Whitehead v. United States

• Decision Date: 04 October 1917
• Docket Number: 2942.
• Citation: 245 F. 385
• Parties: WHITEHEAD et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Fifth Circuit

245 F. 385

WHITEHEAD et al. v. UNITED STATES.

No. 2942.

United States Court of Appeals, Fifth Circuit.

October 4, 1917

Walker Percy, Augustus Benners, and E. N. Hamill, all of Birmingham Ala., and Wm. S. Forrest, of Chicago, Ill., for plaintiffs in error.

Oliver D. Street, of Guntersville, Ala., for the United States.

Before PARDEE, WALKER, and BATTS, Circuit Judges.

BATTS Circuit Judge.

Lee and F. A. Whitehead, L. F. Harris, and the Standard Home Company were indicted for fraudulent use of the mails. Each of the 42 counts of the indictment charged that the defendants devised a scheme involving 'the sale of contracts'; the contracts having pertinent features as follows:

(1) The purchaser paid at the time of the application $6, and was thereafter to pay $6 per month for 80 months. The first $6 were retained by the agent, and the first, second, and third monthly installments by the company; $4.75 of each subsequent monthly installment became a part of what was called a 'loan and reserve fund,' from which loans and cash settlements were made and certificates paid.

(2) After the payment of 6 monthly installments the owner became 'eligible' for a loan 'in the order of his application'; but if a loan were made before 12 monthly installments had been paid in, the borrower would have to advance a sum to make the total equal to 12 installments.

(3) 'When the owner is entitled to a loan or funds to purchase a home,' he furnishes the abstract, executes a mortgage, and pays thereafter $7.50 per month and interest.

On the back of the formal contract were 'Benefits, Provisions and Requirements.' Of these the following may be pertinent:

Section 6 gave the company 60 days to approve the property. Section 11 provided that 'no officer or agent of the company general, special, or state agent, has any authority to promise a loan. ' Sections 13, 14, and 15 provide, after 12 consecutive monthly payments had been made, the owner might secure certificate for the amount which he had paid into the loan and reserve fund, together with 3 per cent. interest for the average time of the payment, which certificate would mature after 80 months, and draw 5 per cent. interest. After 12 months the contract has a cash surrender value of 50 per cent. of the amount paid to the loan and reserve fund, together with 3 per cent. interest on the average time of payment. After 24 months the cash surrender value was 75 per cent. of the amount paid into the loan and reserve fund, together with 3 per cent. interest on the average time of payments. After 80 payments, the owner, 'having refused the acceptance of a loan, or not having received a loan,' was entitled to withdraw 'the amount of his credit' from the amount paid to the loan and reserve fund, with 'his pro rata earnings' therein, not to be less than $528, nor more than $720. Not wishing to accept this, he might wait until the amount to his credit reaches $720.

In 7 counts the indictment charged that the device described was for the purpose of defrauding persons unknown. Upon these counts the defendants were found not guilty and they will not again be referred to. In the others of the 42 counts it was charged that the design was against named individuals. With reference to them severally it was charged that the defendants would fraudulently, and with intent to induce the purchaser to buy said contracts and pay money therefor, conceal the fact that the loan was promised only in the order of its number and when a sufficient fund had accumulated, but would pretend to him and thereby fraudulently mislead and deceive him into the false and mistaken belief that if he would comply with the contract for 6 months (or some other period) he would become entitled to, and at his option would receive, the loan; when, as defendants knew, the loan fund would not be sufficient to provide for said loan at the expiration of the period, and that he could not and would not, at the expiration of the time, receive the loan, or (in another count) when it was altogether uncertain whether he would be able to obtain the loan. The use of the mails in carrying out the scheme was set forth.

