Kingsbury v. State

ON REHEARING.

(For former opinion, see 27 Ariz. 289, 232 P. 887.) This matter is before the court on a petition for rehearing. The facts are stated in the previous opinion of the court reported in 27 Ariz. 289, 232 P. 887, and need not be repeated here.

Counsel for defendant set up five propositions. The fourth and fifth of these raise questions which were considered on the original presentation of the case, and we see no reason for departing from our views previously expressed thereon. The third presents anew the main contention in the original argument, to the effect that, on a charge of this kind, it is necessary to both allege and prove a loss to the bank.

It is urged that a holding, that every unauthorized use of the funds of a bank is criminal, would "make a criminal of every bank officer . . . in bestowing gifts upon the poor . . . or supporting a hospital." In view of the alarmingly prevalent attitude of some bank officers, to the effect that the trust funds of a bank are the private property of the officers, to be used for their personal benefit, and at their whim, it might be well if such were the law. We did not, however, so hold. Our ruling was that, when a certain use was positively prohibited by statutory law, it was ipso facto a misapplication of the funds of the bank for its officers to permit that use, but we also stated such use would not alone constitute such a crime, but there must also exist an intent on the part of the officers to defraud the bank thereby.

Counsel for defendant express great alarm at the decision of this court to the effect that it is not absolutely and conclusively bound by the decisions of another court construing statutes of its jurisdiction, whose substance we have adopted in Arizona, when such decisions are, in our opinion, not in accord with sound logic or fundamental principles of common sense and justice, and confess their utter inability to assure any citizen of the safety of life, liberty and property under such a rule.

We feel that they are unduly alarmed. The great commonwealths of Wyoming, Texas, Colorado, Michigan, Montana, Utah, Mississippi, Missouri and many others have long held this doctrine, and we have yet to learn that life, liberty and property are more unsafe therein than elsewhere in our country. Nor do we believe that the foundations of society will rock if counsel are compelled, in view of this decision, to advise their clients who may engage in the banking business that, notwithstanding the federal decisions, they may not, with intent to defraud their respective banks, use trust funds in a manner positively prohibited by law.

We appreciate what counsel state in regard to the importance of the federal decisions, and the rule of taking any statute with the construction placed on it within the jurisdiction from which it came, but we feel it of even greater importance, that when our legislature has passed a law to meet a prevalent evil, a logical construction of that law and one best calculated to remedy that evil should be adopted. We see no reason to recede from the position previously taken on this point.

The other two propositions raise points not before presented by counsel in their brief, or not considered by us in our original decision, and we feel they should be examined carefully.

The first is, that section 19, chapter 31, Session Laws of 1922, was not operative at the time of the alleged offense, by reason of the provision of section 67 of the same act. Section 19 reads in part as follows:

"The total liability to any banking corporation of any person . . . for money borrowed shall at no time exceed twenty-five per cent. of the amount of the capital stock paid in and of the surplus earned and set aside as a surplus fund of such bank."

Section 67 reads:

"Any banking corporation . . . which banking corporation is in existence at the date of the passage of this banking act shall have three years after the provisions of this act shall have become effective, to comply with the provisions of this banking act regarding its loans and investments."

It is argued that the provisions of section 67 permit a bank to make loans to any amount to one person, up to June 30, 1925, provided only that on July 1, 1925, the loans are reduced to 25 per cent of the capital stock and surplus. In other words, that while the legislature recognized that allowing one person to become indebted to a bank, in excess of 25 per cent of its capital stock and surplus, was an evil so great as to require a law to correct it, yet it deliberately approved of an unlimited increase of future loans for three years, without any apparent reason therefor, and strictly limited such privilege of increase to banks already in existence, while rigidly prohibiting it to newly organized banks.

If, on the other hand, we interpret section 67 to mean that the existing banks — obviously the only kind which could at the time have had loans in excess of 25 per cent — are given three years to bring their present loans down to the limit provided for in section 19, while, so far as new loans are concerned, all banks existing or to exist are governed by section 19, we have a meaning which meets the evil recognized by the legislature, without undue hardship to present debtors, by a violent contraction of existing loans. Such interpretation is equitable, and in accord with common sense, and is adopted by us as the true meaning of the act.

