State v. Johnston

• Decision Date: 11 February 1929
• Docket Number: 12589.
• Citation: 146 S.E. 657,149 S.C. 195
• Parties: STATE v. JOHNSTON et al.
• Court: South Carolina Supreme Court

146 S.E. 657

149 S.C. 195

STATE v. JOHNSTON et al.

No. 12589.

Supreme Court of South Carolina

February 11, 1929

Appeal from General Sessions Circuit Court of York County; Wm. H Grimball, Judge.

D. C Johnston was convicted of publishing false statement in regard to financial condition of bank of which he was director, and he appeals. Reversed, and remanded for new trial.

Gaston Hamilton & Gaston, of Chester, and Marion & Finley and Thos. F. McDow, all of York, for appellant.

J. Lyles Glenn, Sol., and J. H. Glenn, both of Chester, and Williams & Stewart, of Lancaster, for the State.

BLEASE J.

The appellant, D. C. Johnston, along with J. W. O'Neal and John R. Shurley, was indicted by the grand jury of York county for the violation of the provisions of section 244 of the Criminal Code, vol. 2 of the Code of 1922. On his motion, Shurley was granted a change of venue from York to Fairfield county. The appellant, Johnston, and O'Neal were tried together in the court of general sessions for York county before his honor, Circuit Judge William H. Grimball.

The first count of the indictment charged, in brief, that the defendants, as officers and directors of the Citizens' Bank & Trust Company, a banking corporation under the laws of this state, declared and paid a dividend on the capital stock of the said corporation when the said dividend had not been actually earned, in violation of law. The court granted the motion of Johnston and O'Neal for a directed verdict as to that count; accordingly, it is not especially involved in this appeal.

The second count of the indictment was as follows:

"That J. W. O'Neal, D. C. Johnston, and John R. Shurley, late of the County and State aforesaid, on the 31st day of December, in the year of our Lord one thousand nine hundred twenty-six, at York, in the County of York, in the State aforesaid, each and all of the said J. W. O'Neal, D. C. Johnston, and John R. Shurley, being at that time officers and directors of Citizens Bank & Trust Company, a banking corporation organized and existing under the laws of the State of South Carolina, with its principal place of business in the City of Rock Hill, in the County or York and State of South Carolina, and vested by their official positions in the said banking corporation with authority, power and duty to examine, ascertain and know the true and correct condition of the said banking corporation, and actually by virtue of their management, control, and direction of the business affairs, moneys, funds and other properties, and being then and there actually engaged in the management of the said banking company, and well knowing its true and correct financial condition, did make, declare and publish a false statement in regard to the financial condition of the said Citizens Bank & Trust Company, as it then existed; the said statement so made, declared and published being false in the following particulars:

"1. In that the said statement, when so made, declared and published, represented, that the said banking company had actually earned funds out of which to pay a dividend on the capital stock of the said banking company, and that it represented that the bank had a surplus theretofore earned and not set aside for a special purpose, upon the approval of the stockholders of the incorporated company to be affected, sufficient to pay a dividend on the capital stock of the said banking company.

"2. In that the said statement, when so made, declared and published, represented that the said banking company had on deposit a sum of money greatly in excess of the actual deposits.

"3. In that the said statement as so declared, made and published, failed to take into consideration, reflect or show in any way certain liabilities of the said Citizens Bank & Trust Company, among them a mortgage for one hundred thousand ($100,000.00) Dollars, on the new banking house owned and occupied by the said Citizens Bank & Trust Company, which said mortgage was existent, outstanding and unpaid.

"All to the great damage and injury of the depositors, creditors, and stockholders of the said Citizens Bank & Trust Company, and against the form of the Statute in such cases made and provided and against the peace and dignity of the State."

The appellant demurred to the second count in the indictment, and moved to quash the same on the following grounds:

"1. Because there is no allegation to show the nature of the statement alleged to have been made by the said defendants, and what the same consisted of.

"2. Because there is no allegation to show to whom the said alleged false statement was made.

