People v. Pierce, Cr. 4765

• Decision Date: 29 April 1952
• Docket Number: Cr. 4765
• Citation: 243 P.2d 585,110 Cal.App.2d 598
• Court: California Court of Appeals Court of Appeals
• Parties: PEOPLE v. PIERCE et al.

Page 585

243 P.2d 585

110 Cal.App.2d 598

PEOPLE v. PIERCE et al.

Cr. 4765.

District Court of Appeal, Second District, Division 2, California.

April 29, 1952.

Hearing Denied May 29, 1952.

Daniel Schnabel and Royal M. Galvin, Beverly Hills, for appellants.

Edmund G. Brown, Atty. Gen., and Stanford D. Herlick, Deputy Atty. Gen., for respondent.

FOX, Justice.

The defendants Pierce and Morse were convicted, by the court sitting without a jury, on six counts of grand theft and one of conspiracy to commit those crimes. A motion in arrest of judgment and a motion for a new trial were made and denied. Judgment was not pronounced but proceedings were suspended and defendants were placed on probation. They have appealed from the order denying a new trial and have purportedly appealed from the order denying the motion in arrest of judgment, and also from the nonexistent judgment and sentence.

In 1946 one William M. Schultze, Jr., a distributor for a prefabricating company, was in need of a bookkeeper. He contacted Pierce and Morse, who operated a bookkeeping service. A short time later the three men discussed the prefabricated home business and decided to go into the manufacture and sale of such homes. Ultimately a partnership agreement was entered into and they started operations under the name 'Pre-Bilt Homes Company.' Three or four months later Schultz hired defendant Rhylick as office manager. Some time thereafter it appeared advantageous to form a construction concern to erect the houses and the Great Western and Southern Construction Company was formed and articles of incorporation were filed in which the three defendants, Schultze, and one Smedley were the incorporators. During the operation of these ventures a scarcity of gypsum products, specifically plaster and button board, was encountered. They began a search for gypsum deposits. Properties containing such deposits were located and leases taken thereon. One such lease covered a claim near Taft, California, the lease being executed by the five men. A corporation known as Gypsum, Inc., was formed by these same individuals to mine and process the gypsum. A grinding plant near Rosamond was purchased and attempts were made to convert it to the production of plaster. Smedley assisted as engineer to get the plant into operation but the resulting product was not of a consistent quality and only a small amount of usable material was produced. The gypsum used in this operation was not obtained from any of the leased mining claims but was shipped in from a firm in Nevada. Schultze was principally concerned with Pre-Bilt's lumber supply. Neither he nor Smedley became involved in the financing of the gypsum enterprise.

Defendants Rhylick, Pierce and Morse developed a plan to market that portion of the output which was not needed in the construction of their prefabricated houses. To that end contracts were entered into with several persons who were to be distributors, each to have his own territory. Each distributor was required to put up a specified amount of cash to be held as 'a bond of faithful performance.' Gypsum, Inc., failed and went into bankruptcy. The money thus placed with Gypsum, Inc., was neither returned nor repaid. The defendants are charged with the theft of those respective deposits.

The first grand theft count (Count 3) involves the transaction with Charles F. Hoffar, who was a dealer for the Pre-Bilt Homes Company. He was contacted by Pierce in November, 1946, and was told about the shortage of plaster. Pierce explained that defendants were entering this field and offered him a distributorship; he was told that he could obtain all the plaster he wanted up to 5,000 bags a month, but that a bond for faithful performance of the contract would be required. Hoffar thought the premium on such a bond would be about $30. He also talked to Rhylick about the proposal. The next day Pierce called Hoffar in and showed him a form contract and told him that he 'would have to put in a $5,000 cash surety instead of a bond.' Hoffar was surprised at the cash requirement and replied that $5,000 was a lot of money to put up. He was informed his money was to be put into a bank or reserve and not used; that he was to get it back at any time after giving a thirty-day written notice. While he knew he was to be paid four percent interest, he did not intend to invest the money and he did not know defendants intended to use the money in the business. He was also told his money was to go into a reserve so that if he did not pay for the plaster delivered to him 'they could take the money out of my $5,000 * * *.' No discussion was had as to where the defendants would deposit the money. Hoffar later delivered his check for $5,000 to Pierce, payable to Gypsum, Inc., in accordance with Pierce's instructions. It was on this occasion that Hoffar signed the standard distributor contract which had been prepared by defendants. It was signed by Pierce on behalf of Gypsum, Inc. It contained, among others, the following provision: 'It is further agreed that the party of the second part [the distributor] shall place with the party of the first part [Gypsum, Inc.] $5,000, to be held by said party as a bond of faithful performance; said amount shall draw interest at the rate of four per cent (4%) per annum, and shall be returnable to the party of the second part thirty days after the expiration of this agreement.' The contract was to remain in effect until one of the parties gave a ninety-day written notice of cancellation, provided, however, the company could cancel it on seven days' notice in the event Hoffar committed certain specific acts. Being unable to get any useable plaster, Hoffar asked Pierce if he could get his money back and was told he could but it was not forthcoming. He then made demand upon each of the defendants for its return but to no avail. Rhylick entered a plea of guilty to this count.

