Summary
In Riegle v. State, 45 Ohio App. 251, 186 N.E. 875, decided March 20, 1933, this court had under consideration the question whether a wilful misapplication under Section 710-172, General Code, could be based upon a violation of Section 710-121, General Code, which latter section contains no penalty and makes illegal an investment of more than twenty per cent of the capital stock and surplus of the bank in any one stock or security.
Summary of this case from State v. McNaryOpinion
Decided March 20, 1933.
Criminal law — Misapplication of bank funds — Bank president purchased bond from himself for bank — Section 710-172, General Code — Indictment not demurrable for charging nonpenal offense of excessive investment in securities — Section 710-121, General Code — Evidence of large purchases of similar bonds competent upon intent — Extended charge to jury upon excessive investment, misleading — Error to charge jury fraudulent intent inferred, when — Fraudulent intent to be proved beyond reasonable doubt — Bank president not required to overcome presumption of knowledge of bank's transactions — Evidence supported indictment that bonds had no market value — Conviction sustained, although depreciated bond sold later by bank for face value — Bank examiner's reports admissible in evidence, when — Admitting report, not seen by defendant president, not prejudicial, when — Charge to jury upon inference of guilty intent — Ohio, and not federal decisions, govern — Federal judges have more latitude than Ohio judges — State judges cannot comment upon evidence — Defendant presumed innocent and presumption removed, how.
1. Indictment charging misapplication of bank's funds held not demurrable, though also charging excessive investment in one security, which does not constitute penal offense (Sections 710-121 and 710-172, General Code).
2. State had burden of proving bank's excessive investment in one security (Section 710-121, General Code).
3. Under indictment charging president with misapplying bank's funds by purchasing bond from himself for bank, evidence regarding large purchases of similar bonds by bank would be competent as bearing on president's intent (Section 710-172, General Code).
4. Where evidence showed, contrary to indictment, that bank's investment in one security was not excessive, extended charge concerning excessive investment was misleading.
5. Charge that jury, if finding that president sold nearly worthless bond to bank, must necessarily infer fraudulent intent, held erroneous (Section 710-712, General Code).
6. In prosecution for misapplying bank's funds, state must prove fraudulent intent beyond reasonable doubt (Section 710-172, General Code).
7. In prosecution for misapplying bank's funds, defendant need create only reasonable doubt of guilt (Section 710-172, General Code).
8. In prosecution for misapplying bank's funds, charge that president presumably knows of bank's transactions and that such presumption must be satisfactorily overcome by him, held erroneous (Section 710-172, General Code).
9. In prosecution for misapplying bank's funds, indictment charging that bonds, one of which president bought from himself for bank, had no "market value," held supported by evidence (Section 710-172, General Code).
10. President, if purchasing bond from himself for bank at face value with fraudulent intent, bond being worth substantially less, could be convicted of misapplying bank's funds, although bank subsequently disposed of bond at face value (Section 710-172, General Code).
11. In prosecution against president for misapplying bank's funds, bank examiner's reports attested by president and submitted to directors in president's presence held admissible (Section 710-172, General Code).
12. In prosecution against president for misapplying bank's funds, error, if any, in admitting bank examiner's report apparently not seen by president, held harmless, having little bearing on issues (Section 710-172, General Code).
13. In prosecution under statute largely copied from federal statute, propriety of instructions concerning inference of guilty intent from acts held governed by Ohio courts' decisions, rather than federal decisions (Section 710-172, General Code).
14. It is well known that, in instructing juries, federal judges have much more latitude than Ohio judges.
15. Unlike federal judges, state judges in Ohio may not comment on evidence to jury.
16. Defendant is presumed innocent, and such presumption can be overcome only by evidence establishing guilt beyond reasonable doubt.
ERROR: Court of Appeals for Sandusky county.
Messrs. Boyd, Brooks Wickham, and Mr. Charles L. Foster, for plaintiff in error.
Mr. Raymond E. Ladd, prosecuting attorney, for defendant in error.
The plaintiff in error, Franklin P. Riegle, was indicted in Wood county in May, 1932, charged with the violation of Section 710-172, General Code. On his application for a change of venue, the case was transferred to Sandusky county, and was there tried, resulting in his conviction and sentence.
