United States v. Dunn, 14474

• Decision Date: 27 February 1962
• Docket Number: 14475.,No. 14474,14474
• Citation: 299 F.2d 548
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. D. Y. DUNN, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Stanley W. FIZER and Bobbie Baum Darnell, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

299 F.2d 548 (1962)

UNITED STATES of America, Plaintiff-Appellee, v. D. Y. DUNN, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Stanley W. FIZER and Bobbie Baum Darnell, Defendants-Appellants.

Nos. 14474, 14475.

United States Court of Appeals Sixth Circuit.

February 27, 1962.

COPYRIGHT MATERIAL OMITTED

N. Mitchell Meade, Asst. U. S. Atty., Lexington, Ky. (Jean L. Auxier, U. S. Atty., John W. Morgan, Asst. U. S. Atty., Lexington, Ky., on the brief), for plaintiff-appellee.

Charles W. Swinford, Lexington, Ky. (Stoll, Keenon & Park, Lexington, Ky., on the brief), for defendant-appellant, Dunn.

Amos H. Eblen, Lexington, Ky. (Eblen, Howard & Milner, Lexington, Ky., on the brief), for defendants-appellants, Fizer and others.

Before MARTIN, McALLISTER and O'SULLIVAN, Circuit Judges.

O'SULLIVAN, Circuit Judge.

Defendants-Appellants were indicted for, and convicted by a jury of, conspiracy (Title 18 U.S.C.A. § 371) to violate § 1010, Title 18 U.S.C.A. (making false and fraudulent statements in a Federal Housing Administration transaction), and of substantive violations. The conspiracy was charged in Count I. In Counts II and III, defendant Bobbie Baum Darnell was charged with substantive violations of said § 1010; in Count IV, defendants Darnell and D. Y. Dunn were charged, together, with a substantive violation of such section; and in Count V, defendant Stanley Fizer was charged with a substantive violation of such section. The substantive violations described in Counts II through V were among the overt acts described in the conspiracy count.

The indictment and its charges grew out of an application by Darnell for an FHA insured loan of $12,900.00 from Franklin Pioneer Corporation of Lexington, Kentucky. In the forms and material which were a part of Darnell's application he made the following representations, to wit: that he had made an offer to purchase from defendant Dunn a house and lot (1856 Clays Mill Road, Lexington, Kentucky) for the price of $16,400.00 on certain conditions set forth in such offer to purchase; that he had made a $3,500.00 cash down payment on such purchase price; that his annual income (base pay) was $7,100.00; and that he intended to occupy the premises offered as security. The indictment charged that all of these representations were false. Defendant Dunn's alleged offense was his signing, as acceptor, the offer to purchase and making it available for Darnell's use (Count IV). Defendant Fizer's charged offense was his signing of an allegedly false verification that Darnell's annual income was $7,100.00 (Count V).

Defendants were found guilty — all under Count I (conspiracy), as well as Darnell under Counts II, III, and IV, Dunn under Count IV and Fizer under Count V. Each was sentenced to prison for a term of a year and a day on each of such counts, the sentences to run concurrently.

Defendant Stanley W. Fizer, 62 years of age, a life long resident of Lexington, was, and had been for thirty years, engaged in the plumbing and heating business. He was the sole proprietor of Stanley Fizer Heating Service. From 1954 to 1958 he was President and principal shareholder of Better Builders, Inc. Defendant Bobbie Baum Darnell, 38 years old, was and had been for twenty years employed by the Fizer concern. During the times involved he was also a minority shareholder and the Secretary and Treasurer of Better Builders, Inc. Defendant D. Y. Dunn, 69 years old, had been engaged in the real estate and building business since about 1950, following his retirement after twenty years as county school superintendent of Fayette County, Kentucky. At the times involved, he was a shareholder and Treasurer of Fayette Builders, Inc., a house building enterprise. So far as the record discloses, none of the defendants had any previous criminal record.

