State v. Dobry

[1] The D.A. Dobry Securities Company was an Iowa corporation, of which the defendant was the president. For the purpose of securing permission to issue additional securities, on the 27th day of January, 1931, the defendant signed and verified a written statement filed with the secretary of state, the substance of which was to show the financial condition of said corporation at that time, and it is as to statements made in such writing, which were false, that this accusation was brought.

The case was tried and submitted to the jury on the theory that if the statement was, in fact, false, this was sufficient to violate the statute. The contention of the defendant is that the statement must be knowingly false in order to violate the statute.

The question, therefore, is narrowed to the single proposition of whether or not the statement must be "knowingly false." Many authorities have been cited, together with some of our own cases on this proposition of the definition of the word "false." An investigation of those cases, however, in the light of the statutes under which they are decided, is of little use or value to us in the determination of the question before us. For a fair understanding of this proposition it is necessary to refer to the statute under which this indictment was brought and its purpose and history.

The statute under which this indictment was returned was passed by the legislature of this state in 1915 and appears as section 20, chapter 149, of the Acts of the Thirty-sixth General Assembly, and appears now in the Code of 1931 as section 8581-c21. The material part thereof in which we are interested is as follows:

"Any person, firm, association, company or corporation * * * that shall * * * make or subscribe to any false statement, exhibit or paper filed with the secretary of state, * * * or shall make to said secretary of state, his superintendent, agent or representative any false statement as to the financial condition of such person, firm, association, company or corporation shall be deemed guilty of a felony * * *."

It will be noticed that the term used here is "false statement." This section appears in what is known as the "Blue Sky Law" or the "Iowa Securities Act," and is chapter 393-C1 of the Code.

It might be well first to consider the purpose intended to be accomplished by this act. It is well known that this state in times past has been flooded with worthless securities, and that there are people who have thus been defrauded. It was the intention of the legislature in passing this act to avoid this situation. A study of the act shows that securities could not be issued by corporations in this state without first obtaining permission from the secretary of state, and, in order to obtain such permission, written statements provided for in the act were required to be made by the corporation or its officers, sworn to prior to having been filed with the secretary, and it was for the secretary of state to determine, under the showing made, the good faith and financial stability of the corporation thus wishing to issue such securities. As one of the provisions of said act, the above-quoted section of the Code was made to aid the purpose of the act.

The first act passed by the General Assembly of this state was by the Thirty-fifth General Assembly (1913), chapter 137, and section 10 thereof is the section in that act treating with the same subject of false statements as section 20 of the present act. The aforesaid act of the Thirty-fifth General Assembly was held invalid by the U.S. District Court. Compton Co. v. Allen, 216 F. 537. Thereafter the original law, with numerous changes, was re-enacted in the aforesaid chapter 149 of the Thirty-sixth General Assembly. Section 10 of the original act provided that any company, or person, who shall knowingly and wilfully subscribe to or cause to be made any false statement or false entry in any book of such investment company, or exhibit any false paper with intention to deceive any person authorized to examine the affairs of said investment company, or shallknowingly or wilfully make or publish any false statement of the financial condition of the investment company, or the stocks, bonds, or other securities by it offered for sale, shall be deemed guilty of a felony.

It will be noticed on comparison of the last-quoted section with the previous section dealing with the same subject that the present statute makes it a felony to make or subscribe any "false" statement, while the original act provided that any person who shall "knowingly and wilfully subscribe or cause to be made any false statement, or shall knowingly or wilfully publish any false statement" shall be deemed guilty of a felony.

The distinguishing feature between the two acts, therefore, is that under the original act the term "false statement" was qualified by the use of the terms "wilfully and knowingly" and that, under the present act, those qualifying terms are omitted. It is suggested in argument that these qualifying terms were omitted by inadvertence, but with this conclusion we cannot agree. We are supported in this conclusion, in part at least, by the subsequent section of the present statute. Section 8581-c23 deals with the sale of these stocks through agents or representatives, and it provides that any such agent who shall "knowingly make any false representations or statements as to the nature, character or value of such security * * * or knowingly violate any of the provisions of this chapter with intent to defraud, shall be deemed guilty of a felony * * *."

