People v. Meadows

The indictment of the defendant for grand larceny in the

The grand larceny charged in the indictment is that defined in sub-division 2 of section 528 of the Penal Code, and formerly known as embezzlement. In more specific terms, the charge is that the defendant, as the servant, agent or bailee of one William Silverthome, had in his custody and possession $72,-012.50 belonging to said Silverthome, and. with the intent to deprive or defraud said Silverthome “ did then and there feloniously steal ” said money.

In May, 1908, and since 1903, the firm of Meadows, Williams & Co., was engaged on quite an extensive scale in a gem eral brokerage business, with offices in the Fidelity and Trust Company building in the city of Buffalo. The defendant Meadows was in charge of the business. Mr. Williams, the other Buffalo partner, took no active part in the affairs of the company; and Mr. De Witt, the remaining partner, resided in Hew York, and his contribution to the co-partnership assets was a seat in the Hew York Stock Exchange. The Hew York brokerage correspondents of Meadows, Williams & Co. were Post & Flagg, with whom the defendant’s firm had private telegraph wire connection, and Mr. De Witt had. desk room in their office. Mr. Silverthome, the complainant, was a resident of Buffalo and evidently a man of means and an acquaintance and friend of the defendant. He had purchased stocks of the defendant’s firm two or three times, paying cash therefor, and the certificates of stock were made payable to himself or his wife, as he directed, and were delivered to him. He made no purchases on margins, but each stock purchase was intended as an investment.

On the 20th of May, 1908, he called at the defendant’s of

“ memorandum.

“ Hr. W. E. Silverthorne, “ Front

Headows, Williams & Go., Fidelity Building, Buffalo, May 21, 1908.

“ Bought 700 U. S. Steel pfd. at

102| .......................... 71925.

“ Com..............................87.50

“ 72012.50

“ Received Payment,

“ MEADOWS, WILLIAMS & CO.,

“ Per Wm. H. CoueHRAN."

Accompanying the same w'as the following statement:

“ Meadows, Williams & Go.,

Bankers and Brokers,

Fidelity Building.

“ Telephones:

“Bell, Seneca 2768.

“Frontier 2768.

“ Buffalo, May 21, 1908.

“ Hr. W. E. Silverthorne,

“ No. Tonawanda, N. Y.:

“ Deab Sib.—We have this day BOUGHT for your account and risk, 700 Steel Pfd. @ 102¾.

“ Thig. account received by telegraph from HEW YORK. Hames of Parties from whom purchase Was made will be given, if desired, as soon as advices are received by mail.

“ Very truly yours,

“ MEADOWS, WILLIAMS & 00.

“ By C.”

On the same day Silverthorne mailed a check on the Columbia Hational Bank of Buffalo for the full amount stated, to the order of Meadows, Williams & Go., returning the bill or memorandum, which was receipted by that firm and returned to Silverthorne. The check was indorsed by said payees and deposited in their general account in the bank of Buffalo. Silverthorne two or three times within the next week or ten days inquired of the defendant if his stock had arrived, and each time Was advised that it had not been received, the defendant explaining the delay with the statement that it was because of the transfer of the stock in Hew York. Silverthorne expected to start for Europe early in June, as the defendant knew, and he first directed that the stock be made out in hi® name and left with Davenport, his clerk, to be deposited in his safe deposit vault in the Manufacturers and Traders’ Bank of Buffalo. Later he told the defendant to keep, the 'certificates in the safe of Meadows, Williams & Co. until his return from. Europe, which Meadows agreed to do.

Silverthorne did not know the brokers Who were the Hew York correspondents of Meadows', Williams & Co., nor did he know anything of the stock-dealing arrangements existing between Meadows, Williams & Co. and Post & Elagg, or. of the manner in which his direction to buy the stock had been carried out. There was nothing in his direction suggesting a purchase on a margin. He expected to pay the full purchase price of the

At the time the avails of the check -were deposited in the Bank of Buffalo to the credit of Meadows, Williams & Co., their credit balance in the bank was about $1,500. Before the first, of June the greater part of the funds to their credit, including, the avails of the check, were paid out by checks to creditors of the firm or to meet the individual obligations of the defendant.. A considerable portion was applied on the general indebtedness owing Post & Elagg, although no part was specifically to. be applied on the purchase of the 700 shares of the United States Steel Preferred.

