Gordon v. State

Murphy, C.J., delivered the opinion of the Court. The appellant Milton Gordon, an attorney and a partner in the law firm of Gordon & Myers, with offices located in Montgomery County, Maryland, was convicted of embezzlement on October 4, 1967 by a jury in the Circuit Court for Somerset County, the trial having been removed to that jurisdiction from the Circuit Court for Montgomery County at appellant’s request. He was sentenced to five years under the jurisdiction of the Department of Correction. The indictment returned against appellant contained three counts — embezzlement, larceny after trust, and larceny.

The larceny count was abandoned by the State at the trial, and the jury returned a not guilty verdict on the count charging larceny ²⁹⁴ after trust. The embezzlement count of the indictment, upon which appellant was convicted, charged that on September 8, 196.6 and then continually until December 23, 1966, he did “unlawfully embezzle from Raymond Francis Scholl, Jr. and Mary E. Scholl” the sum of $13,895.04, “in violation of Article 27, Section 129, of the Annotated Code of Maryland.” Insofar as pertinent, Section 129 provides: “Whosoever * * * being employed for the purpose or in the capacity of a cashier, servant, agent, officer or clerk, by any person or body corporate shall fraudulently embezzle any money * * * which * * * shall be delivered to or received, or taken into possession by him, for or in the name or on account of his master or employer, shall be deemed to have feloniously stolen the same from his master or employer, although such money * * * was not received into the possession of such master or employer, otherwise than by the actual possession of his cashier, servant, agent, officer, clerk or other person so employed, * * *.” The facts essential to a determination of the merits of the appeal are these: In August of 1966 Mr. and Mrs. Clarence L. Ranck listed their residence property in Rockville, Maryland, for sale with R. E. Smith, a real estate broker. The Ranck property was then encumbered with a first trust (mortgage) held by Emigrant Industrial Savings Bank (Emigrant) in the approximate amount of $14,000.00. Within a day or so after the property was listed, Smith procured Raymond and Mary Scholl as purchasers for the Ranck property, and a contract of sale was concluded, the purchase price being $19,950.00.

At Smith’s suggestion, the Scholls went to the offices of Bogley, Harting, Ma-honey and Lebling, Inc. (Bogley), a mortgage lending firm, to obtain the necessary financing for the property. Bogley agreed subject to certain conditions, to make a VA guaranteed loan to the Scholls in the amount of the purchase price of the property, vis., $19,950.00. Settlement for the property was to be held at the law offices of Gordon & Myers, and that firm assigned its case number T1179 to the transaction. A title search of the property was ²⁹⁵ initiated by Gordon & Myers, as a result of which the firm filed its “Report on Title,” certified as of August 19, 1966, showing that the Rancks had a marketable fee simple title, subject to an outstanding deed of trust.

An interim title insurance binder was then issued by Lawyers Title Insurance Company (Lawyers Title) to Bogley, the prospective lender. On August 22, 1966 Bogley wrote to Gordon & Myers stating that it had agreed “subject to the conditions listed” to make a VA loan to the Scholls in the amount of $19,950.00. In its letter Bogley set out the terms of the loan, stated that settlement was to be held in August of 1966, specified that “all papers” were to be prepared by Gordon & Myers, directed that the current YA standard forms of deed of trust and note be used and that the note was to be made payable to Bogley, designated the names of the trustees of the deed of trust and outlined certain provisions to be included in that document. The letter further stated that title was to be in fee simple “good of record in the borrowers and subject to foregoing deed of trust as first lien”; that title insurance was to be obtained insuring Bogley, and that the binder was to be marked up opposite existing liens showing the same to be “satisfied” or “to be satisfied out of proceeds.” Bogley’s letter further directed that certain documents, including the “marked up” title insurance binder, be mailed to them after settlement and specified that “The closing and disbursement of this loan is subject to all aspects of title and loan papers being satisfactory to us and in such form that the VA will issue its Certificate of Guaranty for the loan.” In its letter, Bogley set out various charges to be made at the time of settlement, directing that these charges “be collected for our account at settlement.” The letter concluded by stating that Bogley’s loan check would be issued; that the deed of trust was not to be recorded before Bogley’s check was received; that Gordon & Myers was to “advise of any unusual circumstances surrounding this case that come to your attention that might preclude complete settlement of this case within seven (7) days of the receipt of oitr check”; and that if there should be any deviation from these closing conditions, the case was not to be closed since “it will be necessary that you consult further with this office.” ²⁹⁶ Settlement was held on August 24, 1966 at the offices of Gordon & Myers.

