Errion v. Connell, 14797.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Citation236 F.2d 447
Docket NumberNo. 14797.,14797.
PartiesEdgar Robert ERRION, also known as E. R. Errion and Bob Errion; Amy Errion, Violet Kellerstraus, and C. W. Williamson, Appellants, v. Marguerite L. CONNELL, Appellee.
Decision Date10 August 1956

236 F.2d 447 (1956)

Edgar Robert ERRION, also known as E. R. Errion and Bob Errion; Amy Errion, Violet Kellerstraus, and C. W. Williamson, Appellants,
Marguerite L. CONNELL, Appellee.

No. 14797.

United States Court of Appeals Ninth Circuit.

August 10, 1956.

236 F.2d 448
236 F.2d 449
Olwell & Boyle, Lee Olwell, Thomas C. Boyle, Seattle, Wash., for appellants

White, Sutherland & White, William F. White, Portland, Ore., Malcolm S. McLeod, Seattle, Wash., for appellee.

Before STEPHENS, POPE and FEE, Circuit Judges.

STEPHENS, Circuit Judge.

Appellee, Marguerite L. Connell, an eighty-year-old widow, brought this action in the district court for damages together with a prayer for the cancellation of certain instruments under section 10 (b), section 27 and section 29(b) of the Securities Exchange Act of 1934, as amended,1 and Rule X-10B-5 as promulgated by the Securities Exchange Commission.2 Named as party defendants were the appellants herein and others who were either dismissed from the case or who did not appeal.

236 F.2d 450

The facts of the case were vigorously disputed at the trial. In order to understand the case, we will here state it as the facts were found by the trial court. Whether they find support in the evidence we shall presently discover.

Appellee, Marguerite Connell, was induced by Edgar Robert Errion, hereinafter referred to as Mr. Errion, to enter into a purchase and sale agreement wherein Mrs. Connell would sell and Mr. Errion would purchase securities and other property having a total value of $124,180.09. Mr. Errion was in turn to deed to Mrs. Connell 125 acres of tide-lands in Coos Bay, Oregon, at the time of sale represented by Errion to Mrs. Connell to be worth $1200 per acre, or a total of $150,000.

The negotiations for this purchase and sale agreement were undertaken on or about August 22, 1949, and consummated on or about October 19, 1949, with E. R. Errion and/or Holdorf Oyster Corporation. Holdorf Oyster Corporation was held by the trial court to be controlled by Mr. Errion and that it was his alter ego. The court found that Mrs. Connell considered that she was engaged in a single transaction with Mr. Errion wherein she was selling her securities and other property to Mr. Errion for 125 acres of oyster lands valued at $1200 per acre, and she relied upon Mr. Errion to effect such a transaction. The transaction was consummated in the following manner: —

(a) August 22, 1949, Mrs. Connell deeded to Dwight Holdorf and Opal Holdorf two parcels of real property located in Seattle, Washington.
(b) About September 8, 1949, Mrs. Connell handed to Mr. Errion some $24,000 worth of corporate stock. Mr. Errion\'s wife, Amy Errion, sold the stock on her own account with and at Merrill, Lynch, Fenner and Beane, in Seattle, Washington, and received $24,624.11 in her own name, which check she used to purchase cashier checks and delivered the checks to her husband.
(c) On September 12, 1949, Errion gave to Mrs. Connell a one-year promissory note for $24,624.11, which the court held Mrs. Connell considered and treated as a receipt for the shares of corporate stock pending delivery to her of the deed to the Oregon lands. Later, Amy Errion received $122.61 as further proceeds from the sale of the stock and she deposited the check in her own account at Salem, Oregon.
(d) Between August 22, 1949, and October 19, 1949, the other securities and property consisting of a promissory note (maturity exceeding nine months), an annuity insurance policy, and three conditional sales contracts upon real property in Seattle, Washington, were transferred either to Dwight Holdorf, Opal Holdorf, and/or Holdorf Oyster Corporation.
(e) About October 19, 1949, with Opal Holdorf present and witnessing the signature of Mrs. Connell, Dwight Holdorf presented to Mrs. Connell a written document receipting for all of the securities and other property, except the corporate shares, together with the promissory note of Errion in the amount of $24,624.11 dated September 12, 1949, for and in consideration of a deed to 125 acres of land in Coos
236 F.2d 451
Bay, Oregon. The receipt document was signed on behalf of Holdorf Oyster Corporation by Dwight Holdorf and Katherine Gold, as officers, and by Mrs. Connell, with Opal Holdorf signing as a witness. At this time Dwight Holdorf secured from Mrs. Connell, endorsed in blank, the note of Mr. Errion. Mrs. Connell received a deed of Holdorf Oyster Corporation to 125 acres of land in Coos Bay, Oregon. Federal Documentary Stamps were placed on the deed which would indicate that the consideration from Mrs. Connell was $150,000.

