Case ID: f_183/html/0907-01.html
Source: Caselaw Access Project
Author: {"author": "HOUGH, District Judge.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

UNITED STATES v. HEINZE.
    (Circuit Court. S. D. New York.
    September 10, 1909.)
    1. Banks and Banking (§ 257) — National Banks — Willful Misapplication of Funds — Indictment.
    An indictment against an officer of a national bank under Bey. St. § 5209 (U. S. Comp. St. 1901, p. 3497), for willful misapplication of funds of tbe bank, must allege facts showing a conversion of such funds; and an indictment which charges that defendant, as president, with intent to defraud the bank, and for tbe benefit of himself and others unnamed, caused the bank to discount single name commercial paper, and that the bank lost the amount paid on the discount, does not charge an offense.
    [Ed. Note. — For other cases, see Banks and Banking, Cent. Dig. § 973; Dec. Dig. § 257.*]
    2. Banks and Banking (§ 257*) — National Banks — Willful Misapplication of Funds — Indictment.
    An indictment, under Bev. St. § 5209 (U. S. Comp. St. 1901, p. 3497), which charges defendant, as president of a national bank, with willful misapplication of its funds, with intent to defraud the bank, and for the benefit of himself and others, by causing the bank to discount a note signed only by a person known to him to be insolvent, and that the bank lost the amount paid on such discount, sufficiently charges a fraudulent conversion, and is good.
    [Ed. Note. — For other cases, see Banks and Banking, Gent. Dig. § 973; Dec. Dig. § 257.*]
    Indictment against F. A. Heinze. On demurrer to indictment.
    Sustained as to certain counts, and overruled as to others.
    See, also, 177 Fed. 770.
    Henry A. Wise, U. S. Atty.
    Wm. J. Wallace, John E. Stanchfield, and John C. Tomlinson, for defendant.
    
      
      For other cases sec same tonic fc § ncjubki: in Deo. & Am. Digs. 1807 to date, & Kep'r Indexes
    
   HOUGH, District Judge.

With respect to indictments for misapplication, under Rev. St. § 5209 (U. S. Comp. St. 1901, p. 3497), I have expressed fully mv views in the Morse Case, 161 Fed. 429, on the first indictment against this defendant (161 Fed. 125). The present discussion lias not rendered it necessary (so far as I can see) to say much more.

This indictment seems to me to charge, in counts .1 — 15, this, and no more. viz.: That with intent to defraud the hank of which he ivas president, and for the benefit of himself and others unnamed, defendant caused' the bank to discount single name commercial paper, and the bank lost the amount paid on the discount. The sixteenth count varies from the others only in stating that the person responsible on the discounted note was insolvent, to the knowledge of defendant at the time of discount.

The crime of which defendant is guilty, if guilty at all, is “willful misapplication." The one characteristic or essential of this crime on which the Supreme Court has always insisted is “conversion.” No method of being guilty, -without “converting” the money, funds, or credits of the bank has been pointed out. This word “conversion” has supplied the legal measure, which the court has not been able to find in “willful misapplication.” If the facts stated! in an indictment do not set forth a case of conversion, the indictment is bad, and a general allegation of wrongful intent will not cure it. Taking the first count, for example; could the bank have maintained an action for conversion against the recipient of the discount proceeds under the facts stated? I think not, and am therefore of opinion that counts 1-15 are demurrable.

The sixteenth count is also asserted to be bad, under the Britton decision in 108 U. S. 193, 2 Sup. Ct. 525, 27 L. Ed. 703; but this was explained in the Fish Case, 24 Fed. 585, in the manner I have tried! to summarize on page 433 of 161 Fed. Does this count sufficient!}' charge that the discount was originally procured by fraudulent means? And does or can it amount to a conversion for a bank president, for his own benefit, to discount the note of a known insolvent? It appears to me that both questions shóuld be answered affirmatively, and the demurrer to the sixteenth count overruled.

It is much to be hoped that this decision will be reviewed. Anything more unsatisfactory than the ruling cases on “willful misapplication” I have rarely met.