United States v. Fritz Augustus Heinze

• Court: U.S. Supreme Court
• Writing for the Court: McKenna
• Citation: United States v. Fritz Augustus Heinze, 218 U.S. 532, 31 S.Ct. 98, 54 L.Ed. 1139, 21 Ann.Cas. 884 (1910)
• Decision Date: 05 December 1910
• Docket Number: No. 380,380
• Parties: UNITED STATES, Plff. in Err., v. FRITZ AUGUSTUS HEINZE

218 U.S. 532

31 S.Ct. 98

54 L.Ed. 1139

UNITED STATES, Plff. in Err.,

v FRITZ AUGUSTUS HEINZE.

No. 380.

Argued November 3, 1910.

Decided December 5, 1910.

Assistant Attorney General Fowler and Solicitor General Bowers for plaintiff in error.

[Argument of Counsel from pages 533-535 intentionally omitted] Messrs. John c. Tomlinson, A. B. Browne, John B. Stanchfield, and Louis S. Levy for defendant in error.

[Argument of Counsel from pages 535-537 intentionally omitted] Mr. Justice McKenna delivered the opinion of the court:

This is a writ of error directed to review the ruling of the circuit court upon a demurrer to an indictment against defendant in error.

The indictment contains sixteen counts, charging him with wilful misapplication of funds of the Mercantile National Bank of New York city, in violation of § 5209 of the Revised Statutes (U. S. Comp. Stat. 1901, p. 3497). The demurrer was sustained as to fifteen counts, and the United States has brought the case here by virtue of the act of March 2, 1907, chap. 2564, providing for writs of error in certain instances in criminal cases, among which instances is a decision or judgment sustaining a demurrer to an indictment, 'where such decision or judgment is based upon the invalidity or construction of the statute upon which the indictment is founded.' 34 Stat. at L. 1246, U. S. Comp. Stat. Supp. 1909, p. 220.

The averments of the first count may be taken as an example of all. It averred that Heinze was the president of the bank, and that, by 'virtue of his official relation to it as its president, and by virtue of the power of control, direction, and management' which, as president, he had over its moneys, funds, and credits, he 'wilfully, wrongfully, unlawfully, and with intent to injure and defraud' it 'and divers other persons to the grand jurors unknown,' and without the knowledge and consent of it or of its board of directors and committees, for his use and benefit and advantage, and of other persons to the grand jurors unknown, misapplied certain of its moneys, funds, and credits, to wit, the sum of $100,000, by receiving and discounting with its moneys, etc., a certain promissory note (the names of the drawers being given) for the sum of $100,000, payable on demand, and which note, when so received and discounted, 'was not then and there well secured, and, in fact, was not secured at all,' which fact he knew, and which amount, it being the proceeds of the discount of the note, was wholly lost to the bank.

The other counts charge the misapplication of the funds of the bank in the same way, the amounts and makers of the notes discounted being different. And it is alleged of some of them, not that they were not secured at all, but that they were, at the time of discount, 'not well secured.' A total loss to the bank of the respective amounts is alleged.

The demurrer is almost as voluminous as the indictment. It alleges defects and uncertainties, and even repugnances in the indictment. In the brief of counsel emphasis is given to the following: That there is no allegation to whom the proceeds of the discount were paid by the bank, nor to whom the notes were payable; that there is no statement that payment of the notes had been demanded, or that they had not been paid, or that the makers were in default, of that the loss to the bank was due to the discounts, or that the makers of the notes were then or at the time of the discounts insolvent or unable to pay their obligations.

The circuit court sustained the demurrer to the first fifteen counts. 183 Fed. 907.

Section 5209, the section for the violation of which the indictment was found, is part of the provisions for the regulation of national banking associations, and provides as follows: 'Every president, director, . . . or agent of any association, who . . . wilfully misapplies any of the moneys, funds, or credits of the association . . . with intent . . . to injure or defraud the association . . . or any individual person, . . . and every person who, with like intent, aids or abets any officer . . . in any violation of this section, shall be deemed guilty of a misdemeanor.'

