Shreve v. United States

• Decision Date: 29 April 1935
• Docket Number: No. 7460.,7460.
• Parties: SHREVE et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

77 F.2d 2 (1935)

SHREVE et al. v. UNITED STATES.

No. 7460.

Circuit Court of Appeals, Ninth Circuit.

April 29, 1935.

Charles C. Crouch, of San Diego, Cal., Leslie C. Hardy, of Tucson, Ariz., and Louis B. Whitney, Alexander B. Baker, and Lawrence L. Howe, all of Phœnix, Ariz., for appellants Shreve and Evans.

Weinberger & Miller, of San Diego, Cal., for appellant Perkins.

Clifton Mathews, U. S. Atty., of Phœnix, Ariz., and John P. Dougherty, Asst. U. S. Atty., of Tucson, Ariz., for the United States.

Before WILBUR, GARRECHT, and DENMAN, Circuit Judges.

WILBUR, Circuit Judge.

The defendants were charged by indictment with a violation of 18 USCA §§ 88 and 338. Eleven counts charge the use of the mails in furtherance of schemes to defraud certain persons named in the indictment and others of the general public. The twelfth count alleges conspiracy to carry out the schemes alleged in the first eleven counts, by means of organizing a building and loan association and by the incorporation of the Arizona Holding Corporation and the Century Investment Trust. The sufficiency of the indictment to charge an offense and of the evidence to support the verdict of guilty is not challenged. A general statement of the facts involved is necessary to an intelligent consideration of the case on appeal.

The scheme charged in the first count of the indictment is one to organize a building and loan association under the laws of the state of Arizona, to be known as the Security Building & Loan Association. It is alleged that in order to secure business for this association defendants planned to make certain false pretenses, representations, and promises with reference to the financial stability of said building and loan association; its guaranteed capital; its intention to pay 6 per cent. interest; its promise to allow deposits to be withdrawn at any time; its intention to invest the funds of the association in sound first mortgages on improved real estate, and that $300,000 of the capital of the corporation had been paid in. It is alleged that by means of these representations large sums of money were obtained and that in pursuance of the plan certain letters set out in the first three counts of the indictment were mailed. The fourth count charges a scheme to defraud by the incorporation of the Century Investment Trust and the Arizona Holding Corporation, both under the laws of the state of Arizona; that large amounts of stock of these two corporations would be sold to the public upon certain false representations and promises, among others, that the Century Investment Trust was solvent, that it was doing a large and profitable business, that it had net earnings, and net income for the payment of dividends; that the defendants would pretend dividends would be paid from the earnings whereas they were not to be so paid but were to be paid and were paid from funds supplied to the Century Investment Trust by the defendants. Counts 5, 6, 7, 8, 9, and 10 allege the mailing of letters in furtherance of this second scheme to defraud, and the twelfth count alleges conspiracy, as above stated.

The evidence upon which the government sought conviction, so far as appears from the bill of exceptions, consisted largely of the books of the three corporations named in the indictment, and also of a large number of other corporations with which the named corporations, or the defendants, transacted business. These books and documents were incorporated in the bill of exceptions by reference thereto and by number (Krauss Bros. Lumber Co. v. Mellon, 276 U. S. 386, 48 S. Ct. 358, 72 L. Ed. 620) and it was stipulated that all of them could be sent to this court as a part of the evidence in the case and that each side might select such exhibits to be transmitted as they desired to be considered by this court. It is said that these exhibits made a "truck load" of books and documents. Without these exhibits, or without better understanding of their contents than is given by the bill of exceptions, we have found great difficulty in determining the questions presented on the appeal. We have concluded, however, that at least one of the rulings of the trial court in admitting evidence is so clearly erroneous and prejudicial that the judgment must be reversed. We will, therefore, first consider this ruling, stating such facts as are essential to its consideration.

C. K. Firestone, a special agent of the Division of Investigation of the Department of Justice, after preliminary proof as to his competency as an accountant, testified that he had examined the books of the Century Investment Trust and the Arizona Holding Corporation and that they showed the purchase of a note of the Tucson Realty & Trust Company. We quote the testimony as follows: "That examination shows among other things, that on November 15, 1929, there is recorded the sale by the Century Investment Trust to the Arizona Holding Corporation 4,000 shares of its preferred stock, 4,000 shares of its common stock and 4,000 shares of Series A stock, for a total of $100,000, which is recorded as having been received in cash. The books do not record that the cash was deposited. There is recorded on that same date that this $100,000 in cash was spent by payment to the Arizona Holding Corporation to pay for the purchase of a note of $38,540.07 of the Tucson Realty and Trust Company for $32,500; and $1,660.68 mortgage of Glen O. Perkins for $1,000; $9,100 worth of Santa Rita bonds for $6,500; and the purchase of 350 shares of the stock of the Security Building and Loan Association at $60,000, making a total of $100,000."

