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ARGUED AND DETERMINED
UNITED STATES CIRCUIT COURTS OF APPEALS AND THE
CIRCUIT AND DISTRICT COURTS.
FLICKINGER Y. UNITED STATES.
(Circuit Court of Appeals, Sixth Circuit. December 5, 1906.)
1. BANKS AND BANKING-OFFENSES BY OFFICERS OF NATIONAL BANKS-INDICT
MENT FOR MISAPPLICATION OF FUNDS.
In an indictment under Rev. St. 8 5209 [U. S. Comp. St. 1901, p. 3497], charging an officer of a national bank with a willful misapplication of its funds with intent to injure and defraud the association, it is not necessary to aver that the acts set out were done without authority from the directors.
[Ed. Note.For cases in point, see Cent. Dig. vol. 6, Banks and Bank
ing, $ 973.] 2. SAME-ACTS CONSTITUTING OFFENSE.
The discounting by the president of a national bank with the funds of the bānk of commercial paper known by him to be worthless or fictitious, for the benefit of an insolvent corporation of which he is an officer, and with intent to injure and defraud the bank, is a willful misapplication of its funds, constituting a criminal offense under Rev. St. & 5209 [U. S. Comp. St. 1901, p. 3497.]
[Ed. Note.-For cases in point, see Cent. Dig. vol. 6, Banks and Bank
ing, § 964.] 3. CRIMINAL LAW-VERDICT-REPUGNANCY-SEVERAL COUNTS.
Where an indictment under Rev. St. § 5209 [U. S. Comp. St. 1901, p. 3497], charging an officer of a national bank with willful misapplication of its funds, contains counts each based on the discounting of a separate instrument, and another count based on the discounting of all of such instruments, a verdict is not repugnant and inconsistent because it finds the defendant guilty on the latter count and not guilty on the former.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 14, Criminal Law, 88 2100, 2101.] In Error to the District Court of the United States for the Eastern Division of the Northern District of Ohio.
T. E. Powell, for plaintiff in error.
RICHARDS, Circuit Judge. The plaintiff in error, Edward Flickinger, was convicted of aiding and abetting Otho L. Hays, the president of the Galion National Bank, of Galion, Ohio, in certain violations of section 5209 of the Revised Statutes [U. S. Comp. St. 1901, p. 3497]; The indictment contained 52 counts, charging Hays as principal, and Flickinger as aider and abettor, with willfully misapplying the moneys, funds, and credits of the bank by certain methods described, and with unlawfully issuing certain certificates of deposit and bills of exchange without authority from the directors, all with intent to injure and defraud the bank. They were both convicted on six counts, Nos. 38, 40, 41, 42, 43, and 50, each charging a willful misapplication of the moneys, funds, and credits of the bank, with intent to injure and defraud it; the first five by discounting and passing to the credit of the Flickinger Wheel Company, at that time insolvent, certain worthless, fictitious, and fraudulent drafts, drawn by the Flickinger Wheel Company on the Vehicle Wheel Club, and accepted by the latter, and the last by discounting and passing to the credit of the Flickinger Wheel Company certain worthless and unsecured accommodation notes, given it by the Galion Wagon & Gear Company, both companies being then wholly insolvent. A motion for a new trial being overruled, the defendants were each ordered to be imprisoned for 71/2 years in the penitentiary on each of the six counts; the sentence to be concurrent and not cumulative. The defendant Hays is now undergoing the punishment imposed by this sentence; the defendant Flickinger alone having prosecuted error.