Edward Dacy, a salaried employee of the firm, acted as the settlement attorney in closing the transaction. At the settlement a deed conveying the property from the Rancks to the Scholls was executed dated August 24, 1966. The Scholls executed a deed of trust note in the amount of $19,950.00 and also a deed of trust in favor of Bogley on the same date. Separate settlement statements, one for the Rancks and one for the Scholls, were prepared, showing the financial details of the transaction.

As the seller, Ranch’s statement showed a brokerage commission and, inter alia, a first mortgage or trust payoff of $13,095.04, a charge for the recording of the release, and a balance due the Rancks of $3,034.05. The buyer Scholl’s state'ment showed, among other things, charges including a VA funding fee, a loan commission, a title examination and certification fee of $122.50, together with a title insurance and application fee of $64.75. It showed that the buyers were credited with the amount of the mortgage or trust to Bogley, namely $19,950.00 (less a $300.00 deposit previously paid). The “balance due to settle” paid by the Scholls at the time of the settlement was $651.39.

At the settlement the parties executed a document acknowledging that “until funds have been received (from Bogley) there will be no disbursement or processing of this case.” An endorsement to the title insurance binder containing amendments pertaining to the amount of loan, selling price and other details was issued on August 26, 1966 and the original copy of Gordon & Myers’ “Report on Title” contained a handwritten notation that the outstanding Ranck mortgage (to Emigrant) was to be paid out of the loan proceeds. The various settlement documents were forwarded to Bogley for review in accordance with its previous instructions. After reviewing the documents, Bogley forwarded its check dated September 8, 1966, payable to Gordon & Myers, to the offices of Gordon & Myers, the check being in the amount of $18,130.35, representing the amount of the loan less certain of the charges made at the time of settlement. Bogley’s check was deposited on the same date in Gordon & Myers’ real estate escrow account in the State National Bank of Bethesda. ²⁹⁷ The firm of Gordon & Myers consisted of two partners, the appellant and Mitchell Myers, and two salaried attorneys Edward Dacy and Donald Wasserman.

Myers specialized in negligence and domestic cases and had nothing whatsoever to do with real estate settlements, the appellant and Dacy handling all such work, with Dacy doing approximately 80% of the actual settlements. Appellant had established the office procedure for the handling of settlements and disbursement of funds. While all four attorneys had authority to sign checks on the firm’s real estate escrow account, the recordation of title instruments and disbursements of settlement funds could only be made upon appellant’s authority, and this was particularly well established office procedure in connection with paying off prior mortgages or trusts. Under the normal operating procedure of Gordon & Myers, a secretary or the accountant, after receiving the lender’s draft, and after the draft had cleared the bank, would draw the necessary checks on the firm’s escrow account necessary to have the legal documents recorded; and after recordation had been effected, the other checks were made up in accordance with the settlement statements.

Following receipt of Bogley’s check covering the Ranck-Scholl settlement, checks were drawn on the firm’s escrow account on September 8, to cover taxes, documentary stamps and for recordation of the deed and deed of trust. These instruments were recorded on September 16, 1966. A commission check to the real estate broker was issued on September 21, 1966. The Rancks received the money due them as sellers at some unspecified time and from an unspecified source.

No disbursement was ever made to Emigrant to pay off the Ranck trust. On November 23, 1966, Lawyers Title purchased the deed of trust note covering the property from Emigrant for $14,-564.72. Neither the firm of Gordon & Myers, nor the appellant, or anyone else connected with the firm, ever paid anything on the Emigrant note. The ledger sheets of the State National Bank pertaining to the real estate escrow account of Gordon & Myers showed that from October 24, 1966 until December 23, 1966, when the account was closed, it was with the exception of several days in ²⁹⁸ October, overdrawn.

