Parnell v. State

339 S.W.2d 49, 170 Tex. Crim. 30, 1959 Tex. Crim. App. LEXIS 2681

• Court: Court of Criminal Appeals of Texas
• Decided: April 29, 1959
• Docket: 30391
• Status: Published

Opinions

WOODLEY, Judge.

The offense is felony embezzlement; the punishment ten years.

This is a companion case to that of Hamman v. State, 166 Tex .Cr. Rep. 349, 314 S.W. 2d 301.

The count of the indictment upon which the case was submitted to the jury is in form identical with that set out in the opinion in the Hamman case.

All of the relevant events occurred in the year 1955 and early in 1956. Unless otherwise indicated, all dates herein mentioned will refer to the year 1955.

For convenience and brevity, Guy B. Hamman, George S. McGhee and James T. Valentine will be referred to as Hamman, McGhee and Valentine, respectively. Collectively they and appellant will be referred to as the “promoters”.

Physicians Life and Accident Insurance Company, a Corporation, the injured party, will be referred to as the Insurance Company. Physicians Investment Corporation will be called the Investment Corporation.

The case was submitted to the jury as one of circumstantial evidence and a conviction was authorized upon a finding by the jury that appellant acted together with Hamman or McGhee or Valentine or R. A. Stuart, or all of them,

That part of the law of principals was given in charge which makes all who are guilty of acting together in the commission of an offense guilty as principals.

The evidence from the state’s standpoint is in a large measure shown in our opinion in Hamman v. State, supra. Notes secured by deed of trust liens, assigned to the Investment Corporation by the promoters in exchange for original stock of the Insurance Company at $1.00 per share were, according to witnesses for the state, paid with money belonging to the Insurance Company, without the consent of the Board of Directors, and released to the makers.

To account for the debit to surplus and credit to the Investment Corporation of the funds to pay off these obligations of the promoters, stock certificate stubs were altered to make it appear that stock sold to the public at $11.00 and $14.20 per share months earlier was stock that had been issued to the promoters and transferred by them.

Additional evidence will be set out in connection with appellant’s contentions.

A principal contention of appellant repeatedly asserted in connection with various assignments of error will be first disposed of.

The indictment herein was in three counts. The first alleged theft of $225,000.00 from the Insurance Company and the third count alleged that appellant, together with Hamman, McGhee, Valentine and R. A. Stuart entered into a conspiracy to embezzle $225,000.00 belonging to the Insurance Company.

The second count, alleging the embezzlement, alone having been submitted to the jury, it is contended that appellant was thereby acquitted of conspiring with the other promoters. Accordingly, he argues, all evidence tending to show that appellant conspired with the other promoters to embezzle money from the Insurance Company “passed out of the case for all purposes.”

Assuming that appellant stood acquitted of the substantive crime of conspiracy, this did not deprive the state and the jury of the evidence tending to establish the conspiracy, including the acts and declarations of his co-conspirators, in considering the charge of embezzlement in pursuance of the common design or conspiracy. Richards v. State, 53 Tex. Cr. R. 400, 110 S.W. 432; Holt v. State, 39 Tex. Cr. R. 282, 46 S.W. 829; and 9 Tex. Jur., Sec. 14, pp. 392 and 393, are deemed authority contrary to appellant’s contention.

Appellant contends that there is no evidence to show that he was present when the offense of embezzlement was committed, if-it was, and for that reason his conviction as a principal rather than as an accomplice should be set aside.

To decide the question here presented we must first determine where and when the embezzlement occurred.

Dallas M. Parnell, appellant, was vice-president, director, member of the executive committee of the Board of Directors and head of the real estate committee of the Insurance Company. He was also president and a director of the Investment Corporation.

Guy B. Hamman was secretary, director and member of the executive committee of the Insurance Company, and was vice-president and secretary and a director of the Investment Corporation.

George S. McGhee was treasurer, a director and member of the executive committee of the Insurance Company and was treasurer and a director of the Investment Corporation.

James T. Valentine was vice-president, a director and member of the executive committee of the Insurance Company, and was vice-president and director of the Investment Corporation.

Collectively appellant, Hamman, McGhee and Valentine constituted majority control and dominated the executive committee of the board of directors of the Insurance Company.

The minutes of the meeting of the executive committee, approving the purchase of appellant’s $75,000.00 note, do not disclose the fact that it was signed by or represented the obligation of one of the committee. The banker, according to these minutes, appeared and offered the note for sale, describing the security. It may be significant to note that the bank held appellant’s note only as collateral.

