Commonwealth v. Bardolph

• Decision Date: 25 June 1937
• Docket Number: 44,49
• Citation: 192 A. 916,326 Pa. 513
• Parties: Commonwealth v. Bardolph, Appellant, et al
• Court: Pennsylvania Supreme Court

192 A. 916

326 Pa. 513

Commonwealth v. Bardolph, Appellant, et al

Nos. 44, 49

Supreme Court of Pennsylvania

June 25, 1937

Argued March 24, 1937

Appeals, Nos. 44 and 49, March T., 1937, from judgments of Superior Court, April T., 1936, Nos. 265 and 266, affirming judgment of Q.S. Allegheny Co., April Sessions, 1932, No 398, in case of Commonwealth v. C. A. Bardolph and Herman Friedman. Judgment reversed.

Indictment for conspiracy to defraud trust company. Before GRAFF, P.J. specially presiding.

The opinion of the Supreme Court states the facts.

Verdict of guilty and judgment and sentence thereon. Defendant appealed to Superior Court, which affirmed the judgment of the court below. An appeal by defendant was allowed to the Supreme Court.

Errors assigned were the overruling of defendants' assignments of error and the entry of judgment.

The judgment of the court below is reversed and the defendant is discharged.

Charles B. Prichard, for appellant.

Earl T. Adair, with him Andrew T. Park, for appellee.

Before KEPHART, C.J., SCHAFFER, MAXEY, DREW, LINN, STERN and BARNES, JJ.

OPINION

MR. JUSTICE MAXEY:

Bardolph, the appellant, and his co-defendant in the court below, Friedman, were convicted under Section 128 of the Criminal Code of March 31, 1860, P.L. 382 (18 P.S. sec. 2451) of conspiracy to cheat and defraud the Franklin Savings & Trust Company, of Pittsburgh, and they were sentenced to imprisonment of from one to two years. Defendants appealed unsuccessfully to the Superior Court: 123 Pa.Super. 34, 186 A. 421. Leave to appeal to this court was thereupon granted. Since perfecting this appeal, Friedman died; his appeal has been abated; only the appeal of Bardolph remains for determination.

The evidence of conspiracy was circumstantial. The Commonwealth sought to show inferentially from certain banking transactions in which both defendants were involved that a conspiracy existed between them.

Appellant contends that the evidence did not amount to legal proof of conspiracy and that a verdict of acquittal should have been directed. The Commonwealth's case rested on the testimony of officials of the bank and others who dealt with it, and on the results of an audit of its affairs conducted by the Department of Banking after the bank failed and was taken over by the State authorities.

In 1928 appellant was treasurer of the Franklin Savings & Trust Company, J. M. Stoner, Jr., being president. Friedman was a mortgage broker who carried on his financial dealings through the bank, dealing only with Stoner. On July 26, 1928, the trust company made a loan to Friedman of $60,000, taking his note in that amount and as collateral a mortgage he owned for $80,000 and given by Louis Hendel as mortgagor. It was admitted at the trial that the books of the trust company do not reflect the transaction with strict accuracy. The mortgage register shows a debt of $80,000 and a credit of $20,000 in favor of Friedman. The mortgage was, moreover, made direct to the trust company, instead of being first in Friedman's name as mortgagee and by assignment in the name of the trust company as pledgee. Nevertheless, it was the understanding of all parties that Friedman owned the mortgage and had a $20,000 equity in it over and above the debt due the bank. This transaction was handled by Stoner, its president.

Appellant succeeded Stoner as president in January, 1929. Meanwhile payments of $2,000 a month had been made to the trust company by the mortgagor, as required by the mortgage. Ten such payments were made, the last on May 29, 1929, reducing the amount due thereon to $60,000, making Friedman's equity therein still $20,000. The Commonwealth conceded that up to this point appellant had nothing to do with the transaction, and hence the alleged conspiracy, if it came into being, had its birth subsequent to May, 1929. Thereafter no further payments were made on the mortgage and it became in default.

On July 11, 1929, the bank discounted another note of Friedman's for $50,000. The collateral securing it included other mortgages of $50,000 face value and the additional equity of $20,000 in the Hendel mortgage owned by Friedman. The validity of this transaction is not impugned, and it was not shown that appellant had anything to do with its negotiation.

