Hon. H. E. Wassell

Director Agent’s,

License and Investigation Board of Insurance Commissioners Austin,Texas

Dear Sir: OpinionNo. O-2135 Re: Whether facts set forth constitute violation of theft, theft by bailee, or embezzlement statutes.

This is to acknowledgeyour request for our opinion whether under a state of facts submittedby you, a criminal prosecutionmay be maintained as a violation of Article 1410, Penal Code, defining theft; or Artiole 1534, defining embesslementj or Article 1429, defining.conversionby bailee.

-Wetake the liberty to restate the fact,ssubmittedby you, substitutingfor the names ,used:

“A Texas life insurance company on June 19, 1926, had
as its president, one P, with S as secretary and A as one of its insurance agents. 1936. A’s nephew,N, died on May 23,

Soon.thereafterP laid a schemewith Awhereby A
was to make ap licationwith the above company for a policy in the sum of l,OOC.OOpayable to himself, A, and predate

B the application and the companywould re-date the policy and issue it. Thiswas done on June 1ii , 1936, and the policywas on that.

date issuedby P’and S, both signing same as president and~secretaryrespectively in the presence of .A,the agent and beneficiary. The applicationwas signed ‘N,applicant,by A, agent I and the applicationwas predated as of February~ 20, 14360

On June 18, 1936, the proof of death was executed by the beneficiary and claimant and on June 19th a check in the sum of $l,OoO.COwas issued to the beneficiary, A, and

ii aid the same“day. Immediately after B received the l,OOO.OO he gave the money to,S in the presence of P, all in keeping with the exact scheme.

“The $l,OOO.OOwas paid out of the mortuary fund. This schemewas laid in this manner so that the State Insu.rance Departmentwould find allythe papers in order in checking claims against that fund,which, unde.rthe law is for payment of bona fide claims only under the company’sbona fide policies.- .



### Hon.H. E. Wassell, page 2 

### (o-2135)

"The president and secretary, of course,were authorized to pay out of the mortuary fund legitimate claims, and this $l,OOO.OOwas paid out of that fund to the authorized agent of the company. The said agent then gave the money to the above official,with whom the agent did not have a fiduciaryrelationship as individual, and the said officials appropriated same to their own use."

The whole purpose and intent of the scheme outlinedby you was to fraudulently take $l,OOO.OO from the mortuary fund with the intent to appropriate it to the use and benefit of the taker, or those acting togetherwith him. The method of obtaining the money from the mortuary fundwas to issue a pre-dated policy on the life of a person then dead, and on proof of death, to unlawfully take the money from said fund.

We quote the several articles of the Penal Code you referred to:
NIArticle

1410. 'Theft'defined.

"'Theft' is the fraudulenttaking of corporeal personal property belonging to another from his possession, or from the possession of some person holding the same for him, without his consent,with intent to deprive the owner of the value of the same, and to appropriate it to the use or benefit of the person taking."
e,Qticle 

### 1534, Embezzlemegf;.

"If any officer, agent, clerk, employe,or attorney at law or in fact, of any incorporated company or institution,
or any clerk, agent, attorney at law or in fact, servant or employe of any private person, copartnershipor joint stock association, or any consignee or bailee of money or property, shall embezzle, fraudulentlymisapply or convert to his own use, without the consent of his principal or employer, any money or proper~tyof such principal or employerwhich may have come intohis possession or be under his care by virtue of such office, agency OT employment,he shall be punished in the samemanner as if he had committed a theft of such money or property."
"Article 1429. Conversionbv a bailee.
'IAny person having possession of personal property of another by virtue of a contract of hiring or borrowing, or other bailment,who shallwithout the consent of the owner, fraudulently convert such property to his own use with intent to deprive the owner of the value of the same, shall be guilty of theft, and shallbe punished as for theft of like property."Hon. H. E. Wassell, page 3 

### (o-2135)

In connectionwith Article 1410,~~supra, we,direct your attention to the language of Article 1413:

