Terry v. United States, 12210

• Decision Date: 01 December 1942
• Docket Number: No. 12210,12211.,12210
• Parties: TERRY v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

131 F.2d 40 (1942)

TERRY v. UNITED STATES.

Nos. 12210, 12211.

Circuit Court of Appeals, Eighth Circuit.

October 19, 1942.

Rehearing Denied December 1, 1942.

James E. Burke, of Kansas City, Mo., for appellant.

Otto Schmid, Asst. U. S. Atty., of Kansas City, Mo. (Maurice M. Milligan, U. S. Atty., and Richard K. Phelps, Asst. U. S. Atty., both of Kansas City, Mo., on the brief), for appellee.

Before GARDNER, WOODROUGH, and RIDDICK, Circuit Judges.

WOODROUGH, Circuit Judge.

C. W. Terry prosecutes these appeals (consolidated) from judgments of conviction and sentences entered against him under two indictments which charged him and a codefendant with violations of Section 35(A) of the Criminal Code, 18 U.S.C. A. § 80, the pertinent portion of which reads as follows:

"Whoever shall knowingly and willfully * * * make or cause to be made any false or fraudulent statements or representations, or make or use or cause to be made or used any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry in any matter within the jurisdiction of any department or agency of the United States, * * * shall be fined" etc.

The gist of each of the indictments is that defendants on stated dates and within Jackson County, Missouri, made and caused to be made and used and caused to be used, certain certificates containing fraudulent and fictitious statements in a matter within the jurisdiction of an agency of the United States, to-wit, the Federal Housing Administration.¹

At the conclusion of all the evidence the defendant moved the court to direct a verdict in his favor on the ground, among others, that there was no evidence that defendant made or used or caused to be made or used the certificates referred to in the indictments in a matter within the jurisdiction of an agency of the United States, and it is contended on these appeals that the court erred in denying the motion. It is not contended that the Federal Housing Administration is not "an agency of the United States", but it is insisted that there was no evidence that the acts charged to have been committed by defendant in Jackson County, Missouri, on or about January 8th and 11th, 1940, were in a matter within the jurisdiction of the Federal Housing Administration.

The powers conferred upon the Federal Housing Administration include the power to insure financial institutions which the Administrator approves as eligible for credit insurance against losses which they may sustain as a result of purchases of obligations representing advances of credit in limited amounts for the purpose of financing the building of new structures or improving old ones by owners or lessees of real property, and the Administrator is required to charge a premium for such insurance not exceeding three-fourths of one percent per annum of the net proceeds of the advance of credit insured. 12 U.S.C.A. § 1703(a) (f). The legislative plan does not contemplate that the government agency may itself lend money to persons desiring to build upon or improve their property. It leaves such transactions to private enterprise. The governmental aid is to be effected solely through insurance granted to approved institutions, which approved institutions leave the making and servicing of loans to others, buying such as are acceptable to themselves and then obtaining insurance from the Administration in respect to such of the loans as they may choose to have insured.

Pursuant to the power granted and in conformity with regulations promulgated by him, 12 U.S.C.A. § 1703(g), the Administrator has approved many financial institutions as eligible for credit insurance and at their request grants them the insurance contemplated by the Act in consideration of fixed premiums.

It appears from the evidence in this case that the Administrator has so approved the Commercial Investment Trust, Inc., a corporation organized under the laws of Delaware with its principal office in New York. The corporation is referred to as an insured institution having the right to obtain insurance from the Administration against loss in respect to such loans of the character defined in 12 U.S.C.A. § 1703(a) as it may acquire and may desire to have insured at the premium rate fixed by the Administrator.

