New v. Tribond Sales Corporation

• Decision Date: 02 May 1927
• Docket Number: No. 4447.,4447.
• Citation: 19 F.2d 671
• Parties: NEW, Postmaster General, v. TRIBOND SALES CORPORATION.
• Court: U.S. Court of Appeals — District of Columbia Circuit

19 F.2d 671 (1927)

NEW, Postmaster General, v. TRIBOND SALES CORPORATION.

No. 4447.

Court of Appeals of District of Columbia.

Submitted March 8, 1927.

Decided May 2, 1927.

Petition for Rehearing Denied May 20, 1927.

Peyton Gordon, L. A. Rover, and C. W. Hassell, all of Washington, D. C., for appellant.

E. F. Colladay, C. C. Cooper, Jr., and H. S. Barger, all of Washington, D. C., for appellee.

Before MARTIN, Chief Justice, ROBB, Associate Justice, and GRAHAM, Presiding Judge of the United States Court of Customs Appeals.

ROBB, Associate Justice.

Appeal from a decree in the Supreme Court of the District of Columbia, granting a permanent injunction against the enforcement of a fraud order theretofore issued by the Postmaster General against the Tribond Sales Corporation, the appellee.

On April 6, 1925, the Solicitor for the Post Office Department filed written charges against the appellee, and gave notice that it show cause why a fraud order should not be issued against it. Hearings were had on these charges, resulting, on June 2, 1925, in a comprehensive written report by the Solicitor to the Postmaster General, concluding as follows: "I find that this scheme is a lottery, and is likewise inherently fraudulent. I therefore recommend that a fraud order be issued against the Tribond Sales Corporation at New York, New York."

On the day this report was made the Postmaster General, "upon evidence satisfactory to him" (sections 3929 and 4041, R. S. Comp. St. §§ 7411, 7573), issued the fraud order in question. On June 3, 1925, appellee obtained from the court below a temporary injunction against the enforcement of the fraud order, and on June 12th an injunction pendente lite was issued. Thereupon a hearing was had in the court below, resulting, on June 14th, in the permanent injunction from which this appeal was taken.

Appellee's scheme contemplates the sale of so-called "contracts," to each of which is attached three coupons, designated respectively as coupon A, coupon B, and coupon C. The "contract" reads as follows:

"No. ______.

"Tribond Sales Corporation, 150 Broadway, New York City.

"The Tribond Sales Corporation, hereinafter known as the corporation, acknowledges receipt of the sum of four ($4) dollars from ______, hereinafter known as the receipt holder, on account of the purchase of one lot of hosiery, to be chosen from those described on the reverse side hereof, of the agreed price and reasonable value of ten ($10) dollars, the corporation to make immediate delivery upon the payment of the balance of six ($6) dollars on the purchase price within the period of one (1) year from the date hereof.

"The corporation, being desirous of extending its business through its customers, makes the following offer, of which the receipt holder may, if he so desires, avail himself prior to payment of the balance of the purchase price:

"The receipt holder may sell under contract three (3) lots of hosiery to three (3) purchasers, under similar terms and conditions as herein stipulated, in the following manner:

"He shall issue the three (3) coupons attached hereto for the sum of one (1) dollar per coupon to any one desiring to purchase a lot of hosiery of similar description, and shall retain the money so received as his own with the consent of the respective purchasers, forwarding to the corporation, for its records, the names and addresses of such coupon holders on the enclosed sheet.

"The holder of the coupon shall immediately remit the same to the office of the corporation, together with the sum of three ($3) dollars, and will receive in return therefor a receipt and contract acknowledging four ($4) dollar payment on account of said hosiery and similar in all respects to the one herein issued.

"As soon as all three (3) of these coupon remittances are received by the corporation, there will be forwarded to the receipt holder the lot of hosiery selected without any further payment on his part.

"The same offer applies to all persons contracting for the purchase of said hosiery; that is, either to remit the sum of six ($6) dollars balance, or assist in the sales of the corporation in the manner herein above described.

