Commonwealth v. Dow

• Citation: 217 Mass. 473,105 N.E. 995
• Parties: COMMONWEALTH v. DOW.
• Decision Date: 19 May 1914
• Court: United States State Supreme Judicial Court of Massachusetts

217 Mass. 473

105 N.E. 995

COMMONWEALTH v. DOW.

Supreme Judicial Court of Massachusetts, Suffolk.

May 19, 1914

COUNSEL

A. C Webber, of Boston, for the Commonwealth.

Frank Paul and Fred H. Williams, both of Boston, for defendant.

OPINION

RUGG C.J.

This is an indictment in 92 counts. The defendant was found guilty on 24 counts, each of which charged a violation of R. L. c. 208 § 62, with reference to different mining companies of which he was president and director. The material part of the statute is:

'An officer * * * of a corporation which is * * * doing business in this commonwealth * * * who fraudulently * * * appropriates the money or disposes of the rpoperty of such corporation, or fraudulently converts it shall be punished by imprisonment.'

These counts charged that the defendant, being president of one or the other of these corporations, 'did fraudulently appropriate and convert to his own use' a specified sum of its money. He was found not guilty upon the other counts, some of which charged him in the short counts, some of which charged him in the short statutory form with larceny same corporations.

The statute for infraction of which the defendant was found guilty never has been before this court for construction. It was enacted first by St. 1878, c. 274, substantially in the same words as now, so far as concerns this case. Its phraseology is general and comprehensive. It does not savor of the technicalities of ancient criminal law, but employs plain words in common use. It provides punishment for an officer, agent, clerk or servant of a corporation who fraudulently appropriates or converts its money or property. 'The term 'appropriate' is of the largest import.' Boston & Lowell Corp. v. Salem & Lowell Co., 2 Gray, 1, 35; People v. Lammerts, 164 N.Y. 137, 143, 58 N.E. 22. It is defined by lexicographers, 'to take to one's self in exclusion of others.' As used in this statute it embraces every made by which an officer or agent fraudulently or unlawfully obtains the property of the corporation.

There is nothing in the words of the statute, its history or the evil against which it appears to be directed, to indicate that there should be read into it any of the constricting limitations argued for by the defendant. He contends in effect that it was not intended to include larceny or obtaining of money by false pretenses, and is confined in its scope to embezzlement, and that it implies that the money or property appropriated or converted must be in the possession of the officer or agent. These contentions cannot be supported. To adopt them would be subversive of the manifest purpose of the act. It would be contrary to the trend of modern jurisprudence, which is away from the niceties of ancient criminal pleading and practice toward a simplicity and plainness, which affords to defendants every reasonable protection, while depriving them of the opportunity to profit at the expense of the general public from unward prosecuting officers. The scandal which formerly existed in the administration of justice arising from the fine distinctions between larceny, embezzlement and obtaining property by false pretenses has been described in Com. v. King, 202 Mass. 379, 388, 88 N.E. 454. It cannot be supposed that the statute in question, although enacted somewhat earlier than the simplification of criminal pleading act, was intended to perpetuate or increase confusion in this respect. It was aimed by its terms at fraudulent breaches of trust, by which a faithless corporate officer or agent took its estate. The natural meaning of its words leads to this result. This interpretation is confirmed by reference to the proceedings of the Senate, when the original statute was on its passage. It originated in an order for legislation to protect corporations against fraudulent issue or overissue of paper by officers or agents. But a proposed bill to this end was recommitted to the committee with instructions 'to report a bill covering embezzlement and breaches of trust.' Senate Journal 1878, pp. 364, 409, 419, 422, 436. It is apparent that the Legislature intended to accomplish something more than a punishment for embezzlement. The propriety of referring to such legislative history to illuminate a doubtful statute is established by Old South Ass'n v. Boston, 212 Mass. 299, 99 N.E. 235, and cases cited, and Lapina v. Williams, 232 U.S. 78, 90, 34 S.Ct. 196, 58 L.Ed. 515. Moreover, that such was the effect of the act follows from the fact that in 1878 there was ample law for the punishment of embezzlement from a corporation in Gen. St. c. 161, § 38. It cannot be presumed that a new statute duplicating an existing one was intended.

