863 F.2d 1356 (7th Cir. 1988), 86-2893, Deppe v. Tripp
|Docket Nº:||86-2893, 86-2894 and 87-1524.|
|Citation:||863 F.2d 1356|
|Party Name:||, RICO Bus.Disp.Guide 7104, James DEPPE, William Deppe, William Clinton Deppe, and Charles Stephen Aggert, Plaintiffs-Appellees, v. Herman TRIPP and Howard Weitekamp, Defendants-Appellants.|
|Case Date:||December 21, 1988|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued Dec. 4, 1987.
Rehearing En Banc Denied.
John L. Swartz, Giffin, Winning Lindner Cohen & Bodewes P.C., Springfield, Ill., Jeffrey N. Cole, Jeffrey Neal Cole, Ltd., Chicago, Ill., for defendants-appellants.
Duane D. Young, Long Rabin & Young, Ltd., Springfield, Ill., for plaintiffs-appellees.
Before COFFEY and KANNE, Circuit Judges and ESCHBACH, Senior Circuit Judge.
KANNE, Circuit Judge.
The plaintiffs-appellees filed this three count civil action based upon their purchase of stock in the White Mountain Corporation. Count I alleged securities fraud, Count II alleged a conspiracy to commit securities fraud, and Count III alleged a cause of action under the Racketeer Influenced Corrupt Organizations Act ("RICO"). Herman Tripp was named as a defendant in all three counts and Howard Weitekamp was named as a defendant in the second and third counts. A jury returned verdicts in favor of each individual plaintiff-appellee. Herman Tripp was held liable for $25,000.00 in damages in each of Counts I and III. Howard Weitekamp was held liable for $25,000.00 in damages in Count III. Both defendants-appellants were held jointly liable for $25,000.00 in damages in Count II.
Pursuant to the plaintiff-appellees' post-trial motions, the district court trebled the damages under Count III, pursuant to 18 U.S.C. Sec. 1964(c), and awarded limited attorneys' fees. After a hearing, the district court also denied the defendants-appellants' motions for judgment notwithstanding the verdict and for a new trial. Herman Tripp and Howard Weitekamp appeal the district court's entry of judgment upon those verdicts. Howard Weitekamp also appeals the district court's order granting the plaintiffs-appellees' motion for attorneys' fees. We affirm the district court.
This action stems from sales of securities in the White Mountain Corporation ("White Mountain"), an Illinois corporation formed in 1983. Ostensibly, White Mountain was a venture seeking to develop the commercial use of diatomaceous earth. 1 Appellant Tripp had been involved in numerous prior entrepreneurial activities and had agreed to arrange a $1.5 million financing package to aid White Mountain in developing its diatomaceous earth project. Appellant Weitekamp was White Mountain's corporate secretary.
William Bernard Deppe ("Bernard Deppe") is a retired farmer and is the father of James Deppe and William Clinton Deppe ("Clint Deppe"). The fourth plaintiff, Stephen Aggert, is a friend of the Deppe family. This group (the "Deppes") was introduced to Howard Weitekamp and Joe Trello, White Mountain's President, by Bob Garvey who was one of Bernard Deppe's neighbors. Trello unveiled the wonders of diatomaceous earth to Bernard Deppe, hoping that Deppe would loan money to the project on an interim basis until Herman Tripp obtained the $1.5 million financing package. Bernard Deppe agreed to arrange for a bank to provide a $50,000.00 line of credit. This line of credit was never used and it expired. However, shortly after the line of credit expired, Bernard Deppe, at the request of Trello and Weitekamp, loaned White Mountain $27,500.00 for sixty days. This loan was not repaid.
Sometime early in July of 1983, Herman Tripp told Bernard Deppe that he was going to sell some of the stock that he held in White Mountain. 2 Bernard Deppe was led to believe that the proceeds from this sale would provide further interim assistance to White Mountain until the $1.5 million arrived. A few days later, on July 12, 1983, all four plaintiffs-appellees met at Howard Weitekamp's office to purchase White Mountain stock. Joe Trello, Herman Tripp, and Howard Weitekamp all were present. Bernard Deppe received credit for his loan to White Mountain toward his stock purchase. James Deppe, Clinton Deppe, and Stephen Aggert each wrote personal checks to White Mountain in the amount of $25,000.00. Herman Tripp disapproved of this arrangement, insisting that the checks be made payable to him instead of White Mountain. Nevertheless, he assured the Deppes that the money was to go to the corporation. After the plaintiffs-appellees wrote new checks as instructed, Herman Tripp issued stock certificates, which also included the signature of Howard Weitekamp.
