Torbert v. People

• Decision Date: 13 February 1945
• Docket Number: 15379.
• Citation: Torbert v. People, 113 Colo. 294, 156 P.2d 128 (Colo. 1945)
• Parties: TORBERT v. PEOPLE.
• Court: Colorado Supreme Court

156 P.2d 128

113 Colo. 294

TORBERT v. PEOPLE.

No. 15379.

Supreme Court of Colorado

February 13, 1945

In Department.

Error to District Court, City and County of Denver; Joseph J Walsh, Judge.

W. R Torbert was convicted of cheating and swindling, making false pretenses, and using a confidence game, and he brings error.

Affirmed.

Ralph J. Cummings, of Denver, for plaintiff in error.

Gail L Ireland, Atty. Gen., H. Lawrence Hinkley, Deputy Atty. Gen and James S. Henderson, Asst. Atty. Gen., for defendant in error.

JACKSON Justice.

Plaintiff in error was convicted under all three counts of an information alleging 1. cheating and swindling, 2. false pretenses, and 3. a confidence game. The trial court imposed a sentence of five to seven years. As grounds for seeking reversal in this court, plaintiff in error, whom we shall hereafter refer to as defendant, makes assignments of error which counsel for the defendant has epitomized, and counsel for the people have likewise discussed, under four headings: 1. The court should have granted defendant's motion to strike the testimony of witnesses McAfee, O'Neal, Filson, Hamilton and Dickman. 2. The trial court should have directed a verdict of not guilty as to count three charging confidence game. 3. The court should not have admitted in evidence, over the objection and exception of defendant, exhibits I, J, K, and L, being prospectuses by the Savol Supply Company, a Kansas corporation. And 4. The court should not have admitted in evidence, over the objection and exception of defendant, exhibits M, N, O, P, Q, R, S, and T, relating to the Cokano Investment Company.

All three counts are based upon dealings which defendant had with Margaret M. Carroll in Denver, occurring on or about the 8th day of July, 1939, in which the latter exchanged her six shares of preferred stock and four shares of common stock (new) of the Cities Service Company for 103 shares of the common stock of the National Savol Company, a Colorado corporation--an exchange which was brought about by the solicitation of defendant and upon his representation that the stock had a valuation of $3.50 per share and in one or two years would be worth $5 per share. In the exchange, a valuation of $3 per share was placed upon the stock of the National Savol Company, which stock had a par value of one cent per share.

The evidence showed that defendant had organized a company in Kansas engaged in the manufacture and sale of automobile accessories known as Victor Specialty Company. This company acquired a patent pertaining to a compound to be mixed with lubricating oil, which it was claimed made the oil so mixed with it a better lubricant. Shortly afterward and on or about February 24, 1927, the name of this company was changed to the Savol Supply Company. About the same time the capital stock of Savol Supply Company was tripled, and in 1930 defendant began selling stock in his company to the general public. It was in this year that he moved to Colorado, and his stock selling campaign thenceforward took place in this state--he having been formerly a resident of Colorado.

September 23, 1930, the Cokano Investment Company was organized in Colorado. July 22, 1933, this company made application to the state of Colorado for registration as a dealer in securities, reciting that up to that time it had held title to real estate and water rights; that thereafter it engaged in the sale of stock of the Savol Supply Company, building and loan companies, Cities Service, and other similar stocks. Annual applications were made for licenses thereafter, to and including 1940. Licenses were issued by the Colorado Securities Commissioner until 1940, when he refused to renew the application made that year. He testified that the chief activity of the Cokano Investment Company during this period was the sale of Savol stock.

January 3, 1939, the National Savol Company was incorporated in Colorado, with defendant as one of the three directors. One week later an exchange agreement was entered into between the Savol Supply Company of Kansas and the new Colorado corporation by which the bulk of the assets of the Kansas corporation were transferred to the Colorado company. Defendant testified that the reason for this was that two-thirds of three-fourths of his stockholders were residents of Colorado and preferred to own stock in a Colorado corporation. The testimony of Allen Redeker, a certified public accountant examining the books of the companies in question, showed that the principal assets of the Kansas company, which were taken over by the Colorado company, consisted of oil rights, formula, patents and good will which were placed at a par value of $22,905.75; notes receivable amounting to $11,160.98; furniture and fixtures $215; and printing stationery and supplies $50. The Colorado company assumed notes payable in the amount of $15,370.79 owing by the Kansas company; leaving an apparent surplus of assets over liabilities of $18,960.94, which was to be 'liquidated or settled or paid for by turning over the stock of the Savol Supply Company after they had acquired the Colorado corporation, the National Savol Company.' The auditor's comment on the various assets of the National Savol Company include the following:

'I will first comment on the items as shown by the balance sheet as of June 30, 1940. The first item is cash $7.00. This was cash, according to the books, which was paid in by two of the qualifying directors when the company was organized, and I asked Mr. Torbert where the cash was and he said his wife had it in Kansas City, and he said the company had never opened a bank account. There are no cash receipts of any kind shown by the National Savol Company during the entire period for which I audited, except this $7.00, and as I said, that $7.00 was not available for inspection.'

The item of notes receivable entered as $11,160.98 he believed should be shown as of no value, the notes being considered worthless.

'The next asset is stocks and bonds. The records show that the company owned 53,021 shares of common stock of the Savol Supply Company, and 1401 shares of preferred stock of the Savol Supply Company, carried at a total book value of $159,967.76. I would like to make a little explanation as to that. In the first place, I again want to state that when the company was organized it took over the principal assets of the Savol Supply Company in Kansas, then the National Savol Company made an agreement with the Cokano Investment Company whereby they were permitted to exchange their stock with stockholders in Colorado who owned stock in the Kansas corporation, to take in exchange for that stock in the new National Savol Company an even exchange, share for share, and when that was done it was capitalized and set up at that book value. As I say, some 53,000 shares were exchanged of common, and 1400 shares of preferred were exchanged and were set up at a value of $159,967.76. I have eliminated that item from the balance; in the first place, because the charter of the Savol Supply Company in Kansas had been forfeited, and furthermore, as the principal assets of the company had already been transferred to the Colorado corporation, there certainly could be no value to that extent left in the other company; and furthermore, the charter had been forfeited, and therefore I have eliminated that item. Then capital stock issued as collateral amounts to $2,751.08. This is a similar item as I have explained in the Cokano Investment Company, where the Cokano Investment Company went out and borrowed money from certain individuals and gave as collateral stock of the National Savol Company, and then later on turned these notes over to the National Savol Company and they assumed that liability, so it is a continuation of that original transaction.

'Oil rights, patents and good will, $300,000. As I stated Before the value was set up on the books according to the exchange agreement which they had with the Savol Supply Company. The value I placed on that under adjusted balance is $22,905.75. The first entry on the books show that it was set up at that date. On the same date an entry was made increasing the value $277.094.25, and crediting that item to surplus. I have eliminated the $277,094.25, leaving $22,905.75, and even that value which I have left on here as of June 30th is not proper according to accounting proceedings, because a patent runs for a period of only seventeen years, so when you come to the...