State v. Rehg

• Decision Date: 10 July 1943
• Docket Number: 35748.
• Citation: 157 Kan. 203,139 P.2d 838
• Parties: STATE v. REHG.
• Court: Kansas Supreme Court

139 P.2d 838

157 Kan. 203

STATE v. REHG.

No. 35748.

Supreme Court of Kansas

July 10, 1943

Syllabus by the Court.

In prosecution for embezzlement by financial secretary of mining company which obtained money by false representations failure of trial court to give instructions embodying ideas that if money was secured by fraudulent representation of company, secretary was justified in withholding money secretary's duty to secretary's clients from whom money was obtained under secretary's power of attorney should be taken in account, that if money was withheld under a claim of right there was no guilt, and that secretary could withhold amount of company's indebtedness to him, was error. Gen.St.1935, 21-545.

In the prosecution of an agent for embezzlement, a demand by principal upon agent for money or other property claimed to have been embezzled is a necessary prerequisite to a prosecution, and demand should be for amount due and should be reasonably clear and specific. Gen.St.1935, 21-545.

Where agent of mining company was entitled to control money obtained for company on loan contracts, and company was not authorized to demand more than $500 at any time, demand by company for $1,300 was insufficient basis for prosecution for embezzlement by agent. Gen.St.1935, 21-545.

Where Supreme Court found that conviction for embezzlement by agent could not be sustained and that a successful prosecution upon the information could not be maintained, the defendant was discharged. Gen.St.1935, 62-1717.

1. In the prosecution of an agent for embezzlement under the latter part of G.S. 1935, 21-545, a demand by the principal upon the agent for the money or other property claimed to have been embezzled is a necessary prerequisite to a prosecution.

2. When under the contract of employment the agent was custodian of the money claimed to have been embezzled, and the principal was authorized to request the deposit to its credit in a designated bank of only $500 at one time, a demand by the principal upon the agent that he deposit $1300 in the bank to the principal's credit was legally insufficient on which to predicate a prosecution for embezzlement by the agent under the latter part of G.S.1935, 21-545, for refusal to comply with the demand.

3. In an appealed criminal case, when this court finds it must be reversed and the record discloses a successful prosecution upon the information cannot be maintained, the defendant should be discharged. G.S. 1935, 62-1717, and following State v. Fisher, 140 Kan. 511, 38 P.2d 115.

Appealed from District Court, Butler County; Carl Ackarman, Judge.

Norman M. Rehg was convicted of embezzlement, and he appeals.

Judgment reversed with directions that defendant be discharged.

Austin M. Cowan, of Wichita (Robert H. Nelson and Grey Dresie, both of Wichita, and E. W. Grant, of Eldorado, on the brief; C. A McCorkle, W. A. Kahrs, and Henry L. Butler, all of Wichita of counsel), for appellant.

R. C, Woodward, of El Dorado (A. B. Mitchell, Atty. Gen., Braden C. Johnston, Asst. Atty. Gen., O. J. Connell, Jr., Co. Atty., of El Dorado, on the brief; and Gale Moss, former Co. Atty., of El Dorado, of counsel), for appellee.

HARVEY Justice.

Norman M. Rehg was charged under the latter part of G.S.1935, 21-545, with the embezzlement of $1,170 which came into his hands as financial secretary of the Keystone Copper Mining Company of Arizona. A trial resulted in his conviction and sentence. He has appealed and presents many assignments of error.

