133 F. 337 | 8th Cir. | 1904
Percy W. Miller, Arthur M. Gilder, and Allen G. Randall, the plaintiffs in error, who will be called the defendants in this opinion, were convicted under section 5440 of the Revised Statutes of conspiring to commit the offense of devising a scheme to use the post-office establishment of the United States to defraud, which is denounced by section 5480 of the Revised Statutes (U. S. Comp. St. 1901, pp. 3676, 3696). The indictment upon which they were tried contained four counts. The first charged them with the offense of conspiracy, described in section 5440, and the other three with the offense of devising a scheme to defraud, specified in section 5480. At the close of the trial the jury found them guilty under the first count, and acquitted them of the offense charged in the other three. This writ of error therefore challenges the trial under the first count only, and counsel for the defendants allege that they were wrongfully convicted, because this count of the indictment charged no offense, and because in the proceedings at the trial the court made numerous erroneous rulings.
The sufficiency of the indictment will first be considered. The general nature of the offense which the evidence on behalf of the government tended to charge upon the defendants at the trial was a conspiracy to devise a scheme to use the post-office establishment of the United States to defraud persons to the grand jury unknown, who were or became members of the State Mutual Insurance Company of North Dakota, by inducing these persons to pay moneys to that corporation in the belief that these moneys were necessary
Section 5480 reads in this way:
“If any person having devised or intending to devise any scheme or artifice to defraud, or (to sell, dispose of, loan, exchange, alter, give away, or distribute, supply, or furnish, or procure for unlawful use any counterfeit or spurious coin, bank notes, paper money, or any obligation or security of the United States or of any state, territory, municipality, company, corporation, or person, or anything represented to be or intimated or held out to be such counterfeit or spurious articles, or any scheme or artifice to obtain money by or through correspondence, or by what is commonly called the ‘sawdust swindle’ or counterfeit ‘money fraud,’ or by dealing or pretending to deal in what is commonly called ‘green articles,’ ‘green coin,’ ‘bills,’ ‘paper goods,’ ‘spurious treasury notes,’ ‘United States goods,’ ‘green cigars,’ or any other names or terms intended to be understood as relating to such counterfeit or spurious articles, to) be effected by either opening or intending to open correspondence or communication with any person, whether resident within or outside the United States, by means of the postoffice establishment of the United States, or by inciting such other person or any person to open communication with the person so devising or intending, shall, in and for executing such scheme or artifice or attempting so to do, place or cause to be placed, any letter, packet, writing, circular, pamphlet, or advertisement in any postoffice, branch postoffice, or street or hotel letter box of the United States, to be sent or delivered by the said postoffice establishment, or shall take or receive any such therefrom, such person so misusing the postoffice establishment shall, upon conviction, be punishable by a fine of not more than five hundred dollars and by imprisonment for not more than eighteen months, or by both such punishments, at the discretion of the court. The indictment, information, or complaint may severally charge offenses to the number of three when committed within the same six calendar months; but the court thereupon shall give a single sentence, and shall proportion the punishment especially to the degree in which the abuse of the postoffice establishment enters as an instrument into such fraudulent scheme and device.”
A minor objection to the indictment is that it contains an averment that the persons whom the defendants conspired to defraud are unknown to the grand jury, while it shows upon its face that, if they agreed to defraud any one, they conspired to defraud the State Mutual Insurance Company, and that the name of this company
Nor is it a tenable objection to an indictment that it fails to state the names of the parties whom the defendants are alleged to have conspired to devise a scheme to defraud, if it contains a true statement that these persons were unknown to the grand jury. Durland v. United States, 161 U. S. 306, 16 Sup. Ct. 508, 40 L. Ed. 709; Dunbar v. United States, 156 U. S. 185, 15 Sup. Ct. 325, 39 L. Ed. 390.