About this time, or a little later in the summer of 1929, negotiations were opened between Friedman and The Pennsylvania Surety Corporation for the purchase by the latter of the Hendel mortgage still held by the trust company as collateral security. It appeared that the surety company had assumed obligations on Hendel's behalf without full disclosure by him of the fact that the mortgage, which was blanket in form, had been given to Friedman. The surety company, to protect its own interests, determined, first, to take steps to avoid its foreclosure and ultimately to buy it in. It knew that the mortgage was held by the trust company as collateral and would not be assigned until Friedman's debt had been paid. Nevertheless it had complete confidence in Friedman and all its negotiations were with him and none were with the trust company. There was no lack whatever of full disclosure by Friedman. The president of the surety company testified it had no contact with the trust company because it relied implicitly on Friedman both for the extension of the mortgage and the ultimate assignment.

The first step was an oral agreement between Friedman and the surety company, in August, 1929, that payment of the mortgage would not be demanded until September. For this the surety company paid Friedman $5,000. On September 5, 1929, a written agreement was signed between these parties. This recites the fact that the mortgage then stood in the name of the trust company, that a balance of $60,000 remained due on it, that it was in default, and that $5,000 had previously been paid to Friedman for an extension. The parties then agreed to a further extension to October 2, 1929, for an additional consideration of $5,000, and Friedman agreed to procure assignment of the mortgage to the surety company at any time prior to that date, for the sum of $50,000. It was understood that if the purchase was not consummated within the time stated the two sums of $5,000 each paid to Friedman were to be forfeited.

On October 3, 1929, the purchase had not been completed. Thereupon Friedman and the surety company entered into a second written agreement. By it the surety company released all right to a credit on account of the $10,000 previously paid and agreed to purchase the mortgage from Friedman for $56,000, of which $6,000 was to be paid on October 10th, $4,000 each month for eleven months, and a final payment on October 2, 1930, of $6,000, together with interest and taxes. Friedman agreed to retain control of the mortgage meanwhile and postpone proceedings for collection.

It may be noted that on September 4, 1929, the surety company gave a check to Friedman for $750, which he cashed and appropriated. What the nature of this payment was does not appear, but it was probably a bonus.

There was no evidence whatever to show any connection of appellant up to this point with the transaction just detailed, or even knowledge on his part that Friedman had consummated it.

The surety company, pursuant to its contract with Friedman, paid him by check the amounts called for by the agreement. The total amount paid Friedman by the surety company was approximately $69,000, including the original two payments of $5,000 each for extension of the mortgage. There was testimony by an auditor of the State Banking Department, who examined the records of the trust company after it was taken over by the department, that all this money passed through the bank. The disposition of part of it was shown; what became of the balance does not clearly appear.

The first payment under the agreement of purchase was $6,000, by check dated October 9, 1929. Friedman endorsed the check and cashed it, keeping $3,500 for himself as a bonus and remitting $2,500 to the trust company as a bonus. The monthly payments of $4,000 each and interest then began to be made. All except two of the checks were to Friedman's order and were endorsed by him in blank and turned over to appellant. Two of the checks were to the order of the Franklin Savings &amp Trust Company and were cashed by it. In each month, from November, 1929, to September, 1930, of the $4,000 plus interest which was paid, Friedman received a personal credit of $1,500 and interest, a total of $17,141.25. Beginning in January, 1930, appellant Bardolph received personal credits of the balance of the surety company's monthly payments in January, February, March, April and June, 1930, a total sum of $12,896.51. What became of the aggregate balance paid by the surety company was not shown; the auditor testified that $19,500 of these funds could not be traced. The mortgage register, setting forth credits on the Hendel mortgage transaction, showed payments thereon during this period of $2,500 each month from June to September, 1930, a total of $10,000. The note representing Friedman's additional collateral loan of $50,000 contained notations that $12,500 was paid on its reduction on November 18, 1929, and an additional $2,500 on December 17, 1929, reducing it to $35,000. These may be accounted for on the assumption that the $10,000 bonus originally received by Friedman for the extension of the mortgage, in the summer of 1929, had been paid by him to the bank to be credited on one or the other of the two loans, and that there were likewise credited $2,500 out of each of the $4,000 payments in November and December, 1929. Beginning in January, appellant took these credits into his own account, until June, 1930,...