Com. v. Hamblen

• Decision Date: 27 April 1967
• Parties: COMMONWEALTH v. John B. HAMBLEN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 911

225 N.E.2d 911

352 Mass. 438

COMMONWEALTH v. John B. HAMBLEN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued March 7, 1967.

Decided April 27, 1967.

Arthur Gottlieb, Boston, for defendant Hamblen.

Earl Auerbach, Boston (John P. White, Jr., Boston, with him), for defendant Leventhal.

Murray P. Reiser, Asst. Dist. Atty., for the Commonwealth.

Before WILKINS, C.J., and SPALDING, CUTTER, SPIEGEL and REARDON, JJ.

SPALDING, Justice.

The defendants were tried jointly on an indictment alleging conspiracy to steal moneys from American Discount Corporation (ADC) from April, 1960, through March, 1963, and on three indictments alleging larceny exceeding $100 from ADC. The larceny indictments contained ninety-one counts, each involving a separate loan transaction occurring during the period from March, 1960, to November, 1962. ¹ In addition, Leventhal was tried on three indictments alleging violation of G.L. c. 266, § 67 (false entries in corporate books), and two indictments alleging violation of G.L. c. 266, § 74 (fraudulent use of corporate credit). The jury returned verdicts of guilty on all the indictments.

The cases come here on bills of exceptions of Hamblen and Leventhal. Hamblen's exceptions relate to the denial of motions for directed verdicts and the denial of certain requests for rulings. Leventhal's exceptions relate to the denial of his motion for a new trial.

I.

Hamblen's Exceptions.

1. At the close of the Commonwealth's case Hamblen moved for directed verdicts on each of the indictments against him. These motions were renewed at the close of all the evidence. The motions were denied on each occasion, and exceptions were saved.

We summarize the evidence as follows: Hamblen was the president, treasurer, general manager and, after 1958, the sole stockholder of C. B. Hamblen & Son, Inc. (Hamblen & Son). ADC was a Massachusetts corporation engaged in the business of lending money. Leventhal was the treasurer and general manager of ADC and owned 20% of its stock. His mother also owned 20% of the stock and the remainder was owned by three other stockholders. Leventhal's authority to make loans for ADC was limited by votes of the board of directors; he was not authorized to make unsecured loans over $1,600 or any type of loan over $5,000 in the aggregate to any one individual.

Hamblen & Son, through Hamblen, began borrowing money from ADC in 1956. In the first transaction Leventhal and another director of ADC made an inspection, in the presence of Hamblen, of the assets of Hamblen & Son. Leventhal was instructed to make no further loans to Hamblen & Son without the directors' approval. Thereafter, after, Hamblen dealt only with Leventhal on all loan transactions. From time to time money was borrowed on purported accounts receivable. In each transaction Hamblen signed a note and an accounts receivable contract; invoices or delivery slips were sometimes attached to the contract. The contracts recited, in part, '* * * (Hamblen & Son) hereby certifies that the said claims or accounts are bona fide, and correct accounts or claims for goods actually sold and delivered * * *.' In some instances, valid accounts receivable were pledged to ADC. In others, however, the alleged accounts were either nonexistent or else related to customers with whom Hamblen had done business in the past or expected to do business in the future. In a number of instances the attached invoices or delivery slips were either completely false or vastly overstated. Each count of the joint larceny indictments represents a transaction in which Hamblen obtained a loan from ADC by pledging false accounts receivable. ²

ADC's books were audicted twice each year by a certified public accountant. Prior to the audits, Leventhal insisted that Hamblen create new loans, secured by fictitious accounts receivable, the proceeds of which were applied in small amounts against other loans which likewise were secured by fictitious accounts. The purpose of these new loans was 'to create the impression for the benefit of the * * * (directors) and the various banks from which ADC borrowed' that the pledged accounts receivable were valid and current. Hamblen's and Leventhal's bookkeepers conferred each year in order that their books reflected what appeared to be proper payments against the falsely secured loans. Each loan was classified and numbered as a separate loan. Leventhal represented to the directors of ADC in monthly reports that these were separate loans to various persons; that 'the accounts receivable were in excellent condition'; and that 'at least ninety per cent of the accounts receivable were current.'

In fact, 70 to 80% of the accounts were six months to a year in arrears. Leventhal and Hamblen both had personal knowledge of the status of these accounts and there was no misrepresentation between them. There was evidence that Leventhal had told Hamblen of his $5,000 per loan limit. Nevertheless, on various days two or three loans were transacted each of which was under that sum. When Hamblen & Son owed ADC $100,000 Hamblen wanted to discontinue the borrowing, saying to Leventhal, 'I don't want to go to jail.' By the end of 1963 the excess of monies loaned to Hamblen & Son over payments received by ADC had reached $471,000.

During the period in which the loans which are the subject of the indictments were transacted, the directors of ADC did not know that Leventhal, on behalf of ADC, was doing business with Hamblen & Son. They relied upon Leventhal's monthly reports and the limitations upon his authority to make loans, and believed that the large volume of loans made by Leventhal were loans to various persons and were secured by valid and current accounts receivable.

We consider first the denial of directed verdicts relating to the larceny indictments. The Commonwealth's theory was that the defendants obtained moneys from ADC by the use of false pretenses in violation of G.L. c. 266, § 30 (as amended by St.1945, c. 282, § 2). 'To constitute the crime of larceny by false pretences 'it must appear that there was a false statement of fact known or believed by the defendant to be false made with the intent that the person to whom it was made should rely upon its truth, and that such person did rely upon it as true and parted with personal property as a result of such reliance. " Commonwealth v. Kiernan, 348 Mass. 29, 46, 201 N.E.2d 504, 514, and cases cited; Commonwealth v. Monahan, 349 Mass. 139, 150, 207 N.E.2d 29. Hamblen contends that he did not make false statements with the intent that they would be relied upon by ADC, and that no false statements attributable to him were in fact relied upon by ADC in parting with the money loaned. We are of opinion that the larceny indictments were properly submitted to the jury.

The evidence shows that Hamblen knowingly made and participated in the making of false statements. Had he done no more than sign the contracts, it could plausibly be argued that he believed them to be only formalities which he signed with no fraudulent purpose. But in addition to signing the contracts, he substantiated the pledged accounts with false invoices and delivery slips. He collaborated with Leventhal in applying new loans to false accounts in order that the accounts would appear to be current. After the loans had reached the sum of $100,000 'he wanted to stop,' saying, 'I don't want to go to jail.' This evidence is inconsistent with an honest purpose. It is not important that Hamblen may not have known precisely what use Leventhal might have made of the falsifications or whom they might deceive. He was present when, in connection with the first loan transaction, another director of ADC examined his assets. There was evidence that he knew Leventhal's loaning powers were limited. It could be inferred that he knew he was dealing, through Leventhal, with a corporation. He is presumed to intend the probable consequences of his acts. The jury were entitled to find that Hamblen intended the falsifications to deceive some person or persons, other than Leventhal, associated with ADC.

The directors of ADC relied upon Leventhal's false monthly reports and...