Johnson v. United States

• Citation: 95 F.2d 813
• Decision Date: 05 April 1938
• Docket Number: No. 4271.,4271.
• Parties: JOHNSON v. UNITED STATES.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

95 F.2d 813 (1938)

JOHNSON v. UNITED STATES.

No. 4271.

Circuit Court of Appeals, Fourth Circuit.

April 5, 1938.

John H. Meek, of Huntington, W. Va. (J. B. Meek, of Huntington, W. Va., on the brief), for appellant.

Dan M. Jackson, Sp. Asst. to Atty. Gen., and William J. Connor, Sp. Atty., Department of Justice of Washington, D. C. (George I. Neal, U. S. Atty., of Huntington, W. Va., on the brief), for the United States.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

SOPER, Circuit Judge.

The defendant in the District Court was found guilty upon the first count and not guilty upon the remaining five counts of an indictment wherein he was charged with willful misapplication of moneys of the Point Pleasant National Bank in Point Pleasant, W. Va., a member of the Federal Reserve System, while occupying the position of president and director of the bank, in violation of section 592 of title 12 U.S.C.A. He assigns as error the overruling of a demurrer to count 1 of the indictment and also certain rulings of the court upon the sufficiency of the evidence to support the verdict, upon objections to certain testimony offered by the United States, and upon certain requests for instructions to the jury.

The sufficiency of the first count of the indictment was challenged by a demurrer and by motion in arrest of judgment and the question raised is of importance in the case. It was charged in substance that the defendant was president and director of the bank, and, while acting as such, did unlawfully, willfully, knowingly, fraudulently, and feloniously, without the knowledge or consent of the bank, and with intent to injure and defraud it, misapply its moneys and funds to the amount of $600 and convert them to his own use with intent to permanently deprive the bank of the money. The means whereby this misapplication was effected was described in the following terms: "That said wilful misapplication was consummated by the said defendant, Howard S. Johnson, on September 30, 1935, crediting to his personal checking account in the said banking association and member bank, the sum of Six Hundred Dollars ($600.00), which said sum was the proceeds of a note of one Floyd Stover discounted at said banking association and member bank, and the said note was carried in cash items from September 30, 1935, until December 31, 1935, which was not approved by the Board of Directors, and has not been approved by said Board of Directors up to May 1, 1936, said funds and moneys being then and there used and misapplied by the defendant, Howard S. Johnson, to eliminate an overdraft that the said defendant had made in his personal checking account, said crediting to his said personal checking account of the said sum of Six Hundred Dollars ($600.00) said defendant then and there well knew was a misapplication of said sum of money and that said promissory note being the individual obligation of Floyd Stover and not the obligation of Howard S. Johnson, President as aforesaid; contrary to the form of the statute, section 592, Title 12 of the United States Code Annotated and against the peace and dignity of the United States."

Upon an examination of this language, certain questions at once arise in the reader's mind. (a) By whom and by what authority was the note discounted? It is charged only that it was "discounted at said banking association and member bank." The statute, 12 U.S.C.A. § 24(7), provides that a national banking association shall have power "to exercise by its board of directors or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes." The indictment does not state who exercised the power on this occasion. It does not even show with certainty that the note was not discounted by the board itself; for although it is clear that something was done "which was not approved by the Board of Directors," we cannot be sure that this clause applies to the crediting of $600 to the defendant's account, and to the discount of the note, and to the carrying of the note as a cash item, or only to the last of these actions. We may fairly conclude from the punctuation that it was only the last action that the board did not approve. The point, however, is unimportant, for there is nothing to show that the president or some other official of the bank did not have authority to discount paper or that the authority was not properly exercised by the proper persons with regard to the Stover note.

(b) Who caused the note to be carried as a cash item and why was it so carried? It is merely alleged that the note was carried as a cash item from September 30, 1935, when the money was credited to the defendant's account, until December 31, 1935, but it is not shown that this was done by the defendant or upon his orders or with his knowledge. Nor is it charged that the note was carried as a cash item for purposes of concealment or for any other improper purpose.

(c) Passing from these queries, we do not find a certain answer to the question whether the maker of the note was solvent when it was discounted, so as to justify the belief on the part of the agent of the bank who discounted it that it would be paid on maturity. On this point the indictment is silent, and hence it may fairly be inferred that the note was discounted in good faith in the usual course of business; and if this was true, and if the authority to discount notes had been delegated to officials of the bank, it was of no moment that at the time the transaction took place it had not received the approval of the board.

(d) It is said that the note was the individual obligation of Stover and not the obligation of the defendant; and we take this statement to mean that Stover and not the defendant was the maker of the note. But we are not told who was the payee of the note; and it may be that Stover gave the note in payment of a personal obligation due the defendant, who, in turn, had it discounted at the bank. This inference is entirely consistent with the allegations of the indictment.

(e) Did the defendant subsequently withdraw from the bank any part of the proceeds of the note which he caused to be credited to his account? The allegations of the indictment are silent on this point and so it may be that nothing of value was taken from the bank as a result of the transaction.

When we answer these queries in the manner most favorable to the defendant, as we are obliged to do under the established rule of criminal pleading, Fontana v. U. S., 8 Cir., 262 F. 283; United States v. Morse, D.C., 287 F. 906; Asgill v. United States, 4 Cir., 60 F.2d 780, we find that it is consistent with the indictment to say that the Stover note was discounted in good faith by a duly authorized agent of the bank; that Stover was solvent and the bank officials expected it to be paid upon maturity; that the note was payable to the defendant so that it was lawful and proper for him to make use of the proceeds; that they were credited upon an overdraft which had been lawfully made, and that subsequently the defendant made no improper withdrawals of money from the bank. Obviously such a statement imports no criminality on the part of the defendant; but it cannot be disregarded for this part of the count is essential to the validity of the indictment. The Supreme Court pointed out in United States v. Britton, 107 U.S. 655, 669, 2 S.Ct. 512, 27 L.Ed. 520, that the words "willfully misapplied" in the statute have no settled technical meaning and do not of themselves fully and clearly set forth every element of the offense charged; and hence it is not sufficient simply to aver that the defendant willfully misapplied the funds of the bank, but there must be additional averments to show how the misapplication took place and that it was unlawful.

We do not mean to suggest that all of the inferences favorable to the defendant outlined above are necessary to establish the invalidity of the indictment. It is settled by the decisions of the courts that the misapplication condemned by the statute is something more than an irregular or improper use of the bank's funds. Fraud must be found and some conversion of the funds of the bank to the use or gain of the person charged or of some person other than the bank. It is very clear that if Stover was financially able to pay the amount of the discounted note and it was discounted at the bank in that belief, with or without the approval of the board, and the note...