Petition — West v. Iowa

Supreme Court, U. &

- FILED &

JUL 18 1977

es Bos ]

MICHAEL RODAK, JR., CLERK

Guthe Supreme Court of the 1

OcTOBER TERM, 1976

—_ —— 7Z- 72 ig

FRANK R. WEST,

Petitioner,

VERSUS

THE STATE OF IOWA,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF IOWA

JAMES P. LIny, of

Linn, HELMs, KIRK & BURKETT

Suite 410, Fidelity Plaza

Robert S. Kerr at Robinson

Oklahoma City, Oklahoma 73102

Telephone: (405) 239-6781

Attorney for Petitioner,

Frank R. West

July, 1977

- PPB LBBB PIO

UTTERBACK TYPESETTING CO.. 519 W. CALIF... OKLAHOMA City. PH. 235-0030

TABLE OF CONTENTS

Opinions Below

BL EN RAP ME Ree

Question Presented.

Constitutional Provisions and Statutes sss

Statement of the Case _ .

Reasons for the Allowance of the Writ

Conclusion wee, SIE ea

Certificate of Service follows Appendices.

APPENDICES

Appendix A:

Opinion of Supreme Court of Iowa, dated April 20,

Appendix B:

Order by Supreme Court of Iowa, denying Petition

for Rehearing, dated May 19, 1977

Appendix C:

Order of the District Court of Story la dated

October 14, 1976 -

Appendix D:

Iowa False Pretense Statute ($713.1 Iowa Code

| TRESS ak Pec Re eS wae ae RR

Iowa Conspiracy Statute (§ 719.1 Iowa Code (1975) )

Fourteenth Amendment to United States Constitu-

ENED AL Mage

PAGE

A-1

B-1

C-1

D-1

D-1

D-1

—

TABLE OF AUTHORITIES

CASES: PAGE

Bouie vy. City of Columbia, 378 U.S. 347, 84 S.Ct.

1697, 12 L.Ed.2d 894 (1964) 5, 6, 6-7

Douglas v. Buder, 412 U.S. 430, 93 S.Ct. -_— 37

L.Ed.2d 52 (1973) _ a,

Rose v. Locke, 423 US. 3, 96 S.Ct. 243, 46 L.Ed.2d 3

fg REE Ge a RN a

U. S. ConsTITuTION:

Fourteenth Amendment ......0.0000006040.0.4.4.. 24

STATUTES AND CODEs:

I 2

§ 713.1 Iowa Code (1975) ee ee aes 1,2

Svane eee Gee Cee COD

In the

Supreme Court of the United States

OctToser TERM, 1976

Ne ———

FRANK R. WEST,

Petitioner,

VERSUS

THE STATE OF IOWA,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

leontuboenenens COURT OF THE wEnES OF IOWA

_— a = a

Petitioner, Frank R. West. respectfully prays that a

writ of certiorari be issued to review the judgment of the

Supreme Court of the State of Iowa entered in this case

on April 20, 1977. Rehearing was denied on May 19, 1977.

OPINIONS BELOW

The opinion of the Supreme Court of the State of Iowa

is reported at 252 N.W.2d 454 and appears as Appendix A

to this petition. The Supreme Court of Iowa reversed and

remanded an order entered by the District Court of Story

County setting aside indictments charging the Petitioner,

and another individual with the crime of false pretenses

under § 713.1 Iowa Code (1975) and with the crime of con-

spiracy to commit false pretenses under § 719.1 Iowa Code

(1975). The Order denying rehearing appears as Appendix

B to this petition. The Order of the District Court of Story

County appears as Appendix C to this petition.

to

JURISDICTION

The jurisdiction of this Court is invoked under 28

U.S.C. § 1257(3). This petition for writ of certiorari is filed

within ninety (90) days of the order of the Supreme Court

of the State of Iowa denying the petitioner’s petition for

rehearing (May 19, 1977).

QUESTION PRESENTED

Whether a state’s judicial expansion of a criminal stat-

ute with unforeseeable and retroactive application adverse

to an accused individual is prohibited by the due process

clause of the Fourteenth Amendment to the Constitution

of the United States.

CONSTITUTIONAL PROVISIONS AND

STATUTES

The Iowa false pretenses statute, § 713.1 Iowa Code

(1975); the Iowa conspiracy statute, § 719.1 Iowa Code

(1975); and the Fourteenth Amendment to the United

States Constitution appear as Appendix D to this petition.

STATEMENT OF THE CASE

From an order of the District Court of Story County

setting aside the indictments against the petitioner, the

State of Iowa perfected an appeal to the Iowa Supreme

Court. The District Court held that the State of Iowa in

the indictments and bill of particulars filed by the State

failed to allege facts constituting the elements of the crimes

of false pretenses and conspiracy to commit false pretenses

with which the petitioner was charged.

ee

tien

On April 20, 1977, the lowa Supreme Court reversed

the District Court’s decision and remanded the case for

trial. The Iowa Supreme Court in its opinion acknowledged

the correctness of the District Court’s opinion as to what

constituted the elements of the crimes of false pretenses

and conspiracy to commit the same under prior judicial

construction. The Iowa Supreme Court, however, rejected

its own prior construction of the false pretenses statute

and what elements made uo the crime and expanded the

statute to include acts previously not a crime, directing the

new construction of false pretenses be applied to the two-

year-old acts of petitioner in its remand of the case for trial.

The Iowa opinion states in part:

“The trial court correctly points out that a purchase

in the normal! course of business with no intent to pay

has never been the basis for prosecution for false pre-

tenses in this jurisdiction.” (page 5).

“He [the trial court] very properly observed, ‘Up to

this point in time, a false promise generated from a

transactional contract between offender and victim,

without more, has not been treated as a criminal false

pretense in this State. This is also the approach taken

in a majority of the jurisdiction. * * * Insofar as the

trial judge is concerned it is his duty to follow and

apply the existing law, * * *’” (page 6).

