272 F. 615 | 6th Cir. | 1921
Sloan, as plaintiff below, had judgment for $30,000 in an action for slander against the Buckeye Company. A
The alleged slander, which was the basis of the recovery, was uttered by Scboettlekotte, an agent for defendant. Whether there was evidence tending to show that the utterance was within the scope of his aalholity, or tending to show subsequent ratification, were questions which arose and were decided upon the former review. The same questions now arise again. Upon one, if not both, of these questions, the evidence upon this trial differs somewhat from that upon the former trial. The plaintiff insists that the differences are unsubstantial; defendant takes the contrary position. To say the least, it is doubtful whether the differences are such as would justify us in adopting a conclusion opposite to that which the court reached before as to the tendency of the evidence. We do not find it necessary to make a definite disposition of this subject.
Upon the former trial, the defendant stood upon its plea of general issue, which, under the Tennessee practice, amounted to admissions that, if the words were uttered by defendant, they bore the meaning alleged, and that the charge of embezzlement was false. Such evidence as came into the trial tending to show that the charge was true was received upon the theory that, if the defendant believed it to be true, the recoverable damages would be lessened. After the case was remanded, the defendant obtained leave to and did file a plea of justification. The form of this plea is not very artificial, but when we consider together the allegations and innuendos of the declaration and the justification of the plea, we think the latter should be interpreted as affirming that Sloan was short in his accounts with the Buckeye, in that, acting as trusted agent of the Buckeye, he had, without authority, used and lost the trust funds in bucket shop gambling for his own benefit, and that he was thereby guilty of embezzlement. The issue, upon this plea the court submitted to the jury, which impliedly found it for the plaintiff. Defendant insists that the truth of the plea appeared by the undisputed facts, that this issue should not have been submitted, but that a verdict for defendant should have been directed for this reason.
In determining the issue of justification, we are not embarrassed by our former decision. It is true that the same contention — that the
We find, then, as to the tendency of the evidence upon this subject, only three questions to discuss: (1) Was the use of the funds “for his own benefit,” within the meaning of the plea? (2) Was it
Before this lease, it had been customary for the Richmond to advance working capital to the Planters’, wherewith the gin company bought cotton as offered, selling the seed to the Kennett plant, and selling the ginned cotton upon the market. These advances had accumulated until the Planters’ was indebted to the Richmond in the sum of $12,000, in addition to the indebtedness of the stockholders of the Planters’ to the Richmond Company for the full purchase price of the stock. It was at least doubtful whether the stockholders had any substantial interest; certainly there was a large measure of identical interest between the Richmond and the Planters’.
As manager of this business, plaintiff had authority to advance defendant’s funds to the Planters’ for the purpose of enabling it to buy
It is no less embezzlement for an agent to convert his principal’s funds, without authority, to the use of a corporation which the agent wishes to help than to his immediate personal use; and where, as here, if realized, the gains would have been for the primary benefit of a corporation (the Planters’) in which defendant had no direct interest, but which was Sloan’s tool, and for the ultimate benefit of another corporation (Richmond No. 1) in which defendant had no kind of interest, but in which Sloan had a direct, pecuniary share, and upon the success of which his personal reputation and career were dependent, and where, also, one-half the gains would have come directly to plaintiff, through his profit-sharing management contract, to the extent that such gains prevented the advances from being lost as bad debts — in such a situation, it is within the fair meaning of the language to say that, if what he did was embezzlement, it was “for his own benefit,” and neither criminal prosecution nor justification in slander ought to fail merely because of such formal inaccuracy as there may be in that description of the act.
What happened during the (approximately) last year of the leasing period was that the cotton actually bought and ginned by the Planters’ was not promptly sold, but was kept in storage for a long time, and was eventually sold at a heavy loss. The exercise of plaintiff’s discretion on this subject is not challenged. While holding this cotton, and during the period commencing July 1, 1913, and ending in May, 1914, he went through the form of buying, in two Memphis bucket shops, about 60,000 bales of cotton futures and selling about the same amount.
There is no evidence that this sort of dealing was within any accepted definition of hedging. When Sloan undertakes such inclusion, he always says that it was hedging, “as we understood the term,” or “according to our custom,” or with some similar qualifying phrase. There is no evidence from any other witness that this type of gambling was customary in the conduct of ginning operations, or was “hedging” properly referable thereto. No witness goes further than to say that this sort of thing was sometimes done by some gin operators. That, plainly, will not support an inference of a custom so general that the •defendant must have had it in mind in making Sloan its agent for this business.
