Evans v. United States (153 U.S. 584)/Opinion of the Court

This case involves the sufficiency of an indictment for the willful misapplication of the funds of a national bank, in violation of section 5209, Rev. St.

A rule of criminal pleading which at one time obtained in some of the circuits, and perhaps received a qualified sanction from this court in U.S. v. Mills, 7 Pet. 138, that an indictment for a statutory misdemeanor is sufficient if the offense be charged in the words of the statute, must, under more recent decisions, be limited to cases where the words of the statute themselves, as was said by this court in U.S. v. Carll, 105 U.S. 611, 'fully, directly, and expressly, without any uncertainty or ambiguity, set forth all the elements necessary to constitute the offfense intended to be punished.' The crime must be charged with precision and certainty, and every ingredient of which it is composed must be accurately and clearly alleged. U.S. v. Cook, 17 Wall. 174; U.S. v. Cruikshank, 92 U.S. 542, 558. 'The fact that the statute in question, read in the light of the common law, and of other statutes on the like matter, enables the court to infer the intent of the legislature, does not dispense with the necessity of alleging in the indictment all the facts necessary to bring the case within that intent.' U.S. v. Carll, 105 U.S. 611.

Even in the cases of misdemeanors, the indictment must be free from all ambiguity, and leave no doubt in the minds of the accused and the court of the exact offense intended to be charged, not only that the former may know what he is called upon to meet, but that, upon a plea of former acquittal or conviction, the record may show with accuracy the exact offense to which the plea relates. U.S. v. Simmons, 96 U.S. 360; U.S. v. Hess, 124 U.S. 483, 8 Sup. Ct. 571; Pettibone v. U.S., 148 U.S. 197, 13 Sup. Ct. 542; In re Greene, 52 Fed. 104.

The section in question in this case was before this court in U.S. v. Britton, 107 U.S. 655, 2 Sup. Ct. 512, in which the willful misapplication made an offense by this statute was defined to be 'a misapplication for the use, benefit, or gain of the party charged, or of some company or person other than the association,' and that to constitute such an offense there must be a conversion to the use of the offender, or of some one else, of the moneys or funds of the association by the party charged. It was said that a count which merely charged a maladministration of the affairs of the bank, rather than a criminal misapplication of its funds, was insufficient. 'It would not,' said Mr. Justice Woods, 'be sufficient simply to aver that the defendant 'willfully misapplied' the funds of the association. * *  * There must be averments to show how the application was made, and that it was an unlawful one.' The case again came before this court in 108 U.S. 199, 2 Sup. Ct. 531; and it was then held that the declaring of a dividend by the association when there were no net profits to pay it was not a criminal application of its funds, but an act of maladministration, which, while it might subject the association to a forfeiture of its charter, and the directors to a personal liability for damages, did not render them liable to a criminal prosecution. Again, in U.S. v. Northway, 120 U.S. 327, 7 Sup. Ct. 580, it was held not to be necessary to charge that the moneys and funds alleged to have been misapplied had been previously intrusted to the defendant, since a willful and criminal misapplication of such funds might be made by its officer or agent without having previously received them into his manual possession. See, also, Claassen v. U.S., 142 U.S. 140, 12 Sup. Ct. 169.

The counts of this indictment may be divided into three general classes: First, those charging the defendant with procuring the surrender and delivery to himself of the funds of the bank, and which, for convenience, may be termed the 'surrender and delivery' counts; second, those based upon the illegal discount of unsecured paper, and which may be termed the 'unlawful discount' counts; and, third, those in which the defendant is accused of fraudulently overdrawing his own account at the bank, and which may be termed the 'overdraft' counts.

1. The eighth, one of the 'surrender and delivery' counts, charges, in substance, that on May 8, 1891, Evans did knowingly, willfully, unlawfully, and fraudulently aid and abet one Harry H. Kennedy, cashier of the bank, to willfully misapply certain moneys, funds, and credits belonging to the bank, for the use, benefit, and advantage of the said Evans, with intent in him, the said Evans, to injure and defraud the bank; that is to say, that the said cashier did knowingly, unlawfully, fraudulently, and willfully, and with intent to injure and defraud the bank, misapply the sum of $7,500, to wit, a promissory note dated November 10, 1890, made and drawn by A. B. Nettleton for this amount, due March 13, 1891, which had been theretofore discounted by the bank, was then overdue and unpaid, and was held by the bank as and for funds and credits, as aforesaid. Whereupon, the said cashier, with intent to injure and defraud the bank, did willfully, knowingly, and fraudulently misapply the same, by surrendering and delivering the note to Evans without receiving payment therefor for the bank; and the said Evans did there, knowingly and unlawfully, aid and abet the said cashier in such willful misapplication, with intent in him, said Evans, to injure and defraud the bank.

The ninth and tenth counts did not differ from the eighth, except in describing other notes made by Nettleton, of different dates and amounts.

The same objection was taken to all of them, viz. that there was no averment that the defendant did not receive such notes as an agent for collection, or to secure their renewal, and subsequently failed to account for the same to the bank for proceeds or renewals, and, further, that there was no averment that the bank did not, either at the time of the surrender, or at any subsequent time, receive security, value, or renewal notes therefor, and no averment that the bank had been in any manner a loser thereby.

