State v. Hightower

Clarkson, J.,

dissenting: The defendant, J. H. Hightower, the president of the Central Bank & Trust Go., was indicted with H. H. Massey, the cashier, on the charge that on 13 January, 1922, they “did unlawfully, wilfully and feloniously, as officers of said bank, receive, for and in behalf of said bank, money, checks, drafts and other property as deposits therein when they and each of them had knowledge that said bank was then and there insolvent.”

The verdict of the jury was: “Said jurors for their verdict say that the defendant, the said H. H. Massey, is not guilty. . . . The jurors for their verdict further say that the defendant J. H. Hightower is guilty, but recommend the defendant to the mercy of the court.”

*314 Tbe jurors tempered justice with mercy, and I believe their verdict ought to stand.

The offense for which the defendant was tried is simple and easy to understand; it was that he received, for and on behalf of the bank, money, checks, drafts, etc., when he knew the bank was insolvent, or he permitted employees to receive such deposits. A bank is insolvent when it cannot pay those who have put their money in it, and it becomes due in the regular course of business. It is also insolvent when the actual cash market assets are not enough to pay what it owes its depositors and other creditors.

The case is important. It involves the conduct of banking institutions of the State. No one need enter into this line of endeavor, but when he does and is an official he becomes a trustee and guardian of the money of the stockholders and the general public, who deposit and lend their money to the bank. Into these banks are deposited and loaned the hard-earned money of merchant, farmer, manufacturer, laborer, professional men, the widow, orphans and all sorts and conditions of people. The poor who are saving for a “rainy day.” Banks encourage thrift and saving, and are necessary for business develop ment. They are important to a community. Their success depends on the confidence of the public who trust them with their money. It is important that banks have the money so it can be used in industry and not kept idle. This money often represents the toil and sacrifice of years. For this to be swept away by a bank crashing is a serious calamity and a great wrong. Is the defendant, the president of the bank, responsible under the law for this disaster? The only question involved in this case is: Did the defendant, J. H. Hightower, on 13 January, 1922, when deposits were made on that day, know the bank was insolvent? It was incumbent on the State to prove this beyond a reasonable doubt. The defendant introduced no evidence, but relied on the weakness of the State’s evidence. What is some of the evidence showing knowledge? The defendant Hightower was in the employ of the Corporation Commission as a bank examiner eight or ten months prior to 1 July, 1921, when he resigned. That as Bank Examiner he examined the Central Bank & Trust Co. (at that time it was named the City Bank). On 26 April, 1921, he made a report of this bank. The report shows a list of criticisms against the bank, and among the criticisms was an item of $70,000 carried as an investment in the bank building. At the time R. Gr. Allen was president and H. H. Massey was cashier of the bank. Hightower quit his position as Bank Examiner and went into the very bank he had criticized, within a few months after his criticism of the condition of the bank, and in a little over six months the crash came.

*315 Clarence Latham, State Bank Examiner, when the bank was closed, testified: “The total liabilities of the bank were $352,973.20 and the assets which he considered good amounted to $189,145.23, which left had assets as he called them of $163,828.97; that of the $352,973.20 of total liabilities, $50,243.16 was for capital stock and surplus, leaving total liabilities exclusive of stock of $302,730.04, that left bad assets of $113,584.81; that in the list of assets that he considered doubtful there were the following notes of B. G. Allen of $10,000, $7,500, $5,000, $5,000 and $4,638.27; that there was a liability of the Amusement Company of $10,000 and $5,000; of C. M. Hightower, $7,500; Hightower and Massey, $23,000, $10,000 and $20,000; J. H. Hightower, $10,000; Hightower and Massey, $9,000, and R. W. Warren, $5,000, making a total of $136,638.27, and that these were the assets which he considered doubtful; that all of these, exclusive of R. W. Warren’s item of $5,000, he traced back to the original entries items, making $131,638.27, and found that they were obligations of R. G. Allen or the Superba Theater; and that the notes of Hightower and Massey and the Amusement Company and C. M. Hightower, to the extent of $131,638.27, were substituted for the indebtedness of these items; that there was an B. G. Allen note for $32,128.27 and an overdraft of B. G. Allen of $3,626.40.” It will be noted from the testimony that the trust money of the depositors and others was used by the bank officials or former bank officials.

The bank, under Hightower’s own statement as a bank examiner to the Corporation Commission, showed it was to be criticized and not in good condition. He knew this, and yet he resigned as a bank examiner and went into this tottering institution and became its president, and in about six months it was a wreck. On the question of scienter or knowledge, this evidence was before the jury, and rightly so. This evidence was relevant as to the question of scienter or knowledge. “The word relevant means that any two facts to which it is implied are so related to each other that, according to the common course of events, one, either taken by itself or in connection with other facts, proves, or renders probable, the past, present, and future existence or nonexistence of the other.” Step. Dig. Law Ev., 20; S. v. Twitly, 9 N. C., 248 ; S. v. Walton, 114 N. C., 783 ; S. v. Hight, 150 N. C., 817 ; Ins. Co. v. Knight, 160 N. C., 592 ; S. v. Stancil, 178 N. C., 683 . Exceptions were made to the exclusion by -the court of evidence of a settlement with R. G. Allen, former president oL.the bank, after its failure, by which settlement the value of some of the assets were enhanced. This was an attempt to get into the record evidence not relevant to the issues of the case, being res inter alios acta, and so the judge was right in ruling this evidence out. Its .only purpose was to divert the minds of the jurors from the main issue. Suppose Allen did try to *316 save bimself and others, and this can be inferred from the record, and received help to make securities, insolvent or doubtful, better; this was after the crime of 13 January. It was in the nature of restoring goods after they were taken, and was only competent in mitigation of punishment — that restitution was being made for the wrong done. Although the fact that some of the doubtful and insolvent securities were enhanced in value since 13 January, 1922, by Allen was excluded, yet the record shows that this matter was gone into later in the trial and the defendant got the benefit of this evidence, and if there had been error in excluding this class of testimony in the beginning, it was cured by the jury getting the benefit of it during the progress of the trial at a subsequent time. From the entire record the fact that Allen undertook to make good that which was insolvent and doubtful on 13 January was gotten before the jury, notwithstanding the exclusion of this evidence at certain times in the trial.

