State v. Davies

• Decision Date: 05 January 1934
• Docket Number: 24770.
• Citation: 28 P.2d 322,176 Wash. 100
• Parties: STATE v. DAVIES.
• Court: Washington Supreme Court

28 P.2d 322

176 Wash. 100

STATE v. DAVIES.

No. 24770.

Supreme Court of Washington

January 5, 1934

Department 1.

Appeal from Superior Court, Spokane County; Wm. A. Huneke, Judge.

John F Davies was convicted of an unauthorized borrowing and an excessive borrowing from a bank of which he was a director and he appeals.

Affirmed.

Alex M. Winston and E. J. Cannon, both of Spokane for appellant.

Charles W. Greenough and L. F. Bunge, both of Spokane, for the State.

MILLARD Justice.

The defendant was charged, as follows, by information of two counts with an unauthorized borrowing and an excessive borrowing from a bank of which he was a director:

'That the said defendant, * * * on or about the 30th day of September, 1931, * * * then and there being a director of the American Bank of Spokane, * * * did then and there wilfully, unlawfully and feloniously borrow directly and indirectly from the said American Bank of Spokane, both for himself individually and for the Reserved Securities Company, a corporation owned in its entirety by the said John F. Davies and used as a mere agent of the said John F. Davies, the sum of Two Hundred Thousand ($200,000.00) Dollars without a resolution authorizing said loan and approved by a majority of the directors of said bank made and entered in the minutes of said corporation at a meeting when said defendant was absent. * * *

'As a part of the same transaction referred to in Count I, * * * the said defendant, * * * on or about the 30th day of September, 1931, * * * then and there being a director of the American Bank of Spokane, * * * did then and there wilfully, unlawfully and feloniously borrow directly and indirectly from the said American Bank of Spokane, both for himself individually and for the Reserved Securities Company, a corporation owned in its entirety by the said John F. Davies and used as a mere agent of the said John F. Davies, the sum of Two Hundred Thousand ($200,000.00) Dollars, said loan then and there being in excess of twenty per cent (20%) of the capital and surplus of said bank actually paid in and unimpaired.'

The trial resulted in a verdict of guilty on both counts. The defendant has appealed from the judgment and sentence pronounced upon him.

The first question presented by the appeal is whether the evidence was sufficient to warrant a conviction. The information is based upon the statute (Rem. Rev. Stat. §§ 3258, 3259), which provides that:

'§ 3258. The total liability to any bank or trust company of any person for money borrowed, including in the liabilities of a firm or association the liabilities of the several members thereof shall not at any time exceed twenty per cent of the capital stock and surplus of such bank or trust company, actually paid in and unimpaired; but the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper upon solvent parties and actually owned by the person negotiating the same, shall not be considered as money borrowed: Provided, that loans secured by collateral security having an ascertained market value of at least fifteen per cent more than the amount of the loans secured, shall not be limited by this section.

'§ 3259. No bank or trust company shall, nor shall any officer or employee thereof on behalf of such corporation, directly or indirectly, loan any sum of money to any director, officer or employee of such corporation, unless a resolution authorizing the same and approved by a majority of the directors, at a meeting at which no director, officer or employee to whom the loan is to be made shall be present, shall be entered in the corporate minutes.

'Every director and officer of any bank or trust company who shall borrow or shall knowingly permit any of its directors, officers or employees to borrow, any of its funds in an excessive amount or in violation of the provisions of this section, shall be personally liable for any loss or damage which the corporation, its shareholders or any person may sustain in consequence thereof, and shall also be guilty of a felony.'

It clearly appears, as summarized below, that there was evidence--competent and sufficient--to warrant the jury in concluding, as it did, that, on or about September 30, 1931, while a director of the American Bank of Spokane, the appellant borrowed money from that bank without a resolution authorizing the same as required by the statute (Rem. Rev. Stat. § 3259); and that the appellant, on the same date, while a director of the same bank, personally, and through the agency of a corporation which was his alter ego, borrowed for himself from that bank an amount of money in excess of 20 per cent. of the capital stock and surplus of the bank.