“We have concluded we must reexamine our position

that a mere promise to pay, with no intent to do so, is

not a misrepresentation which will sustain the charge

of false pretenses under § 713.1, The Code.” (page 7).

“We therefore hereby reject any previous position

taken by this court that a promise to perform a future

act, made with the invent not to perform is not suffi-

cient to support a charge of cheating by false pre-

tenses.” (page 9).

~~

The opinion clearly states that prior judicial construction

of the false pretenses statute is rejected and the statute

shall now be more broadly construed te include alleged

acts committed by the petitioner which, when committed,

were not considered a crime under the existing construction

of the statute.

Petitioner, in his petition for rehearing, asked the Iowa

Supreme Court to reconsider the issue of the remand only,

and not the Court’s decision to reject its prior positions and

change the construction of a criminal! statute. Petitioner

advocated the position that the remand had the effect of a

retroactive application of a new statutory construction

which is prohibited by the Fourteenth Amendment to the

United States Constitution. The Iowa Supreme Court denied

the petition for rehearing and on this issue the petitioner

now seeks a writ of certiorari.

REASONS FOR THE ALLOWANCE OF

THE WRIT

In this Court, the petitioner presents only a single issue

which he believes to be of great importance since a state

court has decided a question of substance regarding rights

protected by the Federal Constitution and contrary to prior

decisions of this Court.

The issue in essence is whether the Iowa Supreme

Court can judicially expand a state criminal statute with

unforeseeable and retroactive application adverse to an ac-

cused individual and contrary to decisions of this Court

directing such actions to be incompatible with the due

process clause of the Fourteenth Amendment of the Con-

stitution of the United States.

8 ee

= =

This Court has recognized that a criminal statute must

give fair warning of the conduct that it makes a crime. In

Bouie v. City of Columbia, 378 U.S. 347, 351, 84 S.Ct. 1697,

170i, 12 L.Ed.2d 894 (1964), this Court cited tnis general

principle and went on to apply this concept to the action

then at bar:

“As was said in United States v. Harriss, 347 U.S.

612, 617, 74 S.Ct. 808, 812, 98 L.Ed. 989,

‘The constitutional requirement of definiteness is

violated by a criminal statute that fails to give a per-

son of ordinary intelligence fair notice that his

contemplated conduct is forbidden by the statute.

The underlying principle is that no man shall be

held criminally responsible for conduct which he

could not reasonably understand to be proscribed.’

“Thus we have struck down a state criminal statute

under the Due Process Clause where it was not ‘suffi-

ciently explicit to inform these who are subject to it

what conduct on their part will render them liable to

its penalties.’ Connally v. General Construction Co., 269

U.S. 385, 391, 46 S. Ct. 126, 127, 70 L.Ed. 322. We have

recognized in such cases that ‘a statute which either

forbids or requires the doing of an act in terms so vague

that men of common intelligence must necessarily

guess at its meaning and differ as to its application

violated the first essential of due process of law,’ ibid..

and that ‘No one may be required at peril of life, libertv

or property to speculate as to the meaning of penal

statutes. All are entitled to be informed as to what the

State commands or forbids.’ Lanzetta v. New Jersey,

306 U.S. 451, 59 S. Ct. 618, 619, 83 L.Ed. 888.”

These principles have critical application to the Peti-

tion now before the Court since the Iowa Supreme Court

through its reinterpretation of the essential elements of

-

what constitutes the crime of false pretenses in Iowa under

§ 713.1 Iowa Code (1975) has changed a statute which was

subject to one judicial construction for nearly 100 years, to

something which could not have been anticipated as being

proscribed until after the new elements were judicially

written into the law. Judicial expansion of existing laws

deprives an accused of his right of fair warning by an un-

foreseeable and retroactive judicial expansion of narrow

and precise statutory language. Bouie v. City of Columbia,

supra, 84 S.Ct. at 1702. Douglas v. Buder, 412 U.S. 430, 93

S.Ct. 2199, 37 L.Ed.2d 52 (1973). Due process requires that

the law give sufficient warning that men may conform their

conduct to avoid that which is forbidden. Rose v. Locke, 423

U.S. 3, 96 S.Ct. 243, 46 L.Ed.2d 3 (1975).

Mr. Justice Brennan, in the Bouie decision, stated:

“As the Court recognized in Pierce v. United States,

314 U.S. 306, 311, 62 S. Ct. 237, 239, judicial enlarge-

ment of a criminal act by interpretation is at war with

a fundamental concept of the common law that crimes

must be defined with appropriate definiteness. * * *

Indeed, an unforeseeable judicial enlargement of a

criminal statute, applied retroactively, operates pre-

cisely like an ex post facto law, such as Art. I, § 10, of

the Constitution forbids. An ex post facto law has been

defined by this Court as one ‘that makes an action done

before the passing of the law, and which was innocent

when done, criminal; and punishes such action,’ or ‘that

aggravates a crime, or makes it greater than it was,

when committed,’ Calder v. Bull, 3 Dall. 386, 390, 1

L.Ed. 648. If a state legislature is barred by the Ex Post

Facto Clause from passing such a law, it must follow

that a State Supreme Court is barred by the Due

Process Clause from achieving precisely the same re-

sult by judicial construction. Cf. Smith v. Calhoon, 283

=

U.S. 553, 565, 41 S. Ct. 582, 586, 75 L.Ed. 1264. The fun-

damental principle that ‘the required criminal law

must have existed when the conduct in issue occurred,’

Hall, General Principles of Criminal Law (2d ed. 1960),

at 58-59, must apply to bar retroactive criminal pro-

hibitions emanating from courts as well as fiom legis-

latures. If a judicial construction of a criminal statute

is ‘unexpected and indefensible by reference to the law

which had been expressed prior to the conduct in issue,’

it must not be given retroactive effect. Id., at 61.” 84

S.Ct. at 1702.