In 1955, Fayette Builders, Inc., had conveyed three building lots to Better Builders, Inc., in consideration for Better Builders undertaking to construct for Fayette Builders a dwelling on another lot owned by Fayette Builders. This latter was known as the Koster (Avenue) house. Better Builders began construction of the latter house as well as one on one of the lots it had acquired from Fayette Builders. This latter was known as the Clays Mill (Clays Mill Road) house. In August of 1955, Better Builders ran into financial difficulties, with the possibility that liens would be imposed by suppliers on one or both of the houses then under construction. An agreement was thereupon made between Better Builders and Fayette Builders whereby Fayette Builders would assume all the then indebtedness against the Koster house and the Clays Mill Road house. A mortgage of $9,500.00 with some additional items brought the total indebtedness against the Clays Mill house to $14,500.00. The correctness of these figures was not challenged by the government. In consideration of Fayette assuming such indebtedness, it was agreed that Better Builders would reconvey the Clays Mill house and lot to Fayette Builders or to its nominee. Such agreement was reduced to writing under date of August 10, 1955.

On September 27, 1955, an offer to purchase contract was executed by defendant Darnell and Fayette Builders, Inc., whereby Darnell offered to purchase, and Fayette agreed to sell, the Clays Mill house for a stated price of $16,400.00. The body of this contract recited, "as evidence of good faith to bind this contract, the sum of $3,500.00 in checks is deposited with D. Y. Dunn to be applied on the purchase price, upon passing of deed, or refunded * * * if this offer is not accepted. Balance will be paid upon passing of deed from proceeds of FHA loan of not less than $12,900.00." By special rider the offer to purchase was conditioned as follows:

"It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase of the property, described herein, or to incur any penalty by forfeiture of earnest money deposits or otherwise unless the seller had delivered to the purchaser a written statement issued by the Federal Housing Commissioner setting forth the appraised value of the property for mortgage insurance purposes of not less than $15,900.00 which statement the seller hereby agrees to deliver to the purchaser promptly after such appraised value statement is made available to the seller."

On September 28, 1955, defendant Darnell signed and presented to Franklin Pioneer Corporation, the prospective mortgagee, an FHA application form together with the last mentioned offer to purchase contract. In the FHA form, Darnell represented that $3,500.00 in cash had been already paid on the purchase price, that he intended to occupy the premises to be mortgaged and that his annual income was $7,100.00. Defendant Dunn was not with Darnell when the FHA application form was signed and presented, and there was no evidence that he participated in the preparation of the FHA forms. Among the papers supporting an FHA application are forms designated Request for Verification of Employment and Employer's Verification. Such a request was addressed to Stanley Fizer Heating Service, as defendant Darnell's employer. Defendant Stanley Fizer signed and delivered such Employer's Verification, completing, or not completing, the answers called for by such form as follows:

Length of time employed: 20 years

Present rate of pay: Annual, $7,100.00, or hourly,

Approximate annual earnings from regular scheduled work:

The representation by Darnell that he had paid $3,500 in cash was not true unless he was justified in assuming that his check was the equivalent of cash. He was not so justified, because it was undisputed that he had no such sum in the bank account upon which the check was drawn and had no prospect of having such an amount unless he could realize that sum by disposing of his equity in the home where he then resided. He testified that he hoped he would be able to do so in time to make his check good at the time of closing and that he assumed Dunn would hold his check pending the closing. His representation of a $3,500.00 down payment was false.

Concerning Darnell's and Fizer's representations as to Darnell's annual earnings being $7,100.00, the only pay actually being received by Darnell was at an hourly rate as an employee of Fizer Heating Service. For the year in question, 1955, his earnings were approximately $4,500.00, which was substantially the case for the previous year of 1954. His tax return for 1955 reported gross income of $4,411.80. Both Darnell and Fizer sought justification for giving a figure of $7,100.00 as Darnell's earnings from the claimed fact, testified by them, that from the formation of the Better Builders, Inc., in 1954, it was agreed that Darnell would have a salary of $50.00 per week for his work for that concern. He was its Secretary and Treasurer. He testified that after finishing his day's work for Fizer Heating Service, he would give attention to the building operations and other affairs of Better Builders, Inc. Nothing was ever paid to Darnell on account of such allegedly agreed salary. Better Builders became insolvent and was liquidated. Fizer and Darnell contended, however, that it was not wrong to add this accruing annual salary of $2,600.00 to Darnell's estimated hourly earnings from Fizer Heating to justify their representation that his annual earnings were $7,100.00. The verification of employment form was addressed to Stanley Fizer Heating Service. Fizer's signed reply could be fairly construed as a representation that Darnell's annual earnings from Fizer Heating Service were $7,100.00. The jury could have found that this was a false representation. We, likewise, are of the opinion that the jury could find Darnell's own representation of his annual income was false.

The errors assigned by the respective defendant-appellants here are: First, that Fizer's motion for a...