"In the event that the receipt holder shall sell only two lots of hosiery, said receipt holder shall remit to the corporation the sum of three ($3) dollars, accompanied by this contract and the unsold coupon, and he shall immediately receive delivery of the lot of hosiery selected.

"In the event that the receipt holder shall sell only one lot of hosiery, said receipt holder shall remit to the corporation the sum of five ($5) dollars, accompanied by this contract and the two unsold coupons, and he shall immediately receive delivery of the lot of hosiery selected.

"It is distinctly understood that, for the purposes of this contract, a sale shall not be deemed consummated by the receipt holder until the sum of three ($3) dollars has been remitted to the Tribond Sales Corporation by each coupon purchaser.

"It is understood and agreed that the system of the Tribond Sales Corporation is by no means imposed upon prospective purchasers. On the contrary, it represents a proposition to them whereby they may obtain ten dollars' worth of hosiery at a considerable reduction in proportion with the results obtained by them in assisting and promoting the sales of the Tribond Sales Corporation.

"The receipt holder undertakes to communicate to his coupon purchasers the exact terms of this contract, so as to avoid any misunderstandings and insure proper execution of the terms and conditions in the contract, and for that purpose receives herewith three (3) true copies of said contract.

"Tribond Sales Corporation "By ______, Secretary-Treasurer. "Date: ______.

"Please mention the number of your contract or coupon in all correspondence."

On the face of each coupon is the following:

"Tribond Sales Corporation, 1225 Broadway New York. "Coupon ______. $1.00. No. ______. "Holder: ______. (Print name in full.) "______. (Street and number.) "______. (City and state.) "Important: Read other side."

The reverse side of each coupon bears the following:

"The sum of one ($1) dollar paid for this coupon is part payment on account of the purchase price of one lot of hosiery to be chosen from those described on the reverse side of the contract to which this coupon was attached, and of which contract the holder of this coupon acknowledges having received a true copy; said holder declares having carefully noted the terms of sale stipulated in said contract and hereby accepts and agrees to fully comply with same in their entirety.

"The holder of this coupon undertakes and agrees to immediately send to the Tribond Sales Corporation the sum of three ($3) dollars, together with this coupon, and will receive in return therefor an original receipt and contract acknowledging four ($4) dollar payment on account of the purchase price of the lot of hosiery mentioned, which contract is similar in all respects to the one to which this coupon was attached."

A blank form is sent to each "contract" purchaser, upon which to report to the corporation the names and addresses of the purchasers of the three coupons, each of whom receives his "contract" on the same conditions as the original purchaser.

The cost of this "contract" to the purchaser is $4. Upon consummation of the purchase he is designated as "the receipt holder." He may sell the three coupons for $1 each, and, "with the consent of the respective purchasers," retain the $3. The "receipt holder" then has $1 invested in the scheme. If and when each of the three "respective purchasers" remits to the appellee $3, the "receipt holder" is entitled to his hosiery without further payment. This hosiery costs appellee $5.50 and is of the reasonable value of $10. It is apparent, therefore, that if the "receipt holder" succeeds in selling the three coupons, and each of the purchasers remits $3 for another "contract" containing three more coupons, the original "receipt holder" receives goods of the value of $10 for an expenditure of $1. In other words, he gets ten for one. If the original "receipt holder" succeeds in selling only two coupons, and each of the purchasers makes return as in the first instance, the "receipt holder" may obtain the hosiery, of the value of $10, by remitting to the corporation $3 and returning the unsold coupon. The "receipt holder," having reduced his original investment of $4 by the sale of the two coupons for $2, thus gets the hosiery for a total investment of $5. He therefore obtains for $5 hosiery of the value of $10, or gets two for one. If the "receipt holder" succeeds in selling but one coupon, he may obtain the hosiery by returning the two unsold coupons and paying $5, so that in this...