It is apparent that the legislature had this term "knowingly" before it in the preparation of this law, and the fact that it used it in the last-quoted section would naturally carry with it the idea that it purposely omitted it in the first quoted section.

There are certain rules of construction of statutes that must be considered in determining this question. In finding what shall constitute a crime, the legislature has unlimited power. In other words, they can make it include certain elements or omit certain elements therefrom as in their judgment seems best.

We had before us, in State v. Dunn, 202 Iowa 1188, 211 N.W. 850, a similar question. We there said:

"It is quite universally recognized at this day that the legislature may forbid the doing of an act and make its commission a crime without regard to the intent or knowledge of the doer. Whether a criminal intent or guilty knowledge is an essential element of a statutory offense is to be determined as a matter of construction from the language of the act, in connection with its manifest purpose and design."

It is a fundamental rule of construction that where the legislature has purposely omitted words the courts have no power to supply them, and this is especially true in criminal cases. Snowden v. Thompson, 106 Ark. 517, 153 S.W. 823; In re Haines,68 Cal. App. 522, 229 P. 984; California Telephone Light Company v. Jordan, 19 Cal. App. 536, 126 P. 598; Fouracre v. White, 7 Boyce (30 Del.) 25, 102 A. 186; State v. Board of Commissioners,175 Ind. 400, 94 N.E. 716; Morse v. City of Boston,253 Mass. 247, 148 N.E. 813; Thacher v. Secretary of Commonwealth,250 Mass. 188, 145 N.E. 256; King v. Viscoloid Company,219 Mass. 420, 106 N.E. 988, Ann. Cas. 1916D, 1170; In re Algoe,74 Neb. 353, 104 N.W. 751; State ex rel. Mickey v. Reneau, 75 Neb. 1, 104 N.W. 1151, 106 N.W. 451.

From a history of this legislation, as heretofore set out, it cannot be said that these words "knowingly" and "wilfully" were omitted unintentionally from the statute by the legislature, but, on the other hand, we think that they were purposely omitted.

We conclude, therefore, that the theory on which the court tried the case and instructed the jury in reference to knowledge on the part of the defendant was correct.

[2] The written statement in question is known in the record as "Exhibit C." The defendant, together with certain other parties, met at the office of the superintendent of the securities department in Des Moines, shortly after this writing had been filed with the department, and on presentation of the same to the defendant, he stated: "Why, this is a mistake. These figures can't possibly be right." One of the parties present at that meeting testified that Huebner (the superintendent) asked if the earnings statement was correct, and the defendant said, "It is not correct," and that the company had no earnings for 1929 such as that. The state's testimony further shows that the superintendent then told the defendant that he wanted the company checked up, and the defendant said that it would "just blow up the company," because of previous examination by the Illinois securities department. Nevertheless, over the protest of the defendant, Knudsen (one of the employees of the state securities department) went to Davenport for an examination of the company. Knudsen testified: "Dobry didn't want the examination made, as he said it would blow the company up." Knudsen did not see the defendant when he arrived to make the examination. He commenced to examine the books and records of the Dobry Securities Company about the 23d 24th, or 25th of February, A.D. 1931. He testified: "I went to the office of D.A. Dobry Securities Company on the fourth floor of the Kahl building, and asked to see their records, and began an examination of their books and records that were offered to me. I was working on this examination about two and a half weeks. I examined the books and records of the D.A. Dobry Securities Company for the years 1929, 1930 and 1931. I did not find the journals and books of original entry of the company for the year 1929. I made a request of Mr. Ring, the auditor, and Mr. Dobry, president of the D.A. Dobry Securities Company, and then a search was made for them and to my knowledge they did not produce them to me. I talked to Mr. Dobry and told him I was unable to locate the books and he made another search and said the office had been robbed a couple of times and evidently they had been stolen. I examined the general ledger for the year 1929; that was all. As to 1930, I examined the general ledger and books of original entry, in the office of the D.A. Dobry Securities Company. Dobry was there during some part of the examination. Since that examination I have made other examinations of the books and records of the D.A. Dobry Securities Company, about April, 1931. I made a check of the books for the years 1929 and 1930. When I went to the office of the D.A. Dobry Securities Company, I would see Mr. Dobry possibly two days a week while I was there. When Mr. Dobry was there I went to Mr. Ostrem and I went to Mr. Dobry, too. He saw me working on the books and he never told me to get out. I talked to Mr. Ostrem and Mr. Dobry both about the books. I requested specifically of Mr. Dobry that I should be furnished certain books which were not. I advised Mr. Dobry (at the meeting) in Des Moines that I wanted to make an examination of this kind. I came down here with his knowledge. When I came they gave me a room. The books were brought in as I called for."

