United States v. Fish

• Decision Date: 26 June 1885
• Citation: 24 F. 585
• Parties: UNITED STATES v. FISH.
• Court: U.S. District Court — Southern District of New York

24 F. 585

UNITED STATES v. FISH.

United States Circuit Court, S.D. New York.

June 26, 1885

Elihu Root, U.S. Atty., for the United States.

Stanley Clarke & Smith, for defendant.

Heard by WALLACE, BENEDICT, and BROWN, JJ.

BENEDICT J.

The defendant was indicted under section 5209 of the Revised Statutes. Having been convicted, he moved for a new trial. His motion has been heard before the three judges, and is now to be decided. The indictment contains 25 counts, upon 11 of which there was a conviction. Of these counts, the first, the fourth, and the twenty-second, each charges a separate misapplication of the money of the Marine National Banking Association by the defendant, who was president of the association. The remaining eight counts contain charges of making false entries in the books of the association. Of these, the eleventh and twelfth relate to the same entry: one count charging the entry as made with intent to deceive the bank examiner; the other, charging the entry as made with intent to defraud the association. The same is true of counts 13 and 14.

The charge in the first count, in substance, is that on the fifteenth day of February, 1884, the accused, being the president of the association, with intent to injure and defraud the association, for the benefit of himself and one Ferdinand Ward, did misapply of the money of the association the sum of $25,000. The manner in which the misapplication was accomplished is stated substantially as follows: That the defendant, as president, caused to be credited on the books of the association, to the firm of Grant & Ward, of which the defendant and one Ferdinand Ward were members, the sum of $25,000, when the firm was not entitled to be credited with the same or any part thereof, as the defendant then knew; and thereby the defendant placed at the disposal and subject to the order of his firm the said sum of $25,000, fraudulently devising and intending to enable his firm to obtain and convert to its own use the sum of $25,000. And this sum thereafter, by reason of the said credit, that firm did draw from the money of the bank and convert to its own use. The fourth count charges the misapplication of $160,000 in a similar manner.

The twenty-second count charges the misapplication of $350,000 on the fifth day of May, 1884, accomplished by the defendant, as president, with intent to defraud the bank, causing to be paid to the firm of Grant & Ward, out of the money of the bank, $350,000 in excess of the sums which the firm was entitled to draw and have paid, the defendant intending that the firm should appropriate to the use of that firm $350,000 of the money of the bank to which they had no right.

The objections taken to the conviction upon these counts will be first considered. In order to an understanding of these objections some of the facts proved must be stated. The accused was president of the Marine Bank, and also a member of the firm of Grant & Ward. Grant & Ward kept two accounts in the Marine Bank, one of which was known to the directors and appeared in the average balance book; the other was designated 'Grant & Ward Special,' and did not appear in the average balance book. A separate pass-book was kept for this special account, and most of the entries in this book were made by the accused. He also made most of the deposits to the credit of this account. The credits charged in the first and fourth counts were credits to this account and were entered in the special pass-book by the accused himself.

From time to time Fish and Ward arranged between themselves to obtain money from the bank for the use of their firm, outside the firm loans and discounts which went before the directors and were credited to the general account, and then Ward would prepare a series of notes for $40,000 or less, amounting in the aggregate to the sum which Fish and Ward had arranged to obtain from the bank. These notes Ward procured to be signed by different persons,-- Spencer, Armstrong, Doty, etc.,-- who were clerks and messengers of Grant & Ward. The notes in form were ordinary stock notes. Each expressed a promise by the person whose name was signed to the note to pay the sum specified on demand, with interest at 6 per cent. per annum to the Marine Bank, and recited that such person had deposited with the bank, as collateral security, bonds and stock described in the note. The notes thus procured were handed by Fish to Nathan Daboll, the assistant cashier of the bank, with a direction to enter up loans in conformity with the notes, and to credit the amounts to Grant & Ward, and in most instances Fish himself credited the amount in the special pass-book of Grant & Ward. Thereupon Daboll made in the loan and collateral book of the bank entries of loans to the signers of the notes, in conformity with the notes, the entries stating the maker of the notes as borrower, the time of the loan, and the deposit as collateral of the bonds and stock described in the stock note. A ticket for the amount was then prepared and signed by the cashier, the same being a direction to the note-teller to charge the sums specified in the ticket to loans, and to credit the same to Grant & Ward special. From the entries made in the note-teller's book in accordance with the ticket, the book-keeper, in the ordinary discharge of his duties, entered in the ledger a credit to the special account of Grant & Ward, and the sums were thereafter paid out on checks drawn by Grant & Ward.

