Holloway v. Thompson

• Decision Date: 16 June 1942
• Docket Number: 16807.
• Citation: 42 N.E.2d 421,112 Ind.App. 229
• Parties: HOLLOWAY et al. v. THOMPSON et al.
• Court: Indiana Appellate Court

42 N.E.2d 421

112 Ind.App. 229

HOLLOWAY et al. v. THOMPSON et al.

No. 16807.

Appellate Court of Indiana, in Banc.

June 16, 1942

Todd & McCormack and Harvey D. Trimble, all of Indianapolis for appellants.

L Russell Newgent, of Indianapolis, and Scifres &amp Hollingsworth, of Lebanon, for appellees.

FLANAGAN Chief Justice.

Appellees brought this action against appellants by a complaint in four paragraphs.

Each paragraph alleges the following facts:

In February, 1938, appellant Alice G. Holloway, with others organized the Fall Creek Cemetery Association, Inc., appellant herein, for the purpose of developing into a cemetery certain real estate in Indianapolis owned by her and then conveyed to said corporation. Appellant Alice G. Holloway was secretary of said corporation.

The cemetery was to be known as Sutherland Park Cemetery. About the same time appellants engaged one Lee Barker, one Eddleson and one M. Clark to sell the cemetery lots, prepared literature for their use and established an office for them to use under the name of Sutherland Park Sales Company. They authorized said Sutherland Park Sales Company to solicit and offer to buy bonds and securities from the public, convert the same into cash and pay appellants part thereof for the cemetery lots. Appellants accepted the proceeds from such transactions in payment for such lots knowing the nature of the transactions. The literature contained false representations that the project was a "civic enterprise," that purchasers would "reap handsome profits", that numerous improvements were to be made including a new building, and also contained pictures of tombstones and monuments in the cemetery which did not in fact exist. Appellees, who are husband and wife, were 80 and 76 years of age respectively, were wholly unacquainted with Marion County property, lived in Delphi, Indiana, and were infirm and unable to travel alone to Indianapolis. About February 15, 1938, Eddleson called upon appellees at their home in Delphi, made the representations contained in the literature as above set forth, and made the further representations that if appellees would endorse and surrender to him certain stocks which they owned and which were of the market value of about $1,500, he would pay them $2,800 therefor by giving them $150 in ten days and $2,650 with interest at 6% at the end of one year. Appellees were to receive a deed for certain of the Sutherland Park Cemetery lots which they would hold for a year and then surrender upon receiving the $2,650. The money obtained from the sale of their stock, they were told by Eddleson, was to be used in developing the cemetery and they were assured by him that the investment was safe and if they needed any money before the end of the year he would advance it to them. Appellees endorsed and delivered their stock to Eddleson and he sold it and paid part of the proceeds to appellants for which they executed a deed to appellees for four and one-half lots with burial space for 31 bodies. The deed and $150 cash were delivered to appellees but they received nothing more. Neither of appellants, nor the Sutherland Sales Company, nor any of its officers or agents, including Eddleson, were registered under the Indiana Securities Act (§ 25-830 to 25-853, Burns' Supplement 1933, § 14884-7 to 14884-29, Baldwin's May 1937 Supplement) as dealers or agents. All the representations were false and were relied upon by appellees.

The first paragraph contains in addition to the above facts allegations that in April, 1938, appellant Holloway and Sidney L. Aughinbaugh, who was vice-president of appellant Fall Creek Cemetery Association, Inc., called upon appellees in their home in Delphi, inquired why appellees had not been to Indianapolis to see the cemetery and when informed that Eddleson was to take them there but had not done so, said "Yes, we sometimes do that." Appellees then informed their visitors of the representations made to them and were told that Eddleson would no doubt pay them the balance which he had promised to pay them.

Paragraph two contained the additional allegation that Eddleson at the time of the transaction with appellees was the agent of appellants acting within the scope of his authority.

Paragraph three contained the additional allegation that appellees' loss was the proximate result of appellants' bringing to Indianapolis Eddleson and the others to sell the cemetery lots on any method they might adopt.

Paragraph four contained the additional allegation that the transaction resulted from a conspiracy on the part of appellants, Eddleson and his associates to defraud appellees and the public generally.

Each paragraph alleges rescission and demands damages including attorney fees.

A motion to strike parts of the complaint, and a several demurrer to each paragraph thereof were each overruled. Appellants answered in general denial and the cause was submitted to a jury which returned a verdict for appellees assessing damages in the sum of $1,400 plus $500 attorney fees. Appellants' motion for judgment notwithstanding the verdict, and motion for a new trial were each overruled and judgment entered on the verdict.

Appellants assign as error, (1) overruling their motion to strike parts of the complaint; (2) overruling their demurrer; (3) overruling their motion for judgment notwithstanding the verdict; and (4) overruling their motion for a new trial.

The first alleged error is the overruling of appellants' motion to strike parts of the complaint. A motion to strike parts of a complaint is addressed to the sound discretion of the trial court. King v. Ransburg, Ind.App.1942, 39 N.E.2d 822.

Appellants have failed to point out, and we do not discover, wherein the trial court abused its discretion or wherein appellants were harmed by the overruling of their motion to strike parts of the complaint.

The first question presented by appellants' demurrer is whether the complaint alleges such violation of the Indiana Securities Act as to give appellees a cause of action under § 25-847, Burns' Supplement 1933, § 14884-24, Baldwin's May 1937 Supplement, which reads as follows:

"Every sale or contract for sale made in violation of any of the provisions of this act shall be voidable at the election of the purchaser and the person making such sale or contract for sale and every officer, director or agent of or for such seller who shall have participated or aided in any way in making such sale shall be jointly and severally liable to such purchaser in an action at law in any court of competent jurisdiction upon tender to the seller of the securities sold or of the contract made for the full amount paid by such purchaser, together with all taxable court costs and reasonable attorney's fees in any action or tender under this section: Provided, That no action shall be brought for the recovery of the purchase-price after two (2) years from the date of such sale or contract for sale: And provided, further, That no purchaser otherwise entitled shall claim or have the benefit of this section who shall have refused or failed within a reasonable time to accept the voluntary offer of the seller to take back the security in question and to refund the full amount paid by such purchaser, together with interest on such amount for the period from the date of payment by such purchaser down to the date of repayment, such interest to be computed:

"(a) In case such securities consist of interest-bearing obligations at the same rate as provided in such obligations; and

"(b) In case such securities consist of other than interest-bearing obligations at the rate of six (6) per cent per annum; less in every case the amount of any income from said securities that may have been received by such purchaser."

Subsection (c) of § 25-831, Burns' Supplement 1933, § 14884-8 Baldwin's May 1937 Supplement, reads as follows: "The terms 'sale,' 'sell,' 'offer to sell,' or 'offer for sale,' shall include every sale, resale or disposition of, attempt or offer or solicitation to dispose of, or solicitation of an offer to buy, or promotion, repromotion, or promotional distribution of, a security or interest in a security, for value; and shall include an exchange, an option of sale, a subscription or an offer to sell or to invite offers for or inquiries about securities by personal solicitations, directly or by telephone, or by an agent or by letter, circular, radio, advertisement or otherwise; except that such terms shall not include preliminary negotiations or agreements between an issuer and any underwriter. Any security given or delivered with or as a bonus on account of, any purchase of securities or any other thing, shall be conclusively presumed to constitute a part of the subject...