The holding in Bouie that an unforeseeable state court

construction of a criminal statute applied retroactively, sub-

jecting a person to criminal liability for past conduct de-

prives him of due process of law by not giving him fair

warning that his contemplated conduct constitutes a crime

is applicable to the action at bar.

Petitioner contends that the Iowa Supreme Court by

remanding the case for trial after changing the elements of

the crime of false pretenses, which it states quite clearly is

its purpose, has given retroactive effect to a criminal statute

which is prohibited by this Court’s application of the due

process clause oi the Fourteenth Amendment to the Consti-

tution.

—

CONCLUSION

For the reasons stated petitioner respectfully prays

that a writ of certiorari should issue to review the judgment

of the Supreme Court of the State of Iowa.

Respectfully submitted,

JAMES P. Linn, of

Linn, HELMs, KirK & BURKETT

Suite 410, Fidelity Plaza

Robert S. Kerr at Robinson

Oklahoma City, Oklahoma 73102

Telephone: (405) 239-6781

Attorney for Petitioner,

Frank R. West

July, 1977

DLO

APPENDICES

APPENDIX A

FILED

APR 20 1977

CLERK SUPREME COURT

IN THE SUPREME COURT OF IOWA

STATE OF IOWA, ) Filed April 20, 1977

Appellant, )

vs. ) 84

) 59959

FRANK R. WEST and )

ROBERT E. LEE, )

Appellees. )

Appeal from Story District Court, George G. Fagg,

Judge.

Appeal by State of Iowa from order setting aside indict-

ments charging defendants with crimes of conspiracy and

of obtaining cattle by means of false pretenses.

—REVERSED AND REMANDED.

Richard C. Turner, Attorney General, John D. Hudson,

Roxanne Barton Conlin, and Gary H. Swanson, Assistant

Attorneys General, for appellant.

Linn, Helms, Kirk & Burkett of Oklahoma City, Okla-

homa, and Nelson, Vasey & Cahill of Nevada, for appellee

West.

Lathrop & Albracht of Omaha, Nebraska, for appellee

Lee.

En banc.

REES, J.

In this case the State appeals the order ofthe trial court

dismissing indictments against the defendants West and

Lee who were respectively president-chairman of the board

A-2

[APPENDIX]

and group vice-president in charge of procurement of

American Beef Packers (hereinafter ABP). The defendants

were indicted by the grand jury of Pottawattamie County

and charged with conspiracy in violation of § 719.1 and false

pretenses in violation of § 713.1, The Code, 1975. The venue

was subsequently changed to Story County. It is the State’s

contention the trial court erred in holding that the indict-

ments and the bill of particulars filed pursuant to court

order failed to allege facts constituting the elements of the

crimes of false pretenses and conspiracy to commit false

pretenses. We reverse and remand for further proceedings.

As stated above, the defendants were officers of Ameri-

can Beef Packers, Inc., which was engaged in the business

of purchasing cattle for slaughter customarily but not ex-

clusively on a“grade and yield” basis. Under the “grade and

yield” basis the company acquired the cattle without pay-

ing the owners until the cattle had been slaughtered and

the carcasses checked by employees of the United States

Department of Agriculture, payment then being made

based on the “grade and yield” of the carcasses. The indict-

ments and bills of particulars can be reasonably interpreted

to allege that during the time period December 24, 1974

through January 6, 1975, the company had become hope-

lessly insolvent, which resulted in the filing of a voluntary

petition in bankruptcy on January 7, 1975. During this

period of financial distress, the company continued the op-

eration, ordering cattle for slaughter, which were purchased

and delivered during all of said period and until January 6,

1975. A bank account maintained in a Seattle, Washington

bank was customarily used to make payment for cattle

purchases, but the State charges that during this time there

were no funds in this account, and that the bank had been

instructed to return the checks drawn on it and transfer

any remaining funds to another bank. The State further

charges the defendants used the funds left in the several

accounts of American Beef Packers, Inc., to pay off a few

selected creditors, and that any income generated from the

ap ene

A-3

[APPENDIX]

cattle purchased during the period from December 24, 1974

through January 6, 1975 was channeled to such selected

creditors, and the farmers who delivered cattle to ABP

received no payment therefor during said period.

Following the filing of the petition for bankruptcy, the

defendants West and Lee were indicted and charged with

obtaining property under false pretenses and with conspir-

ing to obtain property by false pretenses. Thirty separate

indictments were filed, in which it was charged said crimes

were committed upon 30 separate victims.

The indictments were subseaucntly amplified by the

filing of a bill of particulars which was filed in response to

the application of the defendants and the order of the court

directing its filing. The indictment, the bill of particulars

and a suhsequent amendment to the bill of particulars dis-

closed the State’s theory of the crimes charged; essentially

that the defendants had obtained cattle from the sellers by

representing either expressly cr impliedly that ABP was

in financial condition to pay for the cattle and that the

ccmpany intended to pay for the cattle, when in fact the

defendants knew that the company was unable to pay

therefor and did not intend to make payment for anv cattle

secured.

The defendants moved to set aside the indictments,

contending that the facts alleged in them and in the bill

of particulars as amended did not constitute the crime of

obtaining money by false pretenses or the crime of conspir-

ing to obtain money by false pretenses. The court sustained

the motion and the indictments were set aside. The trial

court held, in its order of dismissal, that one of the elements

of the crime of false pretenses was a false representation

regarding a material existing fact or a past event, and held

that a promise to perform an act in the future, coupled with

a present intent not to fulfill the promise, is not a misrepre-

sentation of an existing fact or nast event. The trial court

further held that the mere nondisclosure of facts known to

A-4

[APPENDIX]

a defendant does not constitute a false representation of

fact, and therefore does not meet the requirements for con-

viction of the crime of obtaining property by false pretenses.