The specific charge laid in the indictment is that Franklin P. Riegle, as president of the Commercial Bank Savings Company doing business under the laws of Ohio in the city of Bowling Green, on December 12, 1925, did unlawfully, fraudulently and wilfully, and with intent to defraud and injure said bank, misapply certain money, funds and credit of the bank in the amount and value of $1,000 and convert the same to his own benefit; that the amount of capital and surplus of said bank was $210,000, and that on said date the bank had invested in certain bonds of the Hughes Dairy Company more than 20 per cent of the paid in capital stock and surplus, all of which was known to said Riegle; that said bank was not, on that date, legally permitted to invest in any additional bonds of said company; that said Riegle, as president, did then knowingly and unlawfully purchase from himself on behalf of the bank a mortgage bond of the Hughes Dairy Company of the purported value of $1,000, notwithstanding said purchase exceeded 20 per cent. of the capital and surplus of said bank invested in bonds of the Hughes Dairy Company, and notwithstanding said bond had no market value, all of which was known to him, and that he did, on that date, knowingly, willfully and feloniously, with intent to defraud said bank and others, cause to be transferred and credited to his account in said bank the sum of $1,000 of the moneys of the bank, which proceeds were unlawfully and willfully misapplied by him for his own use and benefit.
The section of the statute cited, 710-172, is the penal section of the banking laws, but it is manifest that the language of the indictment relating to a claimed excessive investment in the bonds of the Hughes Dairy Company has reference to Section 710-121, General Code, which provides in substance that not more than 20 per cent. of the capital and surplus of a bank shall be invested in any one stock or security, but no penal clause is attached to the latter section.
A demurrer was filed to the indictment; the defendant contending that a violation of Section 710-121 was not a willful misapplication under the terms of the penal section, Section 710-172, General Code.
We have given the language of the indictment a careful examination, and conclude that the demurrer was properly overruled. The mere investment of more than 20 per cent. of the capital and surplus of the bank in any one stock or security would not, of course, constitute a penal offense, but the indictment charges far more than that. Such offense has, in fact, a double aspect, namely, the willful and unlawful purchase by himself, as president, of the $1,000 bond from himself for the bank, with the intent to defraud the bank, and, further, he is subject to the charge that, as president of the bank, knowing that 20 per cent. was unlawfully invested in the bonds of the Hughes Dairy Company, he unlawfully and willfully, and with intent to defraud, invested funds of the bank in the bonds of said company. The conduct which is condemned as criminal in Section 710-172, General Code, is not less criminal because it involves an investment of more than 20 per cent. of the bank's capital and surplus, as prohibited by Section 710-121, General Code.
The evidence discloses that the plaintiff in error, prior to the transaction of December 12, 1925, had been for many years a director and president of the bank, and had served as its attorney, and had for a long time been a director and attorney for the Hughes Dairy Company, and was undoubtedly familiar with the financial affairs of the bank and of the dairy company. He ceased to be president of the bank in August, 1926, and disposed of the stock which he had held. Some three or four years later the bank was taken over by the state superintendent of banks for liquidation. The dairy company was a customer of the bank, and had at various times been largely indebted to it.
Shortly before the date named the dairy company had arranged to float a new loan which involved taking up its existing bonded indebtedness and executing a mortgage and bonds in the amount of $125,000. The bank was the owner of bonds of the dairy company, and the plaintiff in error owned bonds of the same issue. The evidence shows that the bank on October 27, 1925, held bonds of the company of the face value of $6,000, and that the company was indebted to it on promissory notes in the amount of $35,000. On that date, by agreement with the dairy company, the bank cancelled its promissory notes against that company in the sum of $36,000, and accepted in payment thereof bonds of said company of the face value of $39,000. On the same day, $3,000 of bonds of that company, held by the bank, were withdrawn from the bank, but under what circumstances is not disclosed by the record, nor does the record show how much, if anything, the bank paid for $3,000 of bonds against the dairy company which it had obtained on October 26, 1925. On December 2d the bank became the owner of two more bonds of said company, each of $1,000 face value. No further changes occurred until December 12, 1925, and it would therefore appear that at the beginning of business on that date the bank was the owner of $44,000 face value of the bonds of the dairy company, and that these bonds had not cost the bank to exceed $41,000. On that date the plaintiff in error sold the bank one bond of the dairy company, of the face value of $1,000, for the price of $1,000, and the amount was deposited in his individual account in the bank and thereafter checked out by him. This transaction made the bank, at the close of business on that day, the owner of $45,000 face value of the bonds, but, before there could be a violation of the provisions of Section 710-121, General Code, it must appear that more than 20 per cent. of the capital and surplus of the bank was invested in these bonds, and the burden rested on the state to show that fact. While the bank in fact owned $45,000 face value of the bonds, yet as we read the record it had not invested more than $42,000 in acquiring them. The capital and surplus of the bank being at that time $210,000, it had not violated the terms of the section just cited by the fact of investing $42,000 in these bonds.
