Windsor v. United States

• Decision Date: 15 September 1967
• Docket Number: No. 19174.,19174.
• Citation: 384 F.2d 535
• Parties: F. Darold WINDSOR, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

384 F.2d 535 (1967)

F. Darold WINDSOR, Appellant, v. UNITED STATES of America, Appellee.

No. 19174.

United States Court of Appeals Ninth Circuit.

September 15, 1967.

Michael J. Hemovich, Bantz, Hemovich & Schultheis, Spokane, Wash., for appellant.

Sylvan A. Jeppesen, U. S. Atty., Boise, Idaho, for appellee.

Before POPE, HAMLEY and MERRILL, Circuit Judges.

MERRILL, Circuit Judge:

Appellant (with certain codefendants) stands convicted of mail fraud and conspiracy to commit mail fraud. 18 U.S.C. §§ 1341, 371. There is no question whatsoever of his involvement in an unsavory, high-pressure, fly-by-night scheme for the promotion of land sales. The dispute which this case presents is whether he was a party to or aware of that conduct of his codefendants which elevated this exercise in caveat emptor to the level of an outright swindle. The question upon appeal is whether the record supports his conviction.

Appellant is an attorney practicing in Portland, Oregon. In May, 1962, he drew up and filed articles of incorporation for Consolidated Homes Corp., an Oregon corporation. Two of his codefendants were among the incorporators and officers. The headquarters and mailing address was appellant's Portland office.

Lake Coeur d'Alene is located in the panhandle of Northern Idaho, which still boasts substantial areas of untouched countryside. Upon this Eden, Consolidated Homes Corp. descended in classic confrontation of free enterprise with unguarded natural resource. Operating under the trade name of Lakeview Estates, the entrepreneurs proceeded in the following fashion:

1. A twenty-acre tract of lake view property was acquired by contract, largely on credit (one fifth cash).

2. A civil engineer was employed (on credit) to survey the property and prepare a subdivision plat for recording (which was never recorded).

3. A bulldozer operator was employed, largely on credit (three eighths cash), to rough out the roads.

4. Two Portland taxicab drivers (also codefendants) were secured to act as sales force.

5. An office was rented in Coeur d'Alene (for three months).

6. Typists were employed (largely on credit) to prepare over 12,000 bait letters with which Spokane, Washington, and nearby sections of Idaho were flooded. Appellant participated in preparing the letters which showed his Portland office as "Home Office." The addressees (whose names had been secured from telephone directories and auto registration lists) were advised that their names had been "recommended to our advertising department" and were invited to buy an "advertising tract" of at least 60 x 132 feet for $89, and promised a warranty deed for this amount.

7. When a prospect arrived at the local office the sales force took him in hand. He was shown the $89 lots, discouragingly located in the poorest corner of the tract; was advised that the price did not include improvements, for which assessments remained to be levied; and was encouraged to buy a more desirable lot with improvements included (discussed later) priced at from $748 to $2587 (after a discount of $300 for presenting the letter), the average being about $1500, payable $89 down and $20 a month.

8. In October, 1962, less than three months after the selling campaign began, the purchasers were sent a letter advising that the subdivision was sold out; that the local office was closing; that further correspondence should be with the "Home Office" and that payment in full by November 1 would earn 10 per cent discount.

9. Shortly, an advertisement appeared in a Spokane newspaper offering the land contracts at "substantial discount."

10. The entrepreneurs moved out and the postal inspectors, in due course, moved in.

Appellant's connection with all of this is clear. While he remained in Portland and aloof from the activities at Coeur d'Alene, he handled the paper work — the correspondence, the contracts and such deeds as were drawn. The contracts provided:

"It is understood and agreed that there are no terms or conditions to this sale, other than those appearing in writing in this contract."

No improvements were mentioned. When protests resulted a "rider" was added by appellant which promised water, electricity and "all-weather roads" at such time as the purchaser built a home of "approved character" on the lot. How such a home was to be built without adequate access, water or electricity is not discussed.