The contention upon which counsel for the defendants seem to rely most confidently is that the indictment does not disclose the scheme or artifice to defraud with the necessary clearness and certainty. Every man is presumed to be innocent until his guilt is established. When one is indicted for a serious offense, the presumption is that he is not guilty, and that he is ignorant of the supposed facts upon which the charge against him is founded. He is unable to secure and present the evidence in his defense— indeed, he is deprived of all reasonable opportunity to defend — unless the indictment clearly discloses the facts upon which the charge of the commission of the offense is based. It must set forth the facts which the pleader claims constitute the alleged transgression so distinctly as to advise the accused of the charge which he has to meet, so fully as to give him a fair opportunity to prepare his defense, so particularly as to enable him to avail himself of a conviction or acquittal in defense of another prosecution for the same crime, and so clearly that the court, upon an examination of the indictment, may be able to determine whether or not, under the law, the facts there stated are sufficient to support a conviction. United States v. Hess, 124 U. S. 483, 486, 487, 8 Sup. Ct. 571, 31 L. Ed. 516; United States v. Post (D. C.) 113 Fed. 852.
The use of the post-office establishment of the United States to execute a scheme or artifice to defraud, the intention to use it in this way as a part of the scheme or artifice, the scheme or artifice to defraud itself, and the intention of the defendants to defraud, are
A mutual insurance company organized under the laws of the state of North Dakota has no stock or stockholders, and is composed of the persons who are insured by the corporation, only. Rev. Codes N. D. 1899, § 3105. These insured persons are the members of the corporation. Its business is conducted by a board of directors chosen by the members. The members are liable to pay the expenses and losses of the company, and are entitled to all its profits, in proportion to the amounts and terms of their insurance. All the property of the corporation is held by its board of directors and officers, and all its business is conducted in trust for these members. The}r are the only parties liable for its obligations, and the only parties entitled to its gains, and their payments are the only source of its revenues. They are the real parties in interest in its property and in its business. Sections 3108-3114, 3086-3089, 2861. The indictment which the defendants challenge must be read in the light of these statutes of the state of North Dakota, in the light of the character of a mutual insurance company of that state and of its relation to its members, and in the light of the general rules of law and of pleading to which we have adverted. Let us so read the first count of this indictment for the purpose of ascertaining whether or not it fails to disclose the scheme to use the mails of the United States to defraud the unknown members of the State Mutual Insurance Company, which the evidence in behalf of the United States indicated that they had planned and executed, and which we have described. Omitting unnecessary verbiage, this indictment contains averments that the defendants conspired to commit the offense disclosed by these alleged facts: They devised this scheme or artifice to defraud divers persons to the grand jury unknown. The State Mutual Insurance Company was a purely mutual insurance company organized under the laws of the state of North Dakota. The defendants planned to cause the board of directors of this corporation to make an agreement or arrangement with the defendant Gilder to the effect that he should be the manager, and should have the possession of the funds and the control of the business of that corporation, and to cause them to appoint him such manager without the knowledge or consent of the members of the corporation who were not officers thereof, so that while
It is said that the indictment discloses no scheme to defraud, because a contract with Gilder that he should be the general manager of the corporation, in possession of its funds and in control of its business, was a lawful agreement. But there are two answers to this proposition: In the first place, if a legal contract is conceived and intended to be used, and if it is actually used, to defraud or despoil another, the intentional procurement and use of it is a scheme or artifice to defraud. In the second place, this indictment charges much more than the mere procuring and using of the contract with Gilder. It charges that the defendants schemed and intended to use, and that they did use, the post-office establishment of the United States, together with the contract with Gilder, to procure from the members of the corporation, and to secure to themselves, large sums of money, and to make the corporation insolvent. The intentional bankrupting of the corporation by procuring and appropriating to themselves large sums of money which belonged to the corporation and to its members is inconsistent with an honest purpose, and indelibly stamps the entire scheme and transaction with bad faith and fraud.
It is contended that the averment that the scheme “was to be effected by the said Miller, Gilder, and Randall by opening correspondence and communication with divers persons to the grand jury unknown, by means of the post-office establishment of the United States,” contains no notice that the plan charged was to communicate with the members by means of letters and circulars signed, sent, or received by the insurance company, and that communications of that character were inadmissible in evidence. But when it is considered that previous allegations had declared that it was a part of the scheme to place and keep the control of the business of the corporation in the hands of Gilder without the knowledge of the members who were not its chosen officers, and to procure the moneys which the defendants intended to, and did* appropriate to themselves from these members, this averment could not have failed to give to even the casual reader complete notice that it was a part of their scheme to use the name of the corpora
After the pleader had averred in the first count of this indictment that the defendants conspired to devise a scheme to defraud unknown persons, and after he had alleged in his description of this scheme that the defendants were to get the possession of the funds and the control of the business of the corporation by means of the contract with Gilder, without the knowledge of the members who were not officers, and that they were to procure the large sums of money from the corporation and its members, to secure these sums to themselves, and to thereby render the corporation insolvent, he made this averment:
“And the scheme and artifice to defraud aforesaid was to be effected by the said Miller, Gilder, and Randall by opening correspondence and communication with divers persons to the grand jury unknown by means of the post-office establishment of the United States.”
