Court Opinion

ID: 8520020
Source: CourtListenerOpinion
Date Created: 2022-11-23 10:21:49.303482+00
Date Added: 2024-06-11T16:51:28.764576
License: Public Domain

Carr, J.,
(Dumbauld, P. J., dissenting, August 23, 1945). — These are motions for a new trial and in arrest of judgment. Theodore Baroni and Ruth J. Frost, defendants, were tried and convicted upon an indictment charging them with conspiracy to withhold, convert, and apply to their own *498use certain moneys alleged to have belonged to William H. Smart, the prosecutor. The motions raise questions of the sufficiency of the evidence to support the charge as a matter of law.
On the part of the Commonwealth the evidence was, in substance, as follows: On May 29, 1932, Smart, being the owner of eight contiguous lots of land upon each of seven of which stood a small single-family frame tenement house and upon the eighth a larger two-family frame tenement house, the whole encumbered by a first mortgage in the principal amount of $2,000 and accrued interest, and by various judgments and tax liens aggregating $4,192, exclusive of interest and costs, entered into a written agreement with defendant, Baroni, a real estate dealer, by the terms of which Baroni was to buy the mortgage, cause it to be foreclosed so as to discharge the inferior liens, take title from the sheriff, and thereafter collect the rents, make necessary repairs, pay the taxes, sell the properties on the best terms and conditions possible, and divide the profits, if any, with Smart in equal shares. Previously the mortgagee had made an offer to Smart ex gratia to accept $1,000 and accrued interest in full satisfáction of the mortgage, of which offer Baroni had been advised; and after the execution of the agreement of May 29, 1932, Baroni arranged with one Rotharmel for the latter to advance the money to buy the mortgage, hold it as security and cause it to be foreclosed. Accordingly, on June 10, 1932, Rotharmel advanced the required $1,100, which was paid over to the mortgagee, who then assigned the mortgage and bond to Baroni, and he in turn assigned to Rotharmel. Thereupon, Rotharmel had judgment entered upon the bond for $2,000 and interest, had execution issued, bid in the property at the sheriff’s sale for costs amounting to $86.60, received a deed from the sheriff, subject to tax liens, and on August 10, 1932, conveyed to Baroni, who thereupon reimbursed Rotharmel in *499full for the .costs and expenses of the sale and repaid his loan, the total of these payments to Rotharmel amounting to $1,585.87. Having thus acquired title free of the inferior liens, Baroni effected á settlement of the delinquent taxes, completed a previously negotiated sale of the larger house and lot for $1,300, borrowed $1,500 on the security of a new first mortgage made by him upon the remaining seven lots, and on January 3, 1933, conveyed them all, subject to the $1,500 mortgage, to Ruth J. Frost, the other defendant, for a consideration of one dollar as expressed in his deed to her recorded on January 5,1933. Subsequently, by her deeds dated respectively December 1, 1939, April 4, 1940, and February 3, 1942, Mrs. Frost conveyed three of the lots for a total consideratioh of $4,300.
The Commonwealth contended at trial that the conveyance by Baroni to Mrs. Frost was merely colorable, and that large profits were realized by her and Baroni from the proceeds of the lots disposed of and from the rents collected over a period of more than 10 years. It was shown that at the time of the conveyance to her she was an employe in Baroni’s office, and Smart testified that she had told him in the fall of 1942 that she was familiar with the terms of his agreement with Baroni. There was testimony that the property consisting of the eight lots and the improvements thereon had in 1933 a value of between $10,000 and $12,000.
For the defense evidence was adduced to the effect that by the end of 1932 Baroni had paid out $5,271.77, including sums expended for repairs to the houses, and had received from all sources only $3,100; that he had then sold the seven lots, not to the defendant, Frost, but to her husband, Walter Frost, for $3,100, the price including the assumption by the purchaser of the $1,500 mortgage, leaving Baroni from the sale $1,600 in cash, the deed having been made to Mrs. Frost at the direction of her husband, who has since died; that *500before making the sale Baroni had informed Smart of the money he had tied up in the property, of his inability during the depression to find purchasers for the remaining houses, and of his decision to try to get his money back by disposing of the entire property as best he could, unless Smart would assist in financing the proposition, whereupon Smart had said that he was not in a position to do so, and had agreed that Baroni should sell the property so as to recover the money he had laid out; that following the sale Mrs. Frost had expended several thousand dollars on extensive improvements; and that she still has a considerable investment in the property.
