Court Opinion

ID: 3987844
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:43:57.865435+00
Date Added: 2024-06-11T07:44:14.032737
License: Public Domain

I dissent. The information, while perhaps containing surplus matter, alleges all of the essential elements of embezzlement. The evidence produced by the state amply established the guilt of the accused. There was positive and convincing proof that on or about the 30th day of April, 1926, when the prosecuting witness, Janie Smith, entered into the contract for the sale of her real property to Bestelmeyer, she directed that the principal payments, which by the contract were payable to the real estate company, should be paid in satisfaction of the Cluff mortgage of $2,500 to *Page 578 
which both Clayton and Heal agreed. That they did not do so, but converted the money to the use of the corporation, was admitted and proved.
The salient facts in the case are that Clayton and Heal personally committed or knowingly participated in all the acts which constitute the crime charged, and that during all the times in question Clayton and Heal were the managing officers of the Provo Consolidated Real Estate Company and owned all of its outstanding capital stock except 10 shares thereof, which were held by Heal's wife. The stock book of the corporation was put in evidence, showing a complete record of the issuance and transfers of capital stock since its organization. On and after October 21, 1924, the outstanding capital stock of the corporation consisted of 4,259 shares, of which Clayton owned 1,419 shares, Heal 2,830 shares, and Heal's wife 10 shares. There were no other stockholders.
The fact that the acts constituting the crime charged were committed by the accused persons as officers of a corporation, does not lessen their guilt or protect them from punishment. It would be a reproach to law and a travesty of justice to exempt from legal punishment a person who commits acts in the name or through the medium of a corporation, which, if committed in his own name, would be felonious and criminal. Such a proposition is opposed to establish law. A corporation is an intangible abstraction, and is incapable of committing a crime where intent is involved. It can only act through its officers. If a felony is committed in the name of the corporation by its officers, such officers are individually liable. It is their criminal act, and not that of the corporation. State v. Ross, 55 Or. 450,104 P. 596, 106 P. 1022, 42 L.R.A. (N.S.) 601, 613.
"The act of an officer of a corporation in committting embezzlement is personal and not official, and he is subject to the same responsibility for such an act done by him through the instrumentality of the corporation as though it were accomplished by any other means." 20 C.J. 457. *Page 579 
"The officers of a trust company whose acts result in the conversion of funds deposited with it, where accessories are punishable as principals, have been held to be indictable therefor. So, too, the officers and directors of a company who permit the conversion of special deposits are personally liable for such act of embezzlement, and the fact that they act for its benefit and not for the benefit of themselves, in wrongfully converting a fund will not relieve them from liability to punishment under an embezzlement statute." 9 R.C.L. 1285.
In Milbrath v. State, 138 Wis. 354, 120 N.W. 252, 131 Am. St. Rep. 1012, a prosecution for embezzlement, the fourth syllabus is:
"In a criminal prosecution the accused cannot be heard to say in justification that he committed the offense in his official capacity as officer of a corporation, nor can he assert that acts in form corporate were not his acts merely because carried out by him through the instrumentality of a corporation which he controlled and dominated and which he employed for that purpose."
To the same effect is Brown v. State, 3 Ohio App. 52, 21 Ohio Cir. Ct. (N.S.) 545.
In People v. Sherman, 133 N.Y. 349, 31 N.E. 107, 108, the manager of a corporation having possession of grain belonging to another in its elevators was held properly convicted of larceny, where he without authority caused the grain to be transferred from one elevator to another, falsified his accounts to conceal his action, and sold the grain and put the proceeds in his bank account as manager of the corporation and applied the same on the corporation liabilities. The court said:
"The offense is described as within the second subdivision of section 528 of the Penal Code, and the claim now made is that the grain was in the custody and control of the elevator corporations, and not in that of the defendant. The section itself obviates the difficulty. It assumes that beneath the technical legal control of the corporation as such lies an actual and effective custody and control of corporate officers and servants. They are specifically desribed, and the fact in this case corresponds with the description. The corporation, as such, — the technical legal entity, — cannot suffer *Page 580 
imprisonment for a crime, but those who represent it and act for it as its officers and agents can. The defendant, as general manager, had the custody and control of the grain in the elevators. It was by means and by force of that very custody and control that he was enabled to shift the grain to sell and convert it, and confuse and falsify the accounts. It is of little utility to carry our inquiry back of the terms of the Penal Code, when the offense charged and proved is clearly within it."
In State v. Thomas, 123 Wash. 299, 212 P. 253, 33 A.L.R. 781, the first syllabus reads:
"A president who is general manager of a corporation engaged in lending money and selling securities is guilty of larceny if he participates in a transaction by which money due on a security which has been sold to a client is placed to the credit of the corporation's bank account when it is paid in by the borrower at a time when the corporation is in financial difficulties, so that the money is lost to the client."
