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COMMONWEALTH v. BOVAIRD (02/13/53)

February 13, 1953

COMMONWEALTH
v.
BOVAIRD, APPELLANT



Appeals, Nos. 119 to 124, inclusive, Jan. T., 1952, from judgment of Superior Court, Oct. T., 1951, Nos. 141 to 146, inclusive, affirming judgment of Court of Quarter Sessions of McKean County, Oct. Sessions, 1950, Nos. 17, 18, 19, 29, 31 and 33, in case of Commonwealth of Pennsylvania v. George Bovaird, Jr. Judgment of the Superior Court affirmed; reargument refused March 24, 1953.

COUNSEL

Charles J. Margiotti, with him Vincent M. Casey, Margiotti & Casey, J. J. McDowell, and McDowell & McDowell, for appellant.

William P. McVay, Deputy District Attorney, for appellee.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey and Musmanno, JJ.

Author: Chidsey

[ 373 Pa. Page 50]

OPINION BY MR. JUSTICE CHIDSEY

Defendant was convicted and sentenced on four indictments charging fraudulent conversion under § 834 of The Penal Code of 1939, 18 PS § 4834, and on two indictments charging embezzlement under § 824 of the Code, 18 PS § 4824. This appeal is from the judgment of the Superior Court which sustained the convictions.

At the trial of the case, upon the conclusion of the taking of testimony, defendant moved for a directed verdict for the reason that the Commonwealth had not made out a prima facie case; that the indictments for fraudulent conversion were "repugnant" to those for embezzlement; that it was legally impossible for the offense under the proof to be both the crimes charged; and that the Commonwealth had not charged or proved a crime as set forth in the sections of the Penal Code under which the indictments were drawn. The motion was overruled, and after the jury had found the defendant guilty on all of the indictments, the same contentions were raised in motions in arrest of judgment and for a new trial, the latter raising an additional question here pressed and hereinafter separately considered.

The Commonwealth adduced evidence that on July 27, 1934, a written agreement headed with the notation "Cotenancy Agreement" was entered into by defendant and his then wife, Margaret C. Bovaird, and John J. Carter and his wife, Beth M. Carter (now Beth M. Putnam, the prosecutrix). The agreement was drawn up by John J. Bovaird, an attorney and brother of defendant. It recited in part that the parties were to be associated together as tenants in common, said continency to be known as Carter & Company, for the purpose of acquiring and operating for petroleum and natural gas, certain properties or tracts of land in McKean

[ 373 Pa. Page 51]

County, Pennsylvania; that the proportionate share of each of said "cotenants" was a one-fourth interest.

The agreement provided further that the defendant, Bovaird, would "... in all respects... manage, control and operate said property with as full and ample authority and unrestricted power as if he were the sole owner thereof... and for this service" he was to "be paid the sum of two hundred dollars monthly." [later increased to $250]. Carter was "... entitled, at any time he... [might] so desire, to work for Carter & Company" and he did so work later on "at the stipulated sum of two hundred dollars per month [likewise increased to $250], under the direction of the Agent, the aforementioned George Bovaird, Jr.,...". The agreement also provided: "Paragraph 4. All oil produced... shall be run and credited in pipe line to the said George Bovaird, Jr., as Agent, and at his discretion, from time to time, sold, and the money so realized paid out by him to take up obligations, company notes and current expenses of said operations. The said George Bovaird, Jr., is accordingly authorized to deposit in the bank to a special company account, all moneys so realized from oil sales as aforesaid, and to issue checks thereon. Paragraph 5. Upon complete payment of notes and interest, major expenditures, contracts and other obligations, if any, incurred in the course of operating said properties and reimbursement of initial installment and other advances by the aforesaid cotenants, the said George Bovaird, Jr., shall thereafter remit to the several cotenants, their proportionate shares of the net profits of said business and at any and all times shall exhibit to the several cotenants his books of account in which his receipts and disbursements shall be regularly entered." (Emphasis supplied).

[ 373 Pa. Page 52]

The only contributions in money to the enterprise were made by Beth M. Putnam (formerly Mrs. Carter) who furnished an initial installment of $30,000 which was used as down money for the acquisition of the properties and two subsequent installments, one of $27,500 in 1940, used on account of acquisition of an additional property, and another of $10,000 later supplied by her at a time when the company could not pay a very pressing obligation. Thus Mrs. Putnam's advances totaled $67,500.

Margaret C. Bovaird died in the fall of 1934 and upon her death her interest in the cotenancy vested in her son, George Christie Bovaird, with his father as trustee. Marital differences having arisen between the Carters, in 1943 Mrs. Carter obtained a divorce and took from her husband an assignment of his one-fourth interest in the enterprise.