"3. Because there is no allegation of the ignorance of its falsity by persons to whom it was made.

"4. Because there is no allegation that the said alleged false statement was intended to be acted upon.

"5. Because there is no allegation that it was acted upon to the damage of any one."

This motion was refused. On the evidence, the presiding judge directed the jury not to consider the allegations of the first specification. The motion of the defendants for a directed verdict as to the second count of the indictment was refused.

The jury acquitted O'Neal, and found Johnston guilty as to the second count. He was sentenced by Judge Grimball to pay a fine of $3,000 or to serve 6 months.

From the verdict and sentence, Johnston has appealed to this court. There are thirty exceptions, but, in our opinion, there are not near so many questions. We shall not attempt to pass upon each of the exceptions separately, but will consider all of them so far as we deem it necessary.

We shall consider, first, the objections made to the indictment. For a full understanding of the matter, it seems necessary to set out in full section 244 of the Criminal Code, which is as follows:

"(244) § 122. No Dividends to be Paid unless Earned.--It shall be unlawful for any incorporated company to pay any dividends on the capital stock of such company, unless the same have been actually earned, or are paid out of any surplus heretofore earned, and not set aside for a special purpose, upon the approval of the stockholders of the incorporated company to be affected.

" Unlawful for Companies to Make False Statements.--It shall be unlawful for any officer or director of any corporation or company to make any false statement in regard to the financial condition of such company or corporation.

" Penalty.--Any violation of this Section by the officers or agents of such company shall be punished by fine of not less than five hundred dollars or imprisonment for not less than six months."

It is to be observed that the allegations of the indictment really involved in this case relate solely to the second subdivision, wherein it is made unlawful for an officer or director of a corporation to make a false statement in regard to the financial condition of such corporation.

The crime charged against the appellant was not known to the common law. It is distinctly a statutory offense. So far as our investigation discloses, no part of the statute has ever been before this court for construction. The headnote of the second paragraph of the section is somewhat misleading. It reads that it is "Unlawful for Companies to Make False Statements," while the language of the statute itself denounces as unlawful the act of an officer or director, not the corporation or company, in making the false statement referred to.

In considering the sufficiency of the indictment, it is necessary first of all to ascertain what is made a crime by the second subdivision of section 244. The words of the greatest import therein are "false statement." Since these have a legal meaning, we must construe the language of this penal statute in accordance with that meaning.

2 Bouv. Law Dict. (3d Rev.) p. 1181, says of the word "false" that, "Applied to the intentional act of a responsible being, it implies a purpose to deceive."

Black's Law Dictionary defines "false" as follows: "In law, this word means something more than untrue; it means something designedly untrue and deceitful, and implies an intention to perpetrate some treachery or fraud."

"Statement" is defined to be: "A formal, exact, detailed presentation; the act of stating, reciting, or presenting, verbally or on paper." 36 Cyc. 817.

Black says of the word "statement": "In general sense an allegation; a declaration of matters of fact."

The word "false," in the expression "false statement," occurring in an act of Congress, relating to an entry of imported goods, was said by the Circuit Court of Appeals of the Eighth Circuit to mean "more than 'incorrect' or 'erroneous.' It implies wrong or culpable negligence, and signifies knowingly or negligently untrue." U.S. v. Ninety-Nine Diamonds, 139 F. 961, 2 L. R. A. (N. S.) 185.

With the legal definitions of the "key words" in mind, therefore, the act denounced as an offense, is the making by an officer or director of any corporation or company to some other person of a statement (verbal or written) in regard to the financial condition of such corporation or company, which is false, and so known to be false by the maker, with the intention to deceive the person to whom the false statement is made or exhibited.

The learned circuit judge, who presided at the trial of the case at bar, rightly conceived, in the main, according to our view, the intention of the law, and the necessary elements of the crime to be established. He instructed the jury very properly that, to convict the defendant, it was incumbent upon the state to establish these things: (1) That he was an officer or director of the named corporation; (2) that as such officer or director he made a statement in regard to the corporation's financial...