Ridenour v. United States, 3400-3403.

Citation14 F.2d 888
Decision Date07 September 1926
Docket NumberNo. 3400-3403.,3400-3403.
PartiesRIDENOUR et al. v. UNITED STATES.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Luther Day, of Cleveland, Ohio, for plaintiff in error Olney.

Homer H. McKeehan, of Cleveland, Ohio, for plaintiff in error Seaver.

Richard W. Martin and Homer N. Young, both of Pittsburgh, Pa., for other plaintiffs in error.

John D. Meyer, U. S. Atty., and F. C. McCutcheon, Asst. U. S. Atty., both of Pittsburgh, Pa.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

DAVIS, Circuit Judge.

The above-named defendants were indicted and tried with Walter Temme and F. L. Kendig for having used the United States mails to carry out a scheme and artifice to defraud, which they had devised, and for conspiracy in violation of sections 37 and 215 of the federal Criminal Code (Comp. St. §§ 10201, 10385). The indictment contains 13 counts. The first 12 are for the misuse of the mails, and the last is for conspiracy to carry out the scheme and artifice set out in the other counts.

At the trial, the judge directed the jury to return a verdict of "not guilty" as to Walter Temme, and the jury acquitted F. L. Kendig. The other six were found guilty, and the judgment is here on their writ of error.

The story of the various activities of the defendants is long, involved, and confused; but, in order to appreciate the ruling by the trial judge on technical objections, it is necessary to give a short account of their principal transactions. Ridenour and Seaver, with others, organized a corporation in 1920, known as the Continental Grocery Stores, Incorporated, for the purpose of establishing a chain of stores in Ohio. When they attempted to sell the stock of the company, the department of securities of the state of Ohio required them to organize a fiscal company, for the purpose of selling the stock of the Continental Grocery Stores, Incorporated, which was capitalized at $1,000,000 8 per cent. preferred stock and $1,000,000 common stock. They organized the fiscal company, which was known as the Continental Grocery Stores Company.

They opened the first store in Cleveland, Ohio, on January 15, 1921; but prior to this time Ridenour and Seaver had decided to extend their system. They associated with themselves for this enterprise Dunlap, Whitney, Cowell, and Olney, and early in January, 1921, organized a corporation in the commonwealth of Pennsylvania, known as the Continental Grocery Stores of Pennsylvania, Incorporated. Ridenour was president, Whitney vice president, Seaver secretary, Cowell assistant secretary, Dunlap treasurer, and Olney assistant to the president. The Pennsylvania corporation was capitalized at $2,000,000 preferred stock to be sold to the public, and $2,000,000 common stock, issued to the incorporators as promotion stock, but subsequently returned to the corporation, to be given in part as bonus on the sale of preferred stock of the Pennsylvania Company, one share of common for every two shares of preferred stock purchased.

At about the same time this operating company was organized in Pennsylvania, they organized a Pennsylvania fiscal company, called the Continental Grocery Company, Incorporated, to sell the stock of the Pennsylvania operating company, which immediately entered into a contract with the selling company, whereby the latter was to sell the stock of the former on a commission of 15 per cent. On October 1, 1921, the defendants organized another corporation, called the Continental Corporation, whose object was to assume the functions of both the Ohio and the Pennsylvania fiscal companies.

The fiscal company of Pennsylvania entered into an agreement with the new fiscal company, the Continental Corporation, to sell the stock of the Pennsylvania operating company on a commission of 25 per cent. This agreement was to date back to the date of the agreement between the Pennsylvania fiscal and operating companies. The Continental Corporation was to have the assets and assume the liabilities of the Pennsylvania fiscal company. The liabilities exceeded the assets by about $37,000. The stock of the Pennsylvania operating company was sold mostly on the installment plan, but the certificates of stock were not delivered by the Continental Corporation until the stock was fully paid for. In the meantime the money received from the installment payments was kept by the Continental Corporation. The defendants, as officers of the Pennsylvania operating company, delivered $1,000,000 worth of the common stock of that company to themselves as officers of the Continental Corporation, and as such officers delivered to themselves as officers of the Pennsylvania Company $1,000,000 of the common stock of the Continental Corporation, which paid to them several dividends.