Mr. W. S. Coursey testified: “That if it should be a fact that Allen did at that time own $40,000 of the capital stock of the Farmers Bank' at Louisburg and an equity of real estate in Wake County amounting to $50,000, then his opinion as to the insolvency of Allen was erroneous.”

The testimony of Clarence Latham, State Bank Examiner, also shows “That in deducting the amount of bad assets the bank lacked $163,828.97 of being solvent on the morning of the 14th, which was the condition at the close of business on the 13th. That he did not consider that at the commencement of business 13 January, 1922, that the bank’s assets were of sufficient cash value to pay its liabilities and depositors; that the liabilities of $352,973.20 included the liabilities of capital stock and a surplus account of $243.16; that the records show that the amount of deposits received on the last two days, the 12th and 13th (of January), were $28,145.50; that when he took charge of the bank there was $678.83 cash on hand and cash items amounting to $612.37, making cash on hand of $1,291.20, and that the bank had paid out on these last two days $27,634.27. That he was requested to take charge of the bank by Hightower and Massey, who said that they had been trying to secure a loan from the Clearing House Association for the purpose of getting enough money to meet their checks, but could not do so, and therefore turned it over to him.” This was strong evidence, almost a practical admission that he received deposits on the 13th knowing the bank was insolvent.

In justice to the defendant, who is to be awarded a new trial, on cross-examination Latham testified: “That at the time he formed his opinion as to the solvency of the bank and Allen’s debt of $35,000 to the bank, he did not then know that he owned two buildings on Fayette- *317 ville Street and the Allen Building on the corner of Martin and Blount streets, and $45,000 of stock in the bank at Louisburg, and that he had an equity in the buildings, but did not know what it was worth; that he did not investigate Allen’s financial condition by the courthouse records, and that his opinion as to Allen’s insolvency was based on investigation that is generally made as to the worth of the party through commercial ratings and otherwise; and that he himself did not investigate anything about Allen’s financial standing and ownership of the property, except only the general knowledge that he had of Allen’s financial standing; that at the time he formed his opinion of Allen’s insolvency he had no definite information as to what property Allen owned or how much bank stock he had, and that his opinion was based on making inquiries which were the opinions of others and commercial reports, and that at the time he formed his opinion as to Allen’s insolvency he himself had no exact or definite information as to what property Allen owned at the time or its value.”

It will be noted that the entire Court is of the opinion that the expert testimony of the State’s witnesses is competent. From my understanding of the essential facts of the record, what was excluded in my opinion was not prejudicial or reversible error.

The State’s evidence showed that on Friday, 13 January, 1922, the Raleigh Clearing House Association had a meeting called at the instance of the defendant Hightower, president of the Central Bank & Trust Co., and Massey, its cashier, to consider a loan to that bank. The first meeting was held in the morning about 11 o’clock. At this meeting Mr. Hightower stated that he wanted to get a loan and showed the association a statement of his bank. A committee was then appointed to go over the assets of the bank and to report to the association at 3 p. m. The committee checked over the assets and collateral of the bank, and refused to recommend the loan. The final decision by the association not to make the loan was made about 11 o’clock the night of the 13th. After this failure to secure the loan, Hightower called Latham, either the night of the 13th or early morning of the 14th, and turned the bank over to him, and asked him to take charge of it. It was in pursuance of this request that Latham took the bank over on the morning of the 14th, and made the examination of its affairs and the audit of its books, which showed the bank badly insolvent.

Mr. W. S. Coursey, who audited the books and accounts of the bank, testified:

“Q. For how long a period, Mr. Coursey, had the bank been insolvent from the disclosure of the books? A. From a very short time after its organization. That he considered the bank insolvent on 11 January, 1922.”

*318 Hightower allowed the agents of the bank to receive deposits, etc., on 13 January, when he was negotiating with the Raleigh Clearing House Association. Did he not know the bank was insolvent when the negotiations were going on? Yet he allowed innocent depositors to put their money in -the bank.

It was a question of fact for the jury. They have rendered their verdict of guilty. They recommended mercy. Perhaps the jurors thought others were also responsible who were not on trial, so they took a merciful view of a serious matter. One of the purposes of punishment is to deter others from committing the same or similar offense. In considering the question of mercy, let us not forget the loss to the innocent and trusting public who had their money deposited, their hard earnings swept away.

In Wilson v. Suncrest Lumber Co., 186 N. C., 57 , this Court said: “Vterdiets and judgments are not to be set aside for harmless error, or for mere error and no more. To accomplish this result it must be made to appear not only that the ruling complained of is erroneous, but also That it is material and prejudicial,' amounting to a denial of some substantial right.’ ”