Court Opinion

ID: 8776731
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:04:37.992969+00
Date Added: 2024-06-11T17:02:36.757586
License: Public Domain

SANBORN, Circuit Judge
(dissenting). I am unable to divest my mind of the conclusion that the trial court missed the crucial issue in this case and erroneously instructed the jury that they might convict the defendants without any proof or finding that they did not believe the representations which they made if the jury found that they had no reasonable cause to believe them. An intent to deceive by their representations, an absence of belief that their statements were true, was indispensable to a lawful conviction of the defendants of the crime with which they were charged. The facts that their representations were false, that they were calculated to deceive, and that the defendants had no reasonable cause to believe that they were true, might have charged them with liability for civil damages; but these facts constituted no criminal offense and established no guilt if the defendants honestly believed that the statements and representations which they made were true. “The significant fact,” said Mr. Justice Brewer, “is the intent and purpose. The question presented by this indictment to the jury was not, as counsel insist, whether the business scheme suggested in this bond was practicable or not. If the testimony had shown that this Provident company, and the defendant, had entered in good faith upon that business, believing that out of the moneys received they could by investment or otherwise make enough to justify the promised returns, no. conviction could be sustained, no matter how visionary might seem the scheme.” Durland v. United States, 161 U. S. 306, 313, 16 Sup. Ct. 508, 511, 40 L. Ed. 709. In other words, no matter how little reasonable cause to believe his representations are *741true a defendant had, he was not guilty of the crime of using the mails to defraud if he did honestly believe his statements were true.
The values of mines and mining stocks are generally unknown. Those values are concealed in the ground and at the times of most of the sales of the mines and the stocks are unknowable. Such stocks and mines are sold and bought upon hope and faith, and not upon facts or reason. It would probably be a conservative statement to say that three-fourths of those who sell and buy them have no reasonable cause to believe that they control the ores or the values which they represent them to possess, or are worth the prices which they respectively receive and pay for them. Yet these dealers are not generally criminals and do not intend to defraud each other although they represent and believe what they have no reasonable cause to believe and what the vast majority of citizens cannot believe on the evidence which is presented to them. Such men are simply more credulous and sanguine than the majority of mankind. In Rudd v. United States, 97 C. C. A. 462, 463, 173 Fed. 912, 913, the defendant used the mails to make false representations that were clearly contrary to familiar fundamental physical laws, representations that no one could have any reasonable cause to believe to be true. The trial court in effect told the jury that the defendant must be guilty because he could have no reasonable cause to believe that his machine was practicable, or that his representations were true. But this court reversed the judgment and said:
“The main, defense was that, though the machine may have been impracticable, the accused honestly believed in its efficiency, and that what he did was without intent to defraud. Of course if this was so there was no violation of the law which was designed to prevent the use of the post office in intentional efforts to despoil. Durland v. United States, 161 U. S. 306, 16 Sup. Ct. 508, 40 L. Ed. 709. A representation may be so obviously without foundation as to afford cogent evidence of the criminal intent in him who makes it; but, nevertheless, if in fact it proceeds from honest ignorance or delusion, it does not help to make a scheme to defraud within the statute. * * ⅜ Whether conduct which is made the subject of a criminal charge results from a credulous self-deception, or, on the other hand, evinces a design to defraud the public, is a question for the determination of the jury; and it is none the less so, though the truth of the matter may be clear to most intelligent minds. That so many projects, which to the discerning are manifest schemes for spoliation meet with success and find victims among honest well meaning people, shows how futile it is to attempt to define the bounds of human credulity.”
The defendants in this case testified that they believed the representations they made to be true, and the crucial question in this case was whether, on the one hand, they did so believe and honestly made these representations, or, on the other hand, knew or believed them to be false and made them to defraud. This, the controlling issue in the case, the court entirely withdrew from the consideration of the jury, and charged them that they might convict without determining this issue. It said: “If you believe and find from all of the evidence and circumstances developed before you that such statements (referring to those claimed to have been made by the defendants) were not true, were not known to the authors of them to be true, and they had no reasonable grounds to believe that such statements were true,” and they found the other facts as stated, they would be justified in finding that *742the defendants had formed a scheme to defraud which, if it was to be effected by the forbidden use of the United States mails, would be a violation of the statutes. The error was in instructing the jury that they might find the defendants guilty of the scheme charged without finding that they believed that their representations were false.
The exception appears to me to clearly point out the error. It was in effect that the facts which the court had told the jury constituted the offense were insufficient to do so. It reads:
“The defendant excepts to that part of the charge which is to the effect that if statements were not true, or not known to he true, or the defendants did not have reasonable grounds to believe them to be true, that the jury might, in connection with other facts, find that the defendants entered into a scheme to defraud.”
The error thus challenged was fundamental. It lay under the whole case and necessarily resulted in a conviction of the defendants without a finding of the indispensable fact that they did not honestly believe their representations to be true. In Pritchett v. Sullivan, 182 Fed. 480, 104 C. C. A.-, this court held the following exception sufficient:
“The defendants except to all that part of the instruction concerning the right of police officers to arrest without a warrant.”
The exception in this case is much more specific, and it seems to me to be sufficient under the rule that, where a basic error has been committed, an exception is ample which calls the attention of the court to the part of the charge which treats of the subject without quoting its exact words in full. Edgington v. United States, 164 U. S. 361, 364, 365, 17 Sup. Ct. 72, 41 L. Ed. 467; Felton v. Newport, 34 C. C. A. 470, 473, 92 Fed. 470, 473. The error to which attention has now been called was so radical that it seems to me clearly to have deprived the defendants of a fair trial of their case according to law and to entitle them to a new trial of this suit.