In addition to funds intended for the corporation instead going to a "shareholder," 3 several other irregularities embraced this transaction. For example, Herman Tripp admitted that he tendered no consideration for his own "shares" in the corporation. Additionally, White Mountain's attorney--its sole incorporator--testified at trial that no authorization existed to issue stock at the time the Deppes purchased the stock. Thus, the shares issued on July 12, 1983 to the Deppes were not legally authorized shares of the White Mountain Corporation. Further, the attorney-incorporator testified that in fact he had told Howard Weitekamp that issuing shares in the corporation was unlawful at that time. Finally, even if shares could have been issued legally, the attorney-incorporator's personal authorization was required before any shares could be issued to new shareholders--authorization never received by Herman Tripp or Howard Weitekamp. Summarized,
the defendants-appellants, contrary to their representations, sold the plaintiffs-appellees stock that the corporation had not authorized or issued. Further, the funds went not to the corporation, but instead to Howard Weitekamp's personal account. Finally, although some portion of the funds were deposited in the corporation's account eventually, a substantial portion of the funds were spent by both Herman Tripp and Howard Weitekamp. 4
Within days, Joe Trello again complained that the corporation needed money. At that time, the plaintiffs-appellees realized that contrary to Herman Tripp's representations White Mountain's corporate coffers had not received the funds. Shortly thereafter, Herman Tripp informed the Deppes that he and "Weitekamp [had] decided to leave White Mountain Corporation and form their own partnership [to develop diatomaceous earth]." (Tr. 127). Herman Tripp offered the Deppes a two percent interest in this new venture, White Mountain Mining and Mineral Company ("White Mountain II"). 5 Herman Tripp further offered to give the Deppes credit for their investment in the old White Mountain Corporation, but stated that he would need another $25,000.00 in cash from Bernard Deppe. Wisely, the Deppes declined the offer.
At the time Herman Tripp offered the Deppes stock in White Mountain II, another slight problem existed. Herman Tripp's offer to the Deppes occurred in September, 1983. However, plaintiffs' exhibit 150, a certificate from the office of the Idaho Secretary of State, indicates that White Mountain Mining and Mineral Company had been dissolved on November 30, 1982.
In November of 1983, the plaintiffs-appellees filed a two count suit in federal court. Herman Tripp and Howard Weitekamp were named as defendants. Count I of the original complaint alleged that Herman Tripp sold stock in White Mountain by making misrepresentations. In addition, his sales were not de jure corporate acts and thus constituted securities fraud in violation of the Securities Exchange Commission's Rule 10b-5. The second count alleged that the defendants-appellants had conspired to fraudulently sell stock in White Mountain to the plaintiffs-appellees. The complaint later was amended to charge both Weitekamp and Tripp with a third count. Count III alleged that the defendants were conducting an enterprise (White Mountain) through a pattern of racketeering activity in violation of RICO, 18 U.S.C. Sec. 1961 et seq. The Deppes sought treble damages and attorneys' fees under this count.
In the district court, Herman Tripp and Howard Weitekamp were represented jointly by attorneys William Ted Lewis and Michael W. Hogan. Prior to trial, the defendants-appellants filed motions to dismiss all three counts. The motions were denied and the case subsequently was tried to a jury. A verdict was returned in favor of all four plaintiffs-appellees and against Herman Tripp upon Counts I, II, and III, and against Howard Weitekamp upon Counts II and III.
After the trial, the plaintiffs-appellees filed a motion to amend the judgment pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. Specifically, as to the jury verdict upon the RICO charges, they sought to have their individual damage awards of $25,000.00 trebled pursuant to 18 U.S.C. Sec. 1964(c). They also sought reasonable attorneys' fees. The district court granted their motion, trebling their damage awards and awarding attorneys' fees in the amount of $33,093.00. The defendants-appellants filed a motion for judgment notwithstanding the verdict and, in the alternative, a motion for a new trial. These motions were denied.
The defendants-appellants, now individually represented and neither by their trial counsel, appeal from the judgments entered in this matter. Howard Weitekamp also filed a notice of appeal from the order
granting attorneys' fees. However, because Howard Weitekamp failed to brief this matter fully upon appeal, the issue is waived. Andree v. Ashland County, 818 F.2d 1306, 1310 n. 5 (7th Cir.1987).
Both Herman Tripp and Howard Weitekamp have alleged numerous errors of sufficient magnitude, in their opinion, to warrant reversal of the damage awards. The...
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