The rule is well established that where a judgment of guilty is based upon several counts and the sentence is concurrent, as in this case, the judgment will be sustained if any one of the counts supporting it is found good. Claassen v. U. S., 142 U. S. 140, 12 Sup. Ct. 169, 35 L. Ed. 966. It is not our purpose, however, to select some one of these six counts, and base out affirmance upon it alone, for we think them all good. The court below overruled a demurrer to the indictment and each count thereof. It is contended it erred because the counts under consideration do not describe a willful misapplication of the funds of the bank within the inhibition of the statute, and, more particularly, do not allege that the defendant Hays did the acts charged against him without authority from the directors. The five counts charging a willful misapplication through the discount of the Vehicle Wheel Club drafts allege that the defendant Hays was, at the time the transaction took place, the president of the Galion National Bank, having general superintendence of its affairs, and that he willfully misapplied the moneys, funds, and credits of the bank, then under his control and custody as president, with intent to convert the same to the use and benefit of the Flickinger Wheel Company, and with intent to injure and defraud the bank, by discounting three drafts, one for $9,000, one for $7,500, and one for $7,500, aggregating in amount $24,000, which bear the acceptance of the Vehicle Wheel Club, by Edward Flickinger, president (describing them and giving a copy of one, the others not being obtainable) — "Which said drafts were then and there, when so discounted, worthless, unsecured, false, and fictitious drafts and obligations, and had been drawn by
the said the Flickinger Wheel Company upon the said Vehicle Club, at a time when the said Vehicle Wheel Club was not indebted in the sum of $24,000, nor in any other sum approximating $24,000, to the said the Flickinger Wheel Company, nor was there any consideration of any kind or value moving from the said the Flickinger Wheel Company to the said Vehicle Wheel Club, nor to any other person, for the said acceptance of the said drafts, but the same were false, fraudulent, and unauthorized; the said acceptance being indorsed upon said drafts by the said E. Flickinger, otherwise known as Edward Flickinger, who was then and there also the president of the said the Flickinger Wheel Company; the drawing and accepting of said drafts being done, and being caused to be done, by the said E. Flickinger, otherwise known as Edward Flickinger, and the said Otho L. Hays, president as aforesaid, acting together, the said Otho L. Hays being then and there the treasurer of the said the Flickinger Wheel Company, and both the making and accepting of said drafts being but a sham and a device to create a worthless and fictitious obligation, all of which he, the said Otho L. Hays, president as aforesaid, then and there well knew ; the said the Flickinger Wheel Company being then and there wholly insolvent, as he, the said Otho L. Hays, president as aforesaid, then and there well knew."
The indictment then charges that the drafts were discounted by Hays by deducting the amount of interest and discount, and causing the Flickinger Wheel Company to be credited on the books with the balance of $23,469.28, which amount was afterwards withdrawn by the Flickinger Wheel Company and converted to its use. The count closes by charging that Flickinger, with intent to injure and defraud the bank, knowingly and unlawfully aided and abetted Hays in this misapplication. The other counts charging willful misapplication through the discount of other Vehicle Wheel Club drafts are similar in form.
The fiftieth count charges that Hays, being then the president of the bank and having general superintendence of its affairs, did willfully misapply its moneys, funds, and credits, then under his control and custody as president, with intent to convert the same to the use and benefit of the Flickinger Wheel company, and with the further intent to injure and defraud the bank, by receiving and discounting 12 certain notes, aggregating $15,000, which are set out in detail"Which said notes were then and there, when so discounted, worthless, unsecured notes and obligations, the said the Flickinger Wheel Company and the said the Galion Wagon & Gear Company both being then and there wholly insolvent and entitled to no credit in said banking association, as he, the said Otho L. Hays, president as aforesaid, then and there well knew."
It is then charged that these notes, aggregating $15,000, were discounted, and the balance, $14,419.50, was passed to the credit of the Flickinger Wheel Company, which withdrew the same from the bank and thus obtained the full use thereof, no part of it ever having been paid to the bank. The count closes by charging that Flickinger, with intent to injure and defraud the bank, knowingly and unlawfully aided and abetted Hays in this misapplication.
Section 5209 of the Revised Statutes provides that: "Every president * of any association, who
willfully misapplies any of the moneys, funds or credits of the association, * * * with intent * to injure or defraud the association,
shall be guilty," etc.
The statute does not make it necessary, in order to constitute an offense, for the president to make the willful misapplication "without
authority from the directors," although there is that special provision with respect to the unlawful issue of any of the notes of the association, or of any certificates of deposit or bill of exchange, etc. In passing upon the demurrer, the court below said:
"Objection is made that there is no averment that Hays discounted this paper without the knowledge and consent of the board of directors. I do not think this averment necessary, and it would not be less criminal done with the knowledge and consent of the board of directors, if the defendants and the board of directors did it under the circumstances which the indictment avers existed in connection with the action of the defendants. It appears, from the averments of these counts, that the defendant Hays misapplied money and funds of the bank by discounting these notes."