The theory upon which Sloan predicates an inference of authority deserves mention. He says that the storage and insurance charges against spot cotton make it expensive to hold, and therefore it is cheaper and better to sell the spots and buy futures. If it were the owner’s policy not to sell his cotton, but to hold it against an expected rise in price (as it was not in this case), this theory is thus far plausible (though it was not applied by selling the spots); but Sloan carries it, as he must, much further. Having justified the purchase in December of 100 bales of March cotton, because lie has sold 100 bales of spots instead of carrying them, he then uses the purchase of March futures to justify indiscriminate buying and selling thereafter during the remainder of the year, in January, March, May, July, or December futures, until he has been in and out of the market perhaps six times, and
This needs only to be stated to show that these transactions are not “hedging” to guard against an anticipated possibility of loss from actual holdings, but constitute unadulterated gambling, in the hope of making a profit to retrieve a loss already suffered or feared. This theory, carried to the extent which it must be to be of any service to Sloan, is not even plausible; we may properly say of it, as we did of the theory upon which he recovered on the first trial, that “we find no testimony as to any facts from which in our opinion it could be fairly and legitimately inferred.” 250 Fed. 721, 163 C. C. A. 44.
When we discard these vague generalities, and come to the specific items of evidence upon which Sloan relies, we find nothing which we can regard as substantial evidence, supporting the extraordinary inference alleged. It is impossible to take the space to review all these items and circumstances. Counsel for plaintiff has, in his brief, recited and grouped what he regards as plaintiff’s strongest claims upon this subject. We have carefully reviewed each item of this
It must be concluded as a necessary inference from the undisputed facts that Sloan’s expenditure of this $26,000 to conduct these gambling operations was wholly without the authority of the owner of the money, express or implied,, and constituted the embezzlement imputed by the pleadings, unless that conclusion can be escaped on account of some good faith supposition by Sloan that he had the right to use the money in this way, and even if his supposition was erroneous.
Because, upon the record as it took shape ori this trial, the plea of justification should have been sustained by direction of the court, the judgment is reversed, and the case remanded for new trial.
NOTE.
(a) There were many references to the “James Sloan Special” account on the books, and this was repeatedly named by Sloan as the basis of his inference that defendant had or was chargeable with knowledge of his course of dealing with the bucket shops. On the first trial, these references were vague and indefinite; upon the second trial, Sloan produced a complete transcript of what he says was the account in question. It turns out to be an. account kept on the books of Richmond No. 1, from January, 1906, to July, 1911, and was then an active account with many entries. During the later three-year lease period, it was relatively inactive, having only eight debit entries in the first two years, and none during the third. It seems apparent that all these later entries pertain solely to the business of Richmond No. 1, and were no part of the records of Richmond No. 2, since the old balances are retained, and carried forward and transferred, and the entries treated in a way that would seem to be impossible, if they had to do with the Richmond) No. 2 business; but, if there is any error in this inference, it is at least plain that the account for these three years contains no reference to any of the checks in question, or to any Planters’ transactions whatever. The account affords no substantial indication that any of the Buckeye’s funds were being used for this unlawful purpose. The account is also relied upon to show that, before the lease, it had been the custom to use Richmond No. 1 funds for this purpose, and that thus an understanding that Richmond No. 2 should continue to finance the Planters’ as Richmond No. 1 had done would cover the practices in question. Not only is there no evidence that the Buckeye ever had any knowledge of this old account before or during the lease period, but the account itself discloses only one reference to the Planters’ (possibly, also, one small item in 1906), which shows that the Richmond No. 1 on February 28,1910, wrote off a loss of about $5,000 marked, “P. G-. Co., Cotton Loss.” This may or may not have reference to some transaction of this kind; but, if the Buckeye had seen it, it would not establish notice of a custom to go beyond legitimate hedging. Some of the testimony references to the “James Sloan Special” account may be intended to refer to such an account on the books of the Planters’, which would have indicated the use being made of these checks; but, if so, there is no evidence that the Buckeye ever saw these Planters’ books, until during the later litigation. This account, thus put in evidence, does indicate that Sloan, on behalf of Richmond No. 1 had been continuously speculating in cotton, and had lost very large sums, but not that he was doing so habitually as a' part of the management of the Planters’ or any other subordinate company. Not only is there no evidence that the Buckeye knew of this account and of these entries, but it is plain enough that Sloan never would have permitted them to be so known, and the testimony indicates that they were not known even to Mr. Montague, the chief owner of the Richmond No. 1.
