People v. Allan

Decision Date16 May 1933
Docket NumberJan. Term, 1933.,No. 134,134
Citation248 N.W. 589,263 Mich. 182
PartiesPEOPLE v. ALLAN.
CourtMichigan Supreme Court

OPINION TEXT STARTS HERE

Appeal from Recorder's Court of Detroit; W. McKay Skillman, Judge.

Robert M. Allan was convicted of willfully and feloniously embezzling, abstracting, and misapplying certain moneys, funds, credits, and property of a bank of which he was president, director, and agent, and of converting the same to his own use, with intent to injure and defraud the bank, and he appeals.

Affirmed by divided court.

Argued before the Entire Bench.Thomas F. Chawke and Arthur Schueler, both of Detroit, for appellant.

Patrick H. O'Brien, Atty. Gen., Philip H. Robinson, Asst. Atty. Gen., and Harry S. Toy, Pros. Atty., and Chester P. O'Hara and Edmund E. Shepherd, Asst. Pros. Attys., all of Detroit, for the People.

SHARPE, Justice.

The information filed in this case contained five counts. The last four were eliminated under the circumstances hereafter referred to. Conviction was had upon the first count and sentence imposed thereon, of which the defendant seeks review by appeal.

In this count it was charged that the defendant as president, director, and agent of the American State Bank, a Michigan banking corporation, did ‘willfully, and feloniously embezzle, abstract and misapply certain moneys, funds, credits and property’ of the said bank of the value of $106,565.39 and convert and same to his own use, with intent to injure and defraud the bank. This count was framed under section 11963, Comp. Laws 1929.

On arraignment the defendant refused to plead, and a plea of not guilty was entered by the court. A bill of particulars of the items making up the said sum of $106,565.39 was demanded and furnished.

The defendant was elected president of the American State Bank in January 1929. He had been in its employ since his graduation from the law department of the University of Michigan in 1910, and a director since 1924. He resigned the presidence on March 9, 1931. In May, 1929, there was discussion between the defendant and Frank H. Dohany, an attorney and one of the largest stockholders of the bank, but not then a director, about the wisdom of organizing a securities or investment company as a subsidiary of the back. A plan therefor was worked out by them and submitted to the board of directors on July 30, 1929, who adopted a resolution recommending that a special meeting of the stockholders be held on August 6, 1929, ‘for the purpose of voting upon an increase in the capital stock of this bank from $1,500,000, to $2,000,000, represented by 100,000 shares of $20 par value stock, and that $500,000 shall be added to the capital account and $750,000 to the surplus and undivided profits account.

‘Be it further resolved, that a securities company shall be formed known as the American-Detroit Company with a paid in capital of $375,000 represented by 100,000 shares of no par value stock and the beneficial interest of such stock to be held by the trustees for the benefit of the holders of bank stock, and that such beneficial interest shall be noted on each security of bank stock outstanding.

‘Be it further resolved, that the board of directors hereby recommend to the stockholders that the above unit of shares shall be sold to stockholders of record at the close of business August 6th, 1929, at $65 per unit share on the basis of the right to purchase one share of the new unit stock for every three shares of bank stock them outstanding.

‘And be it further resolved, that negotiable rights shall be issued and that the stockholders having the ownership of said rights shall pay for the new unit of shares on or before September 30th, 1929, at which date all rights will expire.’

The stockholders met on August 6th. The minutes show that the defendant explained the purpose of the meeting, after which the resolution adopted by the directors at their meeting on July 30th was read and adopted by the unanimous vote of the stock represented. The stockholders then, also by unanimous vote, appointed John J. Barlum, Charles P. Larned, Frank H. Dohany, and Fred J. McDonald ‘to represent them and enter into a contract with the Trustees regarding the holdings of the Stock of the American-Detroit Company for their beneficial interests,’ in accordance with a contract, a copy of which was set forth at length therein, to be executed between the stockholders above named for themselves and all the stockholders of the bank and Robert M. Allan, Gordon Fearnley, Joel Stockard, and George M. Welch, as trustees for themselves and all the stockholders of the American-Detroit Company. It provided:

(b) There shall be deposited with the Trustees and there shall remain on deposit with them as long as the Trust hereby created continues, the certificates of stock representing all of the shares of the present of future capital stock of the American-Detroit Company, except qualifying shares of Directors.

(c) The Trustees may unanimously agree with the consent of all parties to this contract at any time to increase or decrease the capital stock of the American Detroit Company; amend, extend or renew their several charters; and shall, during the life of this Trust have all the rights, power and privileges of absolute owners of all of the Stock of the American Detroit Company, except that all dividends shall be paid to the Committee representing the stockholders of the American State Bank of Detroit at date of payment.

(d) It is understood that each share of the American State Bank of Detroit Stock shall have a notation upon it showing the beneficial interest in one share of the American Detroit Company. The Trustees do hereby agree to hold the Stock as Trustees for the beneficial interest in ratio to the outstanding shares of the American State Bank of Detroit, as shown by the stock books of the American State Bank of Detroit.

