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December 31, 1945


The opinion of the court was delivered by: BARD

Defendant Peter Campanaro was tried before a jury and found guilty on an indictment charging the possession of fifty counterfeit obligations of the United States with intent to defraud. Defendant seeks a new trial on the ground that the court erred (1) in refusing to affirm certain requested points for charge, (2) in admitting in evidence over the objection of defendant five of the government exhibits, and (3) in admitting in evidence over the objection of defendant hearsay testimony with respect to the appearance in Watsonville, California, on or about February 6, 1940, of counterfeit bills similar to those found in the possession of defendant.

The facts, as developed at trial, insofar as they are relevant hereto, are as follows:

 On May 5, 1945 Agents Gruber and Green of the United States Secret Service, together with other government agents, inspected the premises of the Bardinet Company in Morrisville, Pennsylvania. The company distilled and rectified alcoholic beverages and employed defendant as a rectifier. In compliance with the agents' request to disclose the contents of the desk, defendant produced, among other items, a metal container, found in the lower right-hand drawer. This can was filled with coriander seed which concealed a smaller can containing the counterfeit notes. Defendant denied any knowledge of counterfeit bills and the smaller can concealed by the seeds. He was arrested and removed to Philadelphia.

 On May 6, 1945 Agent Green returned to the distillery and, in defendant's absence, found several articles in the storage building which were introduced in evidence over defendant's objection. These include a hand printing press (government exhibit 13); a wooden frame found near the press (government exhibit 4), and a piece of a counterfeit note attached to the frame of the same type found in the can (government exhibit 5). On May 21, 1945 Agent Green made a further search of the distillery and found a carton of chemicals (government exhibit 7) and two glass plates (government exhibit 6) which are all useful in reproducing the type of counterfeit bill found in the can and which were also introduced in evidence over defendant's objection.

 Agent Gruber testified that defendant told him that he was in or near Watsonville, California in February 1940. The witness further testified that the records (of the Secret Service) showed that similar counterfeit bills first made their appearance in Watsonville, California on February 6, 1940. Defendant urges that this testimony was inadmissible as hearsay and since it was prejudicial, he assigns the admission of this testimony as one of the grounds for a new trial. The pertinent testimony is set forth in the margin. *fn1"

  It is elementary in our system of law that the testimony of witnesses must be subjected to the test of cross-examination and confrontation. *fn2" Therefore, evidence which does not derive its value solely from the credibility of the witness, but rests also on the veracity of another person is termed 'hearsay' and is ordinarily inadmissible. Hopt v. People of Territory of Utah, 110 U.S. 574, 4 S. Ct. 202, 28 L. Ed. 262. The vice of such evidence is that the other person upon whose credibility the jury must rely is not present in court and cannot be subjected to cross-examination. However, not every oral or written extrajudicial statement offered in evidence comes within the hearsay rule. It is only where the extrajudicial statement is offered to establish the truth of the fact so stated that the hearsay rule can apply. Where the extrajudicial statement is offered without reference to the truth of the matter extrajudicially asserted, but merely to prove that the oral statement, in fact, was made or that a written statement, in fact, exists, then the evidence is without the hearsay rule. Brolaski v. United States, 9 Cir., 279 F. 1; Petersen v. United States, 9 Cir., 287 F. 17. In the latter instance the witness avers the truth of facts within his own knowledge and may be cross-examined to establish the truth of the facts which he asserts. Wigmore on Evidence, 3d Ed., § 1766; Terry v. United States, 4 Cir., 51 F.2d 49

