U.S. v. Hesse, 77-3360

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: Before BROWN, Chief Judge, and COLEMAN and VANCE; JOHN R. BROWN
• Citation: U.S. v. Hesse, 576 F.2d 1110 (5th Cir. 1978)
• Decision Date: 20 July 1978
• Docket Number: No. 77-3360,77-3360
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Heniz Jurgen HESSE, Defendant, R. P. Kelley, Movant-Appellant. Summary Calendar. *

Page 1110

576 F.2d 1110

UNITED STATES of America, Plaintiff-Appellee, v. Heniz Jurgen HESSE, Defendant R. P. Kelley, Movant-Appellant.

No. 77-3360

Summary Calendar. ^*

United States Court of Appeals Fifth Circuit.

July 20, 1978.

John Allen Curtis, Dallas, Tex., for movant-appellant.

Kenneth J. Mighell, U. S. Atty., William O. Wuester, III, Asst. U. S. Atty., Fort Worth, Tex., Shirley Baccus-Lobel, Asst. U. S. Atty., Dallas, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before BROWN, Chief Judge, and COLEMAN and VANCE, Circuit Judges.

JOHN R. BROWN, Chief Judge:

This is an appeal by one who gambled in a high-risk game and lost. Appellant R. P. Kelley (or Kelly), the surety of an appearance bond in the amount of $200,000, claims that the District Court erred in granting the Government's motions for default and bond forfeiture when the defendant and principal, Heinz Hesse, failed to attend his sentencing after entering a guilty plea. The District Court found that the terms of the bond contract had been breached and refused to remit appellant's obligation to pay the penalty. ¹ We agree that the appellant lost his gamble fair and square and affirm the District Court.

Heinz Jurgen Hesse was arrested on December 15, 1976, pursuant to an SEC criminal complaint charging that he engineered a large-scale scheme to defraud purchasers of securities in violation of the Securities Act of 1933, 15 U.S.C. § 77q(a). ² Hesse appeared before a magistrate, who issued an Order Specifying Methods and Conditions of Release. The order set a cash surety bond in the amount of $200,000. ³ Hesse sought to reduce the bond first by moving before the magistrate, then appealing to the District Court and to this Court. Each tribunal rejected Hesse's motions, finding that the large sum was required by several factors that made Hesse's continued presence in the area open to question.

First, Hesse was a citizen of the Federal Republic of Germany. He did maintain a residence in Dallas, Texas, but also stated his residence as located in Zurich, Switzerland, and was in the United States as a resident alien on a permanent visa. Second, Hesse had no family connections in the Dallas area, and his business connections appeared to be limited to front operations maintained as part of the allegedly fraudulent schemes. Finally, the evidence testimony by government witnesses detailing aspects of the alleged fraud, giving information as to Hesse's international bank accounts, and indicating that Hesse had recently transferred large sums of money to his personal accounts tended to show that Hesse had been engaged in an extensive fraudulent operation to sell securities, that the operation had collapsed, and that Hesse had no incentive to remain in the area and could be expected to "abscond."

On January 18, 1977, after a hearing, the District Court approved Kelley as the surety of the bond, to be posted by a $100,000 surety bond and $100,000 in cash. On the same date, Hesse was ordered released from prison, subject to requirements that he remain within the county unless permission was given to leave and that he keep his attorney informed of his whereabouts at all times. On February 10, 1977, Hesse was indicted with six others for fraud in the sale of securities, for transporting stolen money and securities in interstate commerce, for using the mails to accomplish the scheme to defraud, and for conspiracy. The indictment contained the same charges of violations of 15 U.S.C. § 77q(a) that had been asserted in the SEC criminal complaint, and added charges of violations of 15 U.S.C. § 77x, and 18 U.S.C. §§ 2, 1341, and 2314. A superseding indictment was filed on April 26. On May 27, Hesse entered pleas of guilty to one count of securities fraud and one count of mail fraud. He failed to appear for sentencing on June 24, and a warrant for his arrest, with bail set at $1,000,000, issued immediately.