“The taking must be-wrongful, so that if the property
came into the possession of the person accused of theft by lawfulmeans, the subsequent,appropriationof it is not the~ft but if the taking, though’ originally lawful., was obthe owner of the value ther$of; and appropriate the tainebby any ~false pretext or with any intent to d;ep;;ve

- erty to the use andbenefit of the, person taking, and the
same is so appropriated,,theoff,ense of theft is com@ete.‘V
Thus, we note three distinct. and’ possible crimes, i.e., theft, embezzlement and theftbjr bailee. Article 1413, usually denominated theft by false pretext, is to be considered along with hrticle 1410, supra, and if the offense comeswithin either article, it is nevertheless theft, the indictmentbeing the same. Taylor v. .State,25 ‘Tex.Cr.R. ~96 7 S.?i.861; Riggs v. State, 125' Tex.Cr.R. 647, 70 S.W.(2d) lb4. Many cases and textwriters recognize the difficulty of making a proper practical application of the theoretica,l distincti.ons

between these related offenses. Texas Jurisprudence says: “As a matter.of fact) i.tis apparent that the embezzlement,theft, swindling an-lother stntutes denouncing related offenses,over?apeach other to a ccnsiderable extent.” (16 Tex.Jur. 329).

.Themoney in the mortuary. fund was the property of the insurance company. The wrongful, taking .inany off::iize may prop- ‘erlybe.chargedby any allegation in the indictment to have been from the company. See Modicav. State, 94 .Tex.Cr.A. .4C3 251 S.W. 1049; Osborne v. State, 93 Tex.Cr.R. 54 245 S.W. 938; Houghton v
. State, 116 Tex.Cr.R. 70, 32 s.w.t2d) 837; Sauls v. State, 131.Tex.C..R. 180, 

### 97 S.W.(2d) 195, and many others.

We first conclude that theft by bailee or conversion
as denouncedby Arti.cle 1429, supra, does not apply in this case. It has been said.that for an offense to comewithin the purview of this statute, the fraudulent intent arises subsequentto obtaining the property. See Price v. State, .49Tex.Cr.R. 131, 91 S.W. 571. Whil~ethe Price case. was overruled on this point in Uvarez v. State, 109 Tex.Cr.R. 

### 62, 2 SiW.(2d) 849, thclatter
case is authority that there must be a distinctbailment of hiring, borrowing or other bailment,.By “otherbailment” the court says is ‘meant: “thatpersonal property,whose title is to remain in the owner, is delivered to another for some purpose,with the understanding, express or implied,: that the acceptanceby such other is for the.carrying out of :suchpurpose.” In the instant case,,the fraudulent intent i-s evident from the inception of thescheme;.and prior ,tothe removal of the money from the mortuary funds.owe, are, unable,~to

p~erceive

~abailment, as thatHon. H. E. Wassell, page 

### 4 (O-2135)

has been definedby the courts. We quote the language of Judge Lattimore in the case of Brown v. State, 99 Tex.Cr.R. 441, 270 S.W. 179:
“The relation of bailee as involved in our statute on theft by bailee is constitutedwhere one obtains the property of anotherwith the intent to use it for his own benefit and then to return it (or its equivalent in value).I1 (Parenthetical

### insertionours.1

In determiningwhether the case is one of embezzlement
or theft,we encountergreater difficulty. Various distinctions have been drawn and the authorities are not uniform. We have read many cases, but do not find any case, either in Texas or other jurisdictions,covering an exact fact situationto the one now under oonsiderat ion.