Of the monies so advanced by Mrs. Putnam she received back by several payments a total of $9,500.While obligations of the company remained unpaid (at the time of the trial they amounted to $300,000) and reimbursement of Mrs. Putnam's "initial installment and other advances" had not been made, the defendant, George Bovaird, Jr., nevertheless made withdrawals out of operating profits in the amount of $235,000. In the company's books the capital account of the defendant for the period of the cotenancy ended December 31, 1949 showed an overdraft of $196,704.28. The account of George Bovaird, Jr., trustee, showed a credit balance of $46,645.32; and the account of Beth M. Putnam showed a balance of $127,690.67 in her favor which represented her share of operating profits and the balance of advances due her. The defendant actually drew $235,000 in cash over and above his salary which he placed in his personal bank account for his own use.

[ 373 Pa. Page 53]

The overdraft of $196,704.28 reflects credit for a onequarter share of the profits.

Mrs. Putnam who took no part in the management of the enterprise and who after her first marriage in the fall of 1934 did not live at Bradford where the business was carried on, testified that from time to time she made requests of the defendant for distribution of funds but other than the $9,500 above mentioned, she received nothing. On several occasions defendant told her "Everything is going fine, we are making lots of money.", "... but there is no money for distribution.".

The defendant testified that withdrawals by him were authorized by Mrs. Putnam. His son, George Christi Bovaird, testified on his father's behalf that he knew of his father's withdrawals and acquiesced in them. Carter, Mrs. Putnam's divorced husband, also testifying on defendant's behalf, said it was the understanding that withdrawals were to be made by those who asked for them. Mrs. Putnam testified that she did not know that defendant was making the withdrawals in question and had not authorized them. The jury apparently believed Mrs. Putnam, and a reading of the entire record persuades us they were justified in so doing and in finding that defendant was not authorized to make the withdrawals.

The indictments were founded on specific withdrawals made within the statutory period for prosecution. Each of the four indictments for fraudulent conversion related to a separate transaction and covered a different date and amount, but all of them in substance are the same and charge that defendant being "... an agent of Carter and Company and as such agent being entrusted for the safe custody of the monies, accounts and properties of said Carter and Company, did... fraudulently, unlawfully and feloniously withhold, convert and appropriate to his own use," a certain

[ 373 Pa. Page 54]

    sum of money "... being the funds of Carter and Company, by drawing a check of Carter and Company... on the account of said company in the Citizens National Bank of Bradford payable to [himself], and thereafter... using the proceeds of said check for his own use and benefit,...".

Section 834 of the Code, 18 PS § 4834, provides in part that: "Whoever, having received or having possession, in any capacity or by any means or manner, of any money or property, of any kind whatsoever, of or belonging to any other person, or which any other person is entitled to receive and have, fraudulently withholds, converts, or applies the same, or any part thereof, or the proceeds or any part of the proceeds, derived from the sale or other disposition thereof, to and for his own use and benefit, or to and for the use and benefit of any other person, is guilty of a felony,..." (Emphasis supplied). The section is a reenactment of the Act of May 18, 1917, P.L. 241.

The two indictments charging embezzlement also relate respectively to separate transactions occurring on different dates and involving different amounts but in substance are the same and charge that defendant "... being... an agent of Carter and Company and as such agent being entrusted for safe custody of the money, accounts and properties belonging to Carter and Company, of which Beth M. Putnam was entitled to have a one-half share of interest..., did unlawfully, fraudulently and feloniously take, convert and apply to his own use" a certain sum of money, "... said money being the property of Carter and Company." (Emphasis supplied).

Section 824 of the Code, 18 PS § 4824, provides in part that: "Whoever, being a banker, broker, attorney, merchant or agent, and being entrusted, for safe custody, with the property of any other person, and, with

[ 373 Pa. Page 55]

    intent to defraud, sells, negotiates, transfers, pledges, or in any manner converts or appropriates to or for his own use or the use of any other person, such property, or any part thereof, is guilty of embezzlement, a felony...". The section is a substantial reenactment of § 114 of the Act of March 31, 1860, P.L. 382, 18 PS § 2481.