This allegation is challenged by counsel for the defendants again and again. They insist that it is insufficient (1) to show any intention to use the mails to commit the fraud; (2) to sustain the claim that the defendants conspired to use the mails as a part of their scheme to defraud; and (3) to permit proof of the use of the mails to transmit communications between the corporation and its members. The third objection has already been considered. The first is dignified by the sustaining opinion of Judge Wellborn in United States v. Long (D. C.) 68 Fed. 348, 350. It is, however, met by the stronger reasons and by the decision of the Supreme Court in Stokes v. United States, 157 U. S. 187, 189, 190, 15 Sup. Ct. 617, 39 L. Ed. 667. In that case the government first alleged that the defendants conspired to commit the offense described in section 5480 by devising a scheme to defraud persons unknown, and then alleged that the scheme was to be carried out by making certain representations; that it was to be further effected by ordering-goods ; and “that the post-office establishment of the United States was to be used for the purpose of executing such scheme and artifice to defraud” by opening correspondence with persons unknown. The court declared that the last averment was a sufficient statement of the defendant’s intention to effect the scheme by the use of the post-office establishment. If this is the true interpretation of an allegation that the post-office establishment is to be used to execute the scheme, it must be the fair meaning of an averment that the scheme is to be effected by the use of that establishment,
The second objection is that the allegation challenged does not show that the defendants conspired to use the mails as a part of their scheme to defraud, and here it is confidently asserted that the averment fails because it does not set forth the method by which the defendants planned to use the mails — whether by correspondence to obtain the contract with Gilder, or to secure moneys from the members of the company. But when it is considered that the indictment contains no charge of a scheme to defraud the insurance company by means of the contract with Gilder or otherwise, when the earlier part of the indictment is read, its averments that the defendants conspired to devise the scheme to get control of the funds and business of the corporation to procure from its members their money, and to appropriate it to the defendants, when we consider that these averments are followed by this allegation that they planned to use the mails to effect this scheme, and when we remember that the members of the corporation were the only parties in interest in it, that their payments constituted its only source of revenue, and that it was their moneys that the pleader alleged the defendants conspired to secure, the fair and rational conclusion must be that the indictment shows with adequate clearness that the use of the post-office establishment to communicate with the members of the corporation to induce them to pay their money to the defendants was a part of the scheme to defraud which the defendants conspired to devise.
Another contention of counsel for the defendants is that the only unlawful act alleged in the indictment is the conversion of the money by the defendants that this is alleged to have taken place after all the acts conceived as parts of the scheme to defraud had been done, that the wrongful conversion was not attributable to any of those acts, and therefore that all the parts of the alleged scheme to defraud were lawful, and the indictment must fail. It is not true, however, that the conversion of the money was the only unlawful act alleged in the indictment, nor is it true that this conversion was not in any way attributable to the other acts which were a part of the scheme to defraud. The intentional use of the mails to procure from the members of the corporation moneys which the defendants intended to appropriate to their own use, the intentional use of the contract with Gilder to obtain this money for themselves, as well as the actual appropriation of it from members, were alike unlawful, as long as they were all conditioned, as the indictment alleges that they were, by the prior conspiracy of
Finally it is seriously argued that the indictment contains no adequate averment that the defendants ever had any intention to defraud any one, and the case of United States v. Post (D. C.) 113 Fed. 852, is cited in support of this proposition. The alleged facts in that case bear so little analogy to those here presented that the opinion in it is neither controlling nor persuasive. This indictment contains averments to the effect that the defendants conspired and agreed to devise a scheme to use the mails of the United States and the contract with Gilder to procure from the members of the State Mutual Insurance Company large sums of money, to appropriate these sums to the use of the defendants, and thereby to render the corporation insolvent. These allegations adequately disclose an intention on the part of the defendants to defraud the members of this corporation. They could not have committed the acts which they agreed to devise and to do without despoiling them, Every one is presumed to intend the natural and inevitable consequences of his acts. The defendants could not have agreed to do these acts, the patent consequence of which was to defraud the members of this corporation, without intending to defraud them. The objection that the indictment does not adequately show the intention of the defendants to defraud the members of the insurance company cannot be sustained.
