Harrison v. United States

Decision Date03 December 1912
Docket Number2,220,2,221.
Citation200 F. 662
CourtU.S. Court of Appeals — Sixth Circuit

[Copyrighted Material Omitted]

W. Knox Haynes, of Chicago, Ill., John E. Bruce, of Cincinnati, Ohio and John J. Lentz, of Columbus, Ohio, for plaintiff in error.

Sherman T. McPherson, U.S. Atty., and Edward P. Moulinier, Asst. U.S Atty., both of Cincinnati, Ohio, for the United States.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

DENISON Circuit Judge.

Harrison (respondent below) was engaged in manufacturing and selling, at Cincinnati, various household articles. The business was of large volume and long standing. Among the articles so being manufactured and sold, in the spring of 1910, were a vacuum cleaning device known as the 'New Home Vacuum Cleaner,' and a washing machine called the 'Easy Way Washer.' Sales of these were promoted by sending through the mails advertisements and correspondence. In December, 1910, Harrison was prosecuted under two separate indictments for using the mails in a scheme or artifice to defraud, contrary to section 215 of the Criminal Code (R.S. Sec. 5480 (U. S. Comp. St. 1901, p. 3696)). One indictment had reference to the New Home Vacuum Cleaner; the other to the Easy Way Washer. As to the vacuum cleaner, it was alleged that the scheme was formed April 20, 1910, and that the forbidden use of the mails was from April 20th to July 27th; as to the washer, that the formation of the scheme was in December, 1909, and the use of the mails on July 13 and July 21, 1910. Respondent demurred to each indictment, the demurrers were overruled, the indictments were consolidated, and respondent tried upon his pleas of not guilty. He was convicted and sentenced under each indictment, and brings these writs of error.

Judge Sanborn, speaking for the Circuit Court of Appeals of the Eighth Circuit (Union Pacific Coal Co. v. United States, 173 F. 737, 740, 97 C.C.A. 578, 581), has recently said:

'Where all the substantial evidence is as consistent with innocence as with guilt, it is the duty of the appellate court to reverse a judgment of conviction.' In Clyatt v. United States, 197 U.S. 207, 222, 25 Sup.Ct. 429, 433 (49 L.Ed. 726), the conviction was reversed for lack of essential evidence, and Mr. Justice Brewer said:
'It is the imperative duty of a court to see that all the elements of (the alleged) crime are proved, or at least that testimony is offered which justifies a jury in finding those elements. Only in the exact administration of the law will justice in the long run be done, and the confidence of the public in such administration be maintained.'

We have reviewed this case in the light of the settled rules indicated by the above quotations, and we have reached the conclusion that there was, as to one of the indictments (the vacuum cleaner case), no sufficient evidence of guilt to justify respondent's conviction, and that it was error not to instruct, as he requested, a verdict of acquittal, and that whether the other indictment (the washer case) is governed by the same considerations depends on special reasons, which apparently were not determined by the jury. We are naturally reluctant thus to dispose of a prosecution which has occupied so much of the time and attention of a court and jury, and we have held the case for a repeated consideration of everything urged against the respondent; but we are confirmed in our conclusion. To determine its rightfulness, we have endeavored to ascertain the controlling rules of law, and have very carefully analyzed the mass of detailed, though not complicated, facts shown by the record.

The statute makes it a crime-- a felony-- to use the mails in promoting a 'scheme to defraud.' This statute has received consideration, definition, and application in a great number of decided cases-- among others, by the Supreme Court in Durland v. U.S., 161 U.S. 306, 16 Sup.Ct. 508, 40 L.Ed. 709, and U.S. v. Stever, 222 U.S. 167, 32 Sup.Ct. 51, 56 L.Ed. 145, and by this court in the Cases of Milby, 109 F. 638, 48 C.C.A. 574, Horman, 116 F. 350, 53 C.C.A. 570, O'Hara, 129 F. 551, 64 C.C.A. 81, Bartholomew, 177 F. 902, 101 C.C.A. 182, and Foster, 178 F. 165, 101 C.C.A. 485. It is by the decisions settled, not as an all-inclusive definition, but as one sufficient for the purposes of this case, that the statutory 'scheme to defraud' may be found in any plan to get the money or property of others by deceiving them as to the substantial identity of the thing which they are to receive in exchange; and this deception may, of course, be by implication as well as by express words. On the other hand, the 'scheme' cannot be found in any mere expression of honest opinion as to quality or as to future performance. There must be the underlying intent to defraud. Rudd v. U.S. (C.C.A. 8) 173 F. 912, 97 C.C.A. 462; Brown v. U.S. (C.C.A. 8) 146 F. 219, 76 C.C.A. 577. It is true that the Durland Case contemplates as within the statute 'suggestions and opinions as to the future'; but necessary limitations on a too broad construction of this language are indicated in the McAnnulty Case, 187 U.S. 94, 23 Sup.Ct. 33, 47 L.Ed. 90.