We concur in this view. The averments of these counts show, in each instance, a willful misapplication of the funds of the bank, for an unlawful purpose, with intent to injure and defraud the bank. The transaction in each case is described in detail, and the averments, covering every element of the crime, are full and clear. There could be no proper presumption that the directors, in the ordinary course of business, would consent to the discount by the president of worthless and fictitious paper, with intent to injure and defraud the bank, and therefore no necessity to insert in the indictment an averment to negative such authority. If, under any circumstances, the authority of the directors could validate such conduct on the part of the president, then, in that event, which we see no reason to anticipate, the rule laid down by this court in the McKnight Case would apply. It would be a matter of defense. McKnight v. U. S., 115 Fed. 972, 986, 54 C. C. A. 358.
But, leaving the indictment, it is argued quite strenuously, first, that the verdict of guilty on the counts mentioned is not supported by the evidence; second, that the court erred in its charge to the jury; third, that the verdict of guilty on these counts cannot be sustained, because the jury brought in a verdict of not guilty on other counts covering the same transactions, so that the verdict is repugnant and inconsistent; and, finally, that no offense was consummated, because it appears that when the amounts obtained by the discount of the drafts and notes mentioned were passed to the credit of the Flickinger Wheel Company, that company was overdrawn, so that it obtained no money from the bank, the only result being a change in the form of its obligations to the bank.
It was not necessary, in order to support the verdict, to recount the testimony. The record is long and the transactions many. In brief, the Galion National Bank was organized in 1886, and had a capital stock of $60,000. Otho L. Hays owned over one-third of its capital stock, was its president, and controlled its affairs. It closed its doors on February 15, 1904. An examination of its condition showed that its total loans and discounts at that time were $412,000. Of this amount about $337,000 had been discounted by corporations in which Edward Flickinger was the controlling spirit. The leading company was the Flickinger Wheel Company, of Galion, Ohio, a concern engaged in the manufacture and sale of vehicle wheels, of which Edward Flickinger was president and Otho L. Hays (the president of the Galion National Bank) was treasurer. Another was the Galion Wagon & Gear Company which, prior to June 28, 1902, when its plant burned down, had been engaged in the manufacture of vehicle bodies at Galion, Ohio. Edward Flickinger was president of this company and Otho L. Hays its treasurer. There also figures in this case what was known as the Vehicle Wheel Club, of which Edward Flickinger was president. This was a voluntary organization, composed of some 15 or 20 manufacturers of vehicle wheels, formed for the purpose of regulating prices by controlling the output.
The proof shows that the Flickinger Wheel Company did its principal banking business with the Galion National Bank from 1892 until the failure of the latter. It did a large business on insufficient capital, and was constantly in need of help from the bank. Its account was frequently heavily overdrawn. It not only discounted bona fide commercial paper, but large amounts of accommodation paper drawn to its order by the Galion Wagon & Gear Company and other corporations. Starting in 1892 with a capital stock of $60,000, afterwards increased to $100,000, it ended its business career in April, 1903, without having paid a dividend, with a total indebtedness of $637,775.31. There was proof tending to show that in the summer of 1903 the Vehicle Wheel Club agreed to and did purchase the machinery of the Flickinger Wheel Company for $66,000. There was no agreement about the manufactured stock on hand, although there was talk by individual members, speaking each for himself, of purchasing this stock in whole or in part. The drafts covered by the five counts mentioned were prepared by the cashier of the bank, acting under direction of Hays. The acceptance by the Vehicle Wheel Club was placed upon them by the use of a rubber stamp prepared by the cashier for that purpose; a blank being left for the signature of Flickinger as president. After the drafts had been prepared, Hays took them away and brought them back to the bank properly filled out, when they were discounted. This use of the Vehicle Wheel Club for "kiting.” purposes was unknown to its members and wholly unauthorized. The drafts were, therefore, fictitious and fraudulent, and their discount by the president of the bank, with intent to injure and defraud the bank, was a willful misapplication of the funds under his control.
There was a general exception by the defendants "to the entire charge of the court as given relative to the Vehicle Wheel Club drafts, and each portion thereof.” It would take many pages to set forth all the court said about these drafts. There is no need to do so. The claims of both sides were fairly presented, and the decision of the questions of fact involved was left to the jury. We think the evidence amply supports the conclusion which the jury must have reached in returning its verdict of guilty.
With respect to the discount of the notes aggregating $15,000, drawn by the Galion Wagon & Gear Company, and discounted on February 2, 1904, less than two weeks before the bank failed, the testimony showed that this was purely accommodation paper. At that time there was a large amount of similar paper outstanding in the bank. The Galion Wagon & Gear Company was not engaged in active business, its plant having burned down, and the proof tended to show it was insolvent. Hays, the president of the bank and the treasurer of this