The above record is set out because of the fact that the defendant urges that the books are not in the handwriting of the defendant, nor were they made under the direction of the defendant, and the defendant had no knowledge of their contents, and consequently it is urged that the books of account of D.A. Dobry Securities Company were not admissible in evidence against the defendant. It is argued that the books were not admissible in evidence because it is not shown that they were made in the ordinary course of business and no one testified that they were true and correct; and it is further urged that the general ledgers were not admissible in evidence because they were not books of original entry. We think that, while numerous Iowa cases are cited on these respective propositions, none of them has any application to the situation before us. It was known by the defendant that this examination was to be made of the books of his corporation. The examiner went into the offices of that corporation to make this examination, and Dobry was there on various occasions and was solicited at different times to produce different books. While there is no direct evidence that Dobry himself handed any of these books to the examiner, we think that this failure of evidence is immaterial in the light of the record as made. Difficulties having arisen by the dispute between the securities department of the state and this corporation, and the defendant knowing that the books of the corporation were to be examined, which examination was conducted in the offices of the defendant, the defendant being present when the examination was conducted, was sufficient to overcome the objection lodged against the introduction of such books in evidence in this case, and the other objections made thereto. The examiner made a tabulated statement and a summary of the books thus introduced in evidence, and this was admitted by the court in evidence. We think this was a proper procedure, as we have the books before us and find that it would be a useless and senseless proposition to expect the ordinary jury to utilize half a wagonload of books and make any reasonable deductions therefrom.

[3] Professor Wigmore, in the second volume of his work on Evidence, section 1230, makes a very succinct statement of the rule in such matter. He says:

"Where a fact could be ascertained only by the inspection of a large number of documents made up of very numerous detailed statements * * * it is obvious that it would often be practically out of the question to apply the present principle by requiring the production of the entire mass of documents and entries to be perused by the jury or read aloud to them. The convenience of trials demands that other evidence be allowed to be offered in the shape of the testimony of a competent witness who has perused the entire mass and will state summarily the net result. Such a practice is well established to be proper."

As sustaining this statement of Wigmore, see State v. Cadwell,79 Iowa 432, 44 N.W. 700; State v. Brady, 100 Iowa 191, 69 N.W. 290, 36 L.R.A. 693, 62 Am. St. Rep. 560; State v. Niehaus,209 Iowa 533, 228 N.W. 308.

We think there was no error in the ruling of the court on this matter.

[4] It is next urged that during the argument of one of defendant's counsel the judge was absent from the courtroom, but at all times remained within immediate call. We do not think that under the record made in this case this conduct on the part of the judge was prejudicial. While defendant's counsel was arguing, he certainly would not want to make any objection or raise any question which could call for a ruling of the court. The record, in fact, does not show that there was any effort on the part of defendant to raise any such question during the time of his argument, and there is nothing in the record to show that the absence of the judge resulted in any prejudice to the defendant. A similar condition existed in the case of State v. McGee,207 Iowa 334, 221 N.W. 556, and we therefore find nothing in this exception prejudicial to the defendant.

[5] It is further urged that the prosecuting attorney indulged in certain improper argument. We have read the record in this respect and do not agree with the contention made by the defendant. When the court's attention was called to this matter, the objectionable remarks (if they were objectionable) were stricken out by the court and the jury told to disregard such remarks. We think there was nothing prejudicial here to the rights of the defendant.

It is further urged that the court should have sustained the motion to instruct the jury to return a verdict of not guilty. We have read the record with care, and are satisfied that the court's conduct in refusing such instruction was proper.

We think, on all phases of the case, there was a question for the jury, and after a careful review of the whole record, we conclude that the defendant had a fair and impartial trial. — Affirmed.

STEVENS, KINDIG, CLAUSSEN, KINTZINGER, and ANDERSON, JJ., concur.

EVANS, J., dissents.

MITCHELL, J., joins in dissent.