It is argued by the appellant that as a cotenant of Carter & Company he could not fraudulently convert or embezzle property of the cotenancy in all of which he had an undivided part ownership. Much of the argument in this connection relies on the theory of the law of cotenancy as applied to real property in the civil law. The criminal law is not controlled by the civil law and, while arguments and analogies from the civil law may be of value in determining the relationship of the parties as between themselves and with respect to the property in question, the final determination of this case must lie in the precepts of the criminal law, in the enforcement of which the Commonwealth is an interested party. A private wrong when made a criminal offense becomes a public wrong. Moreover, while textbooks and other authorities relied on by the defendant state generally that a cotenant who takes possession of the common property can be subjected only to an action for accounting, a distinction is made where the property is divisible in character. Thus in 14 Am. Jur., Cotenancy, § 71, it is stated: "It is a general rule that trover will not lie in favor of one cotenant against another who has taken possession of the common property, unless it can be shown that the latter did so with an intent to appropriate it to himself or otherwise to deprive the plaintiff of its use or value. This doctrine is based on the theory that the foundation of the action is the right of possession and that where two or more persons are equally entitled

[ 373 Pa. Page 56]

    to possession, the one who has it cannot be guilty of a conversion by retaining it. But the rule can have no reasonable application in respect of things that are readily divisible into portions absolutely alike in quality, such as grain, money, etc. As to such things, the general view is that an action will lie whenever a cotenant in possession uses more than his share or refuses to permit his cotenant to take his proper moiety....". In Stitt v. Felton, 136 Pa. Superior Ct. 338, 7 A.2d 371, the Superior Court adopted the following language of this Court in Agnew v. Johnson, 17 Pa. 373, 378: "... 'The reason why one joint tenant or tenant in common cannot maintain trover against his companion, is, that both are equally entitled to possession, and the possession of one is the possession of both, and is in accordance with the right of both. But where one misuses the joint property by appropriating it to uses for which it was not designed, and refuses to apply it to the purposes for which it was held by both, or if one delivers the property wrongfully to a stranger, for purposes inconsistent with the uses for which it was designed, and such stranger denies title of the other, and claims the exclusive possession and ownership, the reason of the rule ceases, and trover may be maintained.'". (Emphasis supplied).

Furthermore, we are not dealing here with a simple or pure continency to which most of the authorities cited by defendant are applicable. Unlike the partnership relation where each partner automatically becomes the agent of the other partner, an agreement is required for one cotenant to become an agent for the others, and such an agreement creates an additional relationship different and apart from the relationship as owners in common. A reading of the agreement involved clearly shows that "operating for petroleum and natural gas" was the principal purpose of the association

[ 373 Pa. Page 57]

    of the parties, and the "acquiring" of real estate but a necessary prerequisite. In this connection it may be noted that title to some of the properties later acquired was improperly taken by defendant in his own name. The agreement predominantly created an agency relationship under which the defendant Bovaird was to manage and operate the enterprise for all of the parties thereto. The label "Cotenancy Agreement" could not change the actual relationship disclosed by the terms of the agreement. The defendant's status, therefore, was not merely that of a tenant in common as the relationship ordinarily arises by operation of law as, for example, in the case of acquisition of real estate by several grantees. His status was specially fixed by agreement between the parties. Under it he became a co-owner but he primarily became the agent for the other co-owners. In consideration of the salary paid for his services he undertook the management of the enterprise under the terms prescribed in the agreement, by all of which he was bound. One of these terms was that none of the gross income of Carter & Company should be distributed to any of the associates until after the payment of company obligations and expenses, and the repayment of advances made by the cotenants. This provision he grossly violated by appropriating $235,000 to his own use. It was by virtue solely of his employment as agent and not by reason of his right as a cotenant that he came into possession of the monies which he was charged with converting or embezzling. He had no immediate right of possession as cotenant to these monies received qua agent.*fn1

[ 373 Pa. Page 58]

The defendant relied as an element of his defense upon the powers granted him as agent under the terms of the agreement. But he would disregard the restrictions, duties and trust imposed upon him as such agent. He cannot escape criminal liability by doffing the wrap of agency, a garment of his own making, and donning the cloak of cotenancy with its fictional legal attribute.

Much reliance is placed by appellant on the case of Commonwealth v. Mitchneck, 130 Pa. Superior Ct. 433, 198 A. 463. There the defendant Mitchneck who owned a coal mine, deducted from the wages of his employes certain sums which he was to pay to the grocer with whom the employes dealt. Mitchneck failed to pay the grocer and he was tried for and convicted of fraudulent conversion. The Superior Court reversed the conviction. Careful reading of the case reveals that the decision was based on the fact that a debtor-creditor relationship existed. In its opinion the Superior Court said: "The defendant in the present case had not received, nor did he have in his possession, any money belonging to his employees. True he owed them money, but that did not transfer to them the title to and ownership of the money. His deduction from their wages of the amounts of the store bills which they had assigned to Vagnoni, did not change the title and ownership of the money thus withheld, nor did his agreement to pay to Vagnoni the amounts thus deducted constitute the latter the owner of the money. It effected only a change of creditors....". In the present case there was no debtor-creditor relationship, but an agency. The money received by the defendant Bovaird did not belong to him as it did to the defendant in the Mitchneck case, but belonged to all of the parties to the agreement, and the major portion of the monies appropriated represented the interest therein of his associates for whom he was acting as agent.