Silverthome left for Europe on the fourth of June, returning early in September. On the twenty-fourth of August Meadows, Williams & Co. were adjudged bankrupts with liabilities aggregating $600,000, and assets amounting to about $85,000, and it is obvious that the firm was hopelessly insolvent at the time it received and -deposited to its -credit the check of Silverthome. Nothing was paid by the -defendant to Post & Flagg for the 700 shares of United States Steel Preferred purchased in pursuance of the order of Silverthome and the stock was never delivered to him. Post & Flagg had a list of stocks which it had purchased on the order of Meadows, Williams &■ Co. By their course of dealing stock purchased was held as security for the general indebtedness of Meadows, Williams &. Co., and whenever the New York brokers desired the margins, increased they so advised the Buffalo brokers, or drew on them by draft. On the twenty-third of May their -draft for $28,000

If the transaction was entirely as evidenced by the memorandum, statement and receipt there might be some plausibility in the argument that the stock belonged to Silverthorne. They do not, however, disclose the true transaction. The stock was not in fact deliverable to Silverthorne. He could not have obtained it upon demand and payment of the full purchase price to Meadows, Williams & Co. Title in no Way was assured to him by payment to them. The purchase by Meadows, Williams & Co. was a fiction, or at best a mere option, and full payment to Post & Flagg was essential before the title became vested in Meadows, Williams & Co. or their principal, Silverthorne. Meadows knew this; Silverthorne did not. He expected payment of the purchase price to Meadows, Williams & Co. asr sured title in him; Such was not the effect of the payment, and the defendant understood it. Meadows as the agent of Silverthorne knew it was his duty in the evolution of the agency relation to send the check to Post & Flagg, or the avails thereof, and have the certificate of stock made payable and delivered to Silverthorne. In no other way could the purchase and delivery of the property be consummated. The transaction is no different than if Silverthorne had before any attempt to purchase the stock delivered the check to Meadows, Williams & Co., directing them to purchase 700 shares of stock; and, instead of executing the commission with which they were charged, they had diverted the money to their own use. In that case the transaction would be more bald and direct, but in effect the same. In the <me case there would be no attempt to execute

When Silverthorne delivered the check he had the right to assume either that the payees named had already purchased the stock iand paid for it and had it ready to deliver, or that it was purchased, to be paid for by the check or its avails, which he delivered to them. The defendant knew the exact situation in regard to the stock. Silverthorne did not. If Meadows had informed Silverthorne that nothing had in fact been paid on the 700 shares; that the avails of the check would be placed in the bank to the credit of Meadows, Williams & Co., and checked out in the payment of their general obligations and that at some future time they would procure the stock, very evidently the check would not have been delivered.

The fallacy of the appellant’s position is that he assumes the defendant had purchased 700 shares of stock which belonged to Silverthorne upon the payment of the purchase price or even before. Such was not the true status of the transaction. The stock had been purchased or obtained by Post & Flagg, but it was not deliverable until they had received payment in full.

The following illustration may elucidate the status of the parties. A wishes to buy a black mare, Hambletonian breed, seven years old and twelve hands high. He engages B, a

The chief feature of the transaction are undisputed, and, it seems to me, they clearly show that Meadows was employed at ■a fixed compensation by Silverthorne to purchase the United States Steel stock preferred at a definite price. The money or its equivalent was delivered by the principal to the agent for the specific purpose of paying for the stock which the agent reported he had purchased in ¡compliance with the directions of his principal. The money received in this fiduciary -capacity instead of being used as Silverthorne intended, and as Meadows realized was necessary in order to fulfill his- obligation to his principal, was commingled with the funds of the defendant and appropriated by him to his own use.

Section 528 of the Penal Code provides: “ A person who, with the intent to deprive or defraud the true owner of his property, or of the use and benefit thereof, or to appropriate the same to the use of the taker, or of any other person; either . . 2. Having in his possession, custody or control, as a

The elements constituting the crime defined in the statute-quoted were proved. (People v. Hazard, 28 App. Div. 304 ; affd., 158 N. Y. 727 ; People v. Kellogg, 105 App. Div. 505 , 514 et seq.; People v. Birnbaum, 114 id. 480; People v. Civille, 44 Hun, 497 ; People v. Miller, 169 N. Y. 339 ; Commonwealth v. Cooper, 130 Mass. 285 .)

The gr avamen of the crime is the appropriation of the money or property with intent to 'defraud, etc., by one lawfully in possession of the same, but as the agent, bailee or servant of another. The jury have found that the defendant came rightfully into possession of the check from Silverthorne and as his agent or bailee to consummate the purchase of the stock in order that title to the same should become vested in Silverthorne; that “ with the intent to deprive or defraud ” Silverthorne of his money he embezzled the same by appropriating it to his own-use.

