State v. Davison

• Decision Date: 07 August 1906
• Citation: 74 N.H. 10,64 A. 761
• Parties: STATE v. DAVISON et al.
• Court: New Hampshire Supreme Court

64 A. 761

74 N.H. 10

STATE

v. DAVISON et al.

Supreme Court of New Hampshire. Hillsborough.

Aug. 7, 1906.

Transferred from Superior Court; Peaslee, Judge.

Herbert N. Davison and another were convicted of embezzling the funds of the Manchester News Publishing Company, and the case was transferred from the superior court. Exceptions overruled.

The evidence for the state tended to prove that the Manchester News Publishing Company was organized in January, 1901, for the purpose of publishing a newspaper and doing job printing. The defendant Davison was elected treasurer at the first meeting. No stock was issued and no property acquired by the corporation until several months later. In September, 1901, the capital stock was increased from $15,000 to $25,000, and the defendant Newman was elected president. At a meeting of the directors, held December 23, 191, Newman and Davison expressed a desire to sell to the corporation a printing press and fixtures previously purchased by them of the Goss Printing Company. They stated that the property had been purchased conditionally, that the vendors had a lien thereon for the purchase price, and that a part of the consideration was unpaid. The directors voted to purchase the property of the defendants, to issue to them in payment therefor $13,000 of the capital stock of the corporation, to "deliver the same, in consideration of the payment of the purchase price, and to take therefor a bill of sale of the same subject to such conditions as exist between said Davison and Newman and the Goss Printing Company." The clerk of the corporation was instructed to attend to the execution of a "proper bill of sale and other papers." January 1, 1902, a bill of sale of the property was drawn by Fellows, clerk of, and counsel for, the corporation, and was signed by the defendants. It names the parties, recites the consideration, describes the property, and states that the vendors "warrant the said printing press and fixtures free from all claims and incumbrances of any and all persons whatsoever." It also appeared from the state's evidence that on September 30, 1901, an account was opened in the First National Bank of Manchester, N. H., in the name of "Manchester News Publishing Company, H. N. Davison, Treasurer." The first deposit of $4,750 was the proceeds of a note for $5,000, signed by the corporation and indorsed by E. S. Whitney and B. F. Welch. The total deposit was $10,667.50 to February 10, 1902, when there was a balance of $2,501.25; and on that day the press was accepted, and a check for $1,770, payable to the order of the Goss Printing Company, signed by Newman as president and Davison as treasurer, was drawn upon the First National Bank and given in part payment of the first installment of $1,875 due upon the property. The check was paid by the bank and charged against the account of the corporation. The state alleged that the check was drawn in fraud of the corporation's rights, and that the transaction constituted the crime alleged in the indictment. The defendants were general managers of the corporation. Although there was no bylaw which authorized them to disburse the funds, they paid bills as they came due. Newman knew and approved all that Davison did.