The attack upon this indictment has been earnest, persistent, and determined. The objections to it have been carefully and patiently considered. It is seldom, if ever, that any pleading so clearly and concisely states the alleged facts that it might not be improved after the criticism of an assailant and the trial of a case; and it may be that, in the light of the argument of counsel for the defendants, a more admirable indictment could be drawn. But our conclusion is that this pleading fairly meets all the tests prescribed for a statement of the offense charged against the defendants.
Upon the trial of the case evidence was introduced which tended to show that in the year 1901 the defendants were in the control and management of the State Mutual Insurance Company of North Dakota under a contract between that company and Gilder made on January 19, 1901, which provided that he should be the general manager of the corporation, should receive 25 mills on all hail and 30 mills on all fire insurance applications written by the company during that year, and that he should pay all agents’ commissions, express, telegraph, officers’ salaries, and all other expenses of the company, except attorney’s fees, postage, interest, losses, and exchange, and that he should also pay the existing indebtedness of the company, which was then $5,290.99. There was evidence to the effect that the unpaid losses of the company in December, 1901, were about $18,000; that the commissions of Gilder under his contract amounted to about $65,000; that the aggregate amount he was required to pay out under his agreement was about $30,000; that the defendants caused the members of the company to be assessed and to pay in more than $70,000 to satisfy alleged losses
Conceding that the defendants were in effect the North Dakota insurance company, and that whatever power Wolfe had from that corporation he also had from the defendants, the limit of his authority was to make arguments and to present statements to the Insurance Commissioner on behalf of the defendants upon the single issue whether or not the Kansas City company should be permitted to do business in the state of North Dakota. Upon that issue, and in favor of the parties to that controversy, the acts and admissions of their attorney, Wolfe, were the acts and admissions of the defendants. But are these acts and admissions chargeable to the defendants in the trial of other issues between them and the United States, or other parties not interested in the issue before the commissioner? Unless Wolfe was authorized by these defendants to speak for them through the letters and clippings of April, 1901, upon the issue tried in this case in 1903, so that his admissions were their admissions, the letters and clippings he presented to the Insurance Commissioner did not rise to the dignity of hearsay, even. What the defendants admitted, if Wolfe had not this -authority, was that which they said to him. If their communication to him was not privileged, and if Wolfe had related under oath exactly what they said or wrote to him upon the subjects treated in the letters and clippings, that statement would have been their admission. But the letters and clippings in evidence do not purport to contain what the defendants, or any of them, said or wrote to Wolfe or to any other person. The evidence goes no farther than to show that some of the defendants furnished the clippings and the information upon which Wolfe based the statements in his letters. The repetition of such communications as those which these defendants made to their attorney is always subject to great imperfections. It should be received with great caution. The parties who make the communication may not have correctly expressed their meaning. They may have been misunderstood. A slight alteration of the words, without any design of intentional misrepresentation, may have entirely varied the effect of their saying or writing. The repetition of such communications should never be received unless it appears with reasonable clearness that it is a correct statement of what the parties to be charged said or wrote. It should never be received unless it is clear that the saying or writing was brought home to their knowledge. How the defendants furnished the information to their attorney, whether they furnished it orally or in
It is a general and a salutary rule that one ought not to be and cannot be prejudiced in the hearing and determination of any case or issue by the pleadings, arguments, or acts of his counsel in the trial of another case or proceeding which involved a different issue. Some of the reasons which have induced the establishment of this rule are (1) that an attorney employed to try one case or issue is not presumed to be instructed in, and is generally ignorant of, the facts which condition the other cases and controversies in which his client is interested; (2) that neither client nor attorney should be prejudiced in the subsequent trial of a case or issue not in the mind or contemplation of either by the attorney’s allegations, admissions, or arguments in the trial of another case involving a different controversy; and (3) that the wide variance between the client’s statement of the facts of a case to his attorney, and the latter’s presentation of those facts at the trial of the issue it involves, is so marked and proverbial that the client ought not to be prejudiced by the latter’s statement in any other case involving different issues. The courts, even, do not consider themselves bound by opinions which they may express upon issues which they are not deciding, when those issues subsequently arise for careful consideration and determination. In the execution and enforcement of the general rule to which reference has been made, Con
Eor the same reason, these letters and clippings were not competent evidence that the defendants had any knowledge of any of the alleged facts stated in them. They were not evidence of such knowledge because Wolfe was unauthorized to admit for the purposes of the trial of the issue below that the defendants had this knowledge, and because, in the absence of such authority, the statements in the letters and clippings are much less competent than mere hearsay. The suggestion that the letters and clippings were properly received in evidence because they were a part of the things done by the defendants in execution of the alleged scheme to defraud is not persuasive. It is only those acts in execution of the scheme which have some tendency to prove or to disprove the charge that the defendants conspired to devise and execute it that constitute competent evidence upon the trial of the issue which that charge presents. The attempt to prevent a rival insurance company from doing business in a state has no such tendency. It is a proceeding as usual and characteristic of a legitimate insurance corporation as of an insolvent company, or of a fraudulent scheme to operate one. This evidence was not offered for any such purpose, but to prove the admissions and prior evil intent of the defendants; and, under the established rules of law to which reference has been made, it was not competent for any purpose. The receipt of these letters and clippings in evidence against the defendants was prejudicial and fatal error.
