U.S. v. Madsen, 78-1892
| Decision Date | 28 April 1980 |
| Docket Number | No. 78-1892,78-1892 |
| Citation | 620 F.2d 233 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Dennis G. MADSEN, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
M. David Eckersley, (Wayne L. Black, Salt Lake City, Utah, with him on brief) of Black & Moore, Salt Lake City, Utah, for defendant-appellant.
Francis M. Wikstrom, Asst. U. S. Atty., (with Ronald L. Rencher, U. S. Atty., and Max D. Wheeler, Asst. U. S. Atty., Salt Lake City, Utah, on brief), for plaintiff-appellee.
Before SETH, Chief Judge, and McKAY and SEYMOUR, Circuit Judges.
Defendant sold various art objects to Commercial Liquidators, Inc. (Commercial), but retained physical possession of the goods. Thereafter on three separate occasions he executed security agreements pledging the art objects as collateral in loan transactions. In each case he represented that he had title to the goods, free and clear of all encumbrances. For these acts he was charged and convicted on three counts of knowingly making false statements to federally insured banks for the purpose of influencing the action of the banks extending credit, in violation of 18 U.S.C. § 1014.
Defendant argues the defense of legal impossibility. The argument is based upon Utah statutes which make retention of chattels by a seller for more than a reasonable amount of time after the sale conclusive evidence of fraud against creditors of the seller, and which declare such conveyances void as against the persons defrauded. Utah Code Ann. §§ 25-1-14, 25-1-8 (1976). Defendant contends that, since these statutes make his sale to Commercial fraudulent and void as to the banks, his representations of clear title were not false as to the banks.
Although this argument is imaginative, it cannot withstand scrutiny. Defendant does not deny representing that he owned the collateral free and clear of encumbrances when he had in fact previously sold it. Commercial, and not the defendant, owned the paintings. The fact that Utah law provides a remedy for defrauded creditors does not make the defendant's representations any more truthful. It is the falsity of the statement, not whether the bank may nullify the fraudulent transfer of title, which is relevant under § 1014.
The purpose of § 1014 is to protect lending institutions from deceptive practices. Defendant's claim of clear title was unquestionably deceptive. The false statement prevented the bank from exercising a completely informed judgment about the total value of the security. Without knowing that defendant had actually conveyed title to Commercial, the bank could not take into consideration the cost and delay it would likely incur in reducing this security to usable value. The Utah statutes designed to protect against this kind of fraud do not by some perverse logic...
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