For its general reasons in support of its ruling on the demurrer, the court referred to its opinion in United States v. Morse, 161 Fed. 429, and to the views expressed on the first indictment against defendant. 161 Fed. 425. As to the pending indictment, it was said:

'This indictment seems to me to charge in counts 1-15 this, and no more; viz., that, with intent to defraud the bank, of which he was president, and for the benefit of himself and others, unnamed, defendant caused the bank to discount single named commercial paper, and the bank lost the amount paid on the discount.'

And it was further said:

'The crime of which the defendant is guilty, if guilty at all, is 'wilful misapplication.' The one characteristic or essential of this crime, on which the Supreme Court has always insisted, is conversion; no method of being guilty without converting the money, funds, or credits of the bank has been pointed out. This word 'conversion' has supplied the legal measure which the court has not been able to find in 'wilful misapplication.'

'If the facts stated in an indictment do not set forth a case of conversion, the indictment is bad, and a general allegation of wrongful intent will not cure it.

'Taking the first count, for example, could the bank have maintained an action for conversion against the recipient of the discount proceeds under the facts stated? I think not, and am therefore of opinion that counts 1-15 are demurrable.'

It is contended by defendant that the ruling of the circuit court was not a construction of § 5209, but only a determination of the sufficiency of the indictment, and that the writ of error should be dismised. We are unable to concur in that view. The court expressly ruled that the crime of which the defendant was guilty, if guilty at all, was 'wilful misapplication,' and that the essential ingredient of that is 'conversion,' and made so by the statute. And not only conversion by the officers of the bank, but by the person receiving the proceeds of the discount. The indictment was held insufficient, because the facts alleged in it did not constitute such double conversion; that is, it did not constitute a crime under the statute, as the latter should be construed. The motion to dismiss is therefore denied.

We are therefore brought to the merits, and the first contention of defendant (and for convenience in discussion we use his contentions rather than those of the United States, although the decision below was against the latter), is that if the circuit court did consider the statute, its construction was correct.

A wilful misapplication of the funds of a bank is the essence of the crime, it is urged, and that the decision of this court has defined what constitutes a wilful misapplication, and that the facts alleged in the indictment do not fulfil the definition. The following cases are cited to sustain the contention: United States v. Britton, 107 U. S. 665, 27 L. ed. 524, 2 Sup. Ct. Rep. 512; United States v. Northway, 120 U. S. 327, 30 L. ed. 664, 7 Sup. Ct. Rep. 580; Evans v. United States, 153 U. S. 584, 38 L. ed. 830, 14 Sup. Ct. Rep. 934, 9 Am. Crim. Rep. 668; Coffin v. United States, 156 U. S. 432, 39 L. ed. 481, 15 Sup. Ct. Rep. 394, and certain cases in the circuit courts and circuit courts of appeals.

Before examining these cases it will be well to revert to the averments of the indictment to see what exactly it charges. It charges that the defendant was the president of the bank, and as such, having control of and possession of its funds, wilfully, wrongfully, unlawfully, and with intent to injure and defraud it, and for his use, benefit, and advantage, misapplied certain of its funds. A wilful misapplication of the funds of the bank is charged, and that it was induced by and resulted in a benefit and advantage to defendant. This is a direct accusation of wrongdoing through his office, and the precise manner by which it was accomplished is averred to have been with the illegal intent to injure and defraud the bank by receiving and discounting with its moneys an absolutely unsecured promissory note of a named partnership, whereby the proceeds of the discount of the note were wholly lost to the bank.

We may now turn to the cases. In United States v. Britton, 107 U. S. 655, 27 L. ed. 520, 2 Sup. Ct. Rep. 512, it was decided that the 'misapplication made an offense by this statute means...