The learned counsel for the defendant claims that after the receipt and use of the -check, the relation of debtor and creditor existed between the payees and drawer of the cheek. The prop^ osition of necessity implies that the United States Steel stock became the property of Silverthorne instantly upon its purchase. The evidence is undisputed that it was the invariable-practice of Post & Flagg to hold any stock which they purL chased on the order of Meadows, Williams & Go. until payment

Again, the debtor and creditor argument involves the proposition that the defendant might lawfully and properly mingle the avails of the check with his own funds and use them as he did in the payment of hi® own debts and in every respect like money paid to him for goods purchased and delivered, or salary earned, or acquired in any other manner unquestionably his own. The transaction is not susceptible of that construction. Meadows, Williams & Oo. were the agents of Silverthorne to purchase this stock for a fixed compensation, and the money was paid to them to carry out the arrangement.

It is claimed that Silverthorne relied upon the integrity of Meadows. Undoubtedly. He believed implicitly in his honesty as a man, and also had unquestioning faith in his financial standing. This suggestion is fortified by the fact that just before Silverthorne left for Europe he authorised Meadows to sell 100 shares of the capital stock of the Columbia Hational Bank of Buffalo for the sum of $30,000, and told him he might retain the money as a loan. The stock was sold for $29,000, and the defendant used the money, all of which denotes the high regard in which Silverthorne held the defendant.

The implicit trust and confidence placed in the defendant cannot extenuate its abuse by the latter. His conduct, in view of this faith in him, is the more to be condemned.

The learned counsel argue strenuously that there was no sufficient evidence of any criminal intent to defraud S'ilverthorne by the appropriation of the avails of the check. In the first place it is contended that the defendant acted openly, and not secretly, in depositing and paying out the money. It of course was distributed upon checks, delivered in the usual way. Silverthome did not know it was being used to pay the debts of Meadows, Williams & Co., or of the defendant. * The bank depositary was not advised as to the purpose for which the brokers received the money. None of the payees of the checks by which it was distributed were cognizant of the transaction with Silverthorne. So far as Silverthome, the only person entitled to know, was 'concerned, the disbursement of the money was secret.

The counsel rely upon People ex rel. Perkins v. Moss ( 187 N. Y. 410 , 18 N. Y. Crim. 269 ). In that case Perkins, under the 'direction of the president of an insurance company, contributed to the presidential campaign fund the sum of $50,000 upon the promise that he was to be reimbursed from the funds of the insurance company. It appeared that the president of the company had been in the habit of making such disbursements; that he conferred with the finance 'committee of the company, and all the members agreed that Perkins should be reimbursed for the moneys advanced, and the president, in the execution of the authority with which he had in fact always been endowed, paid Perkins for the moneys advanced. The court held that, while the payment of the money was illegal, there was no criminal intent disclosed and that the transaction was open, and Perkins honestly believed he wasi advancing the money properly as directed by the president and no benefit inured to him. I find no parallel in the two cases.

Again, the defendant knew that Silverthorne expected to start for Europe early in June and Would be absent for three month®. The defendant might have expected that a favorable turn in his stock transactions would enable him to replace the-money appropriated before Silverthorne returned. The agent or trustee generally takes this optimistic view of the outcome of his speculation when he converts the money intrusted to him-. The offense of embezzlement is in the initial act of misappropriation, and the fact that the defendant intended to restore or return the property embezzled is no defense where restoration has not been made. (Penal Code, § 549.)

The intent to misappropriate the money may not have existed

In People v. Thomas ( 83 App. Div. 226 ), relied upon by the appellant, the money which the -complainant claimed was embezzled was paid over to the defendant to be used in stock speculations on marginal accounts. The money was not to be deposited in a special account as the money of the complainant. The court held that the money was- not received in a fiduciary -capacity, but by the defendant as a broker for general use in the purchase of stocks on margins a® his judgment dictated.

We think the verdict was justified by the evidence.

The defendant seeks for a reversal of the judgment for alleged errors -committed on the trial, only one of which calls for •independent -discussion. . The -defendant had been sworn as a ' witness in the bankruptcy proceeding before the referee in bankruptcy, and acting on the advice of hiisi counsel 'availed himself -of the privilege to which he was entitled, and declined to an-swer certain questions involving the transactions with Silverthorne on the ground they would tend to incriminate him. On dhe trial of this action, he testified on his own behalf, detailing with particularity all the transaction's upon which the charge •of embezzlement was framed, and also testifying that he did not intend to defraud S'ilverthorne or deprive him of his prop■erty.

