Rouse v. Burnham, 342.

• Decision Date: 06 August 1931
• Docket Number: No. 342.,342.
• Parties: ROUSE et al. v. BURNHAM.
• Court: U.S. Court of Appeals — Tenth Circuit

51 F.2d 709 (1931)

ROUSE et al. v. BURNHAM.

No. 342.

Circuit Court of Appeals, Tenth Circuit.

August 6, 1931.

John S. Dean, of Topeka, Kan. (John S. Dean, Jr., Frazor T. Edmondson, and George W. Ball, all of Topeka, Kan., on the brief), for appellants.

Tinkham Veale, of Topeka, Kan., and Chas. L. Kagey, of Beloit, Kan. (Lloyd M. Kagey, of Beloit, Kan., on the brief), for appellee.

Before LEWIS, PHILLIPS, and McDERMOTT, Circuit Judges.

LEWIS, Circuit Judge.

Appellee sued appellants in the state district court of Kansas for malicious prosecution. That case went to trial. After all the evidence was introduced, plaintiff took a nonsuit and six months later instituted this suit on the same cause of action and recovered. The defendants then brought this appeal.

The action is bottomed on four complaints verified by appellant Mangus, wherein Burnham was charged with embezzlements of moneys of the Western Producers Oil and Gas, Inc., a corporation. Four complaints were filed with the Justice of the Peace of Goodland, Kansas, who issued warrants of arrest on which the sheriff arrested Burnham and put him in the county jail, where he remained for three hours and thirty-five minutes, when he gave bond for his appearance and was released. On two of the charges, Burnham had preliminary hearing and was let to bail for appearance in the district court. When these two charges came on for trial in the district court the county attorney dismissed them without trial, and he also dismissed the other two charges still pending in the justice of the peace court. Each of the four criminal charges is the basis of a separate cause of action, and the jury returned a verdict for the plaintiff on each count.

The criminal charges against Burnham came about in this way: The corporation, named above, needed about $10,000.00 to complete the drilling of a well for oil in the vicinity of Goodland; the three appellants and H. N. Slater, president of the corporation, owned about 75,000 shares in the corporation, and they entered into a written contract with Burnham in January, 1926, by which he was appointed sales agent of the corporation's treasury stock. He agreed to sell the stock to the amount thought to be needed to complete the well, and the other parties to the contract agreed to give Burnham, for his services, 12,500 shares out of their 75,000, and also to assign to him an oil lease on 160 acres. Burnham did not carry out his obligations of the contract.

There were four sales of shares of stock on which the four criminal charges were based, — one to Jane Van Donge on March 2, 1926, of 50 shares for $50.00, one to Lloyd G. De Lay on March 2, 1926, of 100 shares for $100.00, one to D. A. Laughlin on March 2, 1926, of 100 shares for $100.00, and one to Jane Van Donge on March 4, 1926, of 50 shares for $50.00. When each of the above sales was made Burnham gave the purchaser the corporation's receipt for the named purchase price of the shares, his name appearing thereon as salesman, except he testified that he did not make the sale of the 50 shares to Jane Van Donge on March 2d, that his wife made that sale; nevertheless, the receipt to Jane Van Donge for $50.00 given in the name of the company for those 50 shares has Burnham's name thereon as salesman, and is just like the receipts given when the other three sales were made. A day or so after the sales made on March 2d, new certificates were issued by the corporation, one to De Lay for 100 shares, one to Laughlin for 100 shares, and one to Jane Van Donge for 50 shares, and the corporation's records show that those reissues came out of shares privately owned by one Bane, and, of course, were not treasury stock. What has been said about sales to the parties named and other evidence relating to that subject, hereinafter to be noted, will answer the inquiry whether the plaintiff sustained the burden of showing that he was arrested and prosecuted without probable cause to believe him guilty. This, of course, is the main issue in an action of this kind. There must be malice also, but malice may be inferred from lack of probable cause, and lack of probable cause cannot be inferred from malice. There may be malice — even express — but, if there be probable cause for the arrest and prosecution, an action of this kind must fail. Stewart v. Sonneborn, 98 U. S. 187, 25 L. Ed. 116; Wheeler v. Nesbitt, 24 How. 544, 16 L. Ed. 765; Crescent City Live Stock Co. v. Butchers' Union, 120 U. S. 141, 7 S. Ct. 472, 30 L. Ed. 614; Director General v. Kastenbaum, 263 U. S. 25, 44 S. Ct. 52, 68 L. Ed. 146; Walton Trust Co. v. Taylor (C. C. A.) 2 F.(2d) 342, 345; Daniel v. Pappas (C. C. A.) 16 F.(2d) 880; Blakely v. Greene (C. C. A.) 24 F.(2d) 676; Chapman v. Anderson, 55 App. D. C. 165, 3 F.(2d) 336.

