Grainger v. Jackson

• Decision Date: 30 June 1970
• Docket Number: No. 3,No. 45365,45365,3
• Citation: Grainger v. Jackson, 176 S.E.2d 279, 122 Ga.App. 123 (Ga. App. 1970)
• Parties: Floyd E. GRAINGER et al. v. D. K. JACKSON
• Court: Georgia Court of Appeals

Page 279

176 S.E.2d 279

122 Ga.App. 123

Floyd E. GRAINGER et al. v. D. K. JACKSON.

No. 45365.

Court of Appeals of Georgia, Division No. 3.

June 30, 1970.

Syllabus by the Court

In a deceit conspiracy action, the elements of deceit need not be laid out and proved in hornbook fashion but may be shown by the number and joint operation of apparently trivial circumstances. Similarly, the law does not require proof the parties held a sinister council in order to show a conspiracy. This too may be inferred from the totality of the evidence.

A defendant in a fraud conspiracy action appeals from the judgment and from the denial of his motions for a new trial and judgment n.o.v. The jury returned a verdict for $22,000 actual damages and $53,000 punitive damages against all three defendants. The other two have withdrawn their appeals.

Some time in 1966, appellant Grainger, a real estate developer, met three men in New York City. One was named Fox. These men were in the mortgage loan business. In some unspecified way, they were instrumental in convincing Grainger to enter the loan brokering business. They introduced him to a man representing a company with money to lend, and furnished him with the names of two other such companies. In November, First Fidelity Mortgage Co. was chartered in DeKalb County by defendant Rary, an attorney and personal friend of Grainger. Officer were rented down the hall from Rary's and Fox came in as manager. Grainger was the president and, along with his wife, owned all the capital stock. The business of the company was loan brokering-bringing together people who needed large loans and institutions with available money. The borrower would pay First Fidelity 10 percent of the loan as a 'finder's fee' for this service. The company placed ads in newspapers around the State. Defendant Newberry saw one of these ads. He was an employee of the Jefferson Standard Life Insurance Company whose job was arranging loans. However, in 1966 his employer had no available funds to lend so Newberry was privately finding sources for their clients. During a 90 day period, he brought three potential borrowers to First Fidelity. For this he received a part of the finder's fee. Evidence of seven separate transactions was introduced at the trial and all followed substantially the same pattern. Upon payment of 5 percent of the loan desired, First Fidelity would write up an application for the borrower and seek out a 'loan commitment' from its 'sources.' This money was to be returned if no loan were secured. Upon receipt of another 5 percent and a release, it would give the original copy of the commitment to the borrower. The 'finder's fee' money was supposedly held in escrow by Rary until this point. (However, at least one borrower who wanted to back out of the deal halfway through was told by Rary that the initial 5 percent had already been disbursed) When the borrower signed the release, the money was immediately disbursed-part to Rary for his services as 'escrow agent,' part to People like Newberry who brought in borrowers and the balance to First Fidelity. There is no evidence any of this money went to the companies which issued the commitments. During the six months of First Fidelity's corporate life, over $111,000 was received from these seven loan applicants and disbursed. In most instances, the commitment which was procured provided that the actual loan closing need not take place for 18 months after date of issue. In no instance did any applicant ever receive any money on these loans or get a refund of the finder's fee. First Fidelity itself was collapsed after six months of doing business and a year before most of the commitments became due.

The plaintiff here was one of these loan applicants. The evidence showed that he had no business training or experience; that the worked at Warner Robins Air Force Base and part time at a skating rink; that the owner of the rink (a Mr. Davenport) offered to sell plaintiff the rink for $200,000 and brought him to Newberry to arrange financing; that plaintiff had no money or property of his own; that he had no concept of financial transactions, had never heard of a loan commitment, and had never even signed a promissory note.

Newberry brought plaintiff to First Fidelity. Plaintiff was the last of the three borrowers found by Newberry, and the evidence suggests that by this time Newberry knew a commitment previously received by another borrower could not be used as the basis for a local loan. To raise the application of finder's fee, Davenport (who had credit) borrowed $22,000 from a local bank and plaintiff in turn gave Davenport two notes totaling this amount. Someone from First Fidelity and an agent of Rary flew to Macon to fill in the application for plaintiff's signature. Several days later they flew back with the commitment and collected the balance of the fee. (Flying back and forth in a chartered airplane was s.o.p. in all out-of-town transactions). All this money was turned over to Rary and disbursed. Newberry received $2,200. Plaintiff testified that Newberry had explained the transaction to him and had told him that a loan commitment was as good as money (that any bank would lend money on its strength). Plaintiff also testified that he believed he was borrowing from the Jefferson Standard until he was handed the commitment from a company called Continental Investment Bankers. He and Newberry took it to a local bank which refused to lend anything on it. (This was before Newberry accepted his $2,200). He then asked Newberry to try to get Continental to close the loan as soon as possible. After about six months with no results, plaintiff consulted a lawyer for the purpose of expediting and closing the loan. The lawyer, after several more months of investigation, was unable to even locate Continental Investment. A man in Kansas City who was supposed to be its president told the lawyer that he didn't know what had happened to the company.

Defendant Grainger testified that before commencing business he looked up in Dun & Bradstreet the three companies from which First Fidelity procured commitments and they were rated for a combined worth of 20 million dollars. He also testified that he had not participated in any of First Fidelity's day to...