In answer to the first objection,-that there was no averment that the defendant did not receive the notes as an agent for collection, or to secure their renewal,-it is sufficient to say that the count charges defendant with willfully misappropriating the money and credits of the bank for his own use, benefit, and advantage, and with intent to defraud the bank, and that the object of the subsequent language of the count is rather to identify the property misapplied, than to charge a distinct offense, although the allegation of a willful misappropriation with intent to defraud is repeated. The count charges, as ingredients of the crime-First, that the defendant knowingly, willfully, unlawfully, and fraudulently aided and abetted the cashier; second, in willfully misappropriating the funds and credits of the bank; third, that he did this for his own use and benefit; fourth, with intent to defraud the bank; fifth, the credit misapplied is then described as a note of one Nettleton, which was then overdue and unpaid; sixth, the manner of the misapplication is then set forth as consisting in the surrender and delivery of the same to the defendant, without receiving any part of the sum represented by the note.

Every element of the offense being set forth in the earlier part of the count, there was no necessity of repeating it when the particular credit misapplied is described, nor of negativing every possible theory consistent with an innocent delivery of the note to the defendant. This requirememt would have the effect of limiting the government to allegations it might be wholly unable to prove, and without subserving any useful purpose to the defendant. While the rules of criminal pleading require that the accused shall be fully apprised of the charge made against him, it should, after all, be borne in mind that the object of criminal proceedings is to convict the guilty, as well as to shield the innocent; and no impracticable standards of particularity should be set up, whereby the government may be entrapped into making allegations which it would be impossible to prove. The note might have been delivered to the defendant for a score of honest purposes, which it would be utterly impossible to anticipate. Neither in criminal nor in civil pleading is it required to anticipate or negative a defense. 'Where there is no question of variance, * *  * the indictment need not, by way of negative, introduce matter of defense when it is drawn on a statute, any more than when it is at common law.' 1 Bish. Cr. Pros. § 638. 'In general,' says Chitty, 'all matters of defense must come from the defendant, and need not be anticipated or stated by prosecutor.' 1 Chit. Cr. Law, 231. See, also, U.S. v. Cook, 17 Wall. 173. The general words of a fraudulent misapplication to the use and benefit of the defendant, and of an intent by so doing to defraud the bank, are of themselves inconsistent with an honest purpose. Indeed, the word 'surrender' carries with it something more than a bare delivery, and indicates a transfer of title as well as of possession.

It was equally unnecessary to charge that the bank did not, either at the time of surrendering, or at any subsequent time, receive security, value, or renewals for the notes surrendered, or that it had been the loser by such surrender, since there was an allegation that the surrender was made without receiving therefor, for the bank, the sum represented by the notes, or any part thereof. If it did receive such value thereafter, it was clearly a matter of defense. The misdemeanor was complete when the note was fraudulently misapplied to the use of the defendant, with intent to defraud the bank; and, if the bank subsequently saved itself from loss, it was a matter to be proven by the accused, if, indeed, it were any defense at all. If, at the time of the surrender, the bank received security, value, or renewals, as a part of the same transaction, this would undoubtedly be a defense; but if the accused subsequently repented, and indemnified the bank, or the latter was able to protect itself from loss, it is very doubtful whether this would inure to the benefit of the defendant, or purge him of the charge. 2 Bish. Cr. Law, § 796; Reg. v. Phetheon, 9 Car. & P. 552; Reg. v. Peters, 1 Car. & K. 245; State v. Scott, 64 N. C. 586; Whart. Cr. Law, § 1797.

2. The fourteenth count, which may be treated as a representative of all the 'unlawful discount' counts, charged, in substance, that Evans, knowingly, willfully, unlawfully, and fraudulently, aided and abetted the cashier to willfully misapply the money, funds, and credits of the bank for the use, benefit, and advantage of the defendant, with the intent on defendant's part to injure and defraud the bank, in that the said cashier, knowingly, unlawfully, fraudulently, and willfully, with the intent to defraud the bank, and for the use, etc., of the said Evans, misapplied the sum of $15,000, by receiving and discounting, with the money and funds of the bank, a note made by Evans for this amount (giving copy), which note, when so discounted, 'was not then and there well secured,' as the cashier and Evans both well knew, and which note was never paid, by reason of which the bank suffered loss in this amount, with intent, in the said Evans, to injure and defraud the bank.

