Bosworth v. Van Laningham
| Decision Date | 29 October 1923 |
| Docket Number | 6143. |
| Citation | 293 F. 875 |
| Parties | BOSWORTH v. VAN LANINGHAM. In re KENTUCKY RURAL CREDIT ASS'N. |
| Court | U.S. Court of Appeals — Eighth Circuit |
L. C Boyle, of Kansas City, Mo. (A. M. Baker, of Huntsville, Ala and J. G. L. Harvey and James A. Reed, both of Kansas City Mo., on the brief), for plaintiff in error.
William Thomson, of Kansas City, Mo. (George K. Brasher, of Kansas City, Mo., on the brief), for defendant in error.
Before SANBORN, Circuit Judge, and BOOTH and FARIS, District Judges.
The question in this case is: Does the petition state facts sufficient to constitute a cause of action against the defendant? This question was raised by a general demurrer which was sustained by the court below. The facts stated in the complaint that are material to the determination of the issue are these:
In September, 1914, the Kentucky Rural Credit Association was incorporated under the laws of Delaware for the ostensible purpose of selling its capital stock and loaning money to farmers on long time at low rates of interest upon promissory notes and bonds secured by mortgages. The par value of its shares of stock was $50. On October 2, 1914, it made a contract with the defendant below, Otto L. Van Laningham, to the effect that he should sell its stock to applicants for $100 per share, payable 25 per cent. in cash, 25 per cent. in 90 days, 25 per cent. in 9 months, and 25 per cent. in 15 months; that for his services he should receive a sum equal to the amount of the initial cash payments on the stock so sold by him and should retain such initial cash payments in payment for his services. In accordance with this contract he sold 8,036 1/2 shares of the stock of the corporation, and there was paid to him for the sale of that stock, according to the terms of his contract, $200,912.50.
On May 10, 1917, the association was adjudged bankrupt. Clifford C. Bosworth became the trustee in bankruptcy of its estate, and brought this action as such to recover from the defendant $200,912.50 damages, which he alleged the defendant had inflicted upon the association by receiving and retaining the initial payments on the sales of stock he sold pursuant to his contract. In his petition the trustee alleged, in addition to the facts already stated, that the defendant, in selling the stock, knowingly, intentionally, and fraudulently made many false statements and representations relative to the character, responsibility, and purposes of the association; that he selected and elected, or caused to be selected and elected, directors and officers of the association, who would and did do his bidding; that through them he controlled and directed the affairs, business, and operation of the corporation, and caused the corporation to make the contract with him; that he did all these things for the purpose of securing to himself the initial payments on the stock he sold and making the corporation bankrupt; that he accomplished that purpose, and that by his collection and retention of the initial payments, which aggregated $200,912.50, he damaged the corporation in that amount, and made it insolvent and bankrupt.
In this action the trustee stands in the shoes of the bankrupt corporation. If his petition does not set forth probative facts sufficient to have constituted a cause of action against the defendant in favor of the corporation, if that corporation had not been adjudged bankrupt, it states no cause of action in favor of the trustee.
It is a familiar rule of pleading that probative facts sufficient to constitute a cause of action must be alleged, and that allegations of the legal conclusion of the pleader will not take the place of an averment of such facts. Laying aside the bald allegation of the pleader's legal conclusion that the collection and retention of the initial payments damaged the corporation to their amount, no facts seem to have been alleged from...
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