Thereafter, H. B. Hazeltine, the secretary of the Tucson Realty & Trust Company, who had been connected with the company since 1917 was called as a witness for the government, and the following occurred:

"Q. Mr. Hazeltine, I will ask you if you are familiar with the books and records of the Tucson Realty and Trust Company? A. I am.

"Q. And were you familiar with the records of the Tucson Realty and Trust Company for the years 1928 and 1929? A. Yes sir.

"Q. Now, I will ask you, Mr. Hazeltine, whether during the years 1928 or 1929 the Tucson Realty and Trust Company was obligated on any note in the amount of $38,540.07 to the Arizona Holding Corporation?

"Mr. Hardy. We object to that; it is not the best evidence.

"Mr. Perrin. I presume if the witness has made an examination. * * *

"Mr. Hardy. That is not the question.

"Mr. Perrin. I don't see how — this could be negative testimony. We can't show it in the record.

"Mr. Hardy. Negative testimony?

"Mr. Perrin. If it should be negative testimony.

"Q. I will ask you, Mr. Hazeltine, whether you have examined the books and the records of the Tucson Realty and Trust Company for 1928 and 1929 to determine whether the Tucson Realty and Trust Company was obligated on a note payable to the Arizona Holding Corporation in the amount of $38,540.07?

"Mr. Hardy. That, Your Honor, is the same question in a different form. He is examining the witness on something that the Court has ruled out."

Objection overruled. Exception.

"The Witness. I have examined the records, yes sir.

"Q. I will ask you Mr. Hazeltine, whether they show the existence of such a note?

"Mr. Hardy. We object to that; the books are the best evidence."

Objection overruled. Exception.

"The Witness. They do not.

"Q. Now, I will ask you, Mr. Hazeltine, whether you have examined the books of the Tucson Realty and Trust Company to determine whether the Tucson Realty and Trust Company was obligated on any note to the Century Investment Trust in the amount of $38,540.07?

"Mr. Hardy. We object to that, Your Honor; no proper foundation has been laid."

Objection overruled. Exception.

"The Witness. I have examined the records and found no such note.

"Q. Now, I will ask you, Mr. Hazeltine, if you have examined the records of the Tucson Realty and Trust Company to determine whether they were — whether they were obligated to any one during the years 1928 and 1929 a note in the amount of $38,540.07?

"Mr. Hardy. We object to that; Your Honor, it is immaterial.

"The Court. The witness may answer the question."

Objection overruled. Exception.

"The Witness. My examination does not reveal that any such note was issued to anybody."

The assignments of error relate only to the first objection that the books are the best evidence. It will be observed that to the next question of similar import the objection was made that no proper foundation was laid and to the third question the objection is that it is immaterial.

It seems entirely clear that the books are the best evidence, not only of what they contain but what they do not contain. See Aspinwall v. Chisholm, 109 Ga. 437, 34 S. E. 568; but see contra, Perry v. Camilla Cotton Oil, etc., Co., 28 Ga. App. 512, 111 S. E. 823. The rule is stated as follows in 10 R. C. L., § 59, p. 906: "The material contents of an existing book which is obtainable cannot be proven by parol testimony, as the book itself is the best evidence. Account books, if in existence, are the best evidence of their contents, and a witness may not state the condition of such accounts from memory while such books are accessible. Similarly secondary evidence of the books and papers of a corporation is inadmissible where the originals are available. * * * Furthermore, where books are put in evidence, and it would take a long time to read to the jury the various entries which show the facts relied upon, a witness who has examined the books may be permitted, in the first instance, to state what they contain, not as his own testimony, independently of the books, but as a convenient way of presenting their contents to the jury."

See, also, Pabst Brewing Co. v. E. Clemens Horst Co. (C. C. A.) 229 F. 913, 918; Worden v. United States (C. C. A.) 204 F. 1; Barrett v. United States (C. C. A.) 33 F. (2d) 115; Phillips v. United States (C. C. A.) 201 F. 259; 16 C. J. p. 743...