It also appears that the Commercial Investment Trust, Inc., does business with and owns all the stock of a Maryland corporation known as the C. I. T. Corporation which has its principal place of business at Chicago and a branch office at Kansas City, Missouri. The two corporations are distinct and separate but they have entered into contracts dated January 1, 1940, which recite that C. I. T. Corporation is engaged in the business of purchasing secured installment obligations created in the sale or lease on deferred payment plans of automobiles and other chattels termed "retail paper", and also short time secured obligations of dealers and distributors of automobiles and other products termed "wholesale paper", and that said corporation proposes from time to time to offer certain of said retail and wholesale paper acquired by it for sale to the investment trust company. The investment trust company agrees to buy such of it as is acceptable to it on terms and conditions elaborated in the contract. The collection and servicing of the paper is left to the C. I. T., the uninsured corporation. The contracts contain no reference to the National Housing Act or its insurance provisions.

With this general situation in mind, we turn to the transactions referred to in the indictment in No. 12211. The certificate there set forth is a declaration by Jessie and Francis Williams that all materials had been furnished and installed and all work had been completed in accordance with their application for a loan on premises indicated. Such application was exhibited in evidence and disclosed that said Jessie and Francis Williams had thereby applied in writing to the C. I. T. Corporation for a credit of $500.00 to be expended for materials in the improvement of a house owned by them situated at 2415 North 7th Street in Kansas City, Kansas, which they had bought for $1,500.00. It appeared that the application was presented to the King Lumber and Supply Company, a dealer at Kansas City in building material, and was by it submitted to the C. I. T. Corporation for its approval. Upon receipt of such approval the lumber company made delivery of lumber and other material to the value of $144.25. Thereafter a promissory note payable to the lumber company signed by Jessie and Francis Williams in the amount of $574.87 payable in monthly installments of $15.97 was presented to that company, and after taking out the $144.25 due it it issued its check payable to the co-defendant in the indictment for $355.75, balance of the $500.00 credit. Thereafter the lumber company transferred the $574.87 note to the C. I. T. Corporation, which in turn appears to have sold it to the trust investment company. That company obtained insurance for itself against loss in respect to the note from the Federal Housing Administration.

There was substantial evidence that the application for the credit and the completion certificate contained false and fraudulent statements and that Jessie and Francis Williams had never bought and did not own the described property or intend to make improvements upon it; that no materials were installed or labor performed as declared in the completion certificate, and that the signatures upon the documents had been obtained by fraud and trickery. The government showed, over objection by the defendant, that upon the accrual of loss by the non-payment of the note the Administration was obliged to and did reimburse the holder thereof in accordance with its insurance obligation.

Each of the documents, the application for the credit, the completion certificate and the promissory note, was upon a printed form and each contained reference to the Federal Housing Administration by use of the initials F H A or the name printed in full.²

The references were sufficient to remind the borrower (as by legal implication he was bound to know) that the loan was of such kind and form that the obligation might become the subject of an insurance contract between the Administration and some eligible approved institution which might acquire it and request and pay for credit insurance in respect to it. Nothing in the blanks however was intended as a representation that either the C. I. T. Corporation, to which the application was addressed, or the lumber company, to which the note was made payable and delivered, was an agency of the government or was entitled to have credit insurance under the Act (see 12 U.S.C.A. § 1731(d), and there was no expression of intention or promise on the part of either to obtain or cause such insurance to be obtained in respect to the loan. The information sought to be elicited and stated in the forms was merely such as is required generally by lenders making such loans, and the promissory note is an ordinary negotiable form except as stated. There is nothing in the record to indicate what proportion of loans acquired by the King Lumber and Supply Company, the C. I. T. Corporation or the Commercial Investment Trust Company, ultimately became the subject of the Administration insurance or what circumstances would control the several companies in making disposition of them in that respect. So far as appears, each of the concerns was free to retain its notes to its own use and each was entirely independent of any control or direction of the defendant in that matter.

Extensive arguments are directed to the asserted insufficiency of the evidence to sustain a finding that the appellant participated in the loan transaction in such a way as to be chargeable as a principal therein if it constituted a violation of the statute under which the indictment...