People v. Parker

• Decision Date: 23 February 1934
• Docket Number: No. 21972.,21972.
• Citation: 355 Ill. 258,189 N.E. 352
• Parties: PEOPLE v. PARKER.
• Court: Illinois Supreme Court

355 Ill. 258

189 N.E. 352

PEOPLE

v.PARKER.

No. 21972.

Supreme Court of Illinois.

Feb. 23, 1934.

Error to Criminal Court, Cook County; James J. Kelly, Judge.

Harrison Parker was convicted of embezzlement, and he brings error.

Reversed.Louis N. Blumenthal and Charles Vlach, both of Chicago, for plaintiff in error.

Otto Kerner, Atty. Gen., Thomas J. Courtney, State's Atty., of Chicago, and J. J. Neiger, of Springfield (Edward E. Wilson and Grenville Beardsley, both of Chicago, of counsel), for the People.

HERRICK, Justice.

On the third day of January, 1931, the plaintiff in error was indicted in the criminal court of Cook county charged in the first count of the indictment with larceny as bailee, in the second count with embezzlement, and in the third count with larceny. A jury was waived and the cause tried before the court. At the conclusion of the case, the court excluded all evidence of alleged acts of embezzlement prior to January 27, 1928, except where connected up with the evidence of embezzlement subsequent to January 27, 1928. The state's attorney elected to stand on the embezzlement count. The court found the defendant guilty of the embezzlement of $100,000, as charged in the second count, and judgment was entered on such finding. The cause comes here on writ of error sued out of this court by the defendant.

The count upon which the defendant was found guilty charged that he, as agent in the employ of the North American Trust Company (formerly named Iroquois Trust Company), embezzled the sum of $349,000 which had been delivered to and had come into his possession and was in his care by virtue of such employment.

The record is voluminous, consisting of over 3,200 pages. It will serve no useful purpose to undertake to set out in this opinion all of the facts as disclosed by the evidence.

The case revolves about two corporations, one known as the Guaranteed Reserve System (hereinafter referred to as the Reserve System) and the other as the North American Trust Company, formerly the Iroquois Trust company (hereinafter referred to as the trust company). The Iroquois Trust Company was incorporated on the ninth day of May, 1921, with its principal office in Evanston, with a total capital stock of $50,000 common stock, consisting of 500 shares of the par value of $100. The defendant had no connection with the Iroquois Trust Company at the time of its organization. The original incorporators disposed of their stock in the company in the early part of 1926. On March 24, 1926, the capital stock of the trust company was increased to $250,000. On April 16, 1926, the capital structure was again changed, the capital being increased from $250,000 to $2,000,000, consisting of 20,000 shares of 6 per cent. cumulative preferred stock of the par value of $100 each, and 80,000 shares of common stock of no par value. This certificate of the increase was executed by George W. Sheehan as secretary. On May 4, 1927, the corporate purpose was amended and a certificate was duly filed as provided by law, stating the corporate objects of the trust company as follows: ‘To accept and execute trusts, to carry on a general trust company business in all its branches, and to buy, sell and otherwise deal in stocks, bonds, notes, mortgages and other securities.’ This certificate was signed by John J. Bailey, as vice president. On May 6, 1929, the corporate name of the Iroquois Trust Company was changed to North American Trust Company. The certificate of the change of the corporate name was also signed by Bailey, as vice president.

The activities of the trust company subsequent to April 15, 1926, seem to have been directed to a great extent to the sale of its capital stock, although some ‘trust funds' or ‘units' were sold. On April 15, 1926, the board of directors authorized the sale to the public of all unissued stock in units of 8 preferred shares and 12 common shares at the price of $1,100 per unit. The proceeds were directed to be credited on the company books, at the rate of $100 per share, to the preferred stock account, and at $5 per share to the common stock account, and the balance to the surplus account. This ratio in the units of common and preferred stock, however, was not maintained at all times down to the return of the indictment. Later the number of common shares per unit was reduced from time to time, until latterly only 6 shares of common stock were included in each unit sold, although the selling price of the units remained the same.