Each count of the indictment contained averments that it was a part of the scheme to defraud that Elisha S. Horn should conduct the advertising department for the mining and development company and “in return therefor should receive in money 50 per cent, of the moneys received from the sale of stock in said Central Mining & Development Company, and should also receive as a bonus and as additional remuneration 100,000 shares of stock in said company out of the 800,000 shares of promotion stock aforesaid. Of the balance of said 800,000 shares Frank H. Horn was to receive 500,000 shares as the so-called fiscal or financial agent of said company.” The court instructed the jury in this way:
“It will also be sufficient, gentlemen of the jury, to sustain the allegation of the indictment in its substantial effect, if, as a matter of fact, 500,000 shares of treasury stock were to go into the hands of E. S. Horn, and he did so receive it according to the understanding and plan between the parties.”
The exception to this portion of the charge was:
“They (the defendants) except to that part (of the charge) which directs the jury that it will be sufficient if the treasury stock only was to go to E. S. Horn and not necessary to be proven that E. S. Horn was to get half of the money derived from the sale of the stock.”
*743E. S. Horn was on trial for the offense of conspiring to carry out the alleged scheme and to receive 50 per cent, of the moneys obtained from the sale of the stock of the company and 100,000 shares of the promotion stock. No evidence had been presented to sustain the charge that he was to receive, or ever had received, any part of the money secured by the sale of the stock of the company, or that he had ever received 500,000 shares of its stock. The evidence was that he had received 100,000 shares of -the promotion stock for his service in advertising the stock of the company, and that the defendants Snider and Frank Horn had given him 150,000 shares of their stock on account of his service. The charge of the court upon this subject was therefore clearly erroneous because it instructed the jury that E. S. Horn might be found to have done a material act with which he had never been charged, to wit, to have received the 500,000 shares of stock, and because it informed them that they might find that he had committed the act with which he was charged; that is to say, the receiving of one-half of the money obtained from the sale of the stock of the company in the absence of any evidence whatever of that fact. There can be no question that an error was committed. Did the defendants invite this error by their second request ? That request was:
“The court charges the jury that the scheme laid in the indictment is substantially that through the sale of stock in the corporation, such stock being treasury stock, the defendants arranged among themselves to obtain money from others through false and fraudulent representations to be made under the guise of a fiscal agency in the defendant Elisha S. Horn, and to divide such money or some part of it among themselves; that such scheme must have been proven as laid in the indictment; that there is no evidence that such was the scheme, and the jury must acquit the defendants.”
But the only suggestion in this request that might be misleading was that the scheme was to be effected “under the guise of a fiscal agency in the defendant Elisha S. Horn,” and that suggestion in no way invited a charge that Elisha S. Horn, or any other defendant, could be convicted of the offense with which he was not charged, or of which there was no proof. On the other hand, this request contained an express invitation to instruct the jury “that such scheme must have been proven as laid in the indictment.” Moreover, the court below, as it seems to me, could not have been misled by this request because it refused to give it, or to give its equivalent, and because after it had given the erroneous charge that the averments against Elisha S. Horn might be sustained without proof that he received any of the moneys which he was charged by the indictment with receiving from the sale of the stock of the company its attention was specifically called to its error by the exception to it, and it stil'l refused to correct it. Was this charge an immaterial mistake of the name of Elisha S. Horn for that of Frank Horn which could not possibly have misled the jury? If it was a mistake of the court, it was one which so clearly and radically misled the judge that he could not be persuaded to correct it, but persisted in and reaffirmed it when the defendants, by their exception, sharply challenged his attention to the fact that the charge against Elisha S. Horn was the taking of one-half of the money secured by the sale of the stock, and that it was error to instruct that this charge *744could be established without proof that he had intended to take or had taken any of this money. The legal presumption is that error produces prejudice. It is only when the fact so clearly appears as to be beyond doubt that an error challenged did not prejudice and could not have prejudiced the complaining party that the rule that error without prejudice is not ground for reversal can have effect. Deery v. Cray, 5 Wall. 795, 807, 808, 18 L. Ed. 653; Peck v. Heurich, 167 U. S. 624, 629, 17 Sup. Ct. 927, 42 L. Ed. 302; National Masonic Acc. Ass’n v. Shryock, 20 C. C. A. 3, 11, 73 Fed. 774, 781; Railroad Company v. Holloway, 52 C. C. A. 260, 114 Fed. 458. The error certainly misled. the trial1 judge and produced prejudice against the defendants in his charge. When his attention was called to it by the exception, he did not correct it, but was still misled by it, and the defendants were still prejudiced by it, and it seems to me to be far from certain beyond doubt that every juror in the panel disregarded the error the court instructed them to make and thereby saved the defendants from all prejudice therefrom.
Over the objections and exceptions of the defendants, the United States was permitted to prove that, while the defendant.Frank Horn was, in the spring and summer of 1907, engaged to be married to Mrs. Cross, he sold to her 28,000 shares of stock of the mining and development company which had theretofore been sold by the company to third parties who had paid a part of the purchase price thereof, and had then defaulted, and that the terms of the sale to Mrs. Cross were that she should pay out of the proceeds of the resale that was to be made by Horn 5 cents per share, and the remainder of the proceeds should be divided equally between them. In my opinion this evidence was neither material nor relevant to the issues in this case; it had no tendency to prove or disprove any averment in the indictment, but wrong-. fully to influence the verdict by fastening the attention of the jury upon interesting but irrelevant issues.
For the reasons which have been stated, and others of a similar nature which it would be useless to set forth at length, the defendants in my opinion have not had a trial of their case according to the law and the evidence, and I am unable to consent to the affirmance of the judgments against them.