The opinion of the court was delivered by: DUSEN
This case is before the court on defendant's motion to dismiss an indictment
based on 26 U.S.C.A. § 3793(b)(1), charging that the defendant 'did wilfully and knowingly aid and assist in, and counsel, procure, and advise the preparation and presentation to the Collector of Internal Revenue * * * of a false and fraudulent joint income tax return for the calendar year 1949 of Louis and Emily E. Kamm, the said Louis Kamm having died on or about the 3d of May 1950; that is to say, the defendant, an attorney at law representing the said Emily E. Kamm and the estate of Louis Kamm, undertook to prepare and procure the preparation of the said joint income tax return and he, then and there well knowing that, in the calendar year 1949, he had personally participated in the consummation of the sale of stock of Retail Realty, Inc., held in the name of the said Emily E. Kamm, receiving the proceeds of said sale in the sum of $ 143,258.82 on behalf of the said Emily E. Kamm on December 30, 1949, prepared and caused the said joint income tax return to be prepared without reporting therein the said sale and the long term taxable gain thereon in the sum of $ 71,629.47.'
On August 17, 1949, a contract for the sale of Retail Realties was signed by David Cronheim, representing the seller, and Walter Kirschner, representing the buyer. The stated consideration was $ 321,398.57 and, at the time of signing, a down payment of $ 75,000 was made. On August 18, 1949, Emily Kamm received a check (No. 43766) from David Cronheim for $ 37,500 representing her half of the down payment.
Under the terms of the contract, Mr. Cronheim was to own, both beneficially and of record, all outstanding stock and to produce the certificates properly executed for transfer at the closing, which was to be held in the office of Milton M. Unger in Newark, N.J., on January 3, 1950. At the closing, the seller was to hold a corporate meeting for the purpose of electing new directors, to be designated by the buyer, and to enter such meeting in the minute book of the corporation.
Pursuant to an option in the contract, the buyer, upon giving proper notice in December 1949, accelerated the date of closing to December 30, 1949, in the law offices of Polette, Diamond, Roosevelt, Freidin and Mackay, 598 Madison Avenue, New York City (Par. 14 of Cronheim Exhibit 11).
Under an agreement dated August 18, 1949 (B.P. Exhibit 45),
Helen B. Jacobus, Ruth Sampson, David Cronheim and Emily Kamm, as owners of all the outstanding stock of Retail Realties, endorsed their certificates of shares in blank and delivered them to Milton M. Unger with authority 'to deliver the same to the purchaser * * * and to receive payment of the monies due * * * and upon receiving such monies, * * * to pay one-half of the same to David Cronheim and the remaining one-half to Emily Kamm, free and discharged of all claims on our part.'
Mr. Unger had a conference with Mr. Cronheim on December 23, 1949 (B.P. Exhibit 4, pp. 35 ff., and Tabs A and B to the affidavit of Milton M. Unger dated 2/24/58), at which time he was given instructions relating to the closing of the sale. Upon receiving the purchase price, he was to disburse $ 15,430 to David Cronheim Agency for insurance premiums, $ 12,100 to David Cronheim Agency as commission, $ 12,100 to Louis Kamm Co. as commission, $ 12,100 to Albert M. Greenfield Co.
as commission, and then to divide the balance in two equal shares and remit checks to Mr. Cronheim and Mrs. Kamm
The closing was completed on December 30, 1949 (a Friday and the last banking day of the year) between 2 p.m. and 3 p.m. at the aforementioned 598 Madison Avenue, New York City. Mr. Unger at that time received a check, certified at the request of the buyer-drawer, drawn on the National Safety Bank and Trust Co., Broadway and 38th Street, New York City, in the amount of $ 246,398.57. The practice of the drawee bank, normally, would be to pay such a check in cash upon proper and sufficient identification of the payee, provided it was satisfied as to the genuineness of the instrument and the endorsement thereon, and after having checked with the drawer thereof (see affidavit of Maxim Buchwalter dated 1/29/58).
Returning immediately to Newark, Mr. Unger gained admittance to the Franklin Washington Trust Co. after closing hours and thereupon deposited the certified check in his trustee account (see Exhibit attached to affidavit of Stanley J. Marek filed 2/25/58) and the proper entries were made in Mr. Unger's trustee ledger (see 25(5) of Government's Answer to Bill of Particulars). The deposit slip used by the defendant bore this wording:
'In receiving items for deposit or collection, this Bank acts only as depositor's collecting agent and assumes no responsibility beyond the exercise of due care; * * * all items are credited subject to final payment in cash or solvent credits.'
In accordance with local banking custom, the certified check was sent to the Federal Reserve Bank of New York for collection and the endorsements indicate that the check cleared the Federal Reserve Bank of New York on January 3, 1950, at which time the Franklin Trust Co. was credited with the amount thereof. Thereafter, the funds were available for distribution (see Affidavit of Stanley J. Marek dated 1/7/58).
On December 31, 1949, defendant prepared two checks on his trustee account in the amounts of $ 70,000 and $ 32,443.09 payable to Mrs. Kamm, which were deposited in two separate bank accounts in her name by his secretary on January 3, 1950, that being the first business day following the closing (see B.P. Exhibit 4, p. 37, and p. 4 of Affidavit of Stanley J. Marek dated 1/7/58).
The fact that the agent, receiving a check to his own order, was acting for two independent principals under a contract authorizing him to receive payment, pay expenses, and divide the net proceeds in equal shares between the principals and the size of the check involved in this case (over a quarter of a million dollars) make this comment of Mr. Justice Pitney in Southern Pacific Co. v. Lowe, 1918, 247 U.S. 330, 338, 38 S. Ct. 540, 543, 62 L. Ed. 1142, particularly pertinent: 'The case turns upon its very peculiar facts * * *.'