Court Opinion

ID: 3605753
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:51:16.310508+00
Date Added: 2024-06-11T13:40:23.757426
License: Public Domain

Omitting a clause, concededly unconstitutional in part, the provisions of section 297 of the Penal Law, pertinent to this inquiry, are as follows: "Every director of a moneyed corporation who: 1. In case of the fraudulent insolvency of such corporation, shall have participated in such fraud, * * * is guilty of a misdemeanor, if no other punishment is prescribed therefor by law." Are the words "fraudulent" and "fraud," in the connection in which they are *Page 483 
used, sufficient to define the acts sought to be made criminal?
The law has been thus stated: "And a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates the first essential of due process of law." (Connally v. General Construction Co.,269 U.S. 385, 391.) Penal statutes are too indefinite to satisfy due process when they forbid contractors to pay workmen less than "the current rate of per diem wages in the locality where the work is performed" (Connally v. General Construction Co.,supra, p. 393); prohibit combinations in restraint of trade "except when necessary in order to enable participants to obtain a reasonable profit from products dealt in" (Cline v. FrinkDairy Co., 274 U.S. 445); or forbid "any unjust or unreasonable rate or charge in handling or dealing in or with any necessaries" (United States v. Cohen Grocery Co., 255 U.S. 81, 86). They have been held insufficient where they have sought to punish as criminal "all suspicious persons" (Stoutenburgh v. Frazier,
16 App. Cas. [D.C.] 229); all public officers committing "any misdemeanor in the execution of * * * their respective offices" (State v. Gaster, 45 La. Ann. 636); all dentists guilty of "unprofessional or dishonorable conduct" (Czarra v. Board ofMedical Supervisors, 25 App. Cas. [D.C.] 443); all persons who "commit any act injurious to the public health, or public morals" (Matter of Jackson, 45 Ark. 158); all persons guilty of "mob violence" (Augustine v. State, 41 Tex.Crim. Rep.). Statutes are sufficiently certain, although the definitions given involve elements so differing in degree that estimates thereof might vary, where they have employed (1) "words or phrases having a technical or other special meaning" or (2) words having "a well settled common law meaning." (Connally v. General ConstructionCo., supra, p. 391; Cline v. Frink Dairy Co., supra.) *Page 484 
Certainly the word "fraud" or "fraudulent" has not "a technical or other special meaning." Conduct may be fraudulent or otherwise accordingly as we apply the standards of law or morality, of civil or criminal law, of the common law or of equity. Thus, fraud is said to be any "cunning, deception or artifice used to circumvent, cheat or defraud another" (Story, Eq. Juris. [14th ed.] § 267); "all surprise, trick, cunning, dissembling, and other unfair way that is used to cheat any one" (Willard, Eq. Juris. p. 147); "a device by means of which one party has taken an unconscientious advantage of the other." (Jeremy, Eq. Juris. vol. 3, part 2, p. 358.) It has been said that "It is impossible to separate deceit or artifice from fraud; it is of the very essence of the fraud." (People v. Taylor, 4 Park. Crim. Rep. 158, 161.) On the other hand, it has been remarked: "Fraud and dishonesty are synonymous terms;" "an unjust man is a fraudulent one" (Matter of Clark, 20 N.J.L. 648); "bad faith and fraud are synonymous" terms (Stark v. Starr, 22 Fed. Cases, p. 1084); "Fraud is not a fact," but "a legal epithet applied to * * * facts" (Tibbits v. Miller, 9 Okla. 677); "Whatever is dishonest is fraudulen in foro conscientice and is so treated in a court of equity" (Matter of Clark, supra, p. 650). Of an indictment charging fraud against a man in that he obtained possession of lottery tickets by means of a false statement, GROSE, J., in Rex v. Lara (6 Durnford  East Rep. 565) said that the defendant had been guilty of nothing more "than a bare naked lie." Concerning our indictment, found under a statute nakedly asserting that "fraud" is a crime, we might well say, as did the court in Regina v. Jones (1 Salk. 379): "We are not to indict one man for making a fool of another."