The second point is that the law prohibiting any individual from becoming indebted to a bank in excess of 25 per cent of its capital and surplus applies only to money borrowed, and not to other classes of indebtedness, and, since it is not alleged in the indictment that the indebtedness of the Arizona Cattle Company was for money borrowed, no public offense was stated therein. As we said, this point was not called to our attention until the petition for rehearing, and we therefore — as it now appears unwarrantedly — took it for granted without independent investigation that the pleader had, since his whole case was obviously based on a violation of section 19, supra, correctly used the language of that section. It is apparent, of course, now that our attention is directed to the section, that the inhibition was expressly directed only against an indebtedness "for money borrowed" and not for any other purpose. It is equally clear that while the indictment alleges an indebtedness in excess of 25 per cent of the capital stock and surplus, it nowhere states in terms that the indebtedness was for money borrowed. Does it so state by implication? If the only way in which one could become indebted to a bank were for "money borrowed," it might well be argued the allegation of indebtedness carried with it such implication, but there are at least two other ways in which such indebtedness might readily arise. One is for property purchased from the bank, and the other is on notes and bills discounted.

Under the express provisions of the statute, discounts are excepted from its terms, and an indebtedness for the purchase price of property, not being for money borrowed, is equally without them. If the indebtedness of the Arizona Cattle Company was of either of these last two classes, it was not prohibited by law, and, if the original indebtedness of thirty-five thousand nine hundred ($35,900) dollars was not so prohibited, it was not a violation of section 19, supra, to make the loan of twelve thousand dollars ($12,000), which is the subject of the indictment. If the pleader wished to rely upon a violation of section 19, he must have stated specifically that the indebtedness, which he claimed to be in excess of the 25 per cent of the capital and surplus, was for money borrowed, or else have set up facts which would raise that presumption. Not having done so, there is nothing in the indictment which would show that section 19 was violated, nor that the transaction set up therein was prohibited by chapter 31, supra.

As we pointed out in our previous decision, when the specific transaction which is the subject of an indictment is not forbidden by law, a loss to the bank or a conversion of the money must be pleaded, and nowhere does this appear in the indictment, either by setting up facts which would show it, or by stating an ultimate conclusion of either law or fact. Nay, the pleader did not even use anywhere therein the bare language of the statute, and allege that defendant did "misapply any of the money, funds, or credits" of the bank. Under any theory or construction of the statute, which we can conceive of after diligent research, the defendant might have committed every act set up in the indictment, and still be guiltless of any violation of law. Such being the case, we are most reluctantly compelled to hold the indictment fails utterly to state a public offense.

In our opinion, offenses involving the care of trust funds, and resulting in the wrecking of banking institutions, are, in some of their aspects, often of even greater gravity than murder. The latter offense is generally committed against one who has, in some way, aroused the animosity of the criminal, and is frequently perpetrated under the influence of sudden emotion, while its after effects involve, at the most, but a few. Those of the former class are always long deliberated and carefully planned, and, in many instances, bring lifelong misery to hundreds and thousands. Such crimes have become alarmingly prevalent throughout our country, and especially in this state, and should be most strictly legislated against, and rigorously punished. For this reason we have followed the doctrine of harmless error, set up in article 6, section 22 of the Constitution, to its uttermost limit, to see if the judgment in this case could be upheld, but there is a limit beyond which we cannot go, even under that provision.

The indictment does not, on any possible and reasonable construction thereof, state facts which constitute a violation of any law. We have searched the books diligently, and we cannot find a case, in any state or under any Constitution, no matter how liberally the doctrine of harmless error or substantial justice has been construed, where a conviction on an indictment so fatally defective as the one at bar has been upheld. To affirm the judgment under these conditions would amount to a judicial lynching of the defendant, and, no matter how guilty she may be, she is at least entitled to be convicted in accordance with the fundamental principles of our law. This has not been done.

We feel, however, that the matter should not rest in oblivion, as do so many similar cases. We believe it to be the duty of the county attorney of Maricopa county to see that a proper information is immediately filed, and promptly presented to a jury of the county, so that if defendant be guilty she may be legally convicted and punished, and, if innocent, her reputation declared clear of all stain.

The judgment is reversed, and the case remanded to the superior court of Maricopa county for proceedings not inconsistent with this opinion.

McALISTER, C.J., concurs.