While the mere discount of an unsecured note, even if the marker and the officer making the discount knew it was not secured, would not necessarily be a crime, if the maker believed that he would be able to provide for it at maturity, yet if his original intent was to procure the note to be discounted in order to defraud the bank, as charged in this count, every element of criminality is present. The case is not unlike that of purchasing goods or obtaining credit. If a person buy goods on credit, in good faith, knowing that he is unable to pay for them at the time, but believing that he will be able to pay for them at the maturity of the bill, he is guilty of no offense, even if he be disappointed in making such payment. But if he purchases them, knowing that he will not be able to pay for them, and with an intent to cheat the vendor, this is a plain fraud, and made punishable as such, by statutes, in many of the states. In this particular of an intent to defraud, the case is distinguishable from that of U.S. v. Britton, 108 U.S. 193, 2 Sup. Ct. 526, in which the charge was that the defendant, being president and director of the association, and being insolvent, procured his own note to be discounted, the same not being well secured, the payee and the indorser thereof being also insolvent, which he, defendant, well knew. The incriminating facts were that the note was not well secured, and that both the maker and indorser were, to the knowledge of the defendant, insolvent when the note was discounted. The question there presented was whether the procuring of the discount of such a note by an officer of the association was a willful misapplication of its moneys, within the meaning of the law. It was held that it was not. The criminality really depends upon the question whether there was at the time of the discount a deliberate purpose on the part of the defendant to defraud the bank of the amount.

It is objected, however, to this count, that there was no averment that the cashier, in discounting the note, acted in excess of his powers, or outside of his rgular duties, nor was there any averment that the cashier was not the duly authorized officer of the bank to discount paper, nor was there any averment that the discount was procured by any fraudulent means, or that Evans was at the time of such discount insolvent, or knew himself to be so. It was held by this court in Bank of U.S. v. Dunn, 6 Pet. 51, that the power to discount paper was not one of the implied powers of the cashier, and this is believed to be the law at the present day. Morse, Banks, § 117. If the directors of this bank had authorized their cashier, either generally, or in this particular case, to discount paper, it was clearly matter of defense. But even if he did possess such power, and willfully abused it by discounting notes which he knew to be worthless, and did this with deliberate intent to defraud the bank, it is not perceived that his criminality is any less than it would have been if he had acted beyond the scope of his authority.

No averment was necessary that such discount was procured by fraudulent means, since the offense consists, not in the use of fraudulent means, but in the discount of a note which both parties know to be unsecured, with the intent thereby to defraud the bank. An averment that Evans was at the time insolvent, or knew himself to be so, was also unnecessary, in view of the allegation that Evans knew that the note was not secured, and procured the same to be discounted with intent to defraud the bank. The argument of the defendant, in this connection, assumes that under no circumstances is the discount of a note, which all parties know to be worthless, an offense, under the statute, even though such discount be made for the deliberate purpose of defrauding the bank out of the proceeds of the note so discounted. We do not see how it is possible to give such an interpretation to the statute without a practical nullification of its provisions.

Defendant's entire criticism upon these counts seems to be founded upon the hypothesis that no weight whatever is to be given the words 'knowingly, willfully, unlawfully, and fraudulently,' or to the general allegation of an intent to defraud,-in short, that these words are mere surplusage. Where, however, the statute uses words which are not absolutely inconsistent with an honest purpose, such as was held by this court in Britton's Case were the words 'will-fully misapplied,' the allegation of an intent to defraud becomes material, in the highest degree. In fact, the gravamen of the offense consists in the evil design with which the misapplication is made, and a count which should omit the words 'willfully,' etc., and 'with intent to defraud,' would be clearly bad. While it is entirely true that an allegation of fraud is insufficient, either in an indictment or in a bill in equity, without giving the particulars of the fraud, an intent to defraud is only to be gathered by the jury from all the facts and circumstances of the case. There is no greater need of setting out the evidence to prove such intent than there would be of averring in detail the evidence of a scienter, or of any other fact material to the offense. Where the intent is a material ingredient of the crime, it is necessary to be averred; but it may always be averred in general terms, as in a case of assault with intent to kill. So, in an indictment for murder, it is necessary to aver that the killing was done 'willfully, feloniously, and of malice aforethought;' but the evidence that it was so done, though necessary to be given, is not necessary to be set forth. This subject, however, was so fully considered by this court in U.S. v. Simmons, 96 U.S. 360, that it is needless to dwell upon it more at length here. In that case the indictment averred that the defendant 'did knowingly and unlawfully engage in and carry on the business of a distiller * *  * with intent to defraud the United States of the tax on the spirits distilled by him.' It was held not to be necessary to state the particular means by which the United States was to be defrauded of the tax. 'The defendant,' said the court, 'is entitled to a formal and substantial statement of the grounds upon which he is questioned, but not to such strictness in averment as might defeat the ends of justice. The intent to defraud the United States is of the very essence of the offense; and its existence in connection with the business of distilling, being distinctly charged, must be established by satisfactory evidence. Such intent may, however, be manifested by so many acts upon the part of the accused, covering such a long period of time, as to render it difficult, if not wholly impracticable, to aver, with any degree of certainty, all the essential facts from which it may be fairly inferred.' 'The means of effecting the criminal intent,' says Mr. Wharton, 'or the circumstances evincive of the design with which the act was done, are considered to be matters of evidence to go to the jury to demonstrate the intent, and not necessary to be incorporated in an indictment.' 1 Whart. Cr. Law, § 292.

A general verdict of guilty was rendered upon all the counts of this indictment upon which a nolle prosequi was not entered, and, as such verdict should stand if any one of the counts is goods, it will not be necessary to consider them in any further detail. Claassen v. U.S., 142 U.S. 140, 12 Sup. Ct. 169.

The judgment of the court below is therefore affirmed.