People v. Kolowich

• Decision Date: 02 March 1933
• Docket Number: No. 196.,196.
• Citation: 247 N.W. 133,262 Mich. 137
• Parties: PEOPLE v. KOLOWICH.
• Court: Michigan Supreme Court

262 Mich. 137

247 N.W. 133

PEOPLE

v.KOLOWICH.

No. 196.

Supreme Court of Michigan.

March 2, 1933.

Appeal from Circuit Court, Wayne County; Homer Ferguson, Judge.

George J. Kolowich was convicted of embezzlement and felonious abstraction and misapplication of bank funds, and he appeals.

Conviction set aside, and new trial ordered.

Argued before the Entire Bench.

SHARPE, CLARK, and NORTH, JJ., dissenting.Payne & Payne, of Detroit (Albert McClatchey, of Detroit, of counsel), for appellant.

Paul W. Voorhies, Atty. Gen., and Harry S. Toy, Pros. Atty., Duncan C. McCrea and Edmund E. Shepherd, Asst. Pros. Attys., all of Detroit, for the People.

BUTZEL, Justice.

George J. Kolowich, of Hamtramck, Mich., was convicted of embezzlement, and the felonious abstraction and misapplication of bank funds, defined in section 66 of the General Banking Act (Act No. 66, Public Acts 1929; section 11963, C. L. 1929). The first count of the information charges that on the 15th day of May, 1930, defendant, as president, director, agent, servant, and employee of the State Bank of America of Hamtramck, Mich., came into possession of $82,933.58 of the bank's moneys, and that he fraudulently and feloniously embezzled it, etc. The second count, substantially like the first count, charges that he abstracted the money. The third count charges him with misapplication of the funds. All of the counts charge that he disposed of and converted to his own use the personal property of the value stated and that, without authority of the board of directors of the bank, he drew orders, bills of exchange, and drafts with intent to injure and defraud the bank, and that he made false entries in books, reports, and statements of the bank, with intent to deceive his fellow officers of the bank and the state bank examiner.

It is claimed that defendant's motion to quash the information should have been granted because the evidence taken on the examination was insufficient to sustain the charge. The testimony on the hearing appears in the record and was fufficient to justify holding the defendant for trial. Defendant claims further that he was entitled to a directed verdict and that the verdict was against the great weight of the evidence. For this reason, it is necessary to detail some of the facts.

Defendant occupied a prominent position both in public life and in financial circles. He had been very successful in the years previous to 1929 and had amassed a considerable fortune, represented by real estate, land contracts, stocks, etc. He had been actively engaged in the banking and real estate business, and at one time he, with several others, owned a private bank in Hamtramck, known as the Merchants' & Mechanics' Bank and herein referred to as the ‘private bank.’ His wife purchased the interest of those previously associated with him, so that he became virtually the sole owner and proprietor of the private bank, owing to the inability of a married woman to become a copartner of her husband. Just previous to its failure, the bank did a flourishing business and had many depositors, consisting principally of working men and trades people.

The State Bank of America of Hamtramck, Mich., was incorporated under the state banking laws with a capital of $100,000. Defendant owned 650 shares and his brother Adolph 100, so that together they held 75 per cent. of the stock. The board of directors consisted of defendant, his brother, and four others, three of whom owned only 10 shares apiece, and one held 25. The bank was supposedly run under the direction of the board, officers, and loan committee, with usual powers. One Willard Babcock was a director and the cashier. He had been advanced to this position after a short period in a less important capacity. Defendant, who was responsible for his employment, turned over to him without consideration 10 shares of stock so as to enable him to qualify as a director. Babcock testified that he never took instructions from any member of the board other than defendant while acting as cashier and director. They had frequent conferences and, during the fiscal month in which defendant is alleged to have committed the crimes charged, Babcock saw defendant daily at his private bank, discussing with him the affairs of the State Bank of America.

