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This is a reasonable ruling. As such negotiations and credits are committed by the national banking law to the board of directors, or the constituted discount committee, if the transaction undergoes their observation and approval, the vice president, who obtains the benefit of the credit, is not culpable unless he procures the approval by some fraud or deception; and therefore the indictment should either negative
any knowledge or approval thereof by said directors or committee, or aver some fraudulent imposition practiced by the defendant in securing its approval.
The District Attorney relies upon the case of McKnight v. United States, 115 Fed. 972–986, 54 C. C. A. 358, for the proposition:
“That where the circumstances proven are such that the consent of the board of directors would constitute no offense, it is unnecessary to aver the want of such consent; that under the circumstances as alleged in this count the consent of the board of directors would not have relieved the transaction of its criminal character; that it is only in cases where the consent of the board of directors would relieve the transaction of its otherwise criminal character that it would be necessary to allege the want of consent,” etc.
The case under consideration there by the court was a charge of embezzlement, and it is to be observed that the indictment in that case (see page 986, of 115 Fed., page 372, of 54 C. C. A.) “averred that the transactions of McKnight were without the consent of the board of directors or of the discount committee." All that the learned judge who wrote the opinion meant to say was that, where the proof on the trial disclosed a state of flagrant criminality on the part of the bank officers in loaning the funds of the bank to irresponsible parties, it would, without more, raise the presumption that it was done without the approval of the board of directors or governing committee, so as to devolve the burden of proof on the defendant to show that his action was authorized by the directors or committee; and further, that notwithstanding it should be shown that the act of the offending officer was approbated by the directory or committee, if it were an unlawful act, prohibited by law, connived at by the directors, proof of their approval could not avail the defendant. The opinion does not hold that an indictment is good which simply charges that an insolvent note, placed in the bank as the basis of a discount, the fruit of which is appropriated to the private use of the bank officer, without more, or that an averment is sufficient which simply charges that the act was done without the knowledge or consent of the association.
The pleader in this case recognized the obligation, in drawing the indictment, to charge that the transaction had “passed muster” without the proper authority, and he therefore alleged that it was done without the knowledge of the association. The term "association” is generic. It may comprehend the whole body of men, like the stockholders, who unite in forming the body politic of a banking institution; in which sense the allegation of the indictment might be true when the board of directors or the governing committee had not passed upon the transaction. As it is a recognized usage and fact that the matter of daily discounts and transactions of this character in a national bank are conducted by and through discount committees, the indictment, as applied to the instance of this count, should negative the knowledge and
approval of the recognized body for passing on such transactions. In
There are other objections made on the argument and in the brief
It is furthermore apparent from a careful reading of this count that it proceeds upon the theory that the misapplication was in entering a credit to the Burlington National Bank of the sum of $5,000, the same as if it had been deposited by the defendant in cash. The entry was not the misapplication of the fund, but the wrong would consist in withdrawing the money from the bank. The only allegation of the indictment in this respect is, “that afterwards said Burlington National Bank drew from the funds of said First National Bank the sum of five thousand dollars so placed to its credit." There is no allegation as to when this was done, or that there was any wrong or fraud in withdrawing the money; nor is there any negation that any additional consideration may have been given by the Burlington Bank at that time. Neither is there any allegation of any loss of this money to the bank. The only statement is that at some time after July 17, 1897, the Burlington Bank drew the sum of $5,000. Whether or not this was ever lost or paid, or sufficient security therefor given, is nowhere alleged. As shown in the previous discussion, it is essential to show a loss. As said in Britton's Case, supra, the discount may have turned out to be a benefit to the association, for there is no averment that the note was not paid at maturity, or that the association suffered any loss by reason of this discount. As heretofore stated, as held in the Dow Case, a mere entry in the books of the association did not constitute a misapplication, but as the crime was committed and consummated only when the money was drawn from the bank, it must follow that the indictment must show that the money got out of the bank in some way. As stated by the court in Britton's Case, 108 U. S. 193–197, 2 Sup. Ct. 526, 27 L. Ed. 701, the terms "willfully misapplied” have no marked, technical meaning. "They do not, therefore, of themselves, fully and clearly set forth every element of the offense charged. It would not be sufficient simply to aver that the defendant willfully misapplied the funds of the association. This is well settled by the authorities we have already cited. There must be averments to show how the application was made, and that it was an unlawful one." See, also, United States v. Northway, 120 U. S. 327-332, Sup. Ct. 580, 30 L. Ed. 664; Batchelor v. United States, 156 U. S. 426, 15 Sup. Ct. 446, 39 L. Ed. 478; United States v. Eno (C. C.) 56 Fed. 218, 219, 220.