One of the important issues in the case was whether or not the plan of the defendants was a scheme to operate the State Mutual Insurance Company temporarily for a few months for the purpose of defrauding its members, or a plan to establish and operate a permanent and successful insurance business. If the contract with Gilder was so unfair and unconscionable as to imply fraud and bad faith, that fact tended distinctly to show that their plan was to defraud the members of the company, while, if the agreement with Gilder was just and fair, that fact would go far to persuade to the opposite conclusion. In December, 1901, the unpaid losses of the company were about $18,000. At that time the board of directors of the company defeated a motion made by Gilder to authorize the company to renew his contract for another year; and when Gilder was upon the stand his counsel asked him whether or not, in connection with his application for a renewal of his contract, any proposition was made by him to the company in relation to the procurement of money to satisfy its unpaid losses, and the court refused to permit him to answer the question upon the ground that the inquiry was irrelevant. The presumption from the record is that the answer, if it had been received, would have been favorable to the defendants; that it would have been that the witness offered to obtain the money and to pay the unpaid losses of 1901, as he had agreed to pay those of the year 1900. If he was willing and offered to assume the burden of these losses in consideration of a renewal of his agreement, that fact would indicate much more strongly that his plan and purpose were to establish a permanent and successful business, than it would that he intended to bankrupt the corporation and to defraud its members by making their contracts of insurance worthless. The question related to the issues, and the witness should have been permitted to answer it.
In the course of the attempt of the government to establish the intent of the defendants by their alleged participation in earlier schemes to defraud, it introduced evidence which it claimed indicated that the Grain Growers’ Association of Omaha and the Farmers’ Mutual Hail Association of Watertown were formed and conducted in the same way as was the State Mutual Insurance Company of North Dakota. But it did not produce any evidence which had any tendency to show that the defendant Gilder participated in, or was aware of, the organization or operation of either company before he engaged in the organization of the North Dakota company, or that the defendant Randall was before that time aware of, or in any way connected with, the Grain Growers’ Company. At the close of the evidence for the plaintiff, and again at the close of all the evidence, Gilder made a motion to strike out, as to him, the evidence relative to both these companies, and also relative to the Western Farmers’ Company of Topeka; and Randall moved to strike out, as to him, the evidence in reference to the Grain Growers’ Company, and also relative to the State Mutual Hail Insurance Company of Hankinson. These motions were denied, and the court did not instruct the jury that any of this evidence should not be considered by them in determining the guilt or innocence of the defendants who did not participate in the organization or management of any of these companies. These companies were organized and operated before the conspiracy to defraud charged in this case was formed. The knowledge and intent of one of the defendants prior to the formation of the conspiracy in issue constituted no evidence of the knowledge or intent of the others, and even if the defendant Miller was aware of, or connected with, the formation and conduct of these earlier companies, that fact did not tend to show any knowledge or fraudulent intent of Gilder before or at the time the conspiracy on trial was formed. If Gilder and Randall had no connection with or knowledge of the operation of the Grain
The judgment below is reversed, and the case is remanded to the District Court, with instructions to grant a new trial.