Upon the cross-examination he was interrogated sharply upon the question of his intent, and among other things was examined in regard to the testimony in the bankruptcy proceeding already referred to. He was also aeked what induced him- to

The defendant was not obliged to testify. His omission to do so could not be commented upon. When, however, he elected to take the stand in his own behalf he was subject to cross-examination the same as any other witness. The extent to which disparaging question* are permitted is in the discretion of the trial court, and unless the discretion is abused his rulings are not reviewable on appeal. (People v. Webster, 139 N. Y. 73 , 84, supra.)

In reply to the questions put to him by the district attorney the defendant freely and fully stated the reasons which induced him to avail himself of his constitutional privilege in the bankruptcy proceeding, and even if the questions, were improper when taken in connection with the explanations made they are not of sufficient gravity to call for a reversal of the judgment.

We have examined the other questions discussed upon the

The judgment and orders should be affirmed.

All concurred, except Kruse, J., who dissented, in a memorandum.

I think the jury could well have found from the evidence that Meadows, the defendant, acted in good faith and without intent to defraud Silverthorne, in using the check in question, and that Silverthorne himself did not expect that the identical cheek or the proceeds thereof would be transmitted to the New York correspondents to pay for the stock. Silverthorne was not inexj)erienced. He was a man of affairs; had dealt in stocks, and presumably was familiar with the way in which the business of dealing in stocks is conducted. He knew that the stock had been bought by Meadows, Williams & Co.; that the purchase price or some part thereof had been paid, or at least that Meadows, Williams & Co. had obligated themselves personally therefor. He regarded the firm as perfectly responsible. A day or two after the check was given and used he asked Meadows to retain the proceeds of the sale of certain other stock and allow him the interest thereon. From the final transaction in transmitting the 'check, and the other circumstances, the conclusion is permissible that the check was intended as payment to Meadows, Williams & Co. upon their personal agreement absolutely to sell 'and deliver the stock to Silverthorne, and not merely for transmission by Meadows, Williams & Co. to the New York brokers.

The Silverthorne check is dated May 22, 1908, and on the next day the check was indorsed by Meadows, Williams & Co. and delivered to the Bank of Buffalo, and the amount thereof

It is unnecessary to refer to the numerous checks- which were drawn by Meadows, Williams & Co. upon the Bank of Buffalo, after the delivery of the Silverthorne check and crediting the amount thereof, or to the different items of credit in their account with the bank.

The question of criminal intent, as- it was finally left to the jury, was that it is only necessary that the intent to deprive or defraud Silverthorne existed at the time the money was checked out and used. I am unable to see 'how that -could be so. The crime charged, if -committed at all, was committed when the check was used and not when the defendant drew the firm checks upon the general account. There was no specific money in the bank, represented by the Silverthorne check, which belonged either to Silverthorne or to Meadows, Williams- & Oo. Immediately upon using the check the relation between the bank and Meadows, Williams- & Oo. was that of debtor and creditor. But even if the defendant can be -convicted of the crime of embezzlement in drawing checks in the firm name upon the bank against the general credit balance, created in part by the improper use of the Silverthorne check, that was not the charge -contained in the indictment.

I do not say that the drawing of these checks by Meadows may not be a proper circumstance bearing upon the question

The case of People v. Civille ( 44 Hun, 497 ), relied upon to support the charge as made, is unlike this case, as it seems to me. There it appeared that the check representing the embezzled funds was deposited in a special account, in the name of Giville, the defendant, as trustee, and the amount was thereafter paid by the bank to him and misappropriated. The wrong there consisted in using the money which had been paid over to him by the bank upon this trust account, and that was the crime charged. Here the wrong charged was in using the check and having the amount thereof credited to the personal account of the firm. At all events, that was the only transaction proven which would be consistent with the charge contained in the indictment. If it was intended to charge the defendant with embezzlement in misappropriating the moneys represented by the firm cheeks drawn by him, that charge should have been made specifically in the indictment, and the particular transaction set forth, naming the amount, the time, and other details constituting the offense.

It does not seem to me that the conviction can be upheld upon any such theory. If so, upon which of the numerous checks does the conviction rest? It cannot be successfully claimed that Meadows had no right to draw any cheeks after the Silverthorne checks had been used at the bank, since the firm had a credit balance there before the cheek was so deposited, and, as has been said, that is not the charge contained in the indictment. The offense set up in the indictment is the entire amount of the Silverthome .cheek charged as one act of embezzlement or larceny, as it is defined by the Penal Oode.

I think the judgment of conviction should be reversed and a new trial ordered.

Judgment and orders affirmed.