The capitalization and surplus of the American Bank of Spokane, a domestic corporation now in course of liquidation, totaled $500,000 on September 30, 1931, at which time the appellant was a director of that bank. No one person could legally borrow from the bank an amount in excess of $100,000. The appellant was a director; hence he could not lawfully borrow, in the absence of a resolution by the board of directors authorizing the loan, any sum of money from the bank. The court refused to admit in evidence the minutes of the meeting of February 10, 1931, of the directors of the bank, at which meeting the appellant was not present. At that meeting the directors passed a blanket resolution authorizing a line of credit to all of the directors of the bank. By that blanket resolution a line of credit amounting to $100,000, the maximum any one could legally borrow from the bank, was extended to the appellant. The appellant owned 99 per cent. ($149,000) of the shares of capital stock of the Reserved Securities Company, a domestic corporation. The note indebtedness of appellant to the bank on September 30, 1931, was $45,854.85. The indebtedness of the Reserved Securities Company to the bank at that time amounted to $99,274.86. On September 30, 1931, two notes (Nos. 3168 and 3169) of $100,000 each, both payable to the American Bank of Spokane, were prepared by the loan department of the bank. One of the notes was signed by the appellant personally, and the other was signed by him as president of the Reserved Securities Company. The appellant discussed with the vice president of the bank the matter of the disposition of the proceeds of the two loans. It was agreed that the money was to be applied to the payment of the indebtedness of the Reserved Securities Company to the bank and the appellant's personal indebtedness to the bank, the balance in each instance to be placed in the American Company special account. As stated above, the indebtedness, respectively, of the securities company and the sppellant to the bank amounted to $99,274.86 and $45,854.85. The securities company's balance of $725.14, added to the balance of $54,145.15 in favor of appellant, make a total of $54,870.29, which was deposited, as the appellant directed, to the credit of the American Company special account in the American Bank of Spokane. The bank's loan and discount journal for September 30, 1931, lists the two notes as 'new' notes and not as 'renewal' notes. Other than the directors' minutes mentioned above, there was no evidence of authorization of the two loans.

It was not necessary for the state to show that appellant had access to the American Company's special account, or that he ever withdrew any of the money from that account. The state showed--that was all that was necessary to make out a prima facie case--the extension of credit (a loan) to the appellant, which was utilized for payment of indebtedness to the bank and the balance deposited, as the appellant directed, to the credit of an account other than his personal account or the account of his securities company. The appellant exercised dominion over the money. He directed the disposition of it, and in writing expressly agreed to return or pay, with interest, the amount advanced. Whether or not the transaction was personally profitable to the appellant is not material. The law does not require a showing of personal profit Before a loan or a borrowing can be held to be consummated.

'A loan is made when the borrower receives money over which he exercises dominion, and which he expressly or impliedly promises to return.' First Bank of Cordova v. Tjosevig, 138 Wash. 231, 244 P. 736, 738.

Rem. Rev. Stat. § 3259, provides that every director of a bank who borrows any of the bank's funds in violation of the provisions of that section shall be guilty of a felony. As we said in State v. Lindberg, 125 Wash. 51, 215 P. 41, 44:

'Clearly to our minds this is a provision directed against the borrowing officer, and makes him guilty of a felony, if the borrowing is in violation of the provisions of the act. * * *

'Nor was it necessary that the state allege and prove a financial loss as a result of the borrowing. By the terms of the statute the crime is complete when the borrowing is consummated without a compliance with the statutory requirements; loss of the money borrowed is not an element of the offense.'

In State v. Lynch, 50 S.D. 564, 210 N.W. 988, 989, the appellant insisted that it was incumbent, under a statute similar to that in the case at bar, upon the state to show that the bank parted with the money. The court said:

'Appellant, who was cashier of the First State Bank of Elkton, was convicted of a violation of sections 8980 and 8981, Code of 1919. Section 8980 provides:

"In no case shall the total liabilities of the several stockholders of any bank, including any and all liabilities * * * to such bank, exceed 50% of the paid-up capital of such bank.'

'And section 8981 provides that:

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