Neither the word "fraud" nor the word "fraudulent," as employed in the statute, has "a well settled common-law meaning." "A fraud indictable at common law, *Page 485 
must be such as would affect the public, and such as common prudence would not be sufficient to guard against; as the using of false weights and measures, or false tokens, or where there has been a conspiracy to cheat." (People v. Miller, 14 Johns. 371.) In Rex v. Wheatley (2 Burrow, 1125) Lord MANSFIELD said: "The offense that is indictable must be such a one as affects the public. As if a man uses false weights and measures, and sells by them to all or to many of his customers, or uses them in the general course of his dealing: so, if a man defrauds another under false tokens;" and in Rex v. Lara (supra) Lord KENYON said: "What the defendant did was immoral and highly reprehensible: but as he used no false token to accomplish his deceit, the judgment must be arrested." In People v. Taylor
(supra) an indictment charged the violation of a statute which made it a crime for any city officer, among other things, "to commit a fraud upon the city." The court dismissed the indictment, for the reason that the statute did not sufficiently describe the crime. "Fraud," under the statute now considered, is not made dependent upon the use of false weights, measures or tokens. Therefore, there can be no pretense that the Legislature intended to use the word in the common-law sense. It thus appears that the statute is not saved from the vagueness which condemns it through the employment of words having "a technical or other special meaning" or "a well settled common-law meaning."
The inquiry remains, whether a clause of the statute, which we have omitted, owing to its partial unconstitutionality, may be employed to make sufficiently definite a statute which would otherwise offend due process. The clause is this: "The insolvency of a moneyed corporation is deemed fraudulent unless its affairs appear upon investigation to have been administered fairly, legally and with the same care and diligence that agents receiving a compensation for their services are bound, by law, to *Page 486 
observe." It must be conceded that this clause, to the extent that it throws upon a person charged with "fraud" the burden of proving innocence, is unconstitutional. (Manley v. Georgia,279 U.S. 1.) It is contended, however, that the clause was designed to serve a double purpose, the unconstitutional purpose of erecting a presumption of guilt, and the constitutional purpose of supplying a definition of the word "fraud," which the statute employs; that the unconstitutional part is severable from the constitutional; that the former may be rejected, and the latter retained. We believe it to be conceded that the word "fairly" is as indefinite as the words "fraud" and "fraudulent." We take it that the word "legally" is subject to the same criticism. Omitting these words, therefore, the definition sought to be set up would read in this wise: "The insolvency of a moneyed corporation is fraudulent where it appears upon investigation that its affairs have been administered without
that care and diligence that agents receiving a compensation for their services are bound, by law, to observe." Assuming for the moment that such a definition might thus be erected, it would seem that "confusion worse confounded" would result. What do the words "where it appears upon investigation" signify? Investigation by a trial jury? Trial juries do not investigate; they try issues already framed. If the crime is present only when "it appears" to a jury that the affairs of a bank have been carelessly managed, then that becomes criminal, in the course of a trial, which before was not criminal; in other words, the issue decided by the jury is an issue created simultaneously by their own decision. Investigation by the Superintendent of Banks? If so, that investigation would conclude the question of guilt or innocence. For, if "it appears upon investigation" to the Superintendent that a bank has been carelessly managed, under the proposed definition it would be incontestable that a "fraud" had been committed. Putting that question *Page 487 
aside, however, we think that the clause, admittedly unconstitutional in part, may not be saved as a constitutional provision in so far as it sets up a definition of "fraudulent insolvency."