The State contends the facts alleged in the indictment

and bill of particulars as amended demonstrate ABP and

defendants were operating behind a facade of “business as

usual”, misrepresenting to the cattle owners their intention

and ability to pay for the cattle purchased. The State argues

that by contracting to purchase the cattle, ABP implied and

pretended (falsely) that payment would be made for the

cattle in the regular course of business. It further alleges

ABP had no intention to pay when it purchased the cattle

and deceived the cattle feeders by pretending to be acting

in the ordinary course of business.

The trial court found that the facts alleged in the bill

of particulars as amended amounted to no more than a

promise to pay in the future, joined with a present intent

not to pay for the cattle and the silence of the defendants

regarding a material fact, namely, the distressed financial

condition of the company. Trial court concluded that this

factual recitation did not sufficiently allege the element of

misrepresentation of an existing fact or past event, and

dismissed the indictments on the ground that they, even as

amplified by the bill of particulars as amended, did not

sufficiently allege the necessary element of the crimes

charged therein.

From the foregoing rulings by the trial court the State

appeals, stating as the sole issue justifying a reversal, its

contention that the trial court erred in setting aside the

indictments charging defendants with the crime of false

pretenses under § 713.1, The Code, 1975 and with the crime

of conspiracy to commit false pretenses under § 719.1, The

Code, 1975. The State contends the transactions set out in

the indictments and the bill of particulars were cash trans-

actions and not credit transactions; that a false promise to

pay, coupled with a misrepresentation as to a material past

A-5

[APPENDIX]

or existing fact, is a false pretense; that the concealment

or suppression of the truth can be a false pretense; that a

failure to disclose financial condition is a ground for civil

fraud or deceit, and that a promise made when the promisor

has no present intent to perform, is a false pretense.

We conclude this appeal in reality presents two issues

for determination:

1. Does a promise to perform an act in the future,

made with no intent to perform, constitute a mis-

representation under the false pretenses statute,

§ 713.1, The Code?

2. Does the acquisition of property by a buyer pursuant

to contract amount to a representation of intent to

pay therefor?

I. The trial court bottomed its finding in dismissing

the indictments against the defendants on the rationale that

the misrepresentation must be of a past or existing material

fact. and not of a promise to act in the future. Thus, the trial

court reasoned, ABP though accepting cattle for slaughter

with no intention to pav merely promised to pay for the

cattle and could not be held guilty of misrepresenting an

existing fact. The trial court correctly points out that a

purchase in the normal course of business with no intent

to pay has never been the basis for prosecution for false

pretenses in this jurisdiction. In his order dismissing the

indictments, the trial court invites this court to review the

Iowa precedent on point in order to “ascertain if and when

the precedent has. outlived its usefulness.” He very properly

observed, “Up te this point in time. a false promise gen-

erated from a transactional contract between offender and

victim, without more, has not been treated as a criminal

false pretense in this State. This is also the approach taken

in a majority of the jurisdictions. For a contrast of views,

see the majority and dissenting opinions in Chaplin v.

United States, 157 F.2d 697 (D.C. Cir. 1946). Insofar as the

A-6

[APPENDIX}

trial judge is concerned it is his duty to follow and apply

the existing law, * * * ”

The Iowa cases addressing this issue are all marked by

two characteristics which minimize their value as legal

precedent, namely, (1) that the cases failed to base the

results on the issue discussed here, and (2) that the cases,

all of early vintage, fail to recognize the tenor of present

day commercial enterprise. None of the cases hold a charge

or conviction of false pretenses invalid because of a failure

to allege or prove a misrepresentation of past or existing

fact, although the premise appears in the text of the opin-

ions. The median year of the cases cited by the parties is

1900, although many of the cases do not address the issue,

but merely list the elements of the offense as including a

“misrepresentation of past or existing fact.”

The cases which do address the issue directly all in-

volve a finding of a misrepresentation of past or existing

fact and accordingly sustain the charges against the defend-

ants. In State v. Hollingsworth, 132 Iowa 471, 109 N.W. 1003

(1906), the indictment was found sufficient to charge an

offense when it contained an allegation that defendant ob-

tained a loan of money by falsely stating (1) he had

arranged to go into business (2) he intended to go into

business and (3) he intended to marry. The present fact

falsely represented was that he had arrangements to go

into business.

In State v. Fooks, 65 Iowa 196, 21 N.W. 561 (1884), it

was held that defendant’s statements that his brother was

an English nobleman due to arrive shortly with money to

repay the loan sought amounted to a representation that

defendant had the ability to revay the loan. The present

fact misrepresented was his ability to renay the loan. and

his conviction was sustained.

In State v. Montgomery, 56 Iowa 195, 9 N.W. 120

(1881) a conviction was upheld where defendant obtained

money on the pretense that he had goods to ship by freight,

A-7

{APPENDIX}

and since he had no such goods that pretense was held to

be a representation of present fact.

The case of State v. Dowe, 27 Iowa 273 (1869) directly

addresses the issue of a false promise as a misrepresentation.

In Dowe the court held that defendant, who pretended he

had arrived to pay his debt induced the victim to sign a

receipt for payment. The court found the act of falsely

indicating his intention to pay was a false pretense, and

reversed the order of the trial court setting aside the indict-

ment.

We have concluded we must reexamine our position

that a mere promise to pay, with no intent to do so, is not

a misrepresentation which will sustain the charge of false

pretenses under § 713.1, The Code. The false pretenses stat-

ute was adopted to prohibit the fraudulent taking of prop-

erty. State v. Sabins, 256 Iowa 295, 127 N.W.2d 107 (1964).