The defendants made two defenses: (1) That the money used to pay the installment on the press was their own. (2) That the installment was a debt which the corporation had assumed, and that the money used to pay it, if money of the corporation, was devoted to a lawful and proper purpose. Their testimony tended to prove that the corporation was formed to take over a business conducted by them as copartners, and that nothing was done by the company until January, 1902, except to perfect an organization. From October 30, 1900, to January 1, 1902, the defendants did business under the name "Manchester News Publishing Company," and on the former date they opened an account with the First National Bank, under the name "H. N. Davison, Treasurer Manchester News Publishing Company," which was continued until May, 1901, when they removed the account to the Second National Bank, and thereafter deposited with the latter institution moneys received in their business, and drew checks thereon in payment of a considerable part of the bills of the corporation during its existence. The defendants further testified that prior to the purchase of the press from the Goss Printing Company, and in anticipation of it, they arranged with Whitney and Welch, who were their personal friends, to have the two indorse a note for $5,000 for discount at the First National Bank. This was done on September 30, 1901. The proceeds of the note were deposited to the credit of "H. N. Davison, Treasurer Manchester News Publishing Company," because the defendants were conducting their partnership business in that name. The note was signed "Manchester News Publishing Company, H. N. Davison, Treasurer," and was secured by 50 shares of the stock of the corporation, issued in Whitney's name. The note was indorsed by Whitney and Welch on the credit of the defendants and as a matter of personal friendship. At that time the corporation had neither credit nor property. The subsequent deposits in the First National Bank consisted of a note for $500 given by one Kennard for stock issued to him and proceeds of sales of other stock belonging to the defendants. The account was kept separate from the moneys of the corporation in the Second National Bank for the reason that the defendants considered that the funds belonged to them. From September 30, 1901, to February 10, 1902, the defendants drew checks upon the First National Bank to the amount of $2,500 in excess of the proceeds of the first note, for the payment of bills incurred in installing the press and running the business, and they did this, "because the bills had to be paid, and there was no other money with which to pay them." It also appeared from the defendants' evidence that, in August 1, 1901, they entered into a contract with the Goss Printing Company for the purchase of a press and fixtures. The contract purported to be a lease of the property, and provided for the payment of $7,500, less $500 allowed for an old press. The first installment of $1,875 became due when the press was set up, and the remaining installments were payable monthly in varying amounts. In addition to the first installment of $1,875 the defendants expended about $2,500 in transportation charges and expenses of installation. The value of the press when set up was $15,000, the folder alone was worth $10,000, and a fair rental for the property was $200 a month. When the vote was passed authorizing the purchase of the press by the corporation, both defendants understood that the company assumed the payment of future installments. Their attention was not called to the warranty in the bill of sale, and when they signed they assumed that the Instrument had been drawn in accordance with the vote of the directors as they understood it it further appeared that when the corporation was formed, and later when the capital stock was Increased, it was understood that the greater part, if not all, of the stock was to he issued to the defendants for the property which they were to transfer to the company. January 28, 1902, the directors voted to purchase of the defendants the plant used by them as partners, and to issue to them in payment therefor capital stock of the par value of $7,000, "providing the same shall be agreed to by said parties, and a full and complete title is given." A bill of sale of this property was subsequently executed. The defendants understood that the stock voted to them in payment for the press and the plant might be issued by them in such form and to such persons as would best serve their purposes and the requirements of the business. The proceeds of the note for $5,000 and all moneys received from sales of stock were used by the defendants in the company's business, and for the payment of its legitimate bills. There was no direct evidence that the funds deposited in the First National Bank came from any other source than the first note and sales of the defendants' stock.

The evidence in rebuttal tended to prove that Whitney understood he was indorsing a note of the corporation, and was giving credit to the corporation; that at the annual meeting in February, 1903, Davison, as treasurer, reported that the entire capital of $25,000 had been paid in; that the press in question was worth about $7,500; that the clerk of the corporation, understanding from the defendants' statements that they considered themselves bound to make future payments upon the press, inserted the warranty in the bill of sale for the purpose of securing a clear title in accordance with the vote of the directors.

At the close of the state's evidence and again at the close of all the evidence the defendants moved that a verdict of not guilty be directed. Both motions were denied, subject to the defendants' exceptions.

Fellows, clerk of the corporation, was called as a witness by the state. He testified that he recalled the substance of several conversations with the defendants, and was then asked: "Who was to pay the balance due to the Goss Printing Company, as they told you?" Subject to the defendants' exception, the witness was permitted to reply: "I understood that Davison and Newman were to pay for it"

The court instructed the jury in part as follows, the defendants excepting to the portions inclosed in brackets: "The charge here is embezzlement, and it means that these defendants, having the custody of the funds of the corporation, Intentionally used those funds for their own purposes. * * * The state * * * must have shown that the money in the bank was the property of the corporation; that the debt on the press was theirs and not that of the corporation; and that these respondents, well knowing these facts, took the funds to pay their own...