The transaction with Mr. Griffin and Mr. Kuebler of the Palomar Lumber Company is the basis for count four. They were told by Rhylick that it would be necessary to post a deposit as a bond to be held for faithful performance on their part in ordering plaster and button board, and it would be returned according to the terms of the contract. Rhylick further stated 'it would be kept in trust as a deposit.' The contract, after certain revisions, was signed by Pierce and Rhylick for Gypsum, Inc. The lumber company made the $5,000 deposit. Shortly thereafter Griffin ordered ten carloads of plaster products but none was delivered. Demand was then made upon the company to refund the deposit of $5,000. The money was never returned.

The Berry deal is the foundation of the fifth count. He was told by Rhylick that if he signed the contract he would get certain quantities of hard wall and button board. It would be necessary, however, for him to put up $5,000 'to be held as a bond' to insure performance. He signed the contract and delivered his check for $5,000. Pierce and Rhylick signed for Gypsum, Inc. Berry knew he was to receive four percent on the money but he was not interested in that feature of the transaction. He wanted to obtain material. From reading the contract it was his understanding that his specific $5,000 would be returned to him. Mrs. Berry questioned the necessity of depositing $5,000 cash as a bond and asked Rhylick 'Why can't we put it in escrow and trust if it is just like a bond, you know, performance bond'? He refused to consider such an arrangement. After receiving 100 sacks of plaster that were unusable Berry demanded the return of his $5,000, or, if the defendants were unable to perform, he was willing to take a quantity of lumber or a house. At this, Pierce became angry, tore off his tie, and declared, 'Give us time, give us time, you are trying to pin something on me.' Morse told Berry it was impossible to give him any lumber or a house.

The Brunson and Bunch transaction forms the basis of Count 6. This firm was buying and selling building materials with emphasis on plaster, button board and nails. Bunch was told by Rhylick 'They required a cash bond to be put up' to guarantee their acceptance of plaster for which the firm would be billed on an open account. The firm's check for $10,000 was delivered and the contract signed on January 8. Deliveries were promised by February 1st, but none was forthcoming. Bunch and his partner took a trip to the plant; they discovered some plaster had been produced but it was not satisfactory because it would not 'jell properly.' Pierce explained there had been a mixup and they were trying a new process. He then approached Bunch with an offer of an exclusive distributorship of button board in exchange for an investment of $56,000 to complete the work of the plant. As a result another agreement was executed on February 28, 1947. The $56,000 included the $10,000 deposit originally made. The firm of Brunson and Bunch was given security in the form of a promissory note in the sum of $56,000 with an assignment of 40 percent of the shares of stock in Gypsum, Inc. This agreement provided in part as follows: 'That the distributors [Brunson and Bunch] shall loan and pay to Gypsum, Inc., a corporation, or cause to be loaned and paid to Gypsum, Inc., inclusive of the said sum of $10,000 * * * the total sum of $56,000 * * * and Gypsum, Inc., agrees to repay $56,000 on demand * * * with interest at * * * four percent per annum * * * and upon receipt of said $56,000 Gypsum, Inc., * * * shall make, execute and deliver to said W. B. Brunson and Deon Bunch, copartners, * * * as evidence of said indebtedness, its promissory note for said sum of $56,000 * * *.' Bunch later took over the operation of the company for a period of approximately 45 days. The attempt to produce plaster and button board was not successful and the company went into bankruptcy in September, 1947, and operations came to a close.

The Plunkett transaction is Count 7....