State v. Thompson , 37 N.M. 229 ( 1933 )

The defendant, appellant in this court, seeks through appeal the reversal of a judgment of conviction rendered against him by the district court of Valencia county. He was tried on change of venue from Socorro county. The jury found him guilty of the offense charged, to wit, issuance of a fraudulent check, and he was sentenced to a term of years in the state penitentiary.

Since the decision, as we view the matter, turns upon the correctness of the trial court's denial of defendant's motion for a directed verdict, interposed at close of state's case in chief, upon which ruling the defendant stood and declined to put on evidence, we shall proceed at once to a consideration of this claim of error.

The defendant for some years prior to the date of the offense charged had been engaged on a large scale in the business of cattle buying in Socorro and adjoining counties. On November 12, 1928, pursuant to contract, he received 78 head of cattle at Magdalena in Socorro county from one R.L. Cox, and delivered to him in settlement of purchase a check drawn by defendant to seller's order on First National Bank of Hot Springs, N.M., in the sum of $4,266.87. The check thereafter on November 14th or 15th was duly presented to the drawee bank as a collection item through First National Bank of Albuquerque, and dishonored. It was again presented through First State Bank of Magdalena on November 22, 1928, along with a list of other checks drawn by defendant on the same bank totaling $49,340.19, with request to hold until funds were available, if immediate payment could not be made, and to pay individually and as soon as possible, if balance were insufficient to cover entire amount. Again was payment refused, at least, not made, and the check stood dishonored at time of trial.

We shall assume that the facts hereinabove related made out before the jury the prima facie case contemplated by section 1, c. 132, Laws 1919. The serious question is whether the testimony of the state's witnesses and record evidence introduced in connection therewith do not entirely overcome the prima facie case resulting under the statute from the mere drawing of the check and its dishonor. From a careful consideration of the evidence, we are convinced that the prima facie case is thus overcome.

After defining the offense, section 1 of chapter 132, Laws of 1919, provides: "In the prosecution under this section as against the maker or drawer thereof, the making, drawing, uttering or delivering of a check, draft or order, payment of which is refused by the drawee because of lack of funds or credit, shall be prima facie evidence of intent to defraud and of knowledge of insufficient funds in or credit with such bank or other depositary," etc. (Italics ours.)

Section 1 of chapter 132, Laws of 1919, is amended by chapter 126, Laws of 1929 (sections 35-1910 and 35-1911, Comp. St. 1929), but in no respect material to this prosecution, and the above-quoted portion, being re-enacted in the same language as originally adopted, is deemed merely a continuation thereof. 26 Am. and Eng. Enc. of Law, 735; 1 Lewis' Sutherland Statutory Construction (2d Ed.) § 238; 36 Cyc. 1083; Cortesy v. Territory,7 N.M. 89, 32 P. 504. The offense charged having been committed, if at all, before the amendment, and the material provision thereof remaining the same, no question is presented as to which should control.

Turning again to the facts, they disclose that some two weeks before the check in question was drawn defendant had an interview at Socorro with Sam N. Matson, cashier of drawee bank, and a Mr. McFee, of McFee Commission Company, to which company defendant had been shipping cattle. At this interview the cashier solicited defendant's entire business for his bank. Theretofore the defendant had been having large transactions with the First National Bank of Santa Fe and had expressed some doubt whether the Hot Springs bank was large enough to take care of his business, but was reassured. The net result of this three-man parley was that McFee agreed for the commission company to honor defendant's drafts on it for cattle shipped, and cashier Matson for the Hot Springs bank agreed to honor defendant's checks for cattle purchased. Cashier Matson testified that he agreed to honor the checks because McFee agreed to honor the drafts. Apparently at this same meeting Matson learned of an arrangement defendant had for a loan, and was thus also influenced in making the arrangement outlined. Defendant in turn agreed to deposit with Matson all his receipts, and there is nothing in the record to show that defendant failed in any particular to fulfill his part of the arrangement.