Fifth Count. This count charged misapplication, in that on July 10, 1897, there was deposited in said Emporia bank to the credit of said defendant the sum of $5,000 by entry of such deposit in his account, "which said sum was afterwards drawn by and paid to said William Martindale by said banking association,” without any averment as to when it was so drawn or paid, or the manner thereof. This count is subject to the same objections discussed in respect of the first count, with the further objection that there is no averment to show how the application was made, and that it was an unlawful one. Neither is there any sufficient showing of any loss to the bank by reason of the transaction. The averments respecting lack of consideration and fraudulent intent of the defendant have reference to the entries on the books, which seems to have been the gist of the offense in the mind of the pleader.
Sixth Count. As the District Attorney at the hearing announced that he would enter a nolle as to this count, it is useless to take the time of the court in discussing its validity or invalidity, as under such announcement it is the duty of the court to direct a nolle to be entered.
Seventh Count. This count charges a misapplication, in that there was deposited to the defendant's credit on April 1, 1898; the sum of $5,000. It is quite evident from reading the specifications of this count that it was in the mind of the pleader only to charge the completion of the misapplication by the act of entry in the books of the bank, and not in the withdrawing of the funds. There is no showing when or under what circumstances the money was drawn from the bank, nor is any loss directly alleged to have occurred. The count is also subject to the objection discussed in respect of the first count of the indictment for a fai:ure to allege that the transaction was without the knowledge or approval of the board of directors or discount committee.
Eighth Count. The misapplication alleged in this count consists of a deposit of $6,000 in the Emporia bank to the defendant's credit on August 1, 1898, the charge being that a deposit slip was made on that day crediting Martindale with $6,000, "which said sum was afterwards drawn by and paid to William Martindale by said association.” No allegation is made that the transaction was without the knowledge or approbation of the board of directors or governing committee. The cou:it proceeds, evidently, upon the theory that the misapplication consisted in the entry in the account of the defendant, and not in drawing out the money from the bank. Neither does it show how, when, nor the circumstanccs under which, the money was drawn from the bank, nor does it appear that the money was lost to the bank. It is made apparent to the court that the government does not rely upon a conviction under this count, inasmuch as the District Attorney has subsequently indicted the defendant in several counts, which at the argument was stated by the District Attorney to grow out of and to cover this $6,000 transaction, in which second indictment the palpable infirmities of this eighth count are sought to be corrected.
Ninth Count. As it was stated by the District Attorney at the argument that a nolle would be entered as to this count, it need not be considered.
Tenth Count. The charge in this count is based upon a deposit in said Emporia bank to the credit of Martindale & Cross August 2, 1897, of $10,000, and the misapplication grew out of an entry of a deposit slip, as heretofore discussed. The averment is, “which said sum was afterwards drawn by and paid to Martindale & Cross and William Martindale," without any showing as to how, when, or under what circumstances
the money was drawn or paid, showing that it was drawn upon the theory that the misapplication of the funds of the bank was accomplished in the entering in the account of Martindale, and not in drawing out the money from the bank; nor is it directly averred that any loss occurred to the bank, nor that the transaction was without the knowledge or approval of the board of directors or discount committee.
Eleventh Count. The charge of misapplication of the funds of the bank in this count is predicated of a payment September 27, 1897, of a note of Leibfried, indorsed by Martindale & Cross and Martindale, which payment is alleged to have been made out of the moneys of the Emporia bank then on deposit with the First National Bank of New York City, by which bank it was there paid. This count is subject to the same objections discussed in the first count of the indictment.
Twelfth Count. As the District Attorney at the hearing announced that he would enter a nolle as to this count, its discussion is unnecessary.
Thirteenth Count. As the District Attorney at the argument announced that he would enter a nolle as to this count, its consideration by the court is unnecessary.
Fourteenth Count. This count is subject to the same objections discussed in respect of the first count.
Fifteenth Count. This count is subject to the same objections heretofore discussed.
Sixteenth Count. This count is subject to the same objections heretofore discussed. To this count, as also to other counts of the indictment, counsel for defendant makes the further objection that the indictment, in effect, charges three acts of misapplication in one count, for the reason that the sum drawn from the bank was applied to the payment of three separate notes; and, as the misapplication of the funds of the bank was only completed when the money was paid, and payment was made of three separate notes, they were separate, distinct misapplications, and it was error to join them in the same count. If the misapplication was consummated only when the money was applied and used, the acts of misapplication were separate and distinct, and it would follow that this objection is well taken.
Seventeenth Count. This count charges the misapplication on November 27, 1898, of a note of the Salina Gas & Electric Light Company of $1,768.17. There is no averment that the transaction was without the knowledge or approbation of the board of directors or governing committee, and there is nothing alleged in this count showing any loss to the bank on account