On substantially the same evidence defendants were previously tried and convicted before our president judge on a companion indictment charging them with fraudulent conversion, but a majority of the court set the verdict aside and ordered a new trial, holding that to establish a fraudulent conversion it is essential that the property alleged to have been converted should have been owned by the prosecutor and not merely owed to him by reason of a contractual obligation, whereas the money alleged to have been converted by these defendants was not owned by Smart, the property from which it was received having been transferred to Baroni by operation of law and the former’s title completely divested so far as the two of them were concerned, after which transfer Smart’s right was to have not the proceeds of the lots resold or the rents collected or any specific or segregated money, but only a division of profits, if profits were realized: See Com. v. Baroni and Frost, 7 Fayette L. J. 176.
If, then, as we have already held, Smart retained no such interest in the property or its proceeds as would support a charge of fraudulent conversion by defendants, it is obvious that they cannot bo held to have conspired to commit that offense. There can be no conviction of conspiracy to commit a particular crime *501when the act to accomplish which the combination was formed lacks an essential element of the crime: Cf. United States v. Crawford et al., 52 F. Supp. 843.
It is argued on behalf of the Commonwealth that the true intent'and meaning of the agreement of May 29, 1932, was to make Baroni a trustee for Smart, thus reserving to the latter the beneficial ownership of the property. It must be seen, however, that even if the agreement were intended to create a trust in Smart’s favor upon Baroni’s obtaining title, considerations of public policy would absolutely forbid our regarding the transfer of the property as subject to such reservation. The agreement clearly reveals a collusive scheme to divert the embarrassed debtor’s property from the payment of his debts through a transfer without a fair consideration, in contravention of the Uniform Fraudulent Conveyance Act. Such a transaction is not saved merely because the form of a judicial remedy is used to supply a protective cover for the fraudulent design: Shapiro v. Wilgus et al., Receivers, 287 U. S. 348, 77 L. Ed. 355; Bunn, Raiguel & Co. v. Ahl, 29 Pa. 387; Gill, for use of Rankin, v. Henry, 95 Pa. 388 ; Kennedy, Assignee, v. Borie et al., 166 Pa. 360; Lefkowitz v. Finkelstein Trading Corp. et al., 14 F. Supp. 898; Ever-Ready Label Corp. v. Stuyvesant Photo Engraving Corp. et al., 36 N. Y. S. 2d 468; 27 C. J. 458, 460, §§91 and 92. It is true that the mortgage originally represented an honest obligation, but the sole object of its purchase was to enable Baroni, with Smart’s connivance, to manipulate matters so as to foreclose the rights of other creditors. That object is not only openly avowed in the agreement itself, but is apparent in the proceedings that followed. Promptly upon obtaining control of the mortgage, Baroni caused judgment against Smart to be entered by confession on the accompanying bond for twice the amount paid for the assignment and accordingly for twice the amount for which he was entitled by the terms of *502the agreement to be reimbursed. The property was then exposed to sale, not in parcels but as a whole, though a sale of one of the lots had already been negotiated and the down money was in Baroni’s hands. The result of these maneuvers was that for a comparatively small advancement by Baroni, all of which was immediately recouped by closing the sale of the one lot and borrowing the value of one more upon the security of the seven that remained, the agreed transfer was colorably accomplished, and Smart’s creditors thus forcibly shaken off. In these circumstances the fact that the transfer was accomplished through execution process cannot alter its fraudulent character, and therefore no secret trust for Smart’s benefit could be lawfully created by such means. As between him and Baroni the execution sale must be given the effect that they intended it to appear to his creditors to have, that is, a complete divestiture of all his right, title, and interest in the property. It ought, it seems to us, to go without saying that courts of justice cannot recognize the validity of a fraudulent debtor’s claim to the fruits of his fraud. The fundamental principle involved was stated with forceful clarity by Chief Justice Gibson in a case that went up from this county more than a hundred years ago:
“. . . No dictate of duty calls on a judge to extricate a rogue from his own toils. On any other principle a knave might gain, but could not lose, by a dishonest expedient; and we should but administer provocatives to unfair dealing, did we repair the cross accidents of an unsuccessful trick. It is, therefore, in accordance with a wise and liberal policy which requires the consequences of a fraudulent experiment to be made as disastrous as possible, that a fraudulent bargainee is assisted — assisted for no merit of his own, but for the demerit of his confederate”: Stewart v. Kearney, 6 Watts. 453. See also Bunn, Raiguel & Co. v. Ahl, supra; Gill, for use of Rankin, v. Henry, supra; Ken*503nedy, Assignee, v. Borie, supra; Dent. v. Ferguson, 132 U. S. 50, 33 L. Ed. 242.
August 23, 1945.
We conclude that defendants’ demurrer at trial should have been sustained. This conclusion renders unnecessary a consideration of other reasons assigned and urged for the granting of a new trial.

Dissenting opinion