The false pretenses statute provides a criminal sanction

against one type of fraud, the obtaining of title and posses-

sion of property by deceit. A civil remedy for fraud was in

existence long before the adoption of the criminal statute,

and provided another potential action which could be based

on the same factual situation. The civil action for fraud

which could arise from the facts in this case and the false

pretenses charges made against the defendants differ mainly

in the quantum of proof necessary to prove the charge in

the criminal case. The elements of actionability in a civil or

criminal case bottomed unvon the same set of facts before us

here would be virtually identical. See Grefe v. Ross, 231

N.W.2d 863 (Iowa 1975). Therefore, we feel constrained to

look to the development of the law in the parallel area of

civil fraud in examining our statute on false pretenses,

$ 713.1, The Code.

The rule in Iowa in civil cases as articulated in Grefe

v. Ross, supra, permits a finding of actionable fraud where

a promise to perform a future act is made with the pres-

ent intent not to perform. This area of the civil law has

A-8

[APPENDIX]

developed from the rationale that the present intent of the

promissor is a fact about which a false representation may

be made. In this connection we note the frequently cited

statement by Lord Bowen: “the state of a man’s mind is as

much a fact as the state of his digestion.” Edgington v.

Fitzmaurice, L.R. 29 Ch. Div. 459, 483 (1885). This court

touched upon the foregoing premise by way of dicta in

‘State v. Huckins, 212 Iowa 283, 234 N.W. 554, 559 (1931)

when we said:

“One’s intention or knowledge is a fact as to which

he may make a false pretense and thereby (the other

elements being present) perpetrate the crime of cheat-

ing by false pretenses.”

The issue as to whether false pretenses may be predi-

cated on a false promise was the subject of a discussion in

Chaplin v. United States, 157 F.2d 697 (D.C. Cir. 1946), 168

A.L.R. 828. A well-written dissent in Chaplin makes a per-

suasive argument in favor of permitting a false pretenses

conviction based on a false promise. The federal cases which

succeed Chaplin decline to follow its reasoning. In a prose-

cution for mail fraud, the court noted: _

“Indeed it has been the law ever since 1896 that to

promise what one does not mean to perform, or to

declare an opinion as to future events which one does

not hold, is a fraud.”

United States v. Grayson, 166 F.2d 863 (2nd Cir. 1948),

referring to Durland v. United States, 161 U.S. 306, 16 S.Ct.

508, 40 L.Ed. 709 (1896). See also United States v. Ruben-

stein, 166 F.2d 249 (2nd Cir. 1948), cert. den. 333 U.S. 868,

68 S.Ct. 791, L.Ed. (1948); United States v. John-

son, 284 F.Supp. 273 (W.D. Missouri 1968).

We are persuaded by the reasoning which has led

courts to find fraud based on false promises, and note the

meticulous tendency of this court in criminal cases in find-

A-9

{APPENDIX}

ing statements of present fact out of false promises. In

State v. Foxton, 116 Iowa 81, 147 N.W. 347 (1914), this court

found that the presentation of a personal check implied that

defendant had the ability to pay, sustaining a false pretenses

charge. We are unable to perceive difference between a

finding that the false pretenses may be premised on a false

promise and a finding that defendant misrepresented an

ability to pay. When a defendant, knowing he is insolvent,

promises to pay, he falsely represents his intention to pay.

“(I)t is safer for purposes of the criminal law to construe

a promise only as an assertion of ability to perform, because

ability is ‘factual’ rather than mental. There is little prac-

tical difference between these conceptions.” A. Pearce,

Theft by False Promises, 101 U. Pa. L. Rev. 967, 1008 (1953).

We are constrained to find and now conclude that de-

fendants were properly charged with the crime of false

pretenses under the circumstances here; that is to say,

where they represented an intention to pay for cattle re-

ceived by them when they had neither the intention nor

the ability to pay therefor. A jury should determine if such

representation or promise to pay was made with no inten-

tion to perform. We therefore hereby reject any previous

position taken by this court that a promise to perform a

future act, made with the intent not to perform is not suffi-

cient to support a charge of cheating by false pretenses:

II. The defendants argue that the crime of false pre-

tenses must be committed by the making of some positive

representation and that silence or concealment is insufficient

to justify the charge. We do not agree.

The crime of cheating by false pretenses is predicated

upon misrepresentation. The misrepresentation may be by

words or action. The failure to disclose a material fact may

well be a misrepresentation. In State v. Foxton, supra, this

court found that the presentation of a check with no expec-

tation that it would be covered is sufficient to support a

conviction for false pretenses, even though no representa-

A-10

[APPENDIX]

tion is made other than that involved in the delivery of the

check. We find that no express false representation need be

made. In this case the defendants solicited orders for cattle,

entered into a contract for the purchase of the same at a

stated price and accepted delivery of them. Such action

implied the intent to pay for the cattle, and defendants

deceived the owners of the same by pretending to be acting

in the usual course of business, when in truth the allegations

made by the State in the indictments, if proven, would

justify a jury in concluding the defendants had no intention

to pay for the cattle.

We must therefore conclude and find that the facts

alleged by the State in the indictments and the bill of

particulars as amended, if proven, constitute the crimes

charged. The guilt or innocence of the defendants should

be determined by a jury. We therefore reinstate the indict-

ments and reverse and remand for further proceedings.

REVERSED AND REMANDED.

All Justices concur except McCormick, J., who concurs

specially and Harris, J., who takes no part.

McCORMICK, J. (concurring specially).

I concur in Division II and the result.

We have long held that a false representation of fact

may occur through conduct which misrepresents ability to

pay for purchased goods. State v. Foxton, 166 Iowa 181,

147 N.W.2d 347 (1914). Here the State’s particulars charge

the defendants with purchasing cattle under a “business as

usual” facade while secretly diverting funds to preferred

creditors, planning bankruptcy and concealing ABP’s in-

solvency. Although the trial court did not think so, I believe

these circumstances show a false representation by impli-

cation.