We now point out the additional evidence bearing on the question of probable cause. Burnham testified in this case that the stock sold to the three named persons, barring one of the sales to Jane Van Donge, was Bane's stock; that he was helping Bane at the request of Dawson to make those sales; that Bane got the money on each sale; that he, Burnham, gave the corporation's receipt to each purchaser because he had no other paper with him; and that soon thereafter he and Bane went to the corporation's office and told appellant Mangus and Mr. Heston (the latter being postmaster at Goodland and secretary of the corporation) about the transactions, and that he left with them carbon copies of the receipts he had given. Bane did not testify, nor were Jane Van Donge, De Lay, or Laughlin called as witnesses. Mangus and Heston testified, and each denied that the transactions were reported to them as testified to by Burnham or that copies of the receipts were brought to them or left with them by him. On cross examination, Burnham admitted that on the trial of the civil case in the state court he testified that he was alone in the transaction with De Lay and that he traded 100 shares of his own stock to De Lay for a seed drill, a plow, and a harrow, and thereupon he gave to De Lay the corporation's receipt for $100.00; that he had purchased the shares he traded to De Lay with his own money. It was also shown that Burnham testified in the case in the state court that the 100 shares sold to Laughlin were Burnham's stock, and that those shares were to be taken out of shares Slater had given him or out of 300 shares he had bought with his own money; that those shares were issued to him by Heston and Mangus, and he had paid the money to Heston. This testimony of Burnham in the state court is in direct conflict with his testimony here wherein he says he was helping Bane sell his (Bane's) stock; that Bane got the moneys named in the receipts. That conflicting testimony, however, does not go to the issue of probable cause. It was given after the arrests were made, but it does bear heavily on the credibility and weight to be given to Burnham's evidence in the court below when we come to consider the defendants' challenge to the plaintiff's case when all of the evidence was in.

But there is additional evidence on the issue of probable cause. Appellant Mangus, who verified the criminal charges, testified that on March 3, 1926, Ira Bane brought his stock certificate into the oil company's office and asked him to transfer some of said stock to De Lay, Laughlin, and Jane Van Donge; that he made such transfers himself; Burnham was not present; he did not know that Burnham had anything to do with the sale of Bane's stock, and never did know that he claimed to have anything to do with said sales until the time of Burnham's preliminary trial; Burnham never came into the oil company's office and showed him any receipts concerning sales of Bane's stock, nor did he at any time say anything about such receipts; sometime in the fore part of April, 1926, Mrs. Van Donge came into the office and stated that she had bought some stock in the oil company; Mangus learned from her that she had bought from Burnham, and upon his request she brought in the two receipts which Burnham had given her at the time she bought; Mr. Laughlin also brought his receipt to the office; the first time he saw Mr. De Lay's receipt was when he and the county attorney called at Mr. De Lay's home; after obtaining these receipts, he went to see Mr. Slater, Mr. Dawson, and Dr. Rouse, and some of the other directors, showed them the receipts, and asked their advice. Their advice to him was to take the receipts to the county attorney, and see what he had to say about the matter. Whereupon, he went to see the county attorney, drove the county attorney out to Jane Van Donge's home, also to Mr. Laughlin's home, and to the home of Lloyd G. De Lay. Mr. De Lay and Mrs. Van Donge were at home and were talked to by the...