It was brought out at the trial that Mr. Errion induced Mrs. Connell to enter into this transaction by making a number of false representations, the most important of which was the alleged fact that the Port of Coos Bay, Oregon, was planning to condemn the Oregon land and would do so within a year, and that the land was reasonably worth $1200 per acre; but, that in order to establish such a valuation, Mr. Errion was inducing several people to buy the land there so that there would be sales within the area which would support such a valuation. Mr. Errion represented to Mrs. Connell that she therefore would have a profit, represented by the difference between her securities and property values at some $124,000, and the $150,000, the supposed value of the land in Oregon. At the trial, experts testified that the land was worth only $12,500. Mrs. Connell also testified that another reason she entered into the deal was because it enabled her to sell her two homes in Seattle, Washington. There never was a completed condemnation suit of the land.

After the various transactions described above had been completed, there then occurred a series of what counsel for appellee (Mrs. Connell), and the trial judge, described as "lulling activities" on the part of appellants to prevent Mrs. Connell from ascertaining the true facts. The court held that Mr. Errion told Mrs. Connell not to go to Coos Bay to inspect the tidelands; to stay away from the land she had purchased; and to refrain from discussing the deal with anyone. The court further held that, as an added part in "lulling" Mrs. Connell into a feeling of security, appellants did the following things: allowed Mrs. Connell to live rent free in her home in Seattle which she had later conveyed to Holdorf Oyster Corporation; arranged for Mrs. Connell to go with Amy Errion to Southern California from July, 1950, to December, 1950; and had Holdorf Oyster Corporation pay to Mrs. Connell, as a loan, some $4200 in various amounts between September, 1950, and April, 1951, taking in return promissory notes from Mrs. Connell.

Mrs. Connell, on December 14, 1950, while in Southern California with Amy Errion, was presented by Mr. Errion with a written "Indenture of Lease" which Mr. Errion had brought with him from Oregon, and which already had been signed by appellant, C. W. Williamson. Mr. Errion represented to Mrs. Connell that Mr. Williamson was a man from the East with a great amount of wealth and was interested in cultivating oysters in Coos Bay, Oregon. Mr. Errion told Mrs. Connell if she would execute the lease as lessor, Mr. Williamson would undertake and be obligated to cultivate the land by growing oysters and pay to Mrs. Connell one-third of the net earnings as rent for the land, and also would be obligated over a 12-year period to purchase all of Mrs. Connell's land for $1200 per acre. Mr. Errion also, for the first time, told Mrs. Connell that the condemnation action, commenced by the Port of Coos Bay, had been dismissed but the Port had caused damage to the lands and that Mrs. Connell had a cause of action against the Port for such damage and that he, Mr. Errion, would prosecute the same for her and collect a large sum of money as damages for Mrs. Connell. Mr. Errion also told Mrs. Connell that if she at any time needed money she could use the "Indenture of Lease" as security and borrow large sums of money thereon at any bank. The court

236 F.2d 452
held that Mrs. Connell relied on what Errion had represented, and signed the lease, not having read it as well as she might otherwise have done

The court held that Mr. Williamson knew that his part in the execution of the lease was a segment of an overall scheme to defraud Mrs. Connell; that Mr. Williamson was not a wealthy man from the East; had no intention of buying with his own money any of the oyster lands; and was acting only as a "front" and intended to pay Mrs. Connell such sums of money as Mr. Errion, Dwight Holdorf and/or Holdorf Oyster Corporation might give him for such purposes. The lease actually only obligated Williamson to buy $30,000 worth of the land as Mr. Williamson might select at $1200 an acre.

The court further held that no bank would loan money on such a lease, and that the Port of Coos Bay had not damaged Mrs. Connell's land.

These findings are supported by the evidence.

Mr. Williamson, as a further part of the scheme, paid to Mrs. Connell a total of $22,500 in various installments during the years 1951, 1952, and 1953. This money came from Dwight Holdorf, Holdorf Oyster Corporation, and/or National Forest Products, a corporation, at and upon direction of Mr. Errion.

The court held that National Forest Products was in reality owned by Errion and was the alter ego of Errion.

Most of the money paid to Mrs. Connell under this lease, the court held, came from the sale of securities and other-property which had been received from Mrs. Connell originally in 1949. By virtue of the $22,500 Mrs. Connell received from Mr. Williamson, she deeded to Williamson 16 of her 125 acres. Mrs. Connell attempted to borrow on the "Indenture of Lease" but was unsuccessful.

In July, 1951, Holdorf Oyster Corporation, as a part of the scheme to defraud Mrs. Connell, had deeded back to Mrs. Connell one of the pieces of property in...

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