State v. Johnson
| Citation | 180 Wash. 401,40 P.2d 159 |
| Decision Date | 18 January 1935 |
| Docket Number | 25327. |
| Parties | STATE v. JOHNSON et al. |
| Court | United States State Supreme Court of Washington |
Department 2.
Appeal from Superior Court, Spokane County; W. O. Chapman, Judge.
Clyde Johnson, E. B. McBride, and another were convicted on a charge of violating Rem. Rev. Stat. §§ 3258, 3259, and named defendants appeal.
Affirmed.
Roy A Redfield, of Spokane, Thomas Oakshott, of Colville, and Danson, Lowe & Danson and Lester P. Edge, all of Spokane, for appellants.
C. W Greenough and Louis F. Bunge, both of Spokane, for the State.
Defendants were convicted upon a charge of violating Rem. Rev. Stat. §§ 3258 and 3259, relating to banks and trust companies. Motions in arrest of judgment and for a new trial having been denied sentence was pronounced and judgment was entered.
The information charged that on January 2, 1931, the defendants, being then and there directors of American Bank of Spokane, a corporation, willfully, unlawfully, and feloniously borrowed from the bank the sum of $10,000, without a resolution authorizing such loan having been approved by a majority of the directors of the bank and made and entered in the minutes of the corporation at a meeting while defendants were absent therefrom.
Rem. Rev. Stat. § 3259, upon which the charge was particularly based, reads as follows:
On January 2, 1931, and during the times hereinafter mentioned, American Bank of Spokane was a banking corporation. Defendant Johnson was the president and a director of the bank, defendant McBride was vice president and a director, and defendant Davies was a director, but not an officer, thereof. City Investment Company was a corporation engaged in conducting a general financial and investment business. Johnson was a stockholder in, and president of, that corporation.
McBride and Davies had no financial interest in the investment company and were not officers thereof.
In the latter part of 1930, McBride was heavily indebted to a bank in Seattle and was unable to pay the interest on his indebtedness. The officers of the Seattle bank asked Johnson to indorse McBride's paper evidencing his indebtedness. Johnson declined to do this, but agreed to see that the interest was paid. Johnson then consulted Davies and McBride with reference to the latter's indebtedness to the Seattle bank. At the same time Johnson and Davies were also quite heavily indebted, but it does not appear that they were being pressed upon their obligations.
After some conferences with each other, defendant entered into an agreement which contemplated a pooling arrangement of certain of their assets. The purpose of the agreement was to perfect some workable plan by which the interest on the respective obligations of all three could be paid, particularly those of McBride, and thus obviate any embarrassment to the bank because of McBride's relation to it as an officer and director. Under the plan adopted, the salary and dividend incomes of the three men were to be paid into a common fund to be handled and managed by the Cuty investment Company. From this common fund, withdrawals were to be made for their expenses and interest obligations. Drawings on personal accounts were limited to specified sums, to wit, $1,000 to Johnson, $1,000 to Davies, and $300 to McBride, per month.
Either because the common fund had become depleted or else because it never had sufficient funds to start with, it became necessary to borrow a considerable sum of money in order to make the proposed plan workable. At this point occurred the transaction which formed the basis of the subsequent prosecution.
On January 2, 1931, McBride, at Johnson's direction, prepared a demand note for $10,000, payable to the order of the American Bank. The note was signed McBride took the note, together with a deposit slip, and had one of the tellers of the bank enter the deposit to the credit of The bank, on the same day, made a charge in a like amount upon its loans and discount journal against City Investment Company Special. However, there was no charge of the amount by the bank against the general account of City Investment Company, nor was there any charge made upon the books of City Investment Company against the individuals here involved, until about nine months later. In May, 1931, the account designated City Investment Company Special was changed to Investors' Syndicate, because of the confusion that the former designation had brought about. McBride kept a book showing a record of the receipts and disbursements of the common fund formerly known as City Investment Company Special, and latterly as Investors' Syndicate, used for the benefit of the three individuals. The first entry in that record is dated January 2, 1931, and reads: 'American Bank Loan $10,000.'
Of this special fund there was withdrawn, over an extended period, by Johnson $3,823.57, by Davies $1,832.32, and by McBride $4,175.14, or a total of $9,842.03. There was no resolution specifically authorizing the above loan by the bank.
From the judgment of conviction, Johnson and McBride, alone, have appealed. They will, therefore, be hereinafter referred to as appellants. Davies will be referred to as defendant.
The assignments of error may be grouped under the following heads: (1) Error in denying the challenge to the sufficiency of the state's evidence and denying the motions for directed verdict, in arrest of judgment, and for a new trial, respectively: (2) error in the admission and in the exclusion of evidence; and (3) error in the refusal to give certain requested instructions.
The main question in the case is that presented by the first group of assignments. The offense charged is the unlawful borrowing of money from a bank by a director. The immediate and crucial question here is, Who borrowed the $10,000? Did City Investment Company borrow it, as the appellants contend, or did the appellants and the defendant themselves borrow it, as the state contends? It may be conceded that if the City Investment Company, in law and in fact, borrowed the money, then the individuals would not be guilty of the offense charged. The appellants' contention is that there were in reality two transactions, one, a loan from the bank to City Investment Company, and the other, from the latter to the three individuals. The state contends that the transaction, as a whole, constituted a borrowing from the bank by the individuals and that City Investment Company was simply used as a conduit of the funds from the coffers of the bank to the pockets of the individuals.
The object of the statute is not simply to compel obedience to formal requirements, nor is it satisfied with any such compliance. Its purpose is to protect the bank and its depositors against the possible ravages of internal assaults upon its funds. By its very terms it forbids any loan to be made to any of the directors, officers, or employees of the bank, directly or indirectly, without a proper resolution authorizing the same having been made; and, by a correlative provision, it forbids any officer or director to borrow or knowingly to permit a similar official to borrow any of the bank's funds without such resolution. The statute is, therefore, leveled at indirection as well as at direction. If the forbidden act may not be effected immediately, it may not be permitted to be accomplished circuitously.
It is true that the note evidencing the loan was not, on its face the obligation of the appellants or defendant, but that of City Investment Company Special. Consequently, it is strenuously argued by appellants that there was no intention on the part of the individuals to make a contract or create an obligation running from themselves to the bank; that there was no meeting of minds between the bank and the individuals; and that the note manifests that such was not the intention or the result. But these considerations are not of controlling importance here. We are not now concerned with any possible right of action that the bank may have had against City Investment Company upon the note. We are concerned only with what the appellants and defendant did with respect to the bank's funds. Manifestly, it was their intention to get the $10,000; and they did get it...
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