The same is true as to the notes of the other promoters which were acquired by the Insurance Company. The transaction was between the Insurance Company, represented by the makers of the notes who were officers and directors of the Investment Corporation, and the bank which held the notes as collateral for the Investment Corporation’s note.

Be this as it may, the notes were later assigned to the Investment Corporation and paid for, and were again pledged to secure the payment of bank loans to the Investment Corporation, appellant’s to secure a $75,000.00 note to First National Bank, and Hamman, McGhee and Valentine’s notes to secure a $150,000.00 note to Mercantile National Bank.

According to its minutes, appellant was present at a meeting of the executive committee of the Insurance Company on June 8 when a committee was appointed “to arrange necessary financing to repurchase from the * * * Insurance Company * * * certain loans which had been acquired by the Company from the Empire State Bank.” Hamman and McGhee were also appointed on the committee, the fourth committeeman being the then President Yost.

Appellant was present at a stockholders meeting and a meeting of the executive committee of the Insurance Company on August 15.

There is no reference to the matter in the minutes of this meeting, however another meeting of the executive committee of the Insurance Company was held on September 17, the stated purpose being: “To consider the matter of the guarantee of the * * * Insurance Company to the Mercantile National Bank, as per resolution heretofore passed on the 15th day of August, 1955, as to the payment of a note in the sum of $150,000.00 heretofore executed on August 24, 1955, by the Physicians Investment Corporation to said bank.”

Resolution was unanimously adopted on September 17 rescinding the action taken on August 15 “in which the * * * Insurance Company agreed and issued a letter to the Mercantile National Bank guaranteeing that it would purchase the $150,000.00 note of Physicians Investment Corporation, dated August 2U, 1955.” Appellant and the other promoters whose notes secured the $150,000.00 loan to the Investment Corporation were present and formed a majority of the executive committee.

The minutes of this meeting of September 17 recite that the committee was advised that the Investment Corporation had acquired and had in its treasury a sufficient sum of money to pay off and liquidate the $150,000.00 due and payable to the Mercantile National Bank, and that the executive committee of the Insurance Company “felt that said sum should be liquidated.”

The executive committee further resolved at said meeting that the Investment Corporation “be called upon to immediately pay off and discharge said obligation to the Mercantile National Bank, of Dallas, so as to relieve the * * * Insurance Company from any obligation in connection therewith, and that said letter of agreement be surrendered to the * * * Insurance Company.”

Following the meeting of the executive committee of the Insurance Company at 2 P.M. on September 17, at which the Investment Corporation was called upon to pay off and discharge its obligation to the Mercantile National Bank represented by its $150,000.00 note, the same individuals met as the board of directors of the Investment Corporation at 3 P.M. the same day. The promoters constituted the majority at both meetings. R. A. Stuart and E. H. Owen were the only other members of the executive committee and the board of directors who were present at these meetings.

The minutes of the meeting of the board of directors of the Investment Corporation show that the board was advised of the action of the executive committee of the Insurance Company demanding that the $150,000.00 note be paid, and that resolution was passed that it be paid.

The Investment Corporation, or at least Hamman, its vice-president, and McGhee, its treasurer, appear to have anticipated the action that was taken on September 17, for a check had already been issued by the Investment Corporation and delivered the day before, signed by these officers in their official capacity, and $50,000.00 was paid on the $75,000.00 indebtedness to First National Bank. This note was secured by appellant’s note and in addition its payment was guaranteed by him.

It will be remembered that the notes of McGhee, Valentine and Hamman, secured by their property, had been assigned to the bank as collateral for the $150,000.00 note, and appellant’s note similarly assigned to First National Bank, and that the payment by the Investment Corporation of its indebtedness would entitle that corporation to a return of these collateral notes.

We find, however, that on October 3 Hamman’s note and lien were transferred by the bank to the Investment Corporation and on the same day were released to him by the Investment Corporation.

It was well known to appellant and the other promoters that the only fund from which the $150,000.00 note could be paid by the Investment Corporation was the money which had come into its hands from the proceeds of stock sold by it for the Insurance Company. This money belonged to the Insurance Company.

There is evidence tending to show that, from the beginning, it was the intention of the promoters that their notes, for which they had received shares of stock at $1.00 per share, would be retired by the sale of a part of the stock at a larger sum.

A voting agreement was entered into prior to the execution of the notes in which it was agreed that a certain number of shares would be placed in escrow with the Investment Corporation, to be sold for that purpose at not less than $7.50 per share. Appellant agreed to place 10,667 shares for that purpose.