There are many instances where unconstitutional provisions have been exscinded from a statute by interpretation to give it force as an otherwise valid enactment. (Supervisors v. Stanley,105 U.S. 305; Purdy v. Erie R.R. Co., 162 N.Y. 42; Ratterman v.Western Union Telegraph Co., 127 U.S. 411; Berea College v.Kentucky, 211 U.S. 45; Huntington v. Worthen, 120 U.S. 97;Dollar Co. v. Canadian C.  F. Co., 220 N.Y. 270; People exrel. Alpha P.C. Co. v. Knapp, 230 N.Y. 48; Commonwealth v.Kimball, 24 Pick. [Mass.] 359; Cooley, Constitutional Limitations [8th ed.], p. 361.) It has been said that the elimination of an unconstitutional provision does not hang upon its incorporation in a separate sentence or paragraph, the whole of which may be excised without injury to the part retained. (Dollar Co. v. Canadian C.  F. Co., supra; People ex rel.Alpha P.C. Co. v. Knapp, supra; Cooley, Constitutional Limitations [8th ed.], p. 361.) "It is not the defect of form, but of power, that invalidates any of them; it is, therefore, the subject-matter, and not the arrangement of the language in which it is embodied, that is to be regarded in deciding whether any provision is constitutional or not." (Per SHAW, Ch. J., inCommonwealth v. Kimball, supra.) Nevertheless the two parts, valid and invalid, must be "capable of separation" (Supervisors
v. Stanley, supra, p. 312); the valid part will be retained only "provided the allowed and prohibited parts are severable" (Packet Co. v. Keokuk, 95 U.S. 80, 89); it will be retained only if the unconstitutional part is clearly "separable" (BereaCollege v. Kentucky, supra; Huntington v. Worthen, supra.) In all the cases cited, and in many more, where a constitutional provision has been "separated" and saved, although contained in the same clause with an unconstitutional provision, the statutes *Page 488 
considered have been of wide application, comprehending as the subjects of a tax, a prohibition, or a regulation, non-taxable properties or matter incapable of prohibition, or regulation by the enacting State, as well as properties or matters properly the subject of its enacting powers. The provisions allowed to remain have by their terms covered permissible subjects; subjects forbidden, by reason of the Constitution, have merely been released from statutory coverage. In none of them have new words of coverage, not employed by the Legislature, been interpolated, to make a forceful statute; in none have words employed been rearranged to make a valid tax or a sufficient prohibition or regulation. In United States v. Reese (92 U.S. 214, 221) the court said: "The proposed effect is not to be attained by striking out or disregarding words that are in the section, but by inserting those that are not now there;" and "The question, then, to be determined, is, whether we can introduce words of limitation into a penal statute so as to make it specific, when, as expressed, it is general only;" and "To limit this statute in the manner now asked for would be to make a new law, not to enforce an old one." In Meyer v. Wells, Fargo  Co.
(223 U.S. 298, 300, 302) it was said by HOLMES, J.: "It would be possible only by some extraordinary turn of ingenuity to sustain this after condemning that" and "Neither the court below nor this court can reshape the statute simply because it embraces elements that it might have reached if it had been drawn with a different measure and intent."
In our case we have a statute which insufficiently provides that in case of a "fraudulent insolvency" of a moneyed corporation every director participating in the "fraud" shall be guilty of a misdemeanor. It then provides that every insolvency is "deemed fraudulent" unless its affairs appear "to have been administered fairly, legally and with the same care and diligence that agents receiving a compensation for their services are *Page 489 
bound, by law, to observe." A complete inversion of this unconstitutional provision, which casts the burden of establishing innocence upon an accused, is proposed. The exception from a prohibition is to be employed to determine the thing prohibited. To do this, the statute is to be rewritten, words expressing the reverse of those employed are to be interpolated, new words are to be substituted, and a new enactment to be made. To conclude that we thus have a mere severance, a separation or a permitted deletion is a "turn of ingenuity" which is certainly "extraordinary." That the turn may not be taken, the case of Manley v. Georgia (supra) seems clearly to lay down. In that case the court held that words, setting up a presumption of guilt, almost identical with those employed in our statute, constituted an unconstitutional enactment. The court did not feel justified in using the provision to extract a definition of "fraudulent insolvency" otherwise insufficiently defined. On the contrary, it said: "The statute does not specify the elements of the offense." (p. 6.)
We conclude that the provisions relied upon insufficiently state a crime; that they offend against due process; that the indictment thereunder must, therefore, fail.
The order should be affirmed.
POUND, CRANE and HUBBS, JJ., concur with CARDOZO, Ch. J.; LEHMAN, J., concurs in result in separate opinion; KELLOGG, J., dissents in opinion in which O'BRIEN, J., concurs.
Orders reversed, etc. *Page 490