When closed on December 23, 1966, it showed a deficit of $8,147.11. Dacy testified at the trial that he learned on October 28, 1966 that the firm had been removed from Lawyers Title’s list of “approved attorneys,” immediately after which he “had a conversation” with appellant so as “to confirm certain things in my mind, and, in fact, what he said was that it was a stupid thing to do, it seemed smart at the time.” When asked what appellant was referring to by this statement, Dacy testified that appellant was referring to the “shortage in the escrow account”; that their conversation was “rather rambling” and appellant said, “My greatest mistake was in calling Lawyers Title Insurance Corporation to go over the escrow shortages.” Asked whether appellant ever indicated that anyone other than himself was responsible for the shortage, Dacy testified “he never mentioned any other names at all.” With respect to the Ranck-Scholl settlement, which he handled for Gordon & Myers, Dacy testified that it was not his responsibility to ascertain whether the lender’s check had been received, or whether the disbursement of funds had actually been made. He testified that these were matters for the bookkeeper or secretary and that in accordance with the normal office procedure, the checks would have been drawn and presented for appellant’s approval before being signed. Dacy admitted that he signed a large volume of checks on the firm’s real estate escrow account, and that he signed all the checks chargeable to the Ranck-Scholl settlement.

He testified that he did not recall signing such a check to pay off Emigrant’s first trust or mortgage. He also testified that there was no money due the Scholls at the conclusion of the settlement. Benjamin Dulaney, an attorney representing Lawyers Title, testified that on November 23, 1966, he met with appellant and his attorney and officers of Lawyers Title; that the purpose of the meeting was “to attempt to ascertain whether Lawyers Title could salvage any of the funds which had been paid out because of the shortages in the Gordon & Myers escrow account”; that he told appellant that the known shortage was approximately $350,000.00 and that additional claims were outstanding which would bring these losses up to $500,000.00; and that in response ²⁹⁹ to his question of appellant as to “where the money had gone to,” appellant said: “* * * that in 1961 he was in Florida on his own, and that on May 26, 1961 he was hospitalized and operated on for a disk condition in his back, and that was the first time that he started using escrow funds, and he used them for his personal expenses, somewhere between one and five thousand dollars. “He stated that in 1962 he advanced certain monies from the escrow account to clients in order to settle cases that he was settling in the office; that in 1962 he used some escrow funds to supplement his personal income; that in 1962 he was also paying all or part of his office overhead out of his escrow account; and that in 1962 or ’63 he was some 40 or 50 thousand dollars in the hole as far as his escrow account was concerned; that he made a loan, repaid all or a major part of what he had withdrawn from the escrow account, and at that time was only about 10 or 15 thousand dollars short; that subsequently he repaid the loan out of the escrow account, so that the amount of the shortage again increased. “He stated that he did a lot of traveling in 1963 for Intercontinental Motels, a corporation which sold stock publicly; and in Florida he became involved with a confidence man in Florida by the name of Bonsath; and became involved in a North Carolina Company — ■ Credit Loans, Incorporated, I believe; and he also became involved in the Five Points National Bank in Florida, and it was there that he thought the bulk of the money had gone.” After stating that he couldn’t make appellant’s explanation of the finances “total,” Dulaney further testified that he again asked appellant “Where it went,” and appellant responded, “Well, I frittered it away.” Dulaney testified as to his further conversation with appellant as follows: “He went into several smaller transactions from the escrow account; one where he had in North Caro ³⁰⁰ lina — he said North Carolina — one of the more larger ones, where he was a part-purchaser of a small business investment corporation known as Frontier’s Capital Corporation; in Raurel, Maryland in which he paid $10,000.00 cash which he also loaned from the escrow account; also loaned from the escrow account $5,000.00 to a F.B.W. Fireplaces, and that concern went broke and the loan was never repaid; and he also loaned money to a man named Fishkin on accounts receivable, and that was probably one to three thousand dollars to his recollection — that was an uniform business, and that also went broke, and the note was not paid. “In 1965, having suffered these losses in Florida, Mr. Gordon stated that he realized that wheeling and dealing was no good, started concentrating on title work, expanded his office, which increased the overhead and also the income. “He stated, that the checks from the escrow account were put into Milton Gordon’s own special account, which was merely a bookkeeping account on his office books, and then was utilized for whatever purpose he saw fit. “In addition he had paid a man named Biddle, Victor Biddle, in a billing system business for doctors, and the firm paid his salary and it came out of the escrow account, $225.00 a week, and Mr. Gordon was to own part of the business, this amounted, over a period of years he said, to $9,000.00; and there was a man named Rhombrun, he had loaned some 20 or 25 thousand dollars to him; that he had advanced some 20 thousand dollars to a family realty company known as Aragonas, and there were several brothers and a father in that business; and he stated that the only assets that he had would be the repayment of some of these loans or advances, which he thought would amount to as much as $140,000.00.” [Emphasis Supplied.] Dulaney further testified that appellant told him that in 1965 he first began deliberately not paying off first trusts; that prior ³⁰¹ to that time, “he would just take money out of the escrow account without purposely or consciously not paying off trusts”; and that he began paying only the monthly or quarterly payments on the trusts as they came due. Appellant’s motion for a judgment of acquittal was denied by the court.