However, as to these details of modus operandi in which appellant participated or as to which he was apparently aware, there was no proof that promises were fraudulently made or debts fraudulently incurred. The interest of the postal inspectors was aroused by complaints relating to oral representations made by the Coeur d'Alene sales force. All customers were promised not only water and electricity, but paved roads. Many were promised asphalt roads with cement curbs, a water system with filtration plant and six-inch mains, fire hydrants, gas mains, street lights, sidewalks, removal of trees and of an old building which blocked the view. Some customers were told that contracts had already been let for some of these improvements, and some were told that the cost had already been paid. Most were simply promised completion dates ranging from the fall of 1962 to the spring of 1963. The record is clear that there never was intent to meet any of these promises.

There is nothing but speculation to connect appellant with these on-the-scene representations. His knowing participation in a scheme to defraud is an essential part of the Government's case. Phillips v. United States, 356 F.2d 297 (9th Cir. 1965), cert. denied, Walker v. United States, 384 U.S. 952, 86 S.Ct. 1573, 16 L.Ed.2d 548 (1966). This element may be established circumstantially, but cannot be based on so-called "constructive" knowledge because of facts known to others with whom appellant was involved in this scheme. Id. at 303. A study of the record convinces us that the extent of his proved participation is as consistent with lack of knowledge as it is with knowledge. He, in fact, never went to the Coeur d'Alene site. While he ultimately received knowledge of the representations through complaints arriving at the "Home Office," this was after the selling campaign had been concluded.¹

The Government, then, has failed to meet its burden of establishing the criminal intent essential to the crime of mail fraud.

Reversed.

POPE, Circuit Judge (dissenting).

The court lists at least ten details of the plan or scheme in which the appellant participated. Because he is an attorney he drew up and filed articles of incorporation for Consolidated Homes Corp., whose incorporators and officers were two codefendants; he prepared and handled all the contracts for acquiring the property which was to be used as the basis for the sales; he drew up the contracts and deeds on sales. He knew the contents of what the court terms "bait" letters, 12,000 of them, which he admitted being "a fast sales gimmick" and he knew the contents of a later letter sent to purchasers advising that the subdivision was sold out when the plot began to fold up. Further, when it appeared that some of the prospective purchasers were bothered about lack of promised improvements, appellant added a "rider" to the contract which glibly promised water, electricity and "all-weather roads" at such time as the purchaser built a home of "approved character" on the lot. As to this the opinion says: "How such a home was to be built without adequate access, water or electricity is not discussed."

The opinion finds that "Appellant's connection with all of this is clear. There is no question whatsoever of his involvement in an unsavory, high-pressure, fly-by-night scheme for the promotion of land sales." However, it concludes that as to the details of the modus operandi in which appellant participated or was aware, there was no proof that promises were fraudulently made or debts fraudulently incurred and that although in the oral representations made by the Coeur d'Alene sales force the "record is clear that there never was intent to meet any of these promises" "there is nothing but speculation to connect appellant with these on-the-scene representations."

It is difficult to understand the court's conclusion that there is nothing but speculation to connect appellant with the "on-the-scene" representations when all the proof here points to the fact that appellant was one of the prime movants in the enterprise; that he had actual and not only constructive knowledge of the nature of the scheme. There was knowing participation of the appellant from the beginning to the end; and, although the record may show, as the appellant claims, that he made no verbal statements to any one, participation in the scheme here did not require him to make any.

As for appellant not knowing about the "on-the-scene" representations, appellant acknowledged to Postal Inspector Burnett that he "heard some people were told by salesmen that streets would be blacktopped but that was not contemplated"; however, he did nothing to stop these representations but he did add a "rider" to the contract which supplied the necessary promises. Further, another letter was sent out which was used to answer anticipated inquiries about promised improvements which was signed by the secretary-treasurer for Consolidated Homes pursuant to her instructions from appellant. Since it was shown at the trial that the appellant had intimate knowledge of all written aspects of the scheme it was proper for the trial judge to infer that appellant had heard of the complaints and had prepared an answer to them accordingly.

The trial judge was also satisfied that appellant's legal talent was used to artfully draw the contracts which the purchasers were induced to sign so that they did not bind the defendants or any one else to construct any improvements.

I think that the very language of the court's opinion acknowledges the appellant was...