State v. Quinn

64 N.W.2d 323, 245 Iowa 846, 43 A.L.R. 2d 1240, 1954 Iowa Sup. LEXIS 406

• Court: Supreme Court of Iowa
• Decided: May 4, 1954
• Docket: 48358
• Status: Published

Opinions

Mulroney, J.-

— -The question of general interest presented by this appeal by the State of Iowa from a directed verdict of acquittal is whether a partner’s obtaining partnership funds by false pretense constitutes the crime of obtaining money by false pretenses defined in section 713.1, Code, 1950. The record shows defendant and Harry W. Stanfield were partners doing business, under the name of Midwest Used Car Sales, in Ottumwa. The indictment charged that defendant “unlawfully, designedly, by means of false pretense and with intent to defraud [did] obtain from his then partner, Harry W. Stanfield, the sum of $113.70.” The State’s case was that defendant purchased a car for resale by the partnership with his own money and he told Stanfield he had paid more than he actually did pay for the car and thereby induced Stanfield to draw a check to defendant on the partnership funds in excess of the purchase price of the car, falsely representing to Stanfield that the amount he received was actual reimbursement for said purchase. They were equal partners and the sum stated in the indictment is one half of the alleged excess. Actually both partners had equal rights to write checks on the partnership bank account, and part of the State’s case is that on other occasions defendant merely wrote cheeks on the partnership account to himself to reimburse himself for cars he purchased and turned over to the partnership, and the checks he drew were actually in excess of the amounts he had expended from his personal funds.

I. Section 713.1, Code, 1950, provides: “If any person designedly and by false pretense * * * and with intent to defraud, obtain from another any money * * * he shall be imprisoned * *

The gist of the crime of obtaining money by false pretenses is that the victim transferred title and possession to the wrongdoer under the influence of the false pretenses. As stated in 35 C. J. S., False Pretenses, section 24: “title as well.as possession must pass, although the title may be only voidable.”

In State v. Loser, 132 Iowa 419, 427, 104 N.W. 337, 339, the opinion states: “If the false pretenses induce the owner to part with his property, intending to transfer both title and possession, the crime is cheating by false pretenses. If, on the other hand, one by fraud, trick, or false pretense induces the owner to part merely with the possession of his property, there being no intent to pass the title, and the party who receives it took it with intent fraudulently to convert it to his own use, the crime is larceny.”

In State v. Chamberlain, 215 Iowa 273, 275, 245 N.W. 277, 278, the above language from the Loser case is quoted and the comment made that it states “quite the universal rule.”

Again in State v. Evans, 229 Iowa 932, 937, 295 N.W. 433, 435, the opinion states: “Appellant was accused of the crime of obtaining property by false pretenses. Accordingly, it was essential that the State prove that, when appellant obtained the property from Addie Otto, she intended to pass title to him as a result of the transaction.”

II. The crime of obtaining money by false pretenses differs from, but is somewhat akin to, embezzlement. In embezzlement the property is fraudulently appropriated by the person who has rightful possession, and in obtaining money by false pretenses the property is acquired in the first instance by means of the false pretense. 29 C. J. S., Embezzlement, section 1.

The general rule is that partners cannot embezzle partnership funds. The rule stated in 29 C. J. S., Embezzlement, section 16, is: “In the absence of statutes so providing, it may be stated as a general rule that partners cannot embezzle partnership funds * * *, because of their joint interest or ownership therein.”