The indictment would have been just as good if no reference had been made in it to the claimed excessive investment of funds of the bank in the bonds of the dairy company, for there would still be left in the indictment the charge that the plaintiff in error, as president of the bank, knowingly and unlawfully purchased from himself on behalf of the bank a bond of the dairy company for $1,000, the same having no market value, with intent to defraud the bank. If the indictment had contained no other charge than that just mentioned, the evidence relating to the large purchases of bonds of the dairy company by the bank would have been competent as bearing on the intent of Riegle. In view of the state of the record showing that the bank had not invested any more than $42,000 in the bonds of the dairy company, the extended charge of the court with reference thereto must have been misleading to the jury.
Complaint is made about the charge of the court on the subject of intent. In charging on that subject the court used the following language:
"Every sane man is presumed to know the consequences of his voluntary acts and when he acts he must have intended to act and to so act in the light of the consequences that follow his acts. And when the act is an illegal act, and he did it knowingly, he must have intended to do an illegal act. The intent may be presumed from the doing of the wrongful, fraudulent or illegal act, and in this case, if you find that the defendant as an officer of the bank placed or caused to be placed property of his own which he knew to be worthless or of little value among the assets of the bank at its face value and had that face value placed to his own personal account on the books of the bank, from such finding of fact you must necessarily infer that the intent with which he did that act was to defraud or injure the bank, but this inference or presumption is not necessarily conclusive. There may be other evidence which may satisfy the jury that there was no such intent. The question of intent is to be determined by the facts and circumstances and the surroundings at the time of the transaction, all as shown by the evidence.
"If the defendant wilfully misapplied the funds or money of the bank as charged, whereby as the necessary, natural or legitimate consequences its capital was reduced or its ability to meet its obligations or engagements or continue its business was lessened, the intent to injure or defraud the bank may be presumed, but of course such presumption may be rebutted by other evidence."
We think this is stating the matter too strongly against the defendant. It is not a presumption of law to be drawn by the court. It is quite true that a guilty intent may be inferred from the act, but this is an inference of fact which may or may not be drawn by a jury and it is going quite too far to say that the jury must necessarily infer that the intent was to defraud. Hibbard v. United States (C.C.A.), 172 F., 66, 18 Ann. Cas., 1040.
True, the court informed the jury that the inference or presumption was not necessarily conclusive, but the court follows that statement with the instruction that "there may be other evidence which may satisfy the jury that there was no such intent."
The instruction not only cast the burden on the defendant to remove the presumption of guilty intent, but required that the evidence offered to remove it should be such as to "satisfy" the jury that there was no such intent. In a case of this character, intent to defraud is one of the essential elements of the crime to be proved by the state beyond a reasonable doubt, and, if and when the state has made out a case against a defendant, the only duty resting on defendant is to offer, if he can, sufficient evidence to create a reasonable doubt of his guilt. He is not required to satisfy the jury that there was no such intent, but, if all the evidence in the case, including that on the subject of intent to defraud, created in the minds of the jurors a reasonable doubt of the material facts necessary to establish every element of the crime, it was their duty to return a verdict of not guilty. This rule has been laid down even in cases where an alibi is relied on, although an alibi is a defense to be asserted by the defendant. The instruction, as given, in effect told the jury that the defendant was moved by an intent to deceive if some one was deceived as a result of his conduct.
In the next sentence in the charge, after that above quoted, the trial judge said to the jury: "A presumption arises, in the absence of evidence to the contrary, that a president of a bank has knowledge of its doings and transactions whenever by ordinary diligence he could have acquired the same, and whether or not such presumption is satisfactorily overcome is for you to say from all the evidence, if it arose here."
Here again the charge imposes on the defendant the burden to "satisfactorily" overcome a presumption, while under the law he need only introduce sufficient evidence to create a reasonable doubt as to his guilt. The instruction advises the jury that the presumption applies in a criminal case even to acts of which the defendant had no knowledge, and might make a criminal of him for mere failure to exercise ordinary care. The instruction imposes the same liability on the president of a bank, who can only give a part of his time to the details of its business, as on one who devotes his entire time to the affairs of the bank.
