Stathes v. State

Menchine, J., delivered the opinion of the Court. On July 17, 1974 Peter T. Stathes, a former president of Montgomery Federal Savings and Loan Association, was indicted by the Grand Jury of Montgomery County on two counts of fraudulent misappropriation as a fiduciary in violation of Maryland Code Article 27, § 132. Brought to trial before a jury in the Circuit Court for Montgomery County ⁴⁷⁷ (Shure, J. presiding) Stathes was found guilty under the first count that reads as follows: “Fraudulent Misappropriation by Fiduciary The Grand Jurors of the State of Maryland, for the body of Montgomery County, upon their oaths and affirmations, present that Peter T. Stathes, late of said County, beginning on or about April 6, 1967 until on or about July 20, 1973, at the County aforesaid, did unlawfully, while acting in tile capacity of a trustee and fiduciary, embezzle and fraudulently and wilfully appropriate to a use and purpose not in the due and lawful execution of his trust for and on the behalf of The Montgomery Federal Savings and Loan Association, the sum of Fifty Thousand dollars ($50,000.00), current money, in violation of Article 27, Section 132 of the Annotated Code of Maryland, contrary to the form of the Act of Assembly in such case made and provided and against the peace, government and dignity of the State.” The count had been particularized as follows: “Comes now the State of Maryland and provides the following Bill of Particulars surrounding the allegations of the Indictment filed herein: “Count I: That beginning on or about April 27, 1967 until on or about July 20, 1973, the defendant, then in a position of trust and acting in a fiduciary relationship to the shareholders in The Montgomery Federal Savings and Loan Association, caused certain monies of said Association to be deposited in the Citizen’s Bank and Trust Company of Maryland, pursuant to an agreement with Joel T. Kline. These monies were to remain in non-interest bearing accounts to act as compensating balances on loans made by the Citizen’s Bank and Trust Company of Maryland to companies in which Joel T. Kline had an interest. ⁴⁷⁸ The defendant agreed to this arrangement in return for certain favors and benefits rendered or to be rendered to the defendant by Joel T. Kline.” Stathes was sentenced conditionally to a term of three years imprisonment under the provisions of Code Article 27, § 641 A. His appeal to this Court thus phrases the questions presented: “1.

Was the Circuit Court without jurisdiction to try appellant, an officer and director of a federally chartered savings and loan association, upon an Indictment charging embezzlement in violation of Article 27, Section 132 of the Code? 2. Did the court below err in its instructions to the jury (a) by failing to instruct on the requisite fraudulent intent needed for conviction of a violation of Article 27, Section 132, and (b) by failing to instruct properly on the necessity for corroboration of the testimony of an accomplice? 3. Did the court below err by unduly restricting the cross-examination of two of the State’s witnesses in violation of the appellant’s constitutional right to confront the witnesses against him? 4. Was there sufficient evidence (a) to corroborate the testimony of an accomplice that appellant opened a checking account as a compensating balance for said accomplice, or (b) to show that appellant had the specific intent necessary to sustain a conviction under the statute?” 1.

Jurisdiction Appellant contends that Montgomery Federal Savings and Loan Association as a federally chartered savings and loan association is an “instrumentality and agency of the United States, not subject to state regulation or control.” From that undisputed premise, he argues that State courts are without jurisdiction to prosecute him, contending that Congress has ⁴⁷⁹ provided a complete and pervasive scheme to regulate federal savings and loan associations under Title 12 — Banks and Banking, Ch. 12 — Federal Savings and Loan Associations, Section 1461, et seq. and has by 18 U.S.C.A. § 657 imposed criminal penalties upon officers of such associations for embezzlement. 1 Otherwise stated, appellant contends that Congress has placed such criminal conduct within the exclusive jurisdiction of the federal courts. Appellant’s principal reliance is upon the cases of Easton v. Iowa, 188 U. S. 220 , 23 S. Ct. 288 , 47 L. Ed. 452 (1903); and two State decisions, namely: Martin v. State, 61 S.W.2d 999 (C.C. App. Tex., 1933); and State v. Thornton, 214 N. W. 279 (Minn., 1927). We find Easton, supra, to be readily distinguishable. In Easton , the Iowa statute consisted of two sections that: (a) prohibited every bank “when insolvent, [to] accept or receive [any] deposit,” and (b) imposed criminal liability upon “any owner, officer, director, cashier, manager, member, or person knowing of such insolvency who shall knowingly receive or accept * * * any such deposits * * *.” In reversing state conviction in Easton , the Supreme Court said at 231-32, [291], [457]: “But we are unable to perceive that Congress intended to leave the field open for the states to attempt to promote the welfare and stability of national banks by direct legislation.

If they had such power it would have to be exercised and limited by their own discretion, and confusion would necessarily result from control possessed and exercised by two independent authorities. “Nor can we concede that by such legislation of a state as was attempted in this instance, the affairs of a national bank, or the security of its creditors, ⁴⁸⁰ would be advantageously affected. The provision of the state statute is express that it is the duty of the officers of the bank, when they know it is insolvent, to at once suspend its active operations; for it is obvious that to refuse to accept deposits would be equivalent to a cessation of business. Whether a bank is or is not actually insolvent may be, often, a question hard to answer. There may be good reason to believe that, though temporarily embarrassed, the bank’s affairs may take a fortunate turn.

