People v. Schmidt

Decision Date27 December 1956
Docket NumberCr. 5624
Citation305 P.2d 215,147 Cal.App.2d 222
CourtCalifornia Court of Appeals Court of Appeals
PartiesThe PEOPLE of the State of California, Plaintiff and Respondent, v. Kenneth P. SCHMIDT, Defendant and Appellant.

Morris Lavine, Los Angeles, for appellant.

Edmund G. Brown, Atty. Gen., Norman H. Sokolow, Deputy Atty. Gen., S. Ernest Roll, Dist. Atty., of Los Angeles County, Robert Charles Lutz, Deputy Dist. Atty., Los Angeles, for respondent.

FOURT, Justice.

This is an appeal by the defendant from the judgment of conviction and the order denying a motion for a new trial.

In an information, the defendant was charged with fifteen counts of grand theft and with two counts of violating the Corporation Code. The defendant pleaded not guilty and the matter proceeded to trial with a jury, which found him guilty of grand theft as charged in counts V, VI, VII, VIII and XII, and not guilty as to all other counts.

Count V charged that the defendant took the sum of $10,330.88, the property of Mutual Savings and Loan Association, a corporation (hereinafter referred to as 'Mutual'), on or about January 22, 1953; count VI charged that the defendant took the sum of $6,000, the property of Kenneth P. Schmidt Builders, Inc., a corporation, and Southwest Savings and Loan Association, a corporation (hereinafter referred to as 'Southwest'), on or about February 25, 1953; count VII charged that the defendant took the sum of $5,132.44, the property of Kenneth P. Schmidt Builders, Inc., a corporation, and Mutual, on or about February 24, 1953; count VIII charged that the defendant took the sum of $4,762.25, the property of Mutual, on or about March 6, 1953; count XII charged that the defendant took the sum of $3,150, the property of Kenneth P. Schmidt Builders, Inc., a corporation, on or about March 6, 1953.

A resume of the facts is as follows: Kenneth P. Schmidt Builders, Inc., hereinafter referred to as 'the Corporation', was incorporated in California in 1947. The defendant was president of the Corporation from its inception to July, 1953, at or about which time it went into involuntary bankruptcy. There were various other officers of the Corporation from time to time, among them being Lucille Clark, who was a vice-president and also a secretary to the defendant, Stanley Schmidt as secretary-treasurer, and after January 5, 1953, Kenneth Bohard as secretary-treasurer. From 1947 to April 30, 1953, the defendant was never a licensed contractor in California. However, the Corporation was licensed with Bohard and Stanley Schmidt, a brother of the defendant, as the responsible managing employees during the period July, 1952 to July, 1953. The Corporation had a minute book and stock transfer book, although neither was produced at the trial. There was a conflict in the testimony as to the ownership of the stock, the defendant stating that it was all owned by him personally, and at the same time the books of the Corporation indicated that the defendant owned about 85 per cent of the stock, and further there was testimony that Stanley Schmidt was an owner of stock in the Corporation at the outset of the building projects of the Corporation in 1952. Early in 1952 the Corporation prepared to construct seventy-seven houses in tract 17209 in the city of Monterey Park, California. The defendant conducted negotiations for the Corporation with Mutual and Southwest. On July 1, 1952 the Corporation entered into an agreement with Mutual in which the latter was to loan to the Corporation money for the construction of dwellings on each of twenty lots in tract 17209. On August 15, 1952, the Corporation, entered into agreements with Southwest wherein the remaining fifty-seven houses in tract 17209 were to be financed by Southwest. Each of the agreements as between Southwest and the Corporation contained a trust clause which read in part as follows:

'* * * The undersigned, and each of them agree that all funds received hereunder are received in trust for the purpose of paying in full all contractors and/or material men and/or laborers (other than the undersigned) then or theretofore engaged in said construction; and that the undersigned shall not have any beneficial interest in said funds unless and until said purpose has been fulfilled.'

On April 18, 1952, a bank account was opened for the Corporation by corporate resolution of April 14, 1952, at the Monterey Park branch of the Bank of America. Dealings and transactions in regard to matters having to do with tract 17209 were in the name of the Corporation. Contracts were signed by the defendant in his corporate capacity and dealings were in the corporate name with the house buyers in tract 17209, and with material and labor contractors. Accounts in the books of the Corporation showed that there was $59,888.77, which was received as payments from house buyers which was used by the Corporation for general expenses, including personal expenses of the defendant, and which sums were not placed in escrow. The defendant, acting for the Corporation, bought the land (tract 17209) from the Security Development Company for $89,600, but executed a corporate note in that sum for the purchase price. The note was to be repaid at the rate of $1,500 from an escrow on each lot as it was sold.