In Gary v. Northwestern Mutual Aid Assn., 87 Iowa 25, 30, 53 N.W. 1086, 1087, we approved an instruction which stated: “* * * ‘the use or appropriation of the funds of the partnership [by a partner] to his private use # * * would not constitute the crime of embezzlement, nor would it be a criminal act.’ ” In this opinion (page 31) it is also stated: “The question is whether a member of a partnership is guilty of embezzlement by appropriating the funds of the partnership to his private use. * # * In 6 Am. and Eng. Encyclopedia Law, 479, under the head of ‘Embezzlement,’ is the following: ‘Partners sustain the character of principals as well as agents, and have a community of property .and interest in partnership effects, and therefore cannot embezzle the funds of the partnership which they wrongfully apply to their individual use without mutual consent. But this immunity does not attach as long as the partnership contract is executory only, or depends upon unperformed conditions precedent.’ This announcement of the law is fully sustained by the cases referred to, namely, Napoleon v. State, 3 Tex. App. 522; Reg. v. Wortley, 6 Denison & P. Brit. Cr. Cas. 332, — and is consistent with the recognized rights of partners in the partnership assets.”

In Pierce v. Commonwealth, 210 Ky. 465, 468, 276 S.W. 135, 136, it is stated: “* >Xi * courts have uniformly held that a partner cannot be guilty of the offense of embezzling partnership funds.”

In State v. Reddick, 2 S. D. 124, 125, 48 N.W. 846, 847, it is stated: “* * * the courts have uniformly held that a general partner cannot be convicted of embezzling partnership property [funds] * *

In State v. Sanders, 23 Ariz. 20, 24, 201 P. 93, 94, 17 A. L. R. 980, 982, the opinion cites and quotes from a number of authorities, all supporting the stated conclusion that: “A partner cannot be guilty of embezzlement of partnership funds * # rj^g citations in' the foregoing opinion include our opinion in Gary v. Northwestern Mutual Aid Assn., supra.

III. As previously stated the crimes of embezzlement and obtaining money by false pretenses are somewhat allied. Broadly stated, embezzlement can be termed a crime against the title, and obtaining money by false pretenses can be termed a crime against both possession and title. It would seem the logic of the holding that a partner cannot be guilty of embezzling partnership funds would compel the conclusion that a partner cannot bé guilty of obtaining partnership funds by false pretenses. The reason, usually stated, why a partner cannot be guilty of embezzling partnership funds is because the relationship places the title to partnership funds in all of the partners. The same reason exists when the charge is that one partner obtained partnership funds by false pretenses. No one can be guilty of obtaining, by false pretenses, money that he owns. 22 Am. Jur., False Pretenses, section 33.

In 35 C. J. S., False Pretenses, section 24, page 667, the rule is stated: “A partner cannot be guilty of obtaining money by false pretenses where the money belonged to the partnership * * * ”

We find no cases holding contrary to the above stated rule. There are cases holding that obtaining money from one with whom the accused has entered into a contract to form a partnership is not within this principle. Commonwealth v. Brown, 167 Mass. 144, 45 N.E. 1; State v. Foot, 100 Mont. 33, 48 P.2d 1113. Usually the courts have held the procuring of the money for the account of the partnership of which the accused and the victim were members would not constitute the crime because the victim as a partner retained an interest in the fund. State v. Smalley, Mo., 252 S.W. 443; State v. Woerth, Mo., 256 S.W. 456. But People v. Cravens, 79 Cal. App.2d 658, 180 P.2d 453, the case relied upon by the State, holds the crime of false pretenses can be established by evidence the accused induced the victim to deposit money in a partnership account from which the accused withdrew the money for his own personal use. The cases are not in point here for the State’s case did not involve a scheme to get the victim to place private funds in the partnership account.

In State v. Brown, 38 Mont. 309, 315, 99 P. 954, 957, the charge was larceny and the defense was that the victim and the accused were partners and the money obtained was partnership money. The court held the evidence did not establish an agreement of partnership but in the course of the opinion it is stated: “A partner cannot commit larceny of the funds or property of the partnership of which he is a member, because the interest or ownership of such partner extends to every portion of its property. (Revised Codes, sec. 5469.) Each partner combines in himself at once the character of principal and agent, and may possess and dispose of the firm’s funds and property, even to the extent of appropriating them to his own use, by withdrawing them from the common fund.”