(c) Sloan seeks to have it inferred from his testimony that, when he made ids disclosure at the end of the lease period to McOaw, who was then president of the Buckeye, HcCaw agreed with or acquiesced in Sloan’s claim of full! authority. Sloan’s own testimony as to this disclosure (if it is to bo taken as true, as, for this purpose, it must be) makes it clear that he did not tell MeCaw enough of the facts, as they now appear, to give him notice of what the actual situation was. Any acquiescence by McOaw, under these circumstances, has no evidential force to show formerly existing authority. At that time, McCaw advised him, Sloan says, that Sloan ought not to stand the losses under the situation as Sloan stated it, but ought to have them paid by Richmond No. 1, for which Sloan was really acting. The Buckeye has since undertaken to collect these sums from Richmond No. 1, and, whether or not it may succeed, Sloan’s relations with each company were such that ther«y is nothing necessarily inconsistent in the Buckeye claims that Sloan embezzled from it, and that the Richmond No. 1 was responsible to it therefor.
(d) Sloan says that the Buckeye Company knew about, his custom of cotton speculations, because it was disclosed by an audit of the Richmond books, made by Schoettlekotte, the Buckeye agent. The fact is, appearing from the audit itself and otherwise, that Schoettlekotte did not become the Buckeye agent until after June, 1911, and that the audit in question was made by him five years before, while he was agent of the Richmond, and even then, the audit only shows that ho found some entries that he did not understand and referred the company to Sloan for information.
(e) It is said that the Buckeye Company, in its dealings in oil, carried a “ring account,” and that, its transactions under that account wore of the same character as Sloan’s dealings hero involved. It is therefore inferred that tine Buckeye management might have approved Sloan’s imitation of its conduct. On the former trial, the references to the ring account were confused and unexplained ;¡ on this trial, its character appears without dispute. The Buckeye owned numerous oil mills, and'began, about) October, to buy cotton seed and to press oil. It was in the habit of selling, at that time, on the Oil Exchange in New York (“the ring”), for delivery from time to time during later months, about one-third of its anticipated output. These were sales for actual future delivery, as against an actual product in the course of manufacture. They bear no resemblance to Sloan’s speculations.
On the first trial, plaintiff -produced accounts sales, coining from, respectively, three bucket shops, among which defendant’s money had been distributed; these showed, in each instance, losses of approximately the amount which had been paid to that (so-called) broker, and showed aggregate dealings purporting to be in cotton futures of about 10,000 bales. While the plaintiff did not, in express words, testify that the cheeks in question were appropriated to the losses shown by these accounts, the ease was presented upon the theory that this was the proper inference, and that, since the amount of “spot” cotton handled during that season was about 10,000 bales, these particular dealings in futures aggregating this amount should be considered as within the authority given to “hedge” against the actual cotton handled. Upon the present trial, it appeared without dispute that these accounts sales were not those actually rendered at the time, but had been made up for the trial by selective draft upon the whole class of similar dealings with the bucket shops, aggregating 00,000 or 70,000 bales during the period of the accounts, and that the checks given to disburse defendant’s funds were no't specifically appropriated to these particular accounts sales. This showing of complete truth destroyed the tendency to support plaintiff’s theory of authority, which it was sought to deduce from the inferences rested upon the partial truth presented on the first trial.
In addition to large amounts of oil — justified because it came from cotton seed — and of lard — justified because it was comparable with oil. The figures in the brief 'of defendant’s counsel cover the items from the books of one “broker” only.
Tlie cotton-buying season at the gins begins about October. In the 1913-14 season, the Planters’ bought about 10,000 bales and 2,000 or 3,000 bales are as much- as it probably had on hand in November. In that month, as shown by the records of only two of the bucket shops, Sloan “sold” 13,700 bales and bought 7,000, at a'commission cost of over $1,500.
See note at end of ease.