The check records of the Corporation and other exhibits disclose that there were various expenditures on a personal residence of the defendant in Pasadena, and such checks were posted to the general ledger account of the Corporation. The personal residence of the defendant was never an asset of the Corporation before May 22, 1953, at which time it was deeded to the Corporation. Before that time, namely on April 1, 1953, the defendant had sought to divest himself of any interest he might have had in the house by executing a grant deed of his right, title and interest to his wife, Mary W. Schmidt. There were expenditures of large sums of Corporation funds on the yacht Hilaria, which was owned by the Harrison Finance Company and the defendant as an individual, and not by the Corporation. A race horse, Pusan, was carried on the books of the Corporation, having been purchased with $4,000 of corporate moneys, and various expenditures were made on the race horse from corporate funds. No money came into the Corporation from activities of the horse with the exception of a cash deposit by the defendant in December of 1952, which apparently was the winnings, or a part of such, from a wager made on the horse when it ran at the Tanforan Race Track.

There is no contention that there were any corporate resolutions authorizing the purchase of a race horse, expenditures thereon, expenditures on a yacht, expenditures for living expenses, nor for a personal residence for the defendant, and expenditures thereon.

The funds received by the Corporation from Mutual and from Southwest were to be used solely for the construction of houses and not for preliminary expenses nor personal expense, and the proceeds of these loans were set up in the corporate books as funds held in trust.

The ledger sheets and deposit slips of the corporate bank account showed a pattern of expenditures, and considered with the books of the Corporation, showed that the books accurately reflect the business of the Corporation as to deposits and withdrawals of corporate funds, with the exception of some defalcations on the part of the defendant where information was kept from the employee of the Corporation charged with making entries in the books.

During the period from January 22, 1953, to March 6, 1953, the defendant made withdrawals from the corporate account for personal expenses in the amount of about $45,000. These consisted of expenditures on the yacht Hilaria, expenditures on the personal residence of the defendant, cash withdrawals, expenses of race horses, and living expenses, as well as the sum of $5,132.44, as charged in count VII, and $3,150, as charged in count XII, which sums were never deposited in the Corporation account and no information was given to the employee of the Corporation charged with making entries in the corporate books.

The defendant was fully aware that the Corporation was unable to meet its bills for material, labor and construction costs on tract 17209, and particularly the bills and debts in respect to the lots on which funds were advanced by the loan company.

As to count V the evidence shows that the loan from Mutual to the Corporation of July 1, 1952, included lots 48 and 51 through 57 of tract 17209, and that in accordance with the contract and in reliance upon the representations by the defendant to Mutual that all bills were paid for construction and labor on the lots above set forth, a check was issued by Mutual to the Corporation for $10,330.88, and the funds were received by the Corporation. The representations so made by the defendant were false, as shown by the books of the Corporation as of January 22, 1953, and the funds were not used for the purposes for which they were paid to the Corporation by Mutual, but were used by the defendant for his own purposes as hereinafter related.

As to counts VI and VII, the evidence showed that Southwest had agreed to loan to the Corporation about $372,000, in accordance with the agreement of August 15, 1952. In keeping with the trust clause an advance to the Corporation was made of such trust moneys by Southwest in the sum of $20,000, on February 25, 1953. This sum was deposited in the Corporation account at the Monterey Park branch of the Bank of America on February 25, 1953, and the defendant, on the same day, received $6,000 cash from the corporate bank account on a counter-receipt, and that money was paid from the trust moneys of Southwest. The $20,000 would not have been paid to the Corporation by Southwest if it had been known that the money would not be used for payment of bills on the particular lots....

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24 cases
  • People v. Smith
    • United States
    • California Court of Appeals Court of Appeals
    • May 17, 1984
    ...the beneficial owner of a corporation employs its funds or property for his own purposes, there can be no embezzlement. People v. Schmidt (1956) 147 Cal.App.2d 222, states at page 229, 305 P.2d " '... Any diversion of funds held in trust constitutes embezzlement whether there is direct pers......
  • State v. McCormick, 2
    • United States
    • Arizona Court of Appeals
    • June 18, 1968
    ...distinctions resorted to by the Oregon court. More acceptable to us is the reasoning of the California decision of People v. Schmidt, 147 Cal.App.2d 222, 305 P.2d 215 (1957), holding that funds on deposit in the bank which could be paid out by checks signed by a corporate officer were suffi......
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    ...former § 1963, subd. 20; cf. Evid.Code, § 1105; Hamilton v. Abadjian (1947) 30 Cal.2d 49, 52, 179 P.2d 804; People v. Schmidt (1956) 147 Cal.App.2d 222, 232, 305 P.2d 215; Lantz v. Stribling (1955) 130 Cal.App.2d 476, 482, 279 P.2d 112; People v. Fowzer (1956) 127 Cal.App.2d 742, 748, 274 P......
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    ...on the method by which the theft was committed. (Accord: People v. Theodore, 121 Cal.App.2d 17, 31, 262 P.2d 630; People v. Schmidt, 147 Cal.App.2d 222, 230--231, 305 P.2d 215; People v. Hodges, supra, 153 Cal.App.2d 788, 794, 315 P.2d 38.) It is sufficient if the instructions inform the ju......
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