State v. Harris

• Decision Date: 06 July 1960
• Citation: 147 Conn. 589,83 A.L.R.2d 783,164 A.2d 399
• Court: Connecticut Supreme Court
• Parties: , 83 A.L.R.2d 783 STATE of Connecticut v. Nelson HARRIS. Supreme Court of Errors of Connecticut

Page 399

164 A.2d 399

147 Conn. 589, 83 A.L.R.2d 783

STATE of Connecticut v. Nelson HARRIS.

Supreme Court of Errors of Connecticut.

July 6, 1960.

William L. Hadden, Louis Evans, New Haven, and Joseph W. Bishop, Jr., New Haven, of the New York bar, for appellant (defendant).

Abraham S. Ullman, State's Atty., New Haven, with whom, on the brief, was Arthur T. Gorman, Asst. State's Atty., New Haven, for appellee (state).

Before BALDWIN, C. J., and KING, MURPHY, MELLITZ and SHEA, JJ.

KING, Associate Justice.

In a trial to the jury, the defendant was convicted of one count of theft and twenty-eight counts of embezzlement by agent. ¹ The theft count and eight of the embezzlement counts involved funds of a Connecticut corporation known as Harris Developing Associates, Inc. Eighteen other counts of embezzlement involved funds of a Connecticut corporation known as Woodbridge Manor, Inc. The remaining two counts of embezzlement involved funds of two individuals, William Dukeshire and Mortimer Wallerstein; no assignment of error as to these two counts is pursued in the brief, and we therefore do not discuss them. Martino v. Grace-New Haven Community Hospital, 146 Conn. 735, 736, 148 A.2d 259. The defendant was the record owner of all but two shares of the capital stock of each corporation. Of those two shares, one was owned of record by the the defendant's wife and the other by a daughter. The officers and directors of each corporation were the defendant, his wife and a daughter.

One of the claims of proof of the defendant was that from the incorporation of the two corporations through August 26, 1956, that is, the period within which the embezzlements were claimed to have occurred, he owned beneficially all of the stock of each corporation. He assigns error in the failure of the court to give this request to charge: 'If you find that [the defendant] was the owner of the beneficial interest in one hundred per cent of the stock of Harris Developing Associates, Inc., and Woodbridge Manor, Inc., then I charge you that his handling of the funds of either or both of these corporations cannot legally be held to be embezzlement. A person connot embezzle from a corporation where he is the owner of one hundred per cent of the capital stock.' The court at several points in its charge reiterated the essential elements of the crime of embezzlement, including the requirement, here, that the funds involved belong to the corporations the defendant was charged with embezzling from. See State v. Parker, 112 Conn. 39, 52, 151 A. 325; State v. Serkau, 128 Conn. 153, 158, 20 A.2d 725. The court also charged fully as to the necessity of there being an intent to defraud another of his property. If, because of the defendant's ownership of the stock in either corporation or for any other reason, and however mistakenly, he honestly believed that he had a right to take the funds of the corporation, the jury could not, in view of the absence of an intent to defraud as required under our statute, have convicted him under the charge as given. State v. Lanyon, 83 Conn. 449, 454, 76 A. 1095; State v. Henderson, 102 Conn. 658, 660, 129 A. 724; State v. Parker, supra; State v. Schofield, 114 Conn. 456, 458, 159 A. 285.

The defendant, however, claims that had the requested instruction been given, the jury, if they believed that he owned all of the stock of either corporation, actually or beneficially, would have been obliged to acquit him of embezzlement from that corporation even though they found that the state had proven that he had misappropriated the funds of the corporation with intent to defraud it. This in effect amounts to a claim that it is impossible for a person to embezzle from a corporation the stock in which is wholly owned by him because, despite the corporate entity, title to the corporate assets is in him. See State v. Serkau, supra; also cases such as State v. Wilson, 30 Conn. 500, 505. The crime of embezzlement by agent did not exist at common law and is purely statutory. State v. Parker, supra, 112 Conn. 45, 151 A. 328. Section 53-355 is broad. It refers to 'any private corporation' and to misappropriation 'in any way.' It contains no exception based on an accused's ownership, beneficial or outright, of any or all of the stock in the corporation. The defendant, in making his claim, is forced to, and does, ignore or by-pass the corporate entity. This he cannot do, in view of § 53-355. The property of the corporation was not his, regardless of who owned the corporate stock. See Taylor v. Commonwealth, 119 Ky. 731, 745, 75 S.W. 244. The corporation was an entity, separate and apart from its stockholders. Humphrey v. Abgraves, 145 Conn. 350, 354, 143 A.2d 432; Frank Amodio Moving & Storage Co. v. Connelly, 144 Conn. 569, 572, 135 A.2d 737; Kulukundis v. Dean Stares Holding Co., 132 Conn. 685, 689, 47 A.2d 183; Swiss Cleaners, Inc. v. Danaher, 129 Conn. 338, 345, 27 A.2d 806; Hoffman Wall Paper Co. v. City of Hartford, 114 Conn. 531, 534, 159 A. 346.