The surety advances two arguments in favor of release from the bond obligation. Both arguments have already been unsuccessfully made before the District Court. First, Kelley asserts that the bond was given only in the case filed before the magistrate. The bond set by the magistrate required Hesse to comply with the conditions of release in "the above styled and numbered cause," and to "present himself to abide any judgment entered against him in this cause." Kelley contends that the later indictments, to which Hesse pleaded guilty and under which he was to be sentenced, constitute a different "cause." No new order setting bond was filed after the indictments were returned. Therefore, Kelley argues that Hesse's failure to appear at his sentencing does not constitute a breach of the bond for which forfeiture can be declared. Second, Kelley contends that he did not know of or consent to the increased risk resulting from the filing of the indictments after he had agreed to act as surety.

The principles that govern a surety's obligations have been clearly stated for this Circuit:

An appearance bond is nothing more than a contract between the government on one hand and a principal and his surety on the other. United States v. Jackson, 465 F.2d 964 (10th Cir. 1972). The extent of the undertaking of the surety depends upon the wording of the agreement as interpreted within the framework of general federal principles of suretyship and contract law. 2 As a general rule the terms of a bail contract are to be construed strictly in favor of the surety, who may not be held liable for any greater undertaking than he has agreed to. United States v. Eisner, 323 F.2d 38, 43 (6th Cir. 1963). However, "(l)ike any other contract a bail bond should be construed to give effect to the reasonable intentions of the parties." United States v. Gonware, 415 F.2d 82, 83 (9th Cir. 1969).

United States v. Miller, 5 Cir., 1976, 539 F.2d 445, 447. The surety here agreed that Hesse would:

". . . appear before any magistrate or judge of the U.S. District Court for the Northern District of Texas, or the U.S. District Court where the cause is pending (if other than the Northern District of Texas) and shall appear in any U.S. District Court to which the defendant may be removed or the cause transferred at such times and places as may be directed, and shall present himself to abide any judgment entered against him in this cause." (Emphasis supplied)

We must examine the relationship between the case before the magistrate and the subsequent indictments to determine if they can be considered the same "cause" within the meaning of the bond.

The District Court's memorandum opinion proceeded on the premise that no new order setting bond was filed after the indictment was returned. We would point out, however, that when Hesse was arraigned on February 17, 1977, Judge Hughes sought the Government's recommendation as to a bond, learned that a $200,000 bond had been previously entered, heard the Government ask that the bond for Hesse be continued in the same amount, and agreed that it should not be reduced. ⁴ (Government Ex. 10.) The transcript of the arraignment thus reveals that judicial action was taken to continue the bond that was entered by the magistrate. Kelley did not attend the arraignment, but the record demonstrates that he received notice that the indictment had been filed and that the arraignment had been scheduled. ⁵

Kelley attempts to prove that the cause before the magistrate and the cause of the subsequent indictments are distinct by directing our attention to the docket sheet history of the proceedings. The case before the magistrate, in which bond was set, was assigned District Court No. CR-77-00001 when Hesse appealed the order setting the bond. The charges returned in the February 10, 1977 indictment were assigned case No. CR-3-77-35. On February 10, the Clerk of the District Court made the following notation on the docket sheet of the case filed before the magistrate: "This case closed Bond and related Magistrate papers placed in CR-3-77-35 at time indictment filed." The first page of the docket sheets in the record before this Court reads "Transferred from CR-3-77-00001," an entry apparently made shortly after February 10. Testimony at the forfeiture hearing indicated that it was common practice in the Clerk's Office to merge any pending magistrate's papers with the file begun when an indictment is returned. Usually, a District Court number is not assigned until such a file is opened. This case received its number (CR-3-77-00001) at an earlier stage, when Hesse appealed from the magistrate's order setting the bond.

The District Court Judge cut through this confusion and correctly held that "the change of numbers cannot alone...