State v. Dobry, 41396

CourtUnited States State Supreme Court of Iowa
Writing for the CourtALBERT, C. J
Citation250 N.W. 702,217 Iowa 858
PartiesSTATE OF IOWA, Appellee, v. D. A. DOBRY, Appellant
Docket Number41396
Decision Date24 October 1933

250 N.W. 702

217 Iowa 858

STATE OF IOWA, Appellee,

D. A. DOBRY, Appellant

No. 41396

Supreme Court of Iowa, Des Moines

October 24, 1933


Appeal from Scott District Court.--D. V. JACKSON, Judge.

The defendant was indicted and accused of making and subscribing a false statement, exhibit, and paper filed with secretary of state as to the financial condition of the D. A. Dobry Securities Company. He was tried and found guilty and sentenced, and appeals.


Joseph B. Lawler, and Chamberlin & Chamberlin, for appellant.

Edward L. O'Connor, Attorney-general, Clair E. Hamilton, Assistant Attorney-general, and Leon A. Grapes, County Attorney, for appellee.


OPINION [250 N.W. 703]

[217 Iowa 859] ALBERT, C. J.

The D. A. Dobry Securities Company was an Iowa corporation, of which the defendant was the president. For the purpose of securing permission to issue additional securities, on the 27th day of January, 1931, the defendant signed and verified a written statement filed with the secretary of state, the substance of which was to show the financial condition of said corporation at that time, and it is as to statements made in such writing, which were false, that this accusation was brought.

The case was tried and submitted to the jury on the theory that if the statement was, in fact, false, this was sufficient to violate the statute. The contention of the defendant is that the statement must be knowingly false in order to violate the statute.

The question, therefore, is narrowed to the single proposition of whether or not the statement must be "knowingly false." Many authorities have been cited, together with some of our own cases on this proposition of the definition of the word "false." An investigation [217 Iowa 860] of those cases, however, in the light of the statutes under which they are decided, is of little use or value to us in the determination of the question before us. For a fair understanding of this proposition it is necessary to refer to the statute under which this indictment was brought and its purpose and history.

The statute under which this indictment was returned was passed by the legislature of this state in 1915 and appears as section 20, chapter 149, of the Acts of the Thirty-sixth General Assembly, and appears now in the Code of 1931 as section 8581-c21. The material part thereof in which we are interested is as follows:

"Any person, firm, association, company or corporation * * * that shall * * * make or subscribe to any false statement, exhibit or paper filed with the secretary of state, * * * or shall make to said secretary of state, his superintendent, agent or representative any false statement as to the financial condition of such person, firm, association, company or corporation shall be deemed guilty of a felony * * *."

It will be noticed that the term used here is "false statement." This section appears in what is known as the "Blue Sky Law" or the "Iowa Securities Act," and is chapter 393-C1 of the Code.

It might be well first to consider the purpose intended to be accomplished by this act. It is well known that this state in times past has been flooded with worthless securities, and that there are people who have thus been defrauded. It was the intention of the legislature in passing this act to avoid this situation. A study of the act shows that securities [250 N.W. 704] could not be issued by corporations in this state without first obtaining permission from the secretary of state, and, in order to obtain such permission, written statements provided for in the act were required to be made by the corporation or its officers, sworn to prior to having been filed with the secretary, and it was for the secretary of state to determine, under the showing made, the good faith and financial stability of the corporation thus wishing to issue such securities. As one of the provisions of said act, the above-quoted section of the Code was made to aid the purpose of the act.

The first act passed by the General Assembly of this state was by the Thirty-fifth General Assembly (1913), chapter 137, and section 10 thereof is the section in that act treating with the same subject of false statements as section 20 of the present act. The aforesaid [217 Iowa 861] act of the Thirty-fifth General Assembly was held invalid by the U.S. District Court. Compton Co. v. Allen, 216 F. 537. Thereafter the original law, with numerous changes, was re-enacted in the aforesaid chapter 149 of the Thirty-sixth General Assembly. Section 10 of the original act provided that any company, or person, who shall knowingly and wilfully subscribe to or cause to be made any false statement or false entry in any book of such investment company, or exhibit any false paper with intention to deceive any person authorized to examine the affairs of said investment company, or shall knowingly or wilfully make or publish any false statement of the financial condition of the investment company, or the stocks, bonds, or other securities by it offered for sale, shall be deemed guilty of a felony.