Some of the assets that cannot at once be converted into money may be of a character to justify the expectation that, if actual and open insolvency be avoided, they may be ultimately collectible, and thus the ruin of the bank and its creditors be prevented. McDonald v. Chemical Nat. Bank, 174 U. S. 610 , 43 L. Ed. 1106 , 19 Sup. Ct. Rep. 787.

But, under the state statute, no such conservative action can be followed by the officers of the bank except at the risk of the penalties of fine and imprisonment. In such a case the provisions of the Federal statute would permit the Comptroller to withhold closing the bank, and to give an opportunity to escape final insolvency. It would seem that such an exercise of discretion on the part of the Comptroller would, in many cases, be better for all concerned than the unyielding course of action prescribed by the state law. However, it is not our province to vindicate the policy of the Federal statute, but to declare that it cannot be overridden by the policy of the state.” In Martin, supra, as in Easton , the statute in question had attempted to extend the effect of a state law set up to control banking institutions so as to have application to national banks.

The case therefore factually is parallel to Easton and similarly distinguishable. In Thornton, supra, the Supreme Court of Minnesota made special note that the State indictment “appears to be drawn with painstaking care to state an offense under section 5209, Rev. St. of the United States” (p. 280). There is ⁴⁸¹ nothing in the opinion to indicate that the offense charged was in violation of any Minnesota statute. There is little wonder that, under such circumstances, the Court said (p. 279) “* * * any offense against the [Federal] statute cited is within the exclusive jurisdiction of the federal courts.” We do not interpret the decision in Ea&ton as pre-empting State prosecution or compelling exclusive Federal jurisdiction in the prosecution of general criminal offenses proscribed by both Federal and State statutes.

We do not regard the subject statute as constituting in any sense an attempt by the State to override the policy of a federal statute. On the contrary, we regard this State penal statute, applicable to all persons within its borders, to have no relationship to an attempt to assert control of federally chartered associations. It merely provides for the punishment of an act that is criminal under the laws of both State and Federal Governments. The right of different sovereignties to prosecute in such circumstances is well recognized.

Westfall v. U. S., 274 U. S. 256 , 47 S. Ct. 629 , 71 L. Ed. 1086 (1927); U. S. v. Lanza, 260 U. S. 377, 382 , 43 S. Ct. 141, 142 , 67 L. Ed. 314, 317 (1922); U. S. v. Jackson, 470 F. 2d 684 (5th Cir., 1972). In U. S. v. Jackson, supra, the Court clearly and succinctly stated the rule we apply to the subject case when it said at 689: “An act denounced as a crime by both federal and state sovereignties is an offense against the peace and dignity of both, and may be punished by each.” 2. Instructions (a) Alleged failure to instruct as to fraudulent intent Appellant contends that it was essential that the jury be sufficiently instructed as to the required specific statutory intent and argues that the charge of the court failed to do so. We do not see it that way.

It is an undisputed fact that the appellant was president of Montgomery Federal Savings and Loan Association. As such lie stood in a fiduciary relationship to the corporation ⁴⁸² and thus would not be permitted under any circumstances to use the powers entrusted to him to promote his personal interests at the expense of the corporation. Coffman v. Maryland Publishing Co., 167 Md. 275, 289 , 173 A. 248, 254 (1934). The charge of the court must be considered in the light of this circumstance.

The charge of the court included, inter alia, the following: “Now, we are here dealing with criminal breach of fiduciary duty, specific violations of Article 27, Section 132 of the Annotated Code of Maryland. This section deals with crimes and punishments, and I have had a photocopy made of this section which the foreman can take into the jury room with you for your deliberation. [2] * * * He is charged with a violation of this fiduciary duty, and it is, therefore, for you to determine whether he is or is not guilty, guilty being necessary beyond any reasonable doubt, as I have previously indicated. “The Defendant contends that he did not embezzle or in any way misuse the funds of the shareholders and that the deposits made in the banks in question were approved by the Board of Directors and were for legitimate business purposes only; such as, creating goodwill, solicitation of new accounts and ordinary business operations wherein checking accounts were necessary. The Defendant was acting in a fiduciary ⁴⁸³ capacity as President and Director, and it is for you to determine whether or not he had, first, the ability to control; and secondly, did so control and arrange for the use of funds or compensating balances or otherwise as favors in exchange for favors from Mr. Kline and his associates. If he did use the savings and loan association funds in this manner this constitutes criminal intent and your verdict must be guilty.