The appellant did not testify and presented no evidence in his own behalf. As heretofore indicated, the jury found him guilty on the embezzlement count of the indictment. I Appellant contends that the lower court erred in failing to grant his motion for judgment of acquittal on the embezzlement count because the evidence presented by the State was insufficient to prove the crime of embezzlement from the Scholls under Section 129 of Article 27 of the Maryland Code, as charged in the indictment. He urges that under the express language of Section 129, the State was required to show, first, that he was either a cashier, servant, agent, or clerk of the Scholls and, secondly, that the funds in question had been received by him “for or in the name or on account of his master or employer” (the Scholls).

Appellant maintains that neither he individually nor the firm of Gordon & Myers was a cashier, servant, agent, or clerk of the Scholls; that if occupying any of these designated positions it necessarily could only be as an agent; that if an agent, Gordon & Myers was the agent of the Rancks, their services having been engaged by Smith, the Rancks’ real estate broker, or that the firm could possibly be considered as a sub-agent of the Rancks’ mortgagee, Emigrant; and that to justify a conviction under Section 129, the accused must be shown to be the agent of the principal having title to or a special property interest in the misappropriated funds. Appellant further urges that in no event could he personally be considered as an agent in the Ranck-Scholl transaction, as it was the firm’s business, and not his own, and that moreover the transaction was handled by the firm’s employee Dacy at a time when he, the appellant, was away in Florida. Appellant next argues that even if he or the firm of Gordon & Myers was at one time the agent of the Scholls, it was in the ³⁰² limited capacity of an escrow holder of funds having the duty to record the deed and deed of trust, after which it was to make disbursement of the funds to pay the Rancks, to pay Emigrant, and to satisfy the other obligations in accordance with the settlement statement; that as the Scholls and Bogley had placed only money into the escrow arrangement, when the recorded deed and deed of trust had been delivered to the Scholls and Bogley, respectively, any agency of Gordon & Myers or of the appellant personally, as to them, was thereby terminated; that as this termination occurred on or about September 16, 1966, there was nothing thereafter for the escrow holder to do for the Scholls; that it was the Rancks and Emigrant who, after recordation of the title instruments, were to receive the funds deposited in escrow, and that at the time of the termination of the agency of the Scholls in September of 1966, the escrow account of Gordon & Myers was sufficient to pay off Emigrant, so that at the time of the alleged conversion in October of 1966, no principal-agent relationship existed between the appellant and/or Gordon & Myers and the Scholls. Appellant next contends that under Section 129, an allegation of ownership is an essential averment in an indictment for •embezzlement, and while any legal or special property interest may suffice, it must be shown that such interest was vested in the