The business of the private bank was conducted by defendant with the assistance of John W. Kempisty, acting as cashier and manager. There were also a number of tellers, bookkeepers, messengers, etc. The private bank deposited its funds with the State Bank of America and also had a checking account with two Detroit banks. During the thirty days during which the alleged embezzlements, etc., took place, the private bank deposited over $500,000 with the State Bank of America, but its withdrawals far exceeded this amount. Defendant authorized Kempisty to sign drafts of the private bank on the State Bank of America. The drafts were printed with the words ‘President-Cashier’ appearing below the line reserved for the signature. When Kempisty signed the drafts, the word ‘President’ was stricken out. Due to his frequent absences from the private bank, Kempisty made a practice of signing blocks of 25 or more drafts in blank, leaving the space for the date, name of the payee, and amount, to be filled in by the tellers as funds were needed. When the demands of depositors were particularly heavy, and additional cash needed the bank spaces in the drafts would be filled in by a teller and the drafts sent over to the State Bank of America, where they would be honored and the cash brought back to the private bank.

During the thirty days following May 15, 1930, eleven drafts, signed by Kempisty and aggregating $82,933.58, were paid by the State Bank of America, though there were no funds to the credit of the private bank with which to pay them at the times they were presented. All of them, with the exception of one made payable to M. J. Meehan & Co., brokers, in the amount of $9,980, represented cash withdrawals by the private bank. During this thirty-day period, there was a run on the private bank by its depositors, so that there was an immediate need of funds to prevent the closing of the bank's doors. Defendant claims that he had no idea of the extent of the overdrafts, that there was no intention on his part to overdraw his account, and that he always had good reason to believe that he would have no difficulty in making good and overdrafts; that he was not guilty of any crime, even though he may have committed a misdemeanor as defined in section 11932, C. L. 1929. This section provides that any officer or employee of a bank who knowingly, willfully, and persistently overdraws his account, shall be guilty of a misdemeanor.

There is competent testimony showing that when these overdrafts reached the State Bank of America, where they were paid under orders given by Babcock, they were carried as cash items in order to avoid the appearance of the overdrafts on the books. Babcock claims he was acting under the express instructions of the defendant. The State Bank of America's records were falsified so as to make it appear that the overdrafts were cash on hand, consisting of a large number of bills of particular denominations, never actually in the possession of the bank. Defendant had previously issued overdrafts but had always taken care of them. He claims he did not know of the extent of the overdrafts until they had all been honored by the drawee bank. He alleges that he did not know of the practice of overdrawing. On June 16, 1930, when defendant's attention was called to the large amount of the overdrafts, he immediately attempted to secure a loan from a number of Detroit banks, where he had reason to believe that he had a large line of credit. The Detroit banks refused to come to his assistance, owing to the fact that his assets were not sufficiently liquid in nature. Without delay, he reported the condition of the bank and his overdrafts to the State Banking Commissioner. Defendant immediately turned over to the State Bank of America, with the consent of its board of directors, valuable real estate that apparently would have been more than ample security to protect the bank against loss, had it not been for bankruptcy proceedings in which Kolowich and his private bank were involved, with a resultant setting aside of the preference. The State Bank of America went into the hands of a receiver, and the prosecution of defendant followed.

There are many facts that tend to show a lack of criminal intent on the part of defendant in the entire transaction. However, Babcock's testimony that he was acting only under the instructions and directions of defendant; that he saw defendant daily during the time the money was being taken from the bank; that overdrafts were carried as cash items in accordance with instructions received by Babcock from defendant and transmitted by him to the teller; that he told defendant that overdrafts were being carried as cash items; that, according to additional testimony, defendant was at the private bank at least four hours each day while the moneys were being withdrawn from the state Bank of America; that at the very time in question, defendant was making heavy withdrawals by issuing drafts on the drawee bank for the payment of stock and bonds in which he was dealing, as well as many other facts-tend to overcome defendant's claims. There was sufficient testimony to justify the verdict of the jury. It was not against the great weight of the evidence.

Numerous other errors are assigned. Defendant contends that, even looking at his conduct in the most unfavorable light, he was only guilty of overdrawing. Defendant's acts are repeatedly referred to by the prosecution as ‘overdrafts.’ There is no question that this terminology is correct. However, securing the funds by overdraft is only the means that defendant is charged with having used in committing a much more serious...