U.S. v. Campbell

• Decision Date: 12 September 1995
• Docket Number: No. 94-40897,94-40897
• Citation: 64 F.3d 967
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Ben D. CAMPBELL and John G. Campbell, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 967

64 F.3d 967

UNITED STATES of America, Plaintiff-Appellee, v. Ben D. CAMPBELL and John G. Campbell, Defendants-Appellants.

No. 94-40897.

United States Court of Appeals Fifth Circuit.

Sept. 12, 1995.

John H. Hagler, Dallas, TX, for Ben D. Campbell.

Herbert V. Larson, Jr., New Orleans, LA, for John G. Campbell.

Andrea H. Pustejovsky, Asst. U.S. Atty., Dallas, TX, Michael Ernest Savage, Asst. U.S. Atty., Sherman, TX, for appellee.

Appeals from the United States District Court for the Eastern District of Texas.

Before GARWOOD, JOLLY and BARKSDALE, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

John and Ben Campbell, father and son, appeal their convictions for conspiracy and bank fraud, and Ben appeals his conviction for making a false entry in bank records, all resulting from Ben Campbell's mortgage of property, which he did not own, to the now-failed Flower Mound Bank. The mortgaged property was owned by West-Butte Corporation, a small family owned company formed to develop the property. Our opinion focuses primarily on the alleged conspiracy to defraud the bank (now Security Bank of Flower Mound) by depriving it of its security. The government contends that this conspiracy to defraud the bank began only after Ben defaulted on the loan--not when Ben mortgaged the property to the bank. Once the bank began its attempts to foreclose on the property, John, with Ben's help, demanded release of the property and took legal action to reclaim it from the bank. The government argues that these efforts amounted to a conspiracy to commit bank fraud.

Although we easily conclude that the evidence supports Ben's conviction for fraudulently mortgaging the property by falsely signing as president of West-Butte Corporation, we find that the evidence does not support an illegal conspiracy to deprive the bank of its security. Because the evidence supporting the bank fraud count is the same as that supporting the reversed conspiracy convictions, we also reverse these convictions. We thus affirm in part, reverse in part, and remand.

The facts underlying the alleged conspiracy are complicated, and the government's theory of the illegality of the conspiracy is somewhat unsure or at least not easily grasped. To understand this appeal, we must first set out the facts in laborious detail.

I

A

In 1978, John Campbell purchased for development as a resort 6.2 acres of land near Crested Butte, Colorado (the "Crested Butte property" or the "property"). Daniel Thurman, a life-time friend and business associate of John Campbell, assisted in the development from 1978 until 1984, specifically, by attempting to obtain water rights for the Crested Butte property. In 1984, Thurman, John Campbell, and Ben D. Campbell--John Campbell's son and co-defendant-appellant--formed West-Butte Corporation ("West-Butte") to continue with development of the Crested Butte property. John Campbell contributed to West-Butte the Crested Butte property by warranty deed. The Crested Butte property was West-Butte's sole asset.

West-Butte's Articles of Incorporation listed its officers as Dan Thurman, president; Ben Campbell, vice president; and Shirley Thurman, secretary-treasurer. These same individuals comprised the three-member board of directors. Finally, the Articles of Incorporation authorized, but did not issue, 120,000 shares of common stock. The minutes of the initial organizational meeting for the corporation authorized and directed the president and the secretary to issue 10,000 shares to CATV Systems, Inc. ("CATV"), a corporation wholly-owned by Ben Campbell, and 10,000 shares to Ben Campbell, individually. Two stock certificates were partially completed designating CATV and Ben Campbell as the owners of the shares, but the certificates were never signed as required by West-Butte's bylaws.

B

In addition to his involvement with West-Butte, Ben Campbell owned and operated several companies, including Frontier GMC. In connection with Frontier GMC, Ben Campbell entered into a trust agreement with GMAC for supply and payment of cars. In August 1986, however, GMAC discovered that Ben Campbell sold vehicles without paying GMAC, in violation of the trust agreement. As a result, Ben Campbell owed GMAC approximately $280,000. GMAC ultimately gave Ben Campbell until December 10, 1986, to correct Frontier GMC's financial delinquency.

To meet GMAC's demands, Ben Campbell first turned to MBank Fort Worth ("MBank"). He agreed to pledge as collateral the Crested Butte property. Upon their examination, however, MBank discovered Ben Campbell did not own the Crested Butte property; it was owned by West-Butte. Furthermore, the warranty deed conveying the Crested Butte property from John Campbell to West-Butte was defective. ¹ Thus, John Campbell would need to reconvey the Crested Butte property to West-Butte. Under these circumstances, MBank denied the loan.