A-ll

{APPENDIX}

This case comes well within the principle that a false

promise may be coupled with a false representation of fact

to constitute a false pretense. Pioneer Valley Savings Bank

v. Indemnity Insurance Co., 225 F.Supp. 404 (N.D. Iowa

1964); State v. Dowe, 27 Iowa 273 (1869); State v. Mont-

gomery, 56 Iowa 195, 9 N.W. 120 (1881); State v. Fooks, 65

Iowa 196, 21 N.W. 561 (1884); State v. Tripp, 113 Iowa 698,

84 N.W. 546 (1900); State v. Hollingsworth, 132 Iowa 471,

109 N.W. 1003 (1906); State v. Comes, 245 Iowa 485, 62

N.W.2d 753 (1954).

ee ST)

APPENDIX B

FILED

MAY 19 1977

CLERK SUPREME COURT

IN THE SUPREME COURT OF IOWA

STATE OF IOWA,

| Appellant,

No. 59101

)

)

: )

vs. )

) ORDER

FRANK R. WEST and )

ROBERT E. LEE, )

7 Appellees. )

Defendant-appellees’ petition for rehearing has been

considered by the entire membership of the court in the

above entitled matter and it is now refused and denied.

Done this 19th day of May, 1977.

/s/ C. Edwin Moore

Chief Justice—Iowa Supreme Court

Copies to:

James P. Linn

Suite 410, Fidelity Plaza

Oklahoma City, Okla 73102

Thomas J. Cahill

1015 5th St.

Nevada, Iowa 56201

David S. Lathrop

460 Continental Bldg.

Omaha, Nebraska 68102

Gary H. Swanson

Assistant Attorney General

lll at,

APPENDIX C

FILED

DIST. COURT

STORY CO., IOWA

1976 OCT 14 AM 812

MILLICENT FAGERBURGH,

CLERK

IOWA DISTRICT COURT,

STORY COUNTY

STATE OF IOWA, )

Plaintiff, ) Pottawattamie Co.

) Nos. 2002C-2031C

vs. )

) Story Co.

FRANK R. WEST and ) Nos. 4904-4933.

ROBERT E. LEE, )

)

Defendants. ORDER

A recital of prior proceedings is essential to put this

matter in proper focus.

1. On May 21, 1976, this Court granted the defendants’

request for a bill of particulars in certain respects, namely,

the State was required to describe the false representations

forming the basis for the conspiracy and false pretense

charges against them (see paragraphs 1 and 4 of the order).

2. On September 13, 1976, the State filed the bill of

particulars with its responses corresponding to the num-

bered paragraphs contained in the court order. In paragraph

1 thereof, the false representations were described in detail,

such description being incorporated into paragraph 4 by

reference.

3. On October 8, 1976, this Court gave indication of

a willingness to test on its own motion the sufficiency of the

particulars stated in paragraph 1 of the bill, pursuant to

Section 773.7, The Code, insofar as Story County Cause

C-2

[APPENDIX]

No. 4926 was concerned, as the conspiracy count contained

therein was assigned for jury trial on October 12, 1976.

4. On October 12, 1976, defendants filed a motion to

set aside all of the indictments, including the conspiracy

count (Story County No. 4926) and the false pretense

counts (Story County Nos. 4904-4933). The motion was

denominated as one seeking dismissal, but counsel agree

to treat it as a motion under Section 773.7. Defendants con-

tend the bill of particulars shows on its face that they did

not commit, or conspire to commit, the crime of false pre-

tenses.

5. On October 12, 1976, the State filed a substituted

paragraph 1 of the bill of particulars, it being a complete

substitute for its predecessor. Hence it stands by way of

compliance with paragraphs 1 and 4 of the court order of

May 21. Counsel agree that the substituted paragraph be

considered in connection with defendants’ motion to set

aside the indictments.

The issue to be resolved can be couched in the form

of a question. Do the particulars stated in the bill of par-

ticulars, as recently filed herein by the State, constitute the

charged offenses? If the question is answered in the nega-

tive, the indictments must be set aside. For the purpose of

resolving this issue, the Court’s sphere of reference is lim-

ited to the indictments and particulars furnished in the

bill, and specifically, substitute paragraph 1 is the focus

thereof. State vs. Hall, 235 NW 2d 702, 720-721. United

States vs. Neff, 212 F. 2d 297, 309 (3rd Cir. 1954).

The defendants are charged with conspiracy to obtain

cattle by means of false pretense (Story County No. 4926),

and they are also charged with the crime of false pretense

itself (Story County Nos. 4904-4933). The law relating to

these crimes is relatively well settled in Iowa. In the first

place, a conspiracy in and of itself is not criminal, that is,

it must have illegal activity or the attainment of a legal

objective by illegal means as its goal. State vs. Blyth, 226

we»

e+ a rehee

C-3

[APPENDIX]

NW 2d 250, 263. 16 Am. Jur. 2d, Conspiracy, Section 1. 15A

C. J. S., Conspiracy, Section 42, Page 742. Secondly, the

crime of false pretenses requires a false pretense as an

element thereof. State vs. Warren, 212 NW 2d 509, 513.