If you do not so find, your verdict must be not guilty.” We note that the full text of the criminal statute had been given to the jury by the trial judge. This action caused its language to be incorporated in the charge by reference. This tended to insure that the jury was fully advised that proof of a specific fraudulent intent was an element of the State’s burden. In Andresen v. State, 24 Md. App. 128 , 331 A. 2d 78 (1975), we said at 191-92 [116]: “Elements of Fraudulent Misappropriation by a Fiduciary The appellant now claims that he objected to the failure of the trial court to define the elements of the crime of fraudulent misappropriation by a fiduciary, although he admits that his objection was ‘inartfully worded.’ That is the most artful of understatements, since the confrontation consisted only of the following: ‘THE COURT: ...

As far as the other objections are concerned, there are certain instructions that I gave the jury that have not come from case law, necessarily, Maryland case law, but in order to apprise the jury of the requirements under the various counts, I think it is necessary to explain to them the elements of the crime that needed to be proven, and sometimes you can’t find that particular element defined; therefore you’ve got to go elsewhere. ⁴⁸⁴ ‘MR. LAMB: I would submit that that would be where the judge is the determiner of the law, but in Maryland the jury is the finder of facts.’ We cannot glean the remotest ‘inartful’ suggestion of the objection now being pressed. The judge had, moreover, read to the jury the full text of Article 27, § 132.” We believe that the overall charge of the trial court fairly and adequately instructed the jury that the State was required to show a specific intent or special mens rea of fraud and wilfulness. This is all that was required.

Gordon v. State, 14 Md. App. 245, 258-59 , 286 A. 2d 833, 842 (1972). (b) Failing to instruct properly on the necessity for corroboration of an accomplice The record shows that the appellant did not seek an instruction on the necessity for corroboration of the testimony of an accomplice. The issue is not before us. Rule 756 g.

In Brown, v. State, 14 Md. App. 415, 422 , 287 A. 2d 62, 65 (1972) we said: “* * * we think that as a general guide, we may say that under Rule 756 g we will take cognizance of and correct an irremediable error of commission, but not an error of omission. Of course, the error must be plain, and material to the rights of the accused, and, even then, the exercise of our discretion to correct it should be limited to those cases in which correction is necessary to serve the ends of fundamental fairness and substantial justice. “The omission here was one which the trial court could have, and undoubtedly would have, supplied by a supplementary instruction if appellant had requested it before the jury retired to consider its verdict.” ⁴⁸⁵ That rule is particularly apposite in the subject case. The sole objection to the trial court’s charge relating to the testimony of an accomplice had been as follows: “We object on the grounds of omission from the charge to the Court omitting to give the jury our instruction or charge relating to the great care with which the jury must view the testimony of accomplices.” The trial court had included in its charge the following: “As you will recall, the State has presented certain alleged accomplices in connection with the use of funds claimed to be for compensating balances. One of the witnesses, Mr. Kline, has been granted immunity from prosecution in exchange for his testimony in this case.

This is proper for the prosecution to do, and this is a recognized use in the means of law enforcement. This testimony, however, must be weighed carefully, along with all of the other testimony, and you give it such weight as in your judgment it is fairly entitled to receive.” The record fails to include the instruction that had been sought by the appellant. In its absence, the exception indicates merely that the appellant requested that the jury be alerted to the need for careful examination of the testimony of an accomplice. The charge as given adequately did so.

We do not intimate, of course, that the uncorroborated testimony of an accomplice would serve as legally sufficient evidence to convict. 3. Restrictions on Cross-Examination Appellant contends that cross-examination was wrongfully curtailed to the point where appellant’s constitutional right to confrontation was denied. (a) The witness Kline Extensive cross-examination was permitted with respect ⁴⁸⁶ to Kline’s character as the following excerpts from the record will demonstrate: “Q And did you from time to time offer money or things of value in connection with appointments to federal office? A Yes, sir.

Q And did you from time to time offer money and things of value in connection with an appointment to State office? A Yes, sir. Q And did you from time to time in connection with appointments to State, Federal or County offices offer substantial sums of money? A Yes, sir.

Q And did this conduct extend over a period of time? A Yes, sir. Q And did this extend to the law enforcement officials? A Yes, sir.

Q And did this extend to the offices of the Executive Department of the Federal Government? A Yes, sir. Q And did this extend to the Banking and Insurance Department within the State of Maryland? A Yes, sir.

Q And did you at one time discuss with persons, with people the offering of money or things of value so that you, yourself, might hold the office of Banking Commissioner of the State of Maryland? A Yes, sir. ⁴⁸⁷ Q And did you have similar discussions with other persons in the State of Maryland regarding the offering of money or things of value so that other people might get other appointments? A Yes, sir. Q And did this cover Executive offices, that is, offices of the Executive Branch of the Government of the State of Maryland?

A Yes, sir. Q And that is other than the Banking Commissioner? A Yes, sir.” It had been elicited from Kline in his direct examination that he had pleaded guilty to conspiracy to obstruct justice in that in 1972 “[he] and others were telling the witnesses how to testify and were obstructing justice * * *.” The record also showed the following: “THE WITNESS: There is an agreement that was entered into between myself and the State of Maryland with a promise not to prosecute me for any criminal activity in return for my cooperation in future criminal prosecution,