A second agreement was signed by the promoters in July. This was after sale of stock at $11.00 per share under the 25,000 share offer of May 1 had been oversubscribed and while stock of the company was being sold under a second prospectus offering an additional 25,000 shares at $14.20 per share was in progress.

In the July agreement appellant and McGhee agreed to deposit in escrow with the Investment Corporation 9,605 shares each; Hamman 6,410 shares and Valentine 3,199 shares. These shares were to be sold for not less than $11.00 per share (except with written consent of all parties) ; block sales were to be prorata; proceeds, less 20% commission, were to be credited to a sum to repurchase by the former owners certain real estate mortgages transferred by the owners in exchange for stock in the Investment Corporation and the Insurance Company, listing the mortgages by name and amount, McGhee and Parnell $75,000.00 each, Hamman $50,000.00 and Valentine $25,000.00.

The Securities Act (Art. 579-1 to 579-42 V.A.C.S.) went into effect September 6. After that date no further stock was or could be lawfully sold by the Investment Corporation for either the Insurance Company or the promoters unless and until the requirements of the Act were complied with.

Appellant testified that on September 7th and 8th President Yost and Stuart, attorney for the Insurance Company, “reported to a group of us that it looked like we were in trouble, and somebody was going to have to furnish stock from some source” to cover the oversubscription.

An audit began September 19 and final report was made November 2, pursuant to the resolution of the executive committee of September 17. The audit was restricted to the capital structure.

During the audit, according to the testimony of Mr. Kernaghan of the auditing firm employed, “somebody asked us to figure out something for them one afternoon * * * it was largely, my recollection, a problem in mathematics to prorate among those five gentlemen a pre-determined figure based on some number of shares that they gave us, as to proportion it between themselves * * * it was a very minor thing at the time. It was just not part of our engagement.”

Work sheets and lists were prepared in compliance with the request by the auditors. 'Hamman directed Mrs. Genevive Watson, his secretary, “to make the transfers as set out on that list.” Mrs. Watson then changed the stock certificate stubs shown on the list, totaling 3755 shares, so as to cause it to appear that original stock purchased from the Insurance Company, the net receipts to be “used to embark upon a full scale insurance business” and “to fulfill an expanded business program,” was instead transferred from stock certificate No. 288 which had been issued to appellant for 9,605 shares at $1.00 per share.

Certificate stubs of other stock of the company sold to other members of the investing public were altered in like manner so as to falsely show that the certificate represented stock assigned from Hamman, McGhee, Valentine, R. A. Stuart or appellant.

As a result of these cancellations, falsifications and alterations, $175,801.68 was credited to the Investment Corporation on the books of the Insurance Company as of September 30. Debit was to Surplus.

Molnor, the regular auditor of the Insurance Company, then prepared a similar calculation as to the stock necessary to satisfy the remaining mortgages in like manner, appellant’s portion being 4583 shares.

On December 14 check for $25,886.00 was issued to First National Bank on the account of the Investment Corporation in said bank. It was signed by Hamman and McGhee, and appellant was asked to deliver it to the bank.

Appellant testified that he objected to his note being paid at that time; that a tax problem was involved, and he declined to deliver it.

On December 28 appellant delivered to Hamman additional certificates issued to him by the Insurance Company endorsed in blank.

Appellant testified that such stock “was to be used as previously discussed with major stockholders, donating a part of their stock back to the company.”

The check dated December 14 was delivered to the First National Bank on January 3, 1956, and on the following day appellant received his note and the release of his property mortgaged to secure it.

Appellant’s defense was rejected by the jury. The jury was instructed to acquit if they believed or had reasonable doubt: (1) that appellant did not fraudulently intend to misapply, embezzle or convert to his own use money belonging to the Insurance Company; (2) if he did misapply and convert said money but thought he had a legal right to act in the manner in which he did; (3) if he believed that he had a legal right to use and deal with the money alleged to have been embezzled, and so believing that he or they (Hamman, McGhee, Valentine and R. A. Stuart) had said legal right, committed the acts alleged in the second count of the indictment; (4) that appellant was advised by attorneys and employees of the Insurance Company or the Investment Corporation that he had the legal right to apply the money as alleged, and acted upon such advice in good faith believing it to be true.

The entry of $175,801.68 as a debit to surplus and credit to accounts receivable Investment Corporation as of September 30 was explained on the books as “Stock sold by Investment Corporation for individual stockholders, proceeds of which were erroneously transferred to the Insurance Company (See letter in general voucher file).”

The letter referred to was apparently the original of which a copy was offered in evidence setting out the shares which “have been transferred in accordance with our previous conversation” and listing the number of shares of the promoters and of Stuart cancelled, the number transferred and the number re-issued, and the number of such shares which were $11.00 stock (May 1 offer) and $14.20 stock (July 1 offer) respectively.