The words “false pretense” have a special and restricted

meaning in the criminal law, when compared to civil pro-

ceedings. For criminal purposes, the pretense must not only

be false, but also a representation as to a material existing

fact or past event. State vs. Comes, 245 Ia. 485, 488; 62 NW

2d 753. In Iowa, a promise to perform an act in the future,

although coupled with a present intent not to perform the

promise, is not a false renresentation of past event or exist-

ing fact. Indemnity Insurance Company vs. Pioneer Vallev

Savings Bank, 343 F. 2d 634, 650-651 (8th Cir. 1965) (citing

Towa criminal cases in support of rule). Also State vs. Dowe,

27 Ia. 273, 275. Hence, the fraud of obtaining property by

buying it with no intention to nay for it is not the crime of

obtaining property by a false pretense. 32 Am. Jur. 2d,

False Pretenses, Section 14. However, when a false promise

is coupled with a false statement of existing fact or past

event, the two are taken together as a false pretense. State

vs. Hollingsworth, 132 Ia. 471, 473; 109 NW 1003. State vs.

Montgomery, 56 Ia. 195, 198-199; 9 NW 120. Randle vs.

U. S., 113 F. 2d 945, 949 (D. C. Cir. 1940).

Unlike the criminal law. for civil purposes a promise

to perform a future act is an actionable representation when

it is made with an existing real intention not to perform.

Grefe vs. Ross, 231 NW 2d 863, 867. Significantly, even

though the threshold of actionability is lower for civil pur-

poses, the mere failure of a buver to disclose his real finan-

cial cordition is not a fraud upon the seller. Reid, Murdock

and Fisher vs. Cowduroy, 79 Ia. 169, 172-173; 44 NW 351.

Houghtaling vs. Hills, 59 Ia. 287, 289; 13 NW 305. Reid and

Houghtaling merely echo the prevailing rule that a pur-

chaser, when buying on credit, is not bound to disclose his

financial condition to the seller. and mere silence as to his

C-4

[APPENDIX]

pecuniary condition does not constitute fraud, even if his

ability to pay is doubtful, his financial condition desperate,

or he is insolvent. The rule is the same as to nondisclosure

or silence concerning the financial status, credit or insol-

vency of a third person. 37 Am, Jur. 2d, Fraud and Deceit,

Sections 171 and 172.

There is a related principle that should be mentioned,

to-wit; a false pretense may be made by implication as

well as by verbal declaration. 32 Am. Jur. 2d, False Pre-

tenses, Section 17. However, in the cases enunciating this

rule, a false circumstance has been affirmatively created by

the offender, there invariably being open resort to artifice

wr deceitful means. By wav of example, see the following

cases: Bright vs. Sheriff. Wahoe County (Nev. 1974), 521

P. 2d 371 (a fictitious company was established using

printed invoices and delivery slips signed by a nonexistent

person). State vs. Farrah (Conn. 1971), 282 A. 2d 879 (de-

ceptively worded notes delivered to victim suggested real

estate was pledged as security when in fact the offender and

his company could not provide valid mortgages). State vs.

Huckins, 212 Ia. 283; 234 NW 554 (the defendant made

express statements of fact based upon personal knowledge

that were false). State vs. Foxton, 166 Ia. 181; 147 NW 347

(the defendant gave the victim a check drawn on a bank

in which no funds were deposited).

Importantly, in Rogers vs. People (Colo. 1966), 422 P.

2d 377, wherein the accused failed to disclose his company’s

financial condition to the victim, although it was within his

realm of knowledge. it was held that while “failure to make

a disclosure and intentionally remaining silent as to a ma-

terial fact may form the basis for a civil action in fraud or

deceit, such evidence cannot support a conviction of obtain-

ing money by false pretenses.” In the opinion, at Page 380,

the Court quoted from an earlier decision as follows:

“The Attorney Gencral! does not claim that any false

verbal statement was made by defendant at the time

C-5

[APPENDIX])

of the sale, but seeks to bring the case as made within

the false pretense statute, upon the theory that the

silence of defendant (he exchanged a cow for money

without disclosing the existence of a chattel mortgage)

is of itself a false pretense and misrepresentation. The

general rule is that the mere nondisclosure of facts

known to defendant, even though a disclosure thereof

‘would operate to deter the prosecuting witness from

parting with his money, is not a false pretense. (italics

in opinion) And this is true, even though a false pre-

tense may be proved by acts or conduct of the defend-

ant as well as by his words. In People vs. Baker, 96

N. Y. 340, Earl, J., in delivering the opinion of the

Court, expressly held that mere silence and mere sup-

pression of truth, upon which another may act, is not

sufficient to constitute the crime of false pretenses.”

In Rogers, the Court noted that defendant made no

statements to the victim concerning his company’s financial

condition, and that the victim relied upon defendant’s integ-

rity rather than inquiring about solvency. and concluded

by saying, “All of this was what was in the mind of (the

victim), and, of course, cannot form the basis of a criminal

charge.” The judicial guidance furnished in Rogers is ex-

ceedingly pertinent to the nature of the business contact

and the motivity of the cattle producers in the situation

at hand.

Turning now to the bill of particulars, and specifically,

substitute paragraph 1. Taken in its most favorable light,

the bill of particulars, with explanatory statements fur-

nished during the course of hearing by counsel for the State,

stands for the following:

1. Defendants, through agents and co-conspirators,

purchased cattle for American Beef Pack [sic] from certain

cattle producers upon quoted prices that would be paid

therefor.

C-6

[APPENDIX]

2. Payment was not made at the time the cattle were

obtained from the sellers, nor were drafts or checks issued

in exchange therefor. (In brief and argument, the State

focused on In the Matter of Samuels and Company, 526 F.

2d 1238 (5th Cir. 1976), it featuring a priority dispute under

the Uniform Commercial Code. Even if the cattle producers

herein were treated as cash sellers like the victims in Sam-

uels, it still remains the fact that the cattle producers trans-

ferred title and possession of their cattle to the company in

exchange for a mere promise to pay. The federal regulations

alluded to by the State simply shorten the period within

which payment becomes due, but does not dispel the open

credit aspect of the transaction. )

3. When the cattle were obtained, defendants knew

the company was unable to vay for them at that time. No

representations were made with respect to the availability

of company funds for payment

4. The financial distress of the company was not dis-

closed to the sellers, nor was any inquiry made by the

sellers concerning its solvency.