It is not necessary, nor is it attempted to give a complete exposition of this section of the statute. It is enough to say that it does not require previous possession of the money appropriated or converted by the officer. It is satisfied if there is any appropriation or conversion through any fraudulent means.

The defendant urges that the evidence did not warrant a finding that he was guilty of any crime. Broadly stated, the defendant's position at the trial was and now is that he became possessed of the property of these several corporations by borrowing it from them upon his note, and that the sum of his doings constituted only these simple and innocent transactions. His conduct was susceptible of this construction. But this was not its necessary complexion.

The contention of the commonwealth was that the defendant contrived the scheme of forming mining companies for the purpose of getting from the investing public large sums of money where he could control and use them in his stock speculations.

The evidence was extremely voluminous. No attempt will be made to state it at length. It was enough to say upon the direct testimony and its fair inferences in the aspect most adverse to the defendant, that there was ground for finding that he was the president, a director and the dominating person in all of these corporations, which were copper mining companies not yet producing ore. In two of those which he organized, he personally subscribed for substantially all the stock, except only such as was necessary for others to hold. Although it was stated in various instruments subscribed by the defendant and filed with public officers of Michigan, the state of the domicile of several of the corporations, that their capital stock upon organization was paid in cash, yet in fact it was not so paid, but was represented by the note of the defendant. The treasurer of all these corporations was a person who might have been found to have failed in the exercise of the individual and personal responsibilities inherent in his office, and to have been wholly under the domination of the defendant, whose directions as to the transfer to him of the money of the several corporations in exchange for the defendant's unsecured note were followed in every instance at once, without inquiry or question. One sentence from his testimony referring to the defendant expressed the relation between the two: 'He had the whole command of the business and I was to do what he told me.' He testified also: 'I was treasurer, under his orders.' Large sums of money were taken from the treasuries of the several corporations and handed to the defendant. The method was this: The defendant told the treasurer to make a check to his order for a specified amount, and at the same time make a note for the same amount payable to the corporation. The check was signed by the corporation by its treasurer and handed to the defendant, while his wholly unsecured promissory note was taken by the treasurer. According to the testimony of the defendant the total 'borrowings' amounted to something more than $1,000,000, of which about $250,000 was outstanding and unpaid when he went into bankruptcy. The total of the amounts charged in the counts upon which the defendant was found guilty were about $261,000. None of these exchanges of checks for notes were known to the directors of any of the corporations, nor in any way authorized by them or by the stockholders. Several statements were signed by the defendant to the effect that the amounts represented by his unsecured notes were cash in the treasuries of the corporations. The defendant falsely represented to the treasurer that a vote had been passed by some of the companies, constituting them or them with others a committee, to lend the funds of these corporations. In numerous instances the money which the defendant took was secured for the company's treasury contemporaneously by a company note discounted at some bank or trust company. In others, it was procured from assessments upon the stock represented in the call to be for development purposes. The treasurer was forbidden by the by-laws to disburse the moneys of the corporation except in accordance with the directions of the board of directors.

These, which might have been found to have been the facts, were sufficient to warrant the verdict of guilty.

The numerous false statements under oath that stock had been paid in cash, whereas the only thing in the treasury was the defendant's unsecured note, were significant of an evil purpose. An unsecured note is not cash. Pierce v. Bryant, 5 Allen, 91; Harvey-Watts Co. v. Worcester Umbrella Co., 193 Mass. 138, 78 N.E. 886.

The defendant was himself president and director and, in fact the financial manager of each corporation. It was his duty in that capacity jealously to guard its interests and be vigilant to see that its resources were conserved. If the treasurer was dealing with the funds contrary to the by-laws or without the authority of the directors, it was his duty to restrain him. To be...