The above case is cited in a later Montana opinion, State v. Foot, 100 Mont. 33, 37, 48 P.2d 1113, where the charge was obtaining money under false pretenses, and one of the defenses was that the defendant and victim were partners. The opinion seems to recognize the defense would be good under the authority of the Brown case but it was not established, for the court held the evidence was insufficient to establish a partnership.

One other case where the charge was obtaining property by false pretenses and the defense asserted was that defendant and victim were partners and the property was partnership property is State v. Mendenhall, 24 Wash. 12, 63 P. 1109. As in State v. Foot, supra, the court held the evidence did not establish the partnership; hence, the cases sustaining the doctrine that one partner cannot commit larceny of the goods of the partnership were held not in point.

One old English ease is directly in point. It is Reg. v. Evans, decided in 1862, Court of Criminal Appeal, and reported in Cox’s Criminal Cases, Volume IX, pages 238, 241. Here a partner’s conviction of obtaining money by false pretenses was quashed and the following quotation from the headnote shows how closely the case is in point on the facts:

“A. having invented an improved lamp, entered into a partnership deed with B. and C. for carrying out and vending the subject of the invention. By a subsequent verbal agreement with his co-partners he was to travel about to obtain orders for the lamps upon a commission. On all orders received by him such commission (besides his travelling and personal expenses) was to be paid to him as soon as he received the orders, and to be payable out of the capital funds of the partnership before dividing any profits. By falsely representing to his co-partners that he had obtained orders upon which his commission would be 121.10s., he obtained from them that amount: Held, that, as the subject-matter of the misrepresentation would come under consideration in the partnership accounts, such misrepresentation was not sufficient to sustain an indictment for false pretenses against A.”

In the course of his opinion in the above case Pollock, C. B., stressed the fact that the defendant’s misrepresentation “would be overhauled when the accounts were gone into, and therefore * * * the defendant was not guilty of obtaining money by false pretenses.”

There seem to be but few cases on the precise subject where the charge against the partner was obtaining partnership funds by false pretenses. This is probably because there is little need for the employment of pretense by a partner in order to secure the partnership funds. But all of the cases involving the prosecution of a partner for embezzlement or larceny of partnership funds are in point. The State argues the statute here involved merely states this crime is committed if the wrongdoer “obtain from another” any money, and this differs from the larceny statute (709.1, Code, 1950) which employs the phrase “the property of another”, and the embezzlement statutes (chapter 710, Code, 1950) which use such terms as “belonging to another”, “property of another” or “which is partly the property of another and partly the property of such * * * person.”

The difference in language is not material. Justice Weaver, speaking for the court in State v. Clark, 141 Iowa 297, 302, 119 N.W. 719, 721, said: “The offense which the statute creates can be committed only by obtaining money, goods, or property belonging to another by means of some false pretense or false token.” (Italics supplied.)

The gist of the offenses of larceny, embezzlement and false pretenses is the felonious taking and conversion of the property of another. They differ only in the means by which the taking and conversion is accomplished. All of the authorities, with excellent reasoning, hold that a partner o'f a going partnership cannot be guilty of larceny or embezzlement by proof of a taking and conversion of partnership assets because, as was stated in our opinion in the Gary case, supra, at page 32 of 87 Iowa: “The partners have a community of property and interest tn the partnership effects [and] in law they are treated, in a qualified sense, as joint tenants of the partnership property, having an interest therein per my et per tout.”

Upon the same reasoning the taking and conversion by a partner, in a going partnership, of partnership assets, accomplished by false pretenses, cannot constitute the crime of obtaining property from another by false pretenses. We feel reason and authority support the statement of the rule previously quoted from 35 C. J. S., False Pretenses, section 24, to the effect that a partner is not guilty of obtaining money by false pretenses when the money belonged to the partnership.— Affirmed.

Oliver, Wennerstrum, Smith, Hays, and Larson, JJ., concur. Smith and Oliver, JJ., concur specially. Thompson, J., Bliss, C.J., and Garfield, J., dissent.