 Applying the rules set forth above, I find that the testimony of Agent Gruber to which objection was made, comes within the hearsay rule. In response to a question asking whether, in his knowledge, counterfeit obligations of the type found in defendant's possession had appeared, Agent Gruber answered: 'Yes, Our records show that 12,000 have showed up so far. They made their first appearance on February 6, 1940, at Watsonville, California.' (Italics supplied.) The answer, of course, was not responsive to the question. The witness did not limit his answer to facts within his own knowledge as to which he could be cross-examined, but included facts which he had discovered in the records of his agency. However, if the purpose of his testimony was to prove that the records did, in fact, contain the entries mentioned, then Agent Gruber's answer was not hearsay. As to the truth of that fact, Gruber could be cross-examined. Upon examination of all the testimony, I do not believe this to be the case. The purpose of the question and answer was to establish the fact that similar counterfeit bills had been previously circulated and had first appeared at a place where defendant visited and at a time when he was there. The truth of this fact depended on the veracity of those who had received the bills and on the veracity of the government agents who had investigated the matter and entered the information in the government records. As offered in evidence, the testimony did not permit defendant to test the truthfulness of these persons by cross-examination. For this reason Agent Gruber's testimony was hearsay and inadmissible.

 It should be noted that there is statutory authority *fn3" for permitting the government to prove the same facts by offering in evidence a copy of the government records under the seal of the department. This statute merely codifies a common-law exception to the hearsay rule, that where the person whose statement is offered is unavailable for adequate reason and where there is circumstantial probability of the truthfulness of the evidence offered then the evidence is admissible even though hearsay. Wigmore on Evidence, 3d Ed., § 1420 et seq.; Demeter v. United States, 62 App.D.C. 208, 66 F.2d 188; United States v. Wescoat, 4 Cir., 49 F.2d 193. However, even this statute does not permit the contents of government records to be proved by parol testimony as was here done. Nock v. United States, 2 Ct.Cl. 451.

 In order that the defendant be found guilty, it was incumbent upon the government to prove (1) defendant's possession of the counterfeit obligations, and (2) defendant's intent to defraud therewith. To establish the requisite criminal intent, the government introduced in evidence the equipment for photomechanical reproduction of counterfeit bills found on the Bardinet premises, raising the inference that defendant might have made the bills. The government also offered the 'Watsonville evidence' to show that defendant might have previously circulated similar counterfeit notes. All of this evidence tended to prove that defendant's possession of the counterfeit money was not innocent but that the possession was with criminal intent to defraud.

 The government urges that there was adequate evidence to prove defendant's intent to defraud and that the inadmissible 'Watsonville evidence' was merely cumulative and harmless. United States v. Buchalter, 2 Cir., 88 F.2d 625. It is pure conjecture to assert on what evidence the jury relied to find criminal intent. Since the jury could have relied solely on the 'Watsonville testimony' as proof of intent to defraud, I must hold that this inadmissible evidence was prejudicial to defendant. The 'Watsonville testimony' was hearsay evidence and inadmissible, and, since it was prejudicial to the defendant, he is entitled to a new trial. Nicola v. United States, 3 Cir., 72 F.2d 780; Smith v. United States, 8 Cir., 267 F. 665, certiorari denied 256 U.S. 690, 41 S. Ct. 450, 65 L. Ed. 1173, 1174.

 There remains for consideration the question whether defendant waived his right to move for new trial on this ground by not objecting properly to this evidence. Knoell v. United States, 3 Cir., 239 F. 16. Defendant did object to the question which elicited the inadmissible evidence. This objection was properly overruled. However, defendant failed to object immediately to the improper answer. Ordinarily, failure to object to the answer in this situation would be fatal because it would be considered that defendant thereby waived his right to exclude the improper evidence. Diaz v. United States, 223 U.S. 442, 32 S. Ct. 250, 56 L. Ed. 500, Ann.Cas. 1913C, 1138. However, after a few more questions regarding the appearance of the bills in Watsonville, defendant renewed his objection and asked that the testimony be stricken without assigning any reason therefor. This objection was overruled. Further, in a prior side-bar discussion (as set forth in the margin), counsel for defendant had informed the Court that the answer to the proposed question would be based on information and would be objectionable as hearsay. For this reason, although it might have been better procedure to call the objectionable feature of the answer to the Court's attention again, counsel's failure to object immediately after the inadmissible answer was given is not fatal. Wigmore on Evidence, 3d Ed., § 18.

 The case of Ayervais v. United States, 3 Cir., 72 F.2d 720, is not applicable to the facts of this case. The motion for judgment ...

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