Substitute paragraph 1 of the bili of particulars invites

the following conclusions: The purchase and obtaining of

the cattle without payment or issuance of indicia thereof

invoked a promise to pay in the future, and the defendants’

concurrent silence concerning the company’s financial con-

dition and resultant realization that payment could not then

be made to the sellers is, at best. another way of saying the

promise of payment was false, and this may be too strongly

stated under presented particulars. There is no demonstra-

ble false statement of existing fact or past event, and this

is a prerequisite to the existence of a false pretense.

Up to this point in time, a false promise generated from

a transactional contact between offender and victim, with-

out more, has not been treated as a criminal false pretense

in this state. This is also the approach taken in a majority

C-7

{APPENDIX}

of the jurisdictions. For a contrast of views, see the majority

and dissenting opinions in Chaplin vs. U. S,, 157 F. 2d 697

(D. C. Cir. 1946). Insofar as the trial judge is concerned, it

is his duty to follow and apply the existing law, it being

the prerogative of the Supreme Court to ascertain if and

when the precedent has outlived its usefulness. Kersten

Company, Inc. vs. Department of Social Services, 207 NW

2d 117, 121-122. It appears, therefore, that the particulars

of the bill of particulars are inadequate to support the

offenses charged in the several indictments, and the indict-

ments must be set aside.

Lastly, this judge feels obliged to commend counsel for

the State and defendants. They have presented meritorious

issues. They have been well prepared and professional at

all times. They have been abundantly conscientious to the

service of their clients during the proceedings in this district

court.

IT IS ORDERED:

The indictments, as amended, in Story County Criminal

Cause Nos. 4904 through 4933, inclusive, should be and they

are set aside. '

Dated at Nevada, Iowa, this 11th day of October, 1976.

/s/ George G. Fagg

Judge, 2nd Judicial District of Iowa.

Copies:

Gary H. Swanson

James P. Linn and J. D. He’ms

Suite 410 Fidelity Plaza

Oklahoma City, Oklahoma 73102

Thomas J. Cahill

David S. Lathrop

ee

APPENDIX D

713.1 False pretenses

If any person designedly and by false pretense, or by

any privy or false token, and with intent to defraud, obtain

from another any money, goods, or other property, or so

obtain the signature of any person to any written instru-

ment, the false making of which would be punished as

forgery, he shall be imprisoned in the penitentiary not more

than seven years, or be fined not exceeding five hundred

dollars, or be imprisoned in the county jail not exceeding

one year, or be punished by both such fine and imprison-

ment.

719.1 “Conspiracy” defined—common law

If any two or more persons conspire or confederate to-

gether with the fraudulent or malicious intent wrongfully

to injure the person, character, business, property, or rights

in property of another, or to do any illegal act injurious to

the public trade, health, morals, or police, or to the admin-

istration of public: justice, or to commit any felony, they

are guilty of a conspiracy, and every such offender, and

every person who is convicted of a conspiracy at common

law, shall be imprisoned in the penitentiary not more than

three years.

THE FOURTEENTH AMENDMENT TO THE

UNITED STATES CONSTITUTION

ARTICLE XIV

Section 1. All persons born or naturalized in the

United States, and subject to the jurisdiction thereof, are

citizens of the United States and of the State wherein they

reside. No State shall make or enforce any law which shall

abridge the privileges or immunities of citizens of the

United States; nor shall any State deprive any person of

D-2

APPENDIX]

life, liberty, or property, without due process of law; nor

deny to any person within its jurisdiction the equal protec-

tion of the laws.

Section 2. Representatives shall be apportioned among

the several States according to their respective numbers,

counting the whole number of persons in each State, ex-

cluding Indians not taxed. But when the right to vote at

any election for the choice of electors for President and

Vice President of the United States, representatives in Con-

gress, the executive and judicial officers of a State, or the

members of the legislature thereof, is denied to any of the

male inhabitants of such State, being twenty-one years of

age, and citizens of the United States. or in any way

abridged, except for participation in rebellion, or other

crime, the basis of representation therein shall be reduced

in the proportion which the number of such male citizens

shall bear to the whole number of male citizens twenty-one

vears of age in such State.

SEcTION 3. No person shall be a senator or representa-

tive in Congress, or elector of President and Vice President,

or hold any office, civil or military, under the United States,

or under any State, who having previously taken an oath,

as a member of Congress, or as an officer of the United

States, or as a member of any State legislature, or as an

executive or judicial officer of any State, to support the

Constitution of the United States, shall have engaged in

insurrection or rebellion against the same, or given aid or

comfort to the enemies thereof. But Congress may by a vote

of two thirds of each House, remove such disability.

Section 4. The validity of the public debt of the United

States, authorized by law, including debts incurred for pay-

ment of pensions and bounties for services in suppressing

insurrection or rebellion, shall not be questioned. But nei-

ther the United States nor any State shall assume or pay

any debt or obligation incurred in aid of insurrection or

ee ne lly ate

eae aii oats an > ne

D-3

(APPENDIX)

rebellion against the United States, or any claim for the

loss or emancipation of any slave; but all such debts, obli-

gations, and claims shall be held illegal and void.

Section 5. The Congress shall have power to enforce,

by appropriate legislation, the provisions of this article.

ss ia — lt Mt a 4

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CERTIFICATE OF SERVICE

This is to certify that three (3) true and correct copies

of the instrument to which this certification is attached

were mailed to the following named counsel this ____ day

of July, 1977:

Richard C. Turner

Attorney General of Iowa

and

Gary H. Swanson

Assistant Attorney General

State Capitol Building

Des Moines, Iowa 50319

Attorneys for State of Iowa

with postage thereon fully prepaid.

James P. Linn