(e) It is also agreed that no beneficial interest in the stock of the American Detroit Company shall be capable of being severed from the stock of the American State Bank of Detroit or its successor.

(f) Trustees do hereby agree that they will not transfer, assign or in any way hypothecate stock standing in their name, unless by written direction of all parties to this contract. It however being agreed that the successor of any party to this contract shall be termed as an original party for the purpose of transfer or disposal of stock held by the Trustees.’

The minutes of the meeting further show: ‘On motion by Frank H. Dohany, supported by Nelson J. Dessert, the action of the Committee in entering this General Depositary Agreement was ratified and an unanimous oral vote was cast.’

After this meeting Mr. Dohany was instructed to prepare the necessary instruments for the organization of the American-Detroit Company under the general corporation act. He did so, inserting the names of all of the directors of the bank, except two, as directors. He prepared a waiver of notice of the first meeting of the stockholders, and the proposed minutes thereof, and a suitable set of by-laws for adoption. He also prepared a petition to be executed by those who became officers of the company, to be forwarded to the treasurer of the state, on which to obtain a license to do business. He delivered all of these papers to his secretary, Julia Manly, with instructions to take them to Gordon Fearnley, the vice president of the bank. Miss Manly testified that when she went to the bank Mr. Fearnley was busy and she gave them to his secretary, Miss Clark, and told her they were for Mr. Fearnley. Miss Clark was not sworn as a witness. Mr. Fearnley testified that he had not ‘the slightest recollection of over having seen those papers'; that if he had received them he would have had them executed. He also testified that the first intimation he had that the company was not incorporated was when he and the defendant were so informed by a bank examiner in February, 1931. These papers were not thereafter accounted for in any way, and no proceedings were thereafter had relative to the organization of the American-Detroit Company.

The company, however, began to function, under the control of the defendant and Fearnley. The stockholders began paying in on their purchase of the additional stock. This was placed by Fearnley in an account headed ‘New Capital Account.’ On September 26, 1929, a deposit slip of the bank crediting the American-Detroit Company with $375,000, was made out. This had the O. K. of the defendant upon it, and by it this sum was deposited in the commercial account of the bank to the credit of the American-Detroit Company.

The American State Bank at that time had a number of branch banks in the city, and one of the purposes of the proposed organization of the American-Detroitt t Company was to secure stock in and give the bank a working interest, if not control, of other banks in the Detroit area outside the limits of the city. The first purchase so made was of 508 shares of stock in the Ulrich Savings Bank of Mt. Clemens. It was followed by similar purchases of stock in the Citizens' Savings Bank of Mt. Clemens, the First State Bank of East Detroit, and others. Loans made to the company therefore were approved by the board of directors. Fearnley testified that these stocks were taken in the name of the defendant or himself, or both of them, because of a ruling of the banking department that a corporation could not hold stock in a bank and that ‘the certificates were endorsed over and left in the files as property of the American-Detroit Company.’

About November 5, 1929, a deal was consummated by the defendant and Fearnley by which the stock of the Guaranty State Bank of Detroit was taken over by the American State Bank and the purchase ratified at special meetings of stockholders held for that purpose in January, 1930. Under the deal as made, the stockholders in the Guaranty Bank acquired one and one-quarter shares of stock in the American State...

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4 cases
  • People v. Wilkins
    • United States
    • Court of Appeal of Michigan — District of US
    • April 3, 1978
    ...(1936); People v. Hopper, 274 Mich. 418, 264 N.W. 849 (1936), People v. Stuart, 274 Mich. 246, 264 N.W. 359 (1936); People v. Allan, 263 Mich. 182, 248 N.W. 589 (1933); People v. Kolowich, 262 Mich. 137, 247 N.W. 133 (1933); People v. Dixon, 259 Mich. 229, 242 N.W. 896 (1932); People v. Arm......
  • People v. Hall
    • United States
    • Court of Appeal of Michigan — District of US
    • June 5, 1978
    ...and the people ought not to be compelled to elect.' " People v. Cabassa, supra at 545, 229 N.W. at 443. See also People v. Allan, 263 Mich. 182, 201-202, 248 N.W. 589 (1933); People v. Andrus, 331 Mich. 535, 540-541, 50 N.W.2d 310 (1951); People v. Loncar, 4 Mich.App. 281, 287, 144 N.W.2d 8......
  • Sima v. Wright, 23.
    • United States
    • Michigan Supreme Court
    • September 18, 1934
    ...the attention of the court at the time it is not here for review. People v. Mulvaney, 171 Mich. 272, 277, 137 N. W. 155;People v. Allan, 263 Mich. 182, 206, 248 N. W. 589. In spite of frequent warning by the court that the practice was hazardous, plaintiff's counsel tried the case in revers......
  • Dalby v. Kalahar, 7857.
    • United States
    • U.S. Court of Appeals — Sixth Circuit
    • September 18, 1939
    ...Bank of Mt. Clemens. His endeavors were not entirely successful, and he was later indicted, tried and convicted. See People v. Allan, 263 Mich. 182, 248 N.W. 589. At this time Allan was regarded as very wealthy, and exerted considerable influence in Detroit banking circles. By the latter pa......

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