[ 373 Pa. Page 59]

In claiming that a new trial should be granted, defendant contends that the court below erred in rejecting testimony offered by the defendant to prove the market value of the cotenancy. Appellant argues that he should have been permitted to present the value of the properties of Carter & Company at the time of trial in order to show the relationship between such value and the amount of withdrawals made by him. Upon his direct examination his counsel asked, "What would those properties bring now?", and he answered, "Well, we could sell out our holdings, I feel sure we could sell out our holdings for $1,300,000.". The court ruled that "... the jury should disregard the testimony of the witness as to the value of the property at this time.". Passing the question whether such testimony properly established market value, and also the question whether the value of the properties to be relevant should not have been related to the time of the misappropriations,*fn2 it is apparent that the purpose of the proffered testimony was to establish the defendant's ability to repay the monies he withdrew, that is, in equalizing distribution upon liquidation of Carter & Company, the amount of defendant's overdraft of $196,704.28 could be charged against his share. The testimony was clearly inadmissible. The monies which he misappropriated were monies received by him as agent and not taken in an attempt to accomplish a withdrawal of his interest in the whole, and his contention reduces itself to the ability to "make good". It is fundamental that neither ability nor intention to repay is a defense against fraudulent conversion or embezzlement. See Commonwealth v. Drum, 42 Pa. Superior Ct. 156;

[ 373 Pa. Page 60]

    him, is in accord with the views above expressed. There the defendant, a private banker, was indicted under the Act of May 9, 1889, P.L. 145, for receiving money from a depositor with knowledge that his bank was insolvent. In reversing the lower court, the Superior Court held that the defendant banker could in defense not only show that he was solvent at the time he received the deposit, but, to rebut criminal intent, could show that he believed he was solvent. This is in essence exactly what the court charged in the present case, i.e., that the defendant Bovaird was entitled to acquittal if he had the right to make the withdrawals or if he believed he had such right. Neither in the conclusion reached by the Superior Court in the Hazlett case nor in any of the language used in the opinion was it declared that a defendant's ability or intention to repay constitutes a defense.

The Superior Court in its opinion in the present case properly disposed of appellant's contention that the indictments for fraudulent conversion were repugnant to those for embezzlement when it said: "... it is sufficient to point out that each indictment relates to a separate and distinct transaction and, furthermore, that § 834 specifically provides that 'The offense specified in this section may be joined in the same bill of indictment with any other felony or misdemeanor arising out of the same transaction, and there may be included in the same indictment as many counts as there are separate and distinct misdemeanors hereunder committed against the same person.' Since each of the offenses could have been covered in a single indictment containing two counts, one charging a violation of § 824 and the other a violation of § 834, the indictments were not 'repugnant' nor was defendant prejudiced in any way by having the charges laid in separate indictments.". It follows that the Commonwealth was not

[ 373 Pa. Page 62]

    required to elect as between prosecution for embezzlement and fraudulent conversion as claimed by the defendant. A prosecution for fraudulent conversion "... is properly brought against one who has received property in any capacity and afterwards fraudulently misapplies it, even though an indictment for a different statutory offense would have been proper under the circumstances.": Commonwealth v. Schuster, 158 Pa. Superior Ct. 164, 167, 44 A.2d 303. The fact that § 834 (fraudulent conversion) may have been drafted for the purposes of embracing situations not falling within the provision of § 824 (embezzlement) does not preclude an indictment on a specific set of facts under either of these sections. Nor is there merit in the contention that the indictments were not sufficiently specific. Section 11 of the Act of March 31, 1860, P.L. 427, 19 PS § 261 provides: "Every indictment shall be deemed and adjudged sufficient and good in law which charges the crime substantially in the language of the act of the assembly prohibiting the crime,...". The indictments here unquestionably charged the crimes substantially in the language of the Act of Assembly and it cannot be said that defendant was not apprised of the charges he had to meet. It was not required that facts be set forth therein which were matter of proof at the trial. As said in Commonwealth v. Wooden, 94 Pa. Superior Ct. 452 at p. 455: "The Criminal Procedure Act of March 31, 1860, P.L. 427, provides that every indictment shall be deemed ...


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