In late 1986, Ben Campbell turned to his own bank, Flower Mound Bank ("FMB"), where he chaired the board of directors. He applied for a $90,000 loan ² and again agreed to pledge the Crested Butte property as collateral for his loan. This deal was more complicated, however, because Ben had ten prior unsecured notes held by FMB and executed by Ben, individually, or on behalf of one of his companies. Thus, it was agreed that the Crested Butte property would serve as security for all of Ben's indebtedness.

Joseph Ackley, president of FMB during the time this transaction took place, asked attorney Boyd Newman, a director of FMB, to provide legal services with regard to Ben Campbell's loan. Newman refused to act as FMB's attorney in this matter, but contacted Robert Wright, a Colorado attorney, to assist in preparing a mortgage in favor of FMB and obtaining title insurance. After performing a title search, Wright informed Newman that West-Butte--not Ben Campbell--owned the Crested Butte property. Newman then advised Ackley that a corporate resolution from West-Butte was needed in order to grant Ben Campbell the authority to encumber West-Butte's property. Amazingly, FMB never obtained a corporate resolution from West-Butte allowing Ben Campbell to mortgage the Crested Butte property. Wright also informed Newman that the warranty deed conveying the Crested Butte property from John Campbell to West-Butte was defective. Newman asked Wright to prepare a correction deed and a mortgage in favor of FMB.

Wright prepared a quitclaim deed from John Campbell to West-Butte and a mortgage on the Crested Butte property from West-Butte in favor of FMB and sent these documents to Newman. On December 8, 1986, John executed the quitclaim deed correcting the title problem ³ and the deed was properly notarized. The quitclaim deed was filed in Colorado and vested clear title to the Crested Butte property in West-Butte. On December 10, 1986, Ben Campbell executed the mortgage in favor of FMB. The mortgage was signed on behalf of West-Butte by "Ben Campbell, as President" and his wife, "Phyllis Campbell, as Secretary." Ben then gave Wright authorization to affix a blank seal of West-Butte on the mortgage.

Ben next engaged in a series of actions in an effort to provide corporate ratification for his false signature as president of West-Butte. On December 15, 1986, Ben asked Phil Klingsmith, West-Butte's attorney, to send him West-Butte's corporate seal and to issue the West-Butte stock 50% to him and 50% to his wife. Klingsmith sent the seal and unsigned stock certificates. Furthermore, Ben Campbell testified that, additionally, on December 15, he conducted a "special meeting" of the shareholders and appointed himself president of West-Butte and his wife secretary/treasurer. ⁴ However, the annual corporate reports filed on behalf of West-Butte from June 1986 through June 1989 reflected no change in the officers chosen to serve at West-Butte's inception--Dan Thurman as president; Ben Campbell as vice-president; and Shirley Thurman as secretary/treasurer.

Things did not improve for Ben Campbell. On April 28, 1987, Ben filed for bankruptcy in the United States Bankruptcy Court for the Eastern District of Texas, individually and on behalf of the companies he owned, including CATV, El Centro Ranch, and Frontier GMC. Ben advised FMB that he would not contest foreclosure on the Crested Butte property. The Texas bankruptcy court, however, determined that it did not have jurisdiction to resolve any claim to the Crested Butte property because it was located in Colorado. Ben Campbell was discharged in bankruptcy.

The bank's claim on the Crested Butte property, however, remained unresolved. On January 31, 1989, Security Bank of Flower Mound ("Security Bank") ⁵ made a demand on Ben Campbell, as required under Colorado law, for the amount of the defaulted promissory notes secured by the mortgage on the Crested Butte property. On February 16, Security Bank filed a complaint in Colorado state court requesting foreclosure on the Crested Butte property. The complaint was served on Klingsmith, the registered agent for West-Butte. Security Bank also filed a notice of lis pendens to prevent any conveyance of the property. Because no answer was filed on behalf of West-Butte, ⁶ the Colorado court entered a default judgment against the Crested Butte property on May 10, 1989. ⁷ The court denied West-Butte's motion to set aside the default judgment and scheduled a sheriff's sale of the Crested Butte property for June 30.

C

West-Butte, led by John Campbell, fought back. On June 28, 1989, to prevent sale of the Crested Butte property, the board of directors of West-Butte, including Ben Campbell, authorized the voluntary bankruptcy of West-Butte. On June 30--before the time of the scheduled sheriff's sale--West-Butte filed bankruptcy in the United States Bankruptcy Court for the District of Colorado through its bankruptcy attorney David Oppenheim. The sheriff's sale of the Crested Butte property was stayed.

West-Butte's legal battle to claim...