The pertinent facts shown by the evidence may be summarized briefly as follows: The Keystone Copper Mining Company of Arizona, a corporation, hereinafter called the Company, had mining properties near Dragoon, in Cochise County, Arizona. Its principal active officers were U. R. (Bert) Miller, president; T. C. (Clyde) Miller, secretary, and C. W. (Chuck) Miller, son of U. R. Miller, who appears to have held various positions in the organization. The mines had been operated for several years. By 1935 the Company had an estimated thirty-thousand plus tons of ore, most of which was at the top of the mine, ready for milling, but needed money to mill the ore and place the products on the market. Their attorney, so far as these operations were concerned at least, was John C. Blood of Wichita, a capable lawyer of good standing. Mr. Rehg lived at El Dorado, Kansas, and for perhaps ten years had been engaged in the business of selling corporate bonds and securities and had built up an extensive clientele, many of whom entrusted him with funds to invest in such properties and had given him powers of attorney for that purpose. In 1935 he was contacted by the officers of the Company to sell securities or notes to raise $25,000 needed for the Company's business. In preparation for this work Rehg went to the mines in Arizona and took with him several persons of high standing, well experienced in business affairs and corporate investments, who resided in or near El Dorado, and together they investigated the property and talked with the various officers of the Company with the view of determining whether investments made to raise the $25,000 would be sound and well secured. The testimony disclosed these men were informed by Bert Miller and other officers of the Company that the Company owned the approximately 355 acres of land upon which there were eighteen mining claims, also owned all the buildings, which were quite extensive, and mining equipment; that the same was unencumbered by mortgages, taxes, judgments or other liens. Upon these representations, which Rehg testified were made not only to himself and others at the mine but to him repeatedly through the years 1935 and 1936, and upon which he relied, he undertook the task of trying to raise the $25,000 needed. The Company at the time had not secured a permit from the State Corporation Commission to sell its stock or securities in Kansas. The officers of the Company and their attorney and Rehg thought the matter could be handled by Rehg making loans for his clients under powers of attorney which he had from them. A form of "note contract" was prepared which by way of preamble recited that the Company was the owner and operator of certain mining claims and had about thirty-thousand plus tons of copper bearing ores, and after certain mine repairs and additions were made the company had facilities for concentrating the ore through its mill at the mine, and -- (the name of the person advancing money) had loaned to the Company certain sums for the purpose of milling the ore and preparing the same for smelting and putting the mill and mine in operating condition. It was agreed by the Company that in consideration of the sum of -- (to be inserted) loaned it by -- (name of person advancing money) the Company agreed to repay said -- (lender) within twelve months according to the terms of this contract, the Company to have the right to extend payment not to exceed an additional twelve months. By its terms the Company agreed to set aside the thirty-thousand plus tons of ore as security for the payment of the sum of $25,000, of which the contract was a part; that out of the gross receipts from the ore milled to set aside at least 7 1/2 percent in a separate fund to be placed in the Walnut Valley State Bank at El Dorado, to be paid monthly to the payee of the note, and others having similar note contracts, and that the 7 1/2 percent should be a first and prior charge upon the smelter returns, and the Company agreed to pay semi-annually 4 percent interest from the date on all balances due on the money loaned, and further that the payee of the note contract and others loaning a part of the $25,000 should have the right to inspect the mine, returns from smelters and the books of the company until the money advanced with interest was fully paid; "and the Company further agrees that there are no outstanding liens or mortgage on the real property of the Company except $1500.00 and that same will be paid, and that the Company will not place any liens, mortgage or encumber said property until the $25,000 loan herein is fully paid." The note contract further provided that in case the Company failed to carry out the terms of this agreement the payees of the note contracts should have the right to operate the mines, to mill the ore, and from the receipts thereof pay the actual expenses, including a representative of the creditors, and apply the balance toward the payment of the $25,000 borrowed. Rehg was given a number of these note contracts, blank as to date, amount and name of lender, and was authorized to fill those blanks and deliver the note contracts as they were sold.

Rehg sold $3,200 worth of these contracts in 1935 and 1936 and furnished the Company's attorney with copies of the powers of attorney under which he acted. It was concluded best, however, to procure authority from the State Corporation Commission to raise the money on these note contracts. Whereupon application was made to the State Corporation Commission, and after a hearing in November, 1936, the permit was granted. It was the plan of the Company under which Rehg operated that in borrowing the money on these note contracts the Company would deliver to the payee of the note contracts stock of the corporation in proportion to the amount of money loaned. For example, if $1,500 was loaned, 1,000 shares of no par value stock were given to the payee of the note contract as a bonus. In granting the permit to raise the money in this manner the Corporation Commission declined to permit the Company to issue additional stock, but required such stock as was given as a bonus should be given by the principal stockholders of the Company, and that plan was carried out.

On December 7, 1936,...