Following this case in 33 A.L.R. 787, is an annotation entitled, "Individual criminal responsibility of officer or employee for larceny or embezzlement, through corporate act, of property of third person." In introducing the annotation, the annotator says:
"There is no dissent in the decisions which have passed on the question, from the conclusion that an officer or employee of a corporation may be held criminally responsible for the embezzlement or larceny of the property of a third person through a corporate act, where the act was done by the individual officer, at his direction, or by his permission." Citing numerous cases.
These authorities abundantly sustain the convictions under review, with respect to the relationship of the parties concerning the funds embezzled. The defendants personally committed the acts constituting the offense charged, and their guilt is personal, not corporate. They were the owners of substantially all of the stock of the corporation, and employed the corporate form as a medium for their individual purposes, thereby justifying the courts in disregarding the corporate form.Milbrath v. State, supra. The case is within *Page 581 
the letter of the statute. Comp. Laws Utah, 1917, § 8307. There is naught in this section limiting guilt to the embezzlement of corporation funds or property. It extends to the fraudulent appropriation of any property which any officer has in his possession or under his control by virtue of his trust. Under the view most favorable to the defendants, they had the custody and control of the money in question, by virtue of being corporate officers. People v. Sherman, supra. The cases herein cited are practically all where the property or money of third persons were embezzled or stolen by corporation officers.
The case of Weber v. State, 190 Wis. 257, 208 N.W. 923, 45 A.L.R. 928, cited by Mr. Justice STRAUP, does not support his position, because the facts therein were essentially different from those in the cases at bar. The Wisconsin court expressly distinguished the case cited on account of its peculiar facts, and recognized and approved its previous decision in Milbrath
v. State, supra, which sustained a conviction upon facts which in all essentials were like those in the cases before us. The two instructions alluded to by Mr. Justice Straup present no contradiction or inconsistency, or any defect of proceedings available to the defendants. The first one quoted submits the question of whether or not the defendants agreed to apply the money in question in payment of the Cluff mortgage. This fact was affirmed by the state's evidence and denied by the defendants. The second instruction referred to a similar dispute of fact concerning an asserted agreement by the prosecutrix to permit the use of her money by the defendants in consideration of the payment of interest thereon. Both questions were necessarily decided by the jury adversely to the defendants for which there was ample support in the evidence.
I also disagree with the opinion of Mr. Justice ELIAS HANSEN and his version of the evidence. To warrant this court in substituting its judgment for that of the trial court and jury, upon the evidence and facts in the case, in my *Page 582 
opinion requires a showing of admitted facts far more definite and satisfactory than is presented by the record here.
Notwithstanding the trial court submitted to the jury whether Janie Smith had consented to the use of the money in question by the defendants for interest paid or credited to her and the jury after hearing the evidence found that she had not, it is asserted as grounds for reversal, that the testimony of Janie Smith conclusively establishes such consent and precludes a conviction for embezzlement.
While much is said concerning a "running account" and "the course of business" between the parties, the essential facts in the case are plain and simple. Janie Smith, a woman plainly unlettered and unskilled in business practices, in January, 1924, through the agency of the defendants, who were acting in the name and through the medium of a corporation, negotiated a loan of $2,500 from Harvey Cluff, which she secured by a mortgage upon her farm. The defendants represented both borrower and lender. The proceeds of the loan were not paid to Mrs. Smith in a lump sum. Payments were made by defendants to her and to others upon her order for the greater portion of the loan, but a small amount thereof was retained by the defendants and credited to Mrs. Smith on their books. From such credits and other small sums paid to the defendants by Mrs. Smith the defendants paid the interest periodically on the Cluff mortgage. In April, 1926, Mrs. Smith sold her farm to Margaret Bestelmeyer for $8,000 upon deferred payments of principal and interest. The defendants negotiated the sale for which they were paid a commission. By the contract of sale, the purchase price, both principal and interest, was payable to the defendants' company. After a sum in excess of $2,500 principal had been paid on the contract of sale, this controversy arose.
