5.02, subd. 3, must be construed in light of the context of public defender
eligibility. If an asset can be readily converted to cash or used to secure an indebtedness, the
asset should be considered liquid for purposes of Rule 5.02, given that public defender services
are available only to those who cannot hire an attorney on their own. See Bolds v. Bennett, 159
N.W.2d 425, 428 (Iowa 1968) (providing that court determining public defender eligibility should
consider readily available assets, such as property "of such nature and net value that it would
be [*15] immediately accepted in lieu of or as a fee by a legally qualified attorney.")

We believe that the district court's unwillingness to consider whether the particular real estate
owned is a liquid asset constitutes a failure to exercise the court's discretion. Under Minn. R.
Crim. P. 5.02, the court has a duty to determine whether the assets of the applicant for public
defender services, including real estate holdings, are liquid. The court's refusal to consider
real estate assets thus constitutes a failure to perform an act that the court had a duty to
perform. Therefore, the court of appeals erred in refusing to issue a writ of mandamus requiring
consideration of Schleicher's real estate assets in this case.

We also note that the court of appeals appears to have placed the burden on the SPD to establish
ineligibility for public defender services. Under federal law and in other states, the burden is
on the defendant to show that he or she is financially unable to afford representation. See, e.g.
United States v. Lefkowitz, 125 F.3d 608, 621 (8th Cir. 1997); State v. Smith, 677 A.2d 1058,
1060 (Me. 1996); State v. DuPaul, 527 N.W.2d 238, 241-42 (N.D. 1995). [*16] This allocation of
the burden of proof properly places the burden on the party that has in its possession the
relevant information, and prevents further dilution of the resources of the public defender's
office that would result from requiring that office to investigate an applicant's assets.
Accordingly, we join those states and the federal courts that allocate the burden of proof to the
applicant for public defender services.

While we hold that the district court failed to exercise its discretion in determining
eligibility for public defender services, we do not dictate to the district court how to exercise
its discretion but remand for further consideration by the district court. See Davis, 592 N.W.2d
at 459. In that regard, a threshold determination in this case is whether the homestead remains
available to be considered part of Schleicher's assets. Further, the court must evaluate
Schleicher's post-application transfer of the home to his son for no consideration. The Second
Circuit has held that "a defendant's claim of indigency certainly should be rejected when he puts
his own assets into his relatives' names and those assets remain at his disposal." United States
v. Rubinson, 543 F.2d 951, 964 (2d Cir. 1976). [*17] In Rubinson the Second Circuit found
overwhelming evidence to support the district court's finding that Rubinson was financially able
to retain counsel where he put assets in the name of other members of his family to conceal them
from "creditors, the government and the court." Id.; see also State v. Harris, 5 Conn. Cir. Ct.
313, 250 A.2d 719, 721 (Conn. Cir. Ct. App. Div. 1968) ("Of course, a person claiming the
benefits of the [public defender] statute cannot conceal his assets and demand the services of a
public defender at state expense."); Williams v. Superior Court, 226 Cal. App. 2d 666, 672, 38
Cal. Rptr. 291 (Cal. Dist. Ct. App. 1964) ("Of course, he cannot hide his assets and demand the
help of a public defender at public expense.").

Schleicher admitted putting his home in his son's name so that the state could not seize the
asset as compensation for his care at a state hospital. In general, a court determining
eligibility for public defender services must consider whether transfer of an asset is voidable
as a fraudulent conveyance. See Minn. Stat. § 513.44 (2000) (defining fraudulent transfer with
[*18] respect to present and future creditors); Minn. Stat. § 513.47(a)(1) (2000) (providing for
avoidance of the transfer as a remedy of a creditor). If a homestead is to be considered an asset
of the defendant for purposes of determining public defender eligibility, the court must be
attuned to transfers of homestead property for little or no consideration in an attempt or with
the effect of establishing public defender eligibility. We note that the Kansas State Board of
Indigents' Defense Services has adopted a rule that specifies that the value of any property
transferred after the date of the commission of the alleged offense shall be included in the
defendant's liquid assets. Kan. Admin. Regs. 105-4-2(2). Likewise, we believe that eligibility
for public defender services in Minnesota should include consideration of the value of homestead
property transferred after the date of the offense.

If the district court determines in this case that the homestead is properly considered
Schleicher's asset, the court must also exercise its discretion to determine whether the property
is liquid or whether liquidation of the asset would pose too great a hardship. Ownership [*19] of
real property does not automatically disqualify a defendant for court-appointed counsel. See,
e.g. United States v. Cohen, 419 F.2d 1124, 1127 (8th Cir. 1969) (requiring "full and adequate
inquiry" into landowner's ability to afford counsel). Real property can often be converted into
liquid assets or serve as security for an obligation, but some property is highly mortgaged and
therefore the owner may not have sufficient available equity to compensate an attorney. Moreover,
in some situations a court may conclude that liquidating real property imposes too great a
hardship on the defendant's spouse and dependents. See, e.g., Kan. Admin. Regs. 105-4-2(1)
(considering as liquid asset only homesteads having a net value greater than $ 50,000). That,
however, will be a case-by-case determination for the district court in the first instance.

In sum, the district court must exercise its discretion to determine whether Schleicher has met
his burden of establishing that through any combination of liquid assets and current income he
would be unable to pay the reasonable costs charged by private counsel for defense of a case of
this nature. Minn. R. Crim. P. 5.02, subd. [*20] 3. That inquiry requires the court to consider
the value of the home despite the transfer for no consideration to Schleicher's son, and also
requires the court to consider whether the value of the home can be converted to a liquid asset
and whether converting the home into a liquid asset would result in a hardship on others. We
remand to the district court for this inquiry.

Reversed and writ of mandamus issued.