As it arises in the present case, the question is: When does the not uncommon exaggeration of advertising become sufficient evidence of an intent to defraud? Can a business man, selling an article of merit and of value and at a fair price, be convicted of a scheme to defraud, because his advertising overstates the capacity and usefulness of the article? If so, where is the line to be drawn? And this brings us to the further question: How far are United States courts and juries to become censors of the advertising of manufacturers or dealers? This question stands out for answer, because nearly all business is now aided by advertisements passing through the mails, and on every hand we see claims of capacity, performance, and results which we know cannot stand cross-examination.

On what we think an exhaustive review of all the reported cases arising under this statute, we do not find any one which seems, on its face, to be of the class we have mentioned-- exaggerated claims of merits in articles of inherent utility-- unless it is Faulkner v. U.S., 157 F. 840, 85 C.C.A. 204, in which the Circuit Court of Appeals in the Fifth Circuit reversed a conviction because based merely on exaggerated advertising. The subject is also considered by Judge Severens, then District Judge, who said, in U.S. v. Staples (D.C.) 45 F. 195, 198:

'Parties who have anything to sell have the habit of puffing their wares, and we are all familiar with the fact that it is a very prevalent thing in the course of business to exaggerate the merits of goods people have to sell, and within any proper reasonable bounds such a practice is not criminal. It must amount to some substantial deception, in order to be subject to cognizance by the courts.'

The 'schemes' which have been punished have all smacked of the confidence game, of getting something for nothing, like selling worthless corporate stock (Wilson v. U.S. (C.C.A.) 2) 190 F. 427, 111 C.C.A. 231); running a bucket shop under the pretense of doing real trading (Foster v. U.S. (C.C.A. 6) 178 F. 165, 101 C.C.A. 485); running a 'fake' marriage bureau (Grey v. U.S. (C.C.A. 7) 172 F. 101, 96 C.C.A. 415); getting consignments without intent to remit (McConkey v. U.S. (C.C.A. 8) 171 F. 829, 96 C.C.A. 501); financial schemes impossible of performance (Walker v. U.S. (C.C.A. 9) 152 F. 111, 81 C.C.A. 329); and the like. Schemes like those discussed in Harris v. Rosenberger (C.C.A. 8) 145 F. 449, 76 C.C.A. 225, 13 L.R.A.(N.S.) 762, and in the cases it reviews, fall in this same class, because, though the representation affects quality or performance, it directly pertains to a fact or a plan inherent in the substantial identity-- the essential characteristics-- of the thing itself; and even though the original and underlying business is legitimate, the use being made of it is fraudulent.

In our review of the decisions, we have not overlooked the line of cases arising under sections 3929 and 4041 (U.S. Comp. St. 1901, pp. 2686, 2749), holding, in some cases that seem rather extreme, the right of the Postmaster General to be exempt from reversal by the courts in his conclusion that, in the given case, a 'scheme to defraud' exists. These sections and 5480 do employ the identical phrase, 'scheme to defraud,' and are, doubtless, in some degree in pari materia; but we cannot think that the same criterion is necessarily to be applied in each case. The Postmaster General, in the exercise of some measure of delegated authority, is administering a law which confers a privilege; for the conditions under which the mails may be used are wholly in the control of Congress. Public Clearing House v. Coyne, 194 U.S. 497, 506, 24 Sup.Ct. 789, 48 L.Ed. 1092. The courts and juries, under section 5480, administer a law creating a felony. A liberality of definition, to meet the Postmaster General's ideas of the policy of the law as applied to existing conditions, may be well within the limits of his discretion. A crime cannot be created by ex post facto liberality of definition, and Congress cannot have intended to obliterate the well-known distinction pointed out by Judge Severens. The Court of Appeals of the Eighth Circuit, in Erbaugh v. U.S., 173 F. 433, 435, 97 C.C.A. 663, 665, said:

'The offense denounced by section 5480 was created by that statute, the punishment it prescribes is severe, and a penal statute which creates and denounces a new offense should be strictly construed. The definition of the offense and the classification of the offenders are legislative, not judicial, functions; and one who was not, beyond reasonable

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