The mortgage notes of the promoters were released to them after the Investment Corporation’s notes to the banks were paid. Hamman received his release on October 2 (before the list of the “transfers” to be made was prepared, from which list the $175,801.68 was credited to the Investment Corporation as of September 30). Valentine’s note and lien were released, the date not being shown. Appellant received his cancelled note and release of his properties on January 3, 1956. McGhee’s note and lien were released on January 13, 1956.

The jury was authorized by the charge of the court to convict upon a finding that appellant embezzled any part of the $225,000.00 of the value of over $50.00 any time within the period of limitation before the return of the indictment.

We conclude that the jury was warranted in finding that the offense of embezzlement was committed as alleged; that the offense was committed in pursuance of a common design and intent and during the existence of such intent and conspiracy, and was not fully consumated until the mortgage notes executed by the conspirators were released to them.

We further conclude that there is sufficient evidence to sustain a finding by the jury that appellant acted as a principal in the embezzlement and misapplication and was present at its commission.

There is no settled mode in which appropriation of money or property of the principal by the officer authorized to receive and handle it must take place. It may occur in numberless ways, and the appropriation consumated in any manner capable of effecting it.

In many classes of cases the question as to what acts are sufficient to show an appropriation is one of great difficulty.

So long as the person entrusted with the money or property of another acts in accordance with the terms of his trust in reference thereto he is not guilty of embezzlement. He may deposit the money of his principal in the bank in his own name without being guilty of appropriating it. But a withdrawal by him for purposes of his own constitutes appropriation, 16 Tex. Jur. 70; or constitutes evidence of conversion. 16 Tex. Jur. 38, 39.

Whether the conversion took place when the deposit was made or at the time of withdrawal is generally immaterial. Stephens v. State, 49 Tex. Cr. R. 489, 93 S.W. 545.

Whether the release by the Investment Corporation of the collateral notes of the officers of the Insurance Company, following the payment of the banks’ notes with insurance company funds, established a conversion of such funds by such officers would depend upon their intent. But the acceptance by these officers of their notes and the release of the securities and property pledged to secure their payment based upon their having been paid with funds of their principal constituted the appropriation of the money to• their own use, and was evidence of their fraudulent intent.

The date of the offense is sometimes of great importance as in connection with limitation.

As appropriation piece meal followed by a fabricated note to back up a defense may be considered as one embezzlement or conversion, the time being when the fictitious note was drawn, such act being a clear manifestation of intent to convert the whole sum entrusted to him. Hamer v. State, 60 Tex. Cr. R. 341, 131 S.W. 813.

People v. Stanford, 105 Pac. 2d 969, is cited in appellant’s brief, and points out that in larceny the defendant has obtained possession of his victim’s property by wrongful means, and completion of the offense is not dependent upon whether he appropriates the fruits of his theft by a single act or at sucessive intervals. On the other hand, in the case of embezzlement the property is already in rightful possession of the defendant, and his subsequent fraudulent appropriation is of the essence of the crime.

The record here shows a single impulse to apply money belonging to the corporation to the payment of the obligation of appellant and his confederates. There were a number of transactions which culminated in the surrender of these obligations to the respective parties. The embezzlement and the common design was completed by the release of the notes and securities to the debtor, freeing him from the obligation to pay the same. Appellant was present when the payment from money belonging to the Insurance Company was ordered paid, and when his cancelled note and release of lien was delivered to him.

We find no error in the failure of the court to instruct the jury that the State Witness E. H. Owen was an accomplice witness, or to submit the issue to the jury as to whether he was an accomplice.

Owen was present and participated in the meetings of September 17 which authorized and ordered the payment of the $150,000.00 note to Mercantile Bank. He testified that he was present when the suggestion was made that stock which had been issued at $1.00 per share be substituted for stock sold to the public at $11.00 and $14.20 per share. He further testified that he declined to furnish stock for such purpose and stated that it would in effect be stealing. He was not indebted to the Insurance Company or to the Investment Corporation. When he learned that the promoters’ notes had been paid and released by the substitution of part of their stock for company-sold stock he reported the matter to the district attorney and to the Insurance Commission.

Appellant assigns as error, for which the judgment should be reversed, the overruling of a number of motions for mistrial based upon the propounding of questions to appellant on cross-examination. In view of the court’s instruction to the jury to disregard these questions we do not regard the matters as of such prejudicial nature that a mistrial should have been granted.

The judgment is affirmed.