The Guaranteed Reserve System was incorporated under the laws of the state of Delaware on May 26, 1924. It was purely a personal service corporation, without capitalstock. The membership in the corporation was divided into two classes. The first class was composed of those individuals who should subscribe to the by-laws and who performed personal service in the administration of the corporate functions of the corporation. It was provided that this class of members should control the management of the company's affairs. The second class was composed of individuals, firms, or corporations who by contract with each other desired to avail themselves of the personal services furnished by the Reserve System in the devising of plans, the preparing of contracts, and the execution thereof. The original incorporators of the Reserve System were L. J. Lifka, George F. Ort, and M. P. Lake, all of Chicago. The defendant, Parker, apparently owned and controlled the Reserve System, and he apparently was the dominating factor in the trust company from the spring of 1926 through 1930. Sheehan became connected with the trust company in 1926. Parker was elected director of the trust company at the annual meeting of the stockholders on January 10, 1927, and resigned on June 4, 1927. He was never thereafter identified with the trust company as an officer, director, or otherwise until January 19, 1931, which was just twelve days before the return of the indictment in this case.

The Reserve System from its incorporation in 1924 until 1926 was exclusively engaged in perfecting plans for the raising of capital and for the sale of trust funds by trust companies. There was evidence tending to show that the Reserve System had spent $192,000 developing these plans. A part of the plans was copyrighted by the Reserve System. This plan was sold or transferred to the trust company on April 24, 1926, by written contract executed on that date by the trust company and the Reserve System. The contract provided that in consideration of the sale and transfer by the Reserve System to the trust company of the selling plan and copyright, the trust companywould pay the Reserve System or its agent $220 for each unit of stock sold by the trust company. The trust company agreed to pay out of the $220 per unit to the Reserve System the sum of $165 to salesmen and to pay for developing the sales literature. Paragraphs 8, 9, and 10 of said contract provided as follows:

‘VIII. The party of the first part [trust company] agrees to maintain on its books during the life of this agreement an account that shall be designated as the Guaranteed Reserve System account. The party of the first part agrees to credit the party of the second part [Reserve System] upon this account, from time to time, with the sum of $220 for each and every unit of stock sold, as hereinbefore provided, and also with the proceeds from the sale or conversion by the officers of the party of the first part of any securities owned or furnished by the party of the second part or its agents and deposited with the party of the first part as security for any moneys that may be advanced by the party of the first part to the party of the second part or its agents. This account will be debited with items presented by the party of the second part and approved by the officers of the party of the first part.

‘IX. Should the party of the first part debit or credit this account, or charge the party of the second part with any items whatsoever, either with or without the written consent or approval of the party of the second part or its agents, then, before final settlement of said account or the payment of any notes that may have been given by the party of the second part shall be made, the party of the second part or its agents may dispute and refuse to admit any such debits, credits or charges.

‘X. In event of a refusal of the party of the second part or its agents to admit any such items, such disputed item or items shall be submitted to a certified public accountant licensed to practice in the city of Chicago, Illinois, to be selected by the party of the first part and the party of the second part. Such certified public accountant to whom such disputed items shall be submitted shall determine whether or not such items were legitimate and whether or not such items should or should not have been debited or credited or charged, as the case may be, to said account of the party of the second part, or whether they should not have been charged to the party of the first part. The party of the first part and the party of the second part hereby agree that at this time it cannot be determined what items should finally be debited or credited to the account of Guaranteed Reserve System.’

Paragraph 11 provided that from any decision made by any certified public accountant, either party might within thirty days appeal for arbitration to any circuit judge or superior court judge of Cook county, Ill., or any master in chancery of the superior court or circuit court of Cook county, or to any former master in chancery of the superior or circuit court of Cook county selected by the parties to the contract.

The contract further provided that if the Reserve System or its agents from time to time might ask advances in anticipation of sales to be made or from the proceeds of securities sold or converted to its own account by the trust company, the trust company, before making any such...