Much uncertainty exists as to the value of the bonds issued by the Hughes Dairy Company. The indictment charges that the bonds had no market value. Complaint is made that on the subject of value the indictment charges only that the bonds of the Hughes Dairy Company had no market value, and that no proof was introduced as to their market value. On this subject the trial judge charged the jury that market value was the price property would bring in a fair market after fair and reasonable efforts to find a purchaser who would give the highest price for it; that it was the price that could have been obtained in the open market on fair competition. We find no prejudicial error on this subject. Section 13449-5, General Code. The company had consistently lost money in its business for a long period of time, resulting in the appointment of a receiver some considerable time after the transaction charged in the indictment, and a sale of the plant by the receiver. Apparently the bonds were declining in value, although various sales of them were made. The jury may well have found, under the evidence, that on December 12, 1925, the bond which Riegle sold to the bank was worth much less than its face value of $1,000. It is claimed that the bond was afterwards disposed of by the bank for its face value, and therefore the defendant could not properly have been convicted. Even if the fact be established, we do not think the conclusion necessarily follows. If the bond was worth, when sold to the bank, substantially less than the amount for which it was so sold, and the sale was made with the intention of willfully and knowingly defrauding the bank, the defendant might be found guilty, even though the bank, some time after it became the owner, was able to dispose of the bond at its face value.
Error is assigned to the admission of certain official written reports made by a state bank examiner. It is held in State v. Salmon, 216 Mo., 466, 530, 115 S.W. 1106, that such reports are admissible in the prosecution of an officer of a bank where insolvency of the bank is involved, as bank examiners are state officials and required to make reports of their examinations. See City of Bucyrus v. State Department of Health, 120 Ohio St. 426, 166 N.E. 370. The evidence shows that the later reports were attested by Riegle and submitted to the board of directors of the bank when he was present, and were clearly admissible. The first report, the one signed on April 10, 1925, was not attested by Riegle, and does not appear to have been seen by him, but between the date of that report and the date laid in the indictment the indebtedness of the Hughes Dairy Company to the bank had so radically changed that the report itself seems to have little bearing on the issues, and its receipt in evidence could in no sense be prejudicial.
However, for the errors mentioned, the judgment must be reversed and the cause remanded for a new trial.
Judgment reversed and cause remanded.
WILLIAMS and LLOYD, JJ., concur.
ON APPLICATION for rehearing.
It is urged in support of the application for rehearing that the charge of the court of common pleas, which was found by this court to be erroneous, is in accordance with instructions to juries which have been approved by federal courts. The statute which is charged in the indictment to have been violated was copied, in large part, from a federal statute, and in construing the Ohio statute the state courts would unquestionably consider carefully the decisions of federal courts in construing the federal statute, but the construction of the statute is not involved in the application for a rehearing in this case, only the instructions given to the jury. It is thus a question of practice under the state law, and this court must look on that matter to the decisions of courts of Ohio.
It is well known that judges of federal courts, in instructing juries, are permitted much more latitude than is granted to judges of trial courts in Ohio. Indeed it is fundamental that federal judges may comment on the evidence to the jury, which practice is forbidden in the Ohio state courts. The trial court, following certain federal cases, instructed the jury in effect that the presumption of guilty intent could only be overcome by evidence on the part of the defendant that would satisfy the jury that there was no such intent, while the true rule in Ohio is that the evidence need only be such as, taken in connection with all the other evidence in the case, would create a reasonable doubt of the defendant's guilt. The same charge to the jury that is relied on by counsel for the state contains the following language: "There may be other evidence which may satisfy the jury that there was no such intent, but such an inference or presumption throws the burden of proof upon the defendant, and the evidence upon him in rebuttal to do away with that presumption of guilty intent must be sufficiently strong to satisfy you beyond a reasonable doubt that there was no such guilty intent in such transaction."
Certainly counsel do not claim that this instruction last quoted would be allowable in the trial of a criminal case in a state court in Ohio, but the state law which condemns such an instruction equally condemns the instruction taken from the same charge and given to the jury in the instant case, that the evidence to overcome the presumption should satisfy the jury that there was no such intent. Such an instruction would nullify the rule which has always obtained in Ohio in criminal cases that the defendant is presumed to be not guilty, and that this presumption can only be overcome by evidence establishing his guilt beyond a reasonable doubt.
Application for rehearing denied.
WILLIAMS and LLOYD, JJ., concur.