By the indictment it was charged that the defendant was guilty of misapplying the moneys of the bank, because he, as president of the bank, with intent to defraud the bank, caused these sums to be credited on the books of the bank to his firm, knowing that his firm were not entitled to such credits, and the firm had drawn these sums from the bank when not entitled thereto. The defendant's answer was that his firm was entitled to have these sums credited, and to draw out these moneys, because he, in the exercise of his authority, as president of the bank, had loaned these sums to his firm.

Upon this motion it is first contended that the defendant was improperly convicted of misapplying these moneys, because what was done by him he did as president, and his acts, therefore, were mere maladministration. The decisions of the supreme court of the United States in the Britton Cases do not support this contention. In the Britton Case, reported in 107 U.S. 668, S.C. 2 S.Ct. 512, it is pointed out that an officer of a bank, having an intent to defraud the association, may by an official act misapply the moneys of the association, when the misapplication is not a mere application of the money for the benefit of the association to a purpose forbidden by law, but a criminal misapplication by which the association may be defrauded.

In the discount case, (108 U.S. 193, S.C. 2 S.Ct. 526,) attention is called to the omission from the indictment of an allegation that the discount was procured by fraudulent means, and the implication is that an official act done in bad faith, with intent to defraud the association, is punishable under section 5209. The conspiracy case (108 U.S. 199, S.C. 2 S.Ct. 531) contains nothing to the contrary of this. The proper conclusion to be drawn from the Britton Cases, taken together, seems to be this, viz.: that the honest exercise of official discretion in good faith, without fraud, for the advantage, or supposed advantage, of the association is not punishable; but if official action be taken, not in the honest exercise of discretion, in bad faith, for personal advantage, and with fraudulent intent, it is punishable. So understood, the Britton Cases afford no support to the position taken here, that whatever is done by a bank officer in his official capacity, however wrongful or fraudulent as against the bank, is mere maladministration, and not a crime. Such a position cannot be assented to.

It is next said, in behalf of the accused, that, although it may be a misapplication to deliver or take the moneys of the bank without making any loan, to make an irregular, unsafe, reckless loan is maladministration only; that in the charge to the jury the question of the character of the loans was submitted to the jury, instead of the question of the existence of the loans, and error thereby committed, because 'the attention of the jury was directed to an irrelevant question and diverted from the true one. ' This argument assumes that the charge was calculated to confine the attention of the jury to the question of good faith. If such had been the effect of the charge, it is not seen that error would have been committed. So far as the question of guilt or innocence under this statute is concerned, there is no distinction between a loan in bad faith for the purpose of defrauding the bank, and an application of money, with like intent, in a form other than that of a loan. A loan of the moneys of a bank by the president of the bank in bad faith, for the purpose of defrauding the bank, is no loan in the sense of the law. It is simply a fraud. If, then, as the argument under consideration assumes, the sole question submitted to the jury upon the counts for misapplication had been whether the transactions were or were not loans in good faith, such an instruction would have been the same in legal effect as submitting to them the question whether the accused had allowed his firm to take the money without making any loan. There may be such a thing as an unwise loan. But a loan made in bad faith, with the intent to defraud the bank, is not an unwise act, but a fraudulent act, and, strictly speaking, no loan at all.

In the charge the jury were carefully instructed that the accused was not to be convicted for making an irregular,...