Mrs. Smith claimed and testified that when her farm was sold she directed and the defendants agreed that the payments made by the buyer to them as principal should be *Page 583 
paid on the Cluff mortgage until it was paid in full. In this she was corroborated by other evidence, and the jury was fully warranted in so finding. The defendants paid nothing on the principal of the Cluff mortgage, but appropriated the moneys collected to the uses of the corporation, under whose name they were acting, and afterwards failed in business, so that the money was lost to Mrs. Smith. The defendants denied that they had agreed to apply any of Mrs. Smith's money received by them on the Cluff mortgage, but asserted that there was an understanding that they could use such funds for their own purposes by paying interest thereon at 8 per cent per annum. Before the trial they prepared and furnished to Mrs. Smith a statement of account, purporting to show in detail, the transactions had with Mrs. Smith. The account consists of 1 1/2 pages, and shows the receipt by defendants' company of the proceeds of the Cluff loan, and the payments made by Bestelmeyer, and a few other small sums paid in by Mrs. Smith, together with periodical credits of interest on balances on the credit side, and on the debit side shows the sums paid out on account of Mrs. Smith, including the amount of the Cluff mortgage. The account was introduced in evidence by the state, obviously as an admission that the defendants had received the money or check described in the information. The account was not questioned concerning the amounts received and paid out by, the defendants, except as to the Cluff mortgage. Of course the credits for interest on balances due Mrs. Smith were challenged by the state, and the original ledger account of the real estate company was produced, which showed no corresponding credits for interest, except one or two made at the bottom of the account, after this controversy arose.
The defendant Clayton admitted that early in the year 1929, when pressed by Mrs. Smith for the payment of the Cluff mortgage, he executed and delivered to her a receipt dated back to May 8, 1928, reciting the receipt of $2,500 on the Bestelmeyer contract "paying mortgage to Harvey Cluff in full." Clayton further testified that interest in *Page 584 
favor of Mrs. Smith was first credited July 3, 1924, and from then on she was to receive credit for interest on balances at quarterly periods. Defendants did not claim that any money was ever paid to Mrs. Smith as interest.
The case is ruled by two of my associates, upon the proposition that Mrs. Smith admitted the receipt of interest upon balances of her money in the hands of the defendants. And a portion of her testimony on cross-examination is quoted as supporting such admission. When the whole of Mrs. Smith's testimony and other established facts are considered, I think it plain that she made no such admission. The cross-examination quoted and relied upon is in itself confused and unintelligible — the replies to questions ambiguous and unresponsive — unless viewed in the light of the situation and of other facts. The witness was a simple, unlearned woman. The record shows that she was ill during the trial, for which reason the hearing was suspended on one occasion. She had been subjected to a long and gruelling cross-examination. The matter referred to by the questioner had not been previously mentioned in the case. It is plain that the witness did not understand the questions accurately and accordingly did not answer them. That she understood the reference to interest as the money paid as such by Bestelmeyer is attested by every reply made. The replies are inconsistent with any other understanding by the witness. It must be remembered that the payments on the Bestelmeyer contract consisted of definite payments of principal and interest. Mrs. Smith invariably insisted that the payments of principal were directed and agreed to be applied in payment of the Cluff mortgage, leaving the interest payments for her use. She positively denied receiving interest before she sold her farm which was in 1926, although the defendant Clayton later testified the arrangement was made and interest credited two years before. She further testified that after the sale, "I drew interest on my money;" "the interest was supposed to come to me;" "I drawed interest along-some;" "I was supposed to receive *Page 585 
the interest and the principal was supposed to be turned to them." Under all of the surrounding circumstances, can there be any doubt that the witness had in mind and referred to the interest paid by Bestelmeyer?
But any doubt or ambiguity of her replies to the questions propounded on the cross-examination quoted was removed when she was recalled in rebuttal and testified that she never authorized the use of any money paid as principal by Bestelmeyer for any purpose other than to pay the Cluff mortgage. She was not cross-examined on this statement. The supposed admission is not only groundless in itself, as I have tried to show, but it is in conflict with the whole attitude and conduct and interest of Mrs. Smith. It is clear from the record that she was anxious to have the mortgage paid so she could keep her contract with Bestelmeyer, and that she repeatedly pressed the defendants about it, and that they led her to believe it was being paid, and finally gave her a receipt calculated to deceive her and make her believe it was paid. From the whole of the evidence of Mrs. Smith, it seems to me a perversion of the record to say that she conclusively admitted that she had consented to the use of her money by defendants and knowingly accepted credits of interest therefor.
It is said that the moneys in question were handled by the defendants in the same manner as other moneys of Mrs. Smith which came into their hands. This is true only so far as depositing the money in the bank to their own credit is concerned. They did not fraudulently appropriate to their own use all of Mrs. Smith's money. They accounted to her for a part of it. She was defrauded out of $3,500 only according to the evidence. But neither depositing the money in the bank to the credit of defendants or the failure to pay the Cluff mortgage amounted to embezzlement. Either fact would be good evidence tending to establish the crime, but both could be consistent with innocence. Had the money been retained, available to the owner, there could be no embezzlement. The gist of the offense is the fraudulent appropriation *Page 586 
of funds by one to whom they have been intrusted, so that they are lost to the owner, and this essential fact was expressly proved in these cases by evidence that one of the defendants in the presence of the other told Mrs. Smith that they had collected her money and spent it and had not paid her mortgage and asked what was she going to do about it.
In my opinion there is no valid reason for reversing the judgments, and both should be affirmed.