We note the following excerpts from Texas Jurisprudence: “Whileembezzlement is akin to larceny or theft, the offenses are distinct, and a conviction for one cannotbe had under an indictment for the other. But the same act may constituteboth theft and embezzlement,or both theft under Article 1413 of the .PenalCode and conversionby bailee; and the fact that,.underthe evidence, the defendant might have been prosecuted and convicted of oneof them does not prevent his prosecution end conviction of the other,

. . , Ordinarily, to constitu.te, theft the fraudulent intent,which is an essential element of both theft and embezzlement,must ‘exist when the property is taken, while in embezzlement or conversionby a bailee, the intent may be formed after possession of the propertyhas been obtained,

. . .I! (See 41 Tex.Jur. 17, et seq., ix 10, 11; 

### 16 Tex.Jur. 32V;et seq., i 7,8,10. Brown v.-State, VV Tex.Cr.B. 441, 270 S.W. 179; Connor v. State, 135’ Tex. Cr.R,. 429, 111 S.W.(2d)723; Landis v. State, 

### 85 Tex.Cr.R. 381, 214 S.W. 827.)

In consideringthe proper charge in the casebefore us, we think the provisions of particle 4747, Revised Civil Statutes, to be most pertinent:

‘IAny dfrectar,member of a committee, an officer, or any clerk of a home company,who is chargedwith the duty of handling~

OS:investing its funds, shallnot deposit or invest such %nds, except in the corporatename of such company; shallnot borrow the funds of such company; shall not be interested in anyway ,inany loan, pledge, security or property of such company, except as stookholderj shall not take or receive 

### to his own use any fee,brokerage, commission, gift or other consideration for, or on account of, a-

Hon. R. E. Wassell, page 5 (o-2135)

loan made by or on behalf of such company."

From the above statute, it appears doubtfulwhether such a fiduciary relationship is existent as is essential under the constructionplaced by our courts to constitute embezzlement. In this connection,we point out that the money was really taken by A,with the assent and connivance of P and S at their instigation, suggestion andwith such actual assistance as to make them guilty as principals under the statutes (Arts. 

### 65 to 

### 69 inclusive,Penal Code), and the constructionplaced thereonby the Court of Criminal Appeals. 

### 230 S.W. 410; Asher v. See Smith v. State 

### 89 Tex.Cr.R. 319 State, 128 Tex.Cr.R. 

### 388,81 S.W.(2d) 

### 681: Smith v. State Vol. 1, Vernonis

102 Tex.Cr.R. 

### 139, 277 S.W. 

### 666;notes on p* 

### 86, AnnotatedPenal Code.

In our attempted application of the facts to the law,
we have reached the conclusion that a successfulprosecutionmay be carried on for theft under the provisions of Articles 1410 and 1413 of the Penal Code.

In the recent case of Lovine v. State, 

### 136Tex.Cr.R. 32, 122 S.W. (2d) 1069, the following quotation from 17 Ruling Case Law 

### 13 is given approval:

"If a personwith a preconceiveddesign to appropriate property to his own use, obtains possession of it by means of fraud or trickery, the taking under such circumstances amounts to larceny,because in such cases the fraud vitiates the transaction, and the owner is stilldeemed to retain a constructivepossession of the property, and the conversion of it is a sufficienttrespass, or, as is sometimes said, the fraud or trick practiced on the owner is equivalent to a trespass."

Aswe view it, a constructive theft may be shown under the authority of De Blanc v. 

### 1024;Contrerasv. State, State, 

### 118Tex.Cr.R. 628 

### 37 S.W.(2d) 

### 1.18 Tex.Cr.R. 

### 626, 39 S.W.(?'d) 

### 62; Sherman v. State, 124 Tex.Cr.R. 273 

### 62 S.W.(2d) 146; Conner v. State, 

### ;33Tex.Cr.R. 127 Tex.Cr.R. 552, 429, 111 S.W.(zd) 723; Davenport v. State, 

### 78 S.W.(2d) 605; and that the details of the schemewould be admissible to show the fraudulent intent at the time of the taking.
APPROVEDJUN 

### 19, ii940 Js/ Gerald C. Mann ATTORNEYGENERAL OF TEXAS APPROVED:OPINION COMMITTEE BY: BWB, CHAIRMAN BW:GOtwb Yours very truly ATTORNEYGENERAL OF TEXAS By /s/ Benjamin Woodall BenjaminWoodall, Assistant