Remembering that defendant was convicted of issuing a fraudulent check for $4,266.87, it is significant to note that, according to the state's own evidence, the bank's ledger sheets showed a balance to his credit of $5,029.92 at the close of business on November 13, 1930, the very earliest day on which the check could have been presented; that on the following day he had a balance of $26,578.06; on the day after that a balance of $14,495.15; and on November 22d, the day of the check's second presentment, a balance of $6,314.65. The check was first presented and returned unpaid on November 14th or 15th.

Furthermore, on November 15th the bank through mistake paid a check of the defendant in the sum of $11,481 upon which payment had been stopped. Except for this error of the bank, which was corrected on November 30th by restoring to his credit the amount of the erroneously paid check, the defendant's balance on November 15th would have been $25,976.15; and on November 22d, $17,795.65.

Standing alone, the foregoing facts would be decisive of the case. But the state seeks to overcome their effect by a showing that these book balances were fictitious and unreal. The substance of its showing in this direction consists of evidence that, during the very period and on the very days when these cash balances appeared on the bank's ledger sheets, defendant had credit on the bank's books for $40,000 of drafts on the First National Bank of Santa Fe, which had been dishonored, but not charged back to his account; also, evidence that it held for collection a considerable number of other checks issued on the same or at an earlier date than the one in question. The practice of the bank with respect to these additional checks as outlined by its cashier was that, if defendant's balance were insufficient to pay all as presented on a given day, it would hold and pay in the order of their presentment, as funds became available. In fact, most if not all of the checks thus held were received under specific instructions so to handle. The total of these claims against the account, inclusive of the drafts and checks, at the time of first presentment of check, was some $85,000.

Passing, without considering, question of the bank's right under reason assigned to carry credit balances from day to day, at the same time refusing payment of particular checks within the amount of such balances, if given full force, the only effect of this evidence would be to show defendant's account lacked sufficient funds to meet the check in question, not that he lacked sufficient credit with the bank to absorb same. In order to warrant a conviction under the statute, the state must show both. It is in the latter respect that the state's case fails.

Between October 3 and 19, 1928, defendant drew a series of drafts on First National Bank of Santa Fe totaling $80,000, which were placed to defendant's credit in Hot Springs bank and paid by drawee bank. Between October 22d and 29th, defendant drew three drafts on the Santa Fe bank totaling $40,000, which were placed to his credit in the Hot Springs bank and later dishonored. The reason for their dishonor does not appear in the record. The first to be charged back to defendant's account was one for $10,000 on November 16th; then one for $15,000 on November 19th; and the last for $15,000 on November 30th. Thus at the very moment of the first presentment of this check the bank by its own records was extending to defendant credit on unpaid drafts to the extent of $40,000.

The cashier of the Hot Springs bank, as a state's witness, in answer to a specific question admitted that defendant on the day this check was presented had credit with the bank in excess of the amount thereof. And while asserting that he never at any time had any arrangement with him to pay any check "that he didn't have the money there for," this same witness gave the following testimony, to wit:

"Q. And isn't it true, Mr. Matson, that because of what Mr. McFee of the McFee Commission Company had told you about honoring these drafts that you at that time agreed with Mr. Thompson to honor his drafts for the purchase of cattle? A. Yes, sir.

"Q. And under that arrangement with Mr. Thompson made about the last of October, 1928, you agreed to honor the checks and drafts given by Mr. Thompson for the purchase of cattle? A. With the provision that he keep the account there and send in the drafts that he received for cattle through our bank providing he would do all of his business through the bank so that I could keep a check on him and know what he was buying and what he was selling.

"Q. As a matter of fact, then, Mr. Matson, there was an arrangement made between you, as Cashier of the First National Bank of Hot Springs on behalf of said bank, and Mr. Thompson or understanding between you that he should have credit at the First National Bank of Hot Springs if he did all his business through your bank and that you would honor his drafts or checks, if given by him for cattle? A. Providing — Yes, I gave him permission, told him we would take care of his checks."

Questioned as to whether it was not a fact that, under the arrangement between the defendant and his bank throughout the entire period that he was doing business with it, defendant would deposit with the bank for collection drafts drawn on the various commission houses, and that the bank would then honor checks drawn by defendant in payment for cattle, and thus at times pay overdrafts, which overdrafts would be wiped out by the collection of the drafts, the witness replied: "A. It is partly the way but it wasn't the understanding at first."

