State v. Lake

• Decision Date: 23 February 1935
• Docket Number: 7314.
• Citation: 43 P.2d 627,99 Mont. 128
• Parties: STATE v. LAKE.
• Court: Montana Supreme Court

43 P.2d 627

99 Mont. 128

STATE v. LAKE.

No. 7314.

Supreme Court of Montana

February 23, 1935

Appeal from District Court, Cascade County, Eighth District; H. H Ewing, Judge.

H. B Lake was convicted of larceny as bailee, and he appeals.

Affirmed.

W. F O'Leary and H. R. Eickemeyer, both of Great Falls, for appellant.

Raymond T. Nagle, Atty. Gen., J. J. Lynch, Asst. Atty. Gen., and C F. Holt and J. P. Freeman, both of Great Falls, for the State.

STEWART Justice.

H. B. Lake was convicted of the crime of larceny as bailee in the district court of Cascade county. His motion for a new trial was denied. He appealed from the judgment of conviction.

The information charged in substance that on or about the 30th day of March, 1933, H. B. Lake & Co., a corporation, and the defendant H. B. Lake, as the servants, bailees, and agents of one T. W. McDonald, had in their possession and custody $218.30, the property of McDonald, and that they did unlawfully, wrongfully, and feloniously appropriate such money to their own use, with the intent to deprive McDonald of his property and to appropriate the same to their own use.

H. B. Lake & Co. is a Montana corporation, formed for the purpose of engaging, as broker, in the business of buying, selling, and dealing in stocks, bonds, other securities, and grains. Most of the stock of the corporation was owned by H. B. Lake and members of his immediate family. Lake was president and managing director of the corporation. He was personally in active charge of the business, and all of the employees worked under his direction and obeyed his orders. The firm of Bartlett-Frazier & Co., of Chicago, was the eastern correspondent for the corporation, and at the time under consideration here, practically all stocks handled by Lake & Co. were bought and sold through that firm. The Lake Company maintained an account with the latter firm. There is some dispute as to the character of that account, but it is obvious that the account was in reality a marginal account in so far as Lake & Co. and Bartlett-Frazier & Co. were directly concerned.

On March 27, 1933, McDonald entered the offices of Lake & Co. at Great Falls, and through the floor man gave an order to purchase outright for him fifty shares of American Power & Light at 4 1/8 dollars per share. The order was immediately transmitted to Bartlett-Frazier & Co., and that company purchased the stock as ordered. The next day McDonald was informed that the order had been filled. Thereupon he went immediately to the office of Lake & Co. and drew a check in its favor for $218.30. This was the total purchase price of the stock, including commissions, taxes, and wire service. The check was delivered to Gertrude McGrath, cashier for Lake & Co., together with instructions to order the stock out in his name. The check was drawn upon a Great Falls bank and deposited to the credit of Lake & Co., and was paid in full in the regular course of business. The money remained in the bank, where it was subject to the check and use of Lake & Co. The stock was actually bought through a New York broker on request of Bartlett-Frazier & Co., and was charged on their books to Lake & Co.

On April 12, 1933, Lake & Co. made an assignment for the benefit of creditors and ceased doing business. At that time no transmittal order or order directing the stock out of the hands of Bartlett-Frazier & Co. had ever been sent by Lake & Co. to that company. Subsequently Lake & Co. was adjudged a bankrupt and its business and affairs were placed in the hands of a trustee in bankruptcy. McDonald filed a reclamation claim with the trustee, claiming 50 shares of American Power & Light stock in the hands of Bartlett-Frazier & Co. at the time Lake & Co. suspended. In due course McDonald received $73.62 as his proportionate share of the moneys received from the sale of all American Power & Light stock in the possession of Bartlett-Frazier & Co. to the credit of Lake & Co. at the time of the Lake failure. It developed that instead of having enough American Power & Light stock ordered from Bartlett-Frazier & Co. to satisfy the demands of all who had ordered and paid for it, the account was actually short. Lake & Co. had orders for 175 shares, but Bartlett-Frazier & Co. only held 129 35/50 shares in the Lake account.

