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Kendall v. State

Supreme Court of Arizona

June 8, 1931

T. H. KENDALL, Appellant,
STATE, Respondent

APPEAL from a judgment of the Superior Court of the County of Maricopa. A. S. Gibbons, Judge. Reversed and remanded, with directions.

Mr. W. L. Barnum and Mr. Robert McMurchie, for Appellant.

Mr. K. Berry Peterson, Attorney General, Mr. Riney B. Salmon, Assistant Attorney General and Mr. Lloyd J. Andrews, County Attorney, for the State.


[38 Ariz. 315] ROSS, J.

By information, the appellant Kendall was accused of the embezzlement, on or about September 14, 1927, of the sum of $1,834.53, the money and property of the Arizona Pimacotton Growers' Association, he being at the time the agent and servant of such association and as such in possession of its [38 Ariz. 316] said money. He was tried in June, 1929, and from a verdict and judgment of conviction has appealed.

At the close of the state's case and at the close of the whole case, the appellant made a motion for an instructed verdict on the ground of variance between the allegations of ownership and the proof, it being contended the evidence showed the property alleged to have been embezzled belonged to the Arizona Cotton Processing Company and not to the Arizona Pimacotton Growers' Association. The court's refusal to grant these motions is made the basis of three assignments of error.

The admission of evidence showing, or tending to show, appellant had committed, while such agent and servant of the association, other like acts is made the basis of another assignment.

The Pimacotton Growers' Association, to which we shall refer as the association, was organized under chapter 156, Laws of 1921, as a nonprofit co-operative marketing association. Its membership under the law consisted of producers of cotton and its powers were limited to the handling and marketing of such members' cotton products. Experience had demonstrated to the association that on occasion the demands of the market could not be complied with from the cotton stocks of its members, and that to meet such demand it was necessary to go among nonmember producers of cotton and buy up their products to mix with or supplement those of the association. To do this the association fell upon the idea of using the Arizona Cotton Processing Company, a corporation, to which we shall refer as the processing company, with interlocking officers and boards of directors. The

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capital of the processing company was furnished out of the association's surplus and accumulations.

The processing company, instead of joining the association and going out and buying cotton in its [38 Ariz. 317] own name to meet the needs of the market as above stated, through its and the association's officers authorized appellant Kendall to purchase the cotton as needed in his name but for the processing company's account. Just why the processing company did not join the association and sign the regulation contract that each member was required by law to sign was, as we understand the record, perhaps, for two reasons: It did not wish to incur the duties and obligations of a member, nor the ill will of local cotton brokers by openly entering the brokerage field in competition with them. At all events, it did not join the association and was not under the law entitled to have its cotton handled or marketed by the association. Appellant was a member of the association. Accordingly, it was arranged that he should buy cotton for the processing company and turn it in to the association as demanded or required, the account with the association to appear in the name of "T. H. Kendall, Special." After such arrangement appellant bought cotton for the processing company and paid for it with the latter's funds. He, as the general manager of the association, accepted such cotton for the association and with the latter's funds paid for it.

On March 19, 1927, the books of the association showed a balance due from the association to "T. H. Kendall, Special," of $1,834.53, and on that day appellant, in making final distribution to the members of the association, issued the check to himself for that amount. Appellant kept the check until September 14, 1927, on which day he presented it to the bank and received payment thereof. Claiming certain portions thereof as a refund to him for expenses and the balance as a final distribution to him on his personal account as a member of the association, appellant refused and failed to pay this sum over to the processing company or otherwise to account for it.

[38 Ariz. 318] The evidence is all to the effect that Kendall was the secretary and general manager of the association and general manager of the processing company and as such had general charge of their business and the right to draw and indorse checks for and on account of either or both. The appellant, then, under the evidence had authority, as general manager and secretary of the association, to issue its check to himself to pay the association's debt to the processing company and, as the manager of the processing company, authority to accept said check and upon its payment credit the association therewith. He sustained a trust relation to both corporations. He was the "agent" and "servant" of both, in the sense in which those words are used in the embezzlement statute (section 501, Penal Code 1913). In this particular transaction he represented the association as the payer of a debt and the processing company as the collector of such debt. In this dual capacity he drew the association's check for said sum, that being the amount owing the processing company, but there was no physical or manual change of possession. In the transaction he was figuratively both the creditor and the debtor. He came into possession of the check for a definite use and purpose, to wit, the payment of the association's obligation to himself as the alter ego of the processing company, and the moment he converted the check into money the law automatically applied it to the satisfaction of the processing company's account against the association. The association entrusted appellant with no money but with a check. The check was simply authority to the bank upon which it was drawn to pay the drawee. It did not of itself operate as an assignment of any part of the funds to the credit of the association with the bank. State v. Probert, 19 N.M. 13, 140 P. 1108; paragraph 4334, Civil Code of Arizona 1913. [38 Ariz. 319] Where the same person is the representative of both the creditor and the debtor, the very instant that he as the debtor pays to himself the amount owing necessarily by operation of law he accepts such sum for the creditor and there is an acquittance of the debt. Such, as we conceive it, is the situation here. The rule governing in such circumstances is as follows: "Payment to an agent who is either expressly or impliedly authorized to receive the same is in effect payment to the principal, and, at least to the extent of such payment, is a satisfaction of the debt, and to that extent will discharge the payer, or entitle him to credit on his debt, regardless of what disposition the agent makes of the sum paid. . . ." 2 Corpus Juris 635, § 279. If these two corporations had been represented by different agents in this transaction, there could be no question whatever but that the money received for the check was that of the processing company. The fact that appellant was the agent of both corporations in this transaction cannot change the legal situation.

That the two corporations were separate entities, organized for entirely different purposes, is made to appear from the testimony of Fred J. Elliott, vice-president of the association. The articles of incorporation of the processing company are not in the record, or if so we have not found them, and we must accept the statement of witness as to the purpose for which such company was organized. Such statement is not full, but we gather therefrom that some of the officers of the ...

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