It will be noticed on comparison of the last-quoted section with the previous section dealing with the same subject that the present statute makes it a felony to make or subscribe any "false" statement, while the original act provided that any person who shall "knowingly and wilfully subscribe or cause to be made any false statement, or shall knowingly or wilfully publish any false statement" shall be deemed guilty of a felony.

The distinguishing feature between the two acts, therefore, is that under the original act the term "false statement" was qualified by the use of the terms "wilfully and knowingly" and that, under the present act, those qualifying terms are omitted. It is suggested in argument that these qualifying terms were omitted by inadvertence, but with this conclusion we cannot agree. We are supported in this conclusion, in part at least, by the subsequent section of the present statute. Section 8581-c23 deals with the sale of these stocks through agents or representatives, and it provides that any such agent who shall "knowingly make any false representations or statements as to the nature, character or value of such security * * * or knowingly violate any of the provisions of this chapter with intent to defraud, shall be deemed guilty of a felony * * *."

It is apparent that the legislature had this term "knowingly" before it in the preparation of this law, and the fact that it used it in the last-quoted section would naturally carry with it the idea that it purposely omitted it in the first quoted section.

There are certain rules of construction of statutes that must be considered in determining this question. In finding what shall constitute a crime, the legislature has unlimited power. In other words, [217 Iowa 862] they can make it include certain elements or omit certain elements therefrom as in their judgment seems best.

We had before us, in State v. Dunn, 202 Iowa 1188, 211 N.W. 850, a similar question. We there said:

"It is quite universally recognized at this day that the legislature may forbid the doing of an act and make its commission a crime without regard to the intent or knowledge of the doer. Whether a criminal intent or guilty knowledge is an essential element of a statutory offense is to be determined as a matter of construction from the language of the act, in connection with its manifest purpose and design."

It is a fundamental rule of construction that where the legislature has purposely omitted words the courts have no power to supply them, and this is especially true in criminal cases. Snowden v. Thompson, 106 Ark. 517, 153 S.W. 823; In re Haines, 68 Cal.App. 522, 229 P. 984; California Telephone & Light Company v. Jordan, 19 Cal.App. 536, 126 P. 598; Fouracre v. White, 30 Del. 25, 7 Boyce 25, 102 A. 186; State v. Board of Commissioners, 175 Ind. 400, 94 N.E. 716; Morse v. City of Boston, 253 Mass. 247, 148 N.E. 813; Thacher v. Secretary of Commonwealth, 250 Mass. 188, 145 N.E. 256; King v. Viscoloid Company, 219 Mass. 420, 106 N.E. 988, Ann. Cas. 1916D, 1170; In re Algoe, 74 Neb. 353, 104 N.W. 751; State ex rel. Mickey v. Reneau, 75 Neb. 1, 104 N.W. 1151, 106 N.W. 451.

From a history of this legislation, as heretofore set out, it cannot be said that these words "knowingly" and "wilfully" were omitted unintentionally from the statute by the legislature, but, on the other hand, we think that they were purposely omitted.

We conclude, therefore, that the theory on which the court tried the case and instructed the jury in reference to knowledge on the part of the defendant was correct.

The written statement in question is known in the record as "Exhibit C." The defendant, together with certain other parties, met at the office of the superintendent of the securities department in Des Moines, shortly after this writing had been filed with the department, and on presentation of the [250 N.W. 705] same to the defendant, he stated: "Why, this is a mistake. These figures can't possibly be right." One of the parties present at that meeting testified that Huebner (the superintendent) asked if the earnings statement was [217 Iowa 863] correct, and the defendant said, "It is not correct," and that the company had no earnings for 1929 such as that. The state's testimony further shows that the superintendent then told the defendant that he wanted the company checked up, and the defendant said that it would "just blow up the company," because of previous examination by the Illinois securities department. Nevertheless, over the protest of the defendant, Knudsen (one of the employees of the state securities department) went to Davenport for an examination of the company. Knudsen...

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