Pressed further as to whether this was not the arrangement and the practice, the witness answered unequivocally, "Yes."

Notwithstanding the bank's arrangement through its cashier to honor defendant's checks for cattle purchased against drafts on commission houses for cattle shipped, the cashier stated that, after notice of dishonor of aforesaid drafts on the Santa Fe bank, he did not thereafter credit defendant with the proceeds of drafts deposited until notice of collection was reported; a change in policy not uniformly adhered to as hereinafter noted with reference to some of the drafts on McFee, Commission Company. When asked if he informed defendant of this change in policy, he answered: "I don't remember."

This is significant, in that the cashier admitted that all checks dishonored, including the one in question, were drawn within a period of about seven days of the date on which the check in question was given. Beginning November 14th, and within a space of four or five days, defendant deposited with the Hot Springs bank five drafts on McFee Commission Company for $20,000 each, totaling $100,000. At least one of them was placed to his credit in the bank on November 14th, and notice of its dishonor had not been received when the check in question was presented. Still another was drawn and delivered to the bank on November 15th, and under the arrangement admitted by the bank's cashier, of honoring checks against uncollected drafts, defendant would have been fully warranted in relying at time of issuing the check upon this extension of credit. All of these drafts were subsequently dishonored, though on December 4th following, $48,000 on account was transmitted to the Hot Springs bank for defendant's credit by McFee Commission Company and absorbed in meeting checks held by the bank for collection. It is impossible on the record to apply this $48,000 credit from McFee Commission Company to other than the cattle shipments covered by the foregoing drafts. In fact, at one point in his testimony the cashier admits the credit does flow from such transaction, though later professing ignorance on the subject.

Now where does this line of inquiry lead us? The state asserts the ledger balances though ample in amount may not be relied upon by defendant as showing funds sufficient to meet this check because fictitious. But what as to credit? It is just as essential under the statute to show an absence of credit as a want of funds. The state may with some reason, in view of the facts shown, insist that the ledger balances were unreal as reflecting moneys deposited. It is futile for it to urge that balances disclosed by the bank's own records do not represent credit extended. If they do not represent the latter, what do they represent and why were they there? Indeed, the question naturally occurs why defendant's book balances were not applied in reduction of the numerous checks claimed to be held for collection. The answer, of course, is that it was looking out for its $40,000 of unpaid drafts, though not yet ready to charge them back, and thus withdraw the credit.

An examination of the ledger sheets of defendant's account with the Hot Springs bank over the period from September 10, 1925, down to the dates material to this inquiry show innumerable overdrafts, some of them running into thousands of dollars. The telltale symbol "OD" occurs with frequent regularity opposite the statement of defendant's daily balances. For instance, State's Exhibit 17-A discloses the following on daily balances beginning November 1, 1928, to and including November 15th thereafter, on which last-mentioned day, or the day before, the check made the basis of this prosecution was presented, to wit:

1928 Balance

Nov. 1 ....................... $ 4,902.70 2 ....................... 4,212.70 3 ....................... 4,699.20 5 ....................... 13,149.65 OD 7 ....................... 40,087.34 8 ....................... 19,158.82 OD 9 ....................... 2,518.27 OD 10 ....................... 5,982.77 OD 13 ....................... 5,029.92 14 ....................... 26,578.06 15 ....................... 14,495.15

On all of the dates shown above the bank was extending credit to defendant on its $40,000 of unpaid drafts on the Santa Fe bank, notwithstanding which it permitted him to overdraw to the extent of $13,149.65 on November 5th, and $19,158.82 on November 8th. It seems strange that he should be convicted of fraudulently asserting credit with a bank to the extent of $4,266.87 on November 12th which had extended same to him in an amount almost five times that sum on November 8th.

All of this evidence appears from the state's case in chief. The defendant moved for a directed verdict, and stood upon the court's ruling denying same. Under all the circumstances we cannot escape the conclusion that it overcame the prima facie case resulting under the statute. It follows that the judgment of the trial court must be reversed, and the cause, remanded, with directions to the lower court to discharge the defendant.

It is so ordered.

WATSON, C.J., and BICKLEY, J., concur.

ZINN, J., did not participate.