It appears from the evidence that at about the same time when McDonald placed his order for the American Power & Light stock, other persons had placed orders for stock under similar circumstances and had likewise paid for the stocks and directed that they be ordered out and delivered in due course. In spite of such directions, Lake & Co. never sent transmittal orders to Bartlett-Frazier & Co. ordering out such stock. Most of these customers, like McDonald, filed reclamation claims with the trustee in bankruptcy. This accounted for the short payment to McDonald.

The evidence adduced by the prosecution tended to establish the following facts: It was customary and necessary that Lake & Co. should maintain a certain marginal or credit balance with Bartlett-Frazier & Co. at all times. This marginal account could not be reduced beyond a certain point. When the account reached such minimum point, Bartlett-Frazier & Co. refused to release any more stocks to Lake & Co. for its customers unless the latter company sent a draft along with the transmittal order. From January 1, 1933, until it closed its doors, Lake & Co. was financially embarrassed. Stocks were not ordered out and delivered to customers in regular rotation; only the most insistent of its customers were able to obtain their certificates within a reasonable time. Those who were complaisant about the matter were obliged to wait indefinitely. This situation existed by reason of the condition of the marginal account with Bartlett-Frazier & Co. In order for Lake & Co. to order out and receive the stock which McDonald and others had purchased and paid for, it became necessary that the transmittal orders be accompanied by a draft for the purchase price of the stock ordered out, or that the account with Bartlett-Frazier & Co. be otherwise supplemented. The Lake Company did not have sufficient money or credit to order out all of the stock which McDonald and the other customers had purchased, paid for, and ordered out.

Evidence was adduced to show that a day or two before Lake & Co. closed its doors, the situation was such that if it had ordered out all of the stocks which it had sold and for which it had received payment, it would have lacked something like $27,000 in its Bartlett-Frazier & Co. account to make this possible. The transactions in American Power & Light stock are illustrative of the fact that Lake & Co. did not have enough stock with Bartlett-Frazier & Co. to meet the requirements of customers who had purchased stock outright, or at least thought they had done so. Transmittal orders were made out in due course, but, instead of sending them in the regular order, the defendant H. B. Lake examined them every day as they were written up and selected certain ones that should go forward to Bartlett-Frazier & Co. This, the state contends, was because there was not sufficient money or credit in the account to warrant sending them all in. However, neither Lake nor his employees ever informed any of the customers of the firm of the condition or the practice in that respect.

The defendant introduced evidence tending to show that McDonald never at any time made a demand or request for the return of the money which he had paid to Lake & Co. It was contended that if he had done so at any time prior to the suspension of the company, the money would have been returned to him. Defendant contended that at all times from the 28th day of March until suspension it had to its credit with Bartlett-Frazier & Co. more than 50 shares of American Power & Light stock, that is, more than the amount ordered by McDonald; that at all times between March 28th and the date of suspension it had more than $218.30 (the amount paid by McDonald to it) on deposit in each of the three banks with which it did business in Great Falls. He likewise contends that in filing his claim with the trustee in bankruptcy, McDonald claimed the stock instead of the money; that he could not be the owner of the stock and the money at the same time; that it was the intent of the defendant that the stock ordered by McDonald would be ordered out, and that there was no intent on his part to steal any money or stock from McDonald; that Lake & Co. at all times covered by the transaction had approximately $17,000 in cash and securities in the hands of Bartlett-Frazier & Co. over and above its indebtedness to that firm. All of these facts were introduced in an attempt to show that there was neither necessity nor a design on the part of Lake & Co. to deprive McDonald of the stock or the money.

Defendant was assigned seventeen specifications of error, but in the argument thereof has grouped and discussed some of them together. It will not be necessary for us to discuss all of them, and we will therefore give attention to the more important ones.

The first specification attacks the sufficiency of the information, and it is asserted that the court erred in overruling defendant's demurrer thereto. It is argued that the pleading does not state a public offense, and does not contain a statement of facts constituting the offense charged, in such manner as to enable a person of ordinary understanding to know what is intended, as required by section 11843, Rev. Codes 1921.

The information, after alleging the corporate capacity of Lake & Co. and the official position of defendant therewith, charges that on or about the 28th day of November, 1933, the corporation and the defendant and each of them,...