The defendant claims that he could have procured from the two other directors and stockholders, who were merely dummies, a vote giving himself all or any part of the funds of the corporation and that he would then not have been subject to conviction for embezzlement, at least in the absence of proof of insolvency on the part of the corporation. From that premise he argues that it is an absurdity to hold that his failure to follow this formality could change the essential character of his action. The defendant's argument falls because of the invalidity of his premise. If in fact the defendant, with intent to defraud the corporation, misappropriated its funds 'in any way,' he would be guilty of embezzlement under our statute. This would be true even though he had taken the precaution of procuring a vote of the board of directors or of the stockholders, or of both, purporting to authorize the misappropriation. Had the defendant followed such a course, it might, as a practical matter, have been very difficult for the state to prove the requisite criminal intent to defraud. But if the state had succeeded in so doing, the vote of the two directors and stockholders claimed by the defendant to be dummies, and to have merely a naked legal title to the corporate stock which stood in their names, would not render impossible the conviction of the defendant for embezzlement. He stresses the effect of the existence of § 33-27 of the General Statutes (repealed by Public Acts 1959, No. 618, § 137, effective Jan. 1, 1961), which prescribes a criminal penalty in the case of any director who votes to 'pay any dividend or make any other distribution of [a corporation's] assets except from its net profits or actual surplus, unless in accordance with the law allowing the reduction of stock, or upon the dissolution of the corporation.' The essential elements of a violation of that statute obviously differ widely from those of the crime of embezzlement. Section 33-27 cannot be construed as negating the possibility of a conviction of embezzlement in the case of the defendant. This would be true even had he utilized the subterfuge of a vote of authority from himself and the dummy directors. If the essential elements of embezzlement are present, the crime is established, regardless of the ingenuity employed in its perpetration.

The defendant chose to, and did, organize the two corporations, and he conducted his affairs through them, thereby enjoying the benefits and protection of corporate operation of his business. He cannot now, when it suits his purpose, brush aside the corporate entity and claim that the corporate funds are his own private funds to do with as he pleases. Frank Amodio Moving & Storage Co. v. Connelly, supra. Cases such as Davis v. United States, 6 Cir., 226 F.2d 331, 335; Currier v. United States, 1 Cir., 166 F.2d 346, 348; and Drybrough v. Commissioner of Internal Revenue, 6 Cir., 238 F.2d 735, 738, upon which the defendant lays great stress, do not seem to us to be in point. They are concerned with income tax liability, criminal and civil, under the internal revenue laws. They have nothing to do with the proper construction of our embezzlement statute, nor do they hold that anyone owning all the stock of a corporation can treat the corporate funds as his own and help himself to them with impunity. If, and to the extent that, the cases in question are authority for any such proposition, and we are convinced that they are not, we could not follow them. If the defendant, with the requisite intent to defraud, misappropriated the funds of either corporation, he was guilty of embezzlement under our statute, and this would be so regardless of who owned the corporate stock. This in effect was held in State v. Stites, 5 Utah 2d 101, 103, 297 P.2d 227. The court did not err in refusing to give the charge requested.

Upon the request of the defendant, a lawyer of many years' standing, a number of interviews with the state's attorney were arranged for, and held, prior to the actual institution of criminal preceedings. The responsibility for this request was not assumed by the defendant's counsel, who insisted that the defendant himself make the decision. The purpose of the interviews was to enable the defendant to present his version of his activities to the state's attorney in the hope that it would satisfy the latter that they had not been criminal and that consequently there was no justification for the institution of a criminal prosecution. It was fully understood by the defendant and his attorneys, prior to these conferences, that the state's attorney felt that the facts, as uncovered in his investigation, indicated a strong case requiring prosecution. It was also appreciated that the defendant would run the risk that in the course of the conferences he might disclose to the state's attorney information of which the latter had theretofore been unaware and that the state's case...