The indictment covers 91 pages of the printed record. Notwithstanding the apparent completeness of the statement of the design and of the method by which it was to be carried out, the defendants each primarily filed 67 demurrers to each count. After judgment, by assignments of error, the attacks on the sufficiency of the indictment were increased to 85. It is not fair to assume from the number of the assignments that all of them are without merit, and each has been examined with the same care as if this evidence of lack of confidence did not exist. Each assignment has been carefully considered, and none has been found which would appear to warrant a reversal of the case.

Embellished with an erudition almost innocuous because almost obsolete, and expressed with a clarity characteristic of the dialectical tergiversations of the medieval theological controversialists, some of the objections to the indictment and the argument in their support, involve processes of mental ratiocination not easily within the capacity of persons accustomed to deal with the law in its practical phases only. The conclusion, therefore, that the assignments are without merit is reached with diffidence. It is not more practicable for the court in the opinion to discuss each assignment than it was for counsel in the brief, and controlling conclusions only will be stated.

As to a large number of propositions, the authorities invoked are cases of embezzlement, swindling, obtaining money by false pretenses, and the like. The difference between these offenses and the crime denounced by section 215, P.C., is very substantial. A prime purpose of the latter is to prevent the prostitution of the mail service. The incidental protection of the public from frauds supplements a service usually performed by the state. The devising of a fraudulent design is not enough to constitute the offense. The formulation of such a design, the scheme involving the purpose to use the mails, is insufficient. The offense involves the use of the mails in the consummation of, or in the effort to carry out, the fraudulent design. The gist of the offense is the improper use of the mails. While the fraudulent design is essential, it is merely an element of the crime. As where an indictment charges burglary to commit theft, the theft is not described with the same particularity as if theft were the offense, so, in charging the use of the mails to defraud, the fraud need not be stated with the technical details required when swindling, or a like crime, is the subject of the indictment. The consummation of the crime is not dependent upon the success of the scheme. The crime is complete before the letter designed to mislead or otherwise used in carrying out the scheme, is received by the intended victim. The person addressed may have the shrewdness to detect the fraud; or, being misled, he may be in such financial condition as to be proof against fraud. Neither fact will affect the crime. Neither the mental nor financial condition of the person against whom the fraud is directed, nor any action on his part or failure to act, will increase or diminish a crime completed when, a scheme to defraud having been devised, the mails have been used in an effort to make it effective. A consideration of these principles will render unnecessary a discussion of most of the propositions urged by defendants.

A reference to the fundamental character of the offense will also be a sufficient commentary on defendants' dissertation upon negations. The indictment charges that the scheme involved the misleading and deceiving of the person named in the count into the belief that he would, after a stated period, become entitled to and receive a loan 'when in truth and in fact' (1) 'the loan or reserve fund would not be sufficient to provide said loan for said contract holder in said series at the expiration of said period of . . . months'; (2) 'and that he could not and would not, at the expiration of said time, receive said loan'; or (3) 'it was altogether uncertain whether said contract holder would, at the expiration of said period of time, be able to obtain said loan upon offering said security.'

The three quotations last made are called by counsel negations 1, 2, and 3. Of these it is said that they are 'negations which are negatives pregnant,' and therefore void; 'conjunctive negations,' and therefore void; and 'literal negations,' and therefore void. Whatever may be the technical learning with reference to the negations in indictments for obtaining money by false pretenses, perjury, and like offenses, there is no present occasion for its application. The language used is intended to and does indicate wherein and how the scheme devised was fraudulent. It satisfactorily supplied a necessary element in the description of the device.

A contention to this effect seems to be made: The indictment alleging that the contract holder was fraudulently misled into the belief that the contract provided that he could secure a loan in six months, and negativing such an effect for the contract, did not allege that he could not get his loan in six months and one day; that the maxim de minimis would apply to one day; that one might do the things charged and yet not be subject to the law. If this proposition were meritorious, it would not be possible to draw an indictment that would properly charge the offense here involved. Whatever period might be given to cover the additional time required to escape the rule de minimis would have another little period following it, which could just as well be the basis for an invocation of the...