In addition to the five companies which are mentioned above, the defendants, or some of them, organized two other companies. The result was a confusion of seven "Continental" companies: The Continental Grocery Stores, Incorporated, Continental Grocery Stores Company, Continental Grocery Stores of Pennsylvania, Incorporated, Continental Grocery Company, Incorporated, the Continental Corporation, the Continental Properties Company, and the Continental Chain Stores, Incorporated.

While these corporations were being organized, and while their stock was being manipulated, the operating companies of Ohio and Pennsylvania were establishing stores here and there, mostly in Cleveland and Pittsburgh. For a while, particularly in Cleveland, the operation of the stores and the sale of stock seem to have gone along successfully. The defendants received from the sale of stock of the Ohio operating company about $700,000, from that of the Pennsylvania operating company about $800,000, from that of the Continental Properties Company between $30,000 and $40,000, and from the Continental Corporation about $40,000. The gross receipts of the Continental Grocery Stores of Pennsylvania from January, 1921, to March, 1923, amounted to more than $2,000,000. But as time went on stores were established faster than sound business judgment dictated, and consequently they became financially embarrassed. This alone, or together with other causes, led to the organization of corporations, to questionable methods of stock manipulation, and then to direct misrepresentation. Finally the whole enterprise looked like an illegitimate business, a scheme to defraud, in which the United States mails were used in violation of section 215 of the Federal Criminal Code.

Whatever might have been the motives of the defendants in the beginning in establishing a chain of stores, in organizing the various corporations, and in selling stock, in the end there can be little doubt that their sole object was "to get the money," even though their methods were "disgustingly dishonest." On May 9, 1922, the operating company of Pennsylvania entered into a contract with the Crager System, Inc., whereby the latter was to sell the stock of the former. On its face, this contract purported to be a sale of a certain amount of common stock; but in reality the salesmen of the Crager System simply became the agents of the defendants for the sale of the stock of the Pennsylvania operating company. The Crager salesmen do not appear to have been overly scrupulous.

Ridenour, president of the Continental Corporation, in writing to Olney, Nims, and Seaver, said that they were all aware that the sales by the men of the Crager Company would be accompanied by a "certain amount of dirty work and subsequent grief," and urged that they, as "principal executives in the fiscal end of the work, must guard against the demoralization from your observation of things that are disgustingly dishonest. You must steel yourselves to look upon this as the price we are paying for an amount of money which is going to be of wonderful benefit to our stockholders."

There are 52 assignments of error, but all of these have been compressed into a few propositions:

The first one is that the plaintiffs were tried upon charges not contained in the indictment. By this they refer to the allegation in the indictment that certain transactions took place between two of the companies, which were named, when, in fact, they were...

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13 cases
  • United States v. Schneiderman
    • United States
    • U.S. District Court — Southern District of California
    • August 19, 1952
    ...Engineering Co., 3 Cir., 1927, 22 F.2d 403, 406, certiorari denied, 1928, 276 U.S. 623, 48 S.Ct. 303, 72 L.Ed. 737; Ridenour v. United States, 3 Cir., 1926, 14 F.2d 888, 891; Holzer v. Read, 1932, 216 Cal. 119, 122, 13 P.2d 697, 698; Hirshfeld v. Dana, 1924, 193 Cal. 142, 148, 223 P. 451, 4......
  • Dranow v. United States
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • October 5, 1962
    ...as a whole." It is an axiom in federal practice that instructions need not be given in form and language as requested. Ridenour v. United States, 14 F.2d 888 (3 Cir. 1926). It is the duty of a trial court to instruct the jury on general principles of law applicable to the facts of a case. I......
  • Bryan v. United States 13 8212 14, 1949
    • United States
    • U.S. Supreme Court
    • January 16, 1950
    ...v. United States, 57 F.2d 816; Third Circuit: United States v. Di Genova, 134 F.2d 466; United States v. Russo, 123 F.2d 420; Ridenour v. United States, 14 F.2d 888; Eithth Circuit: Pines v. United States, 123 F.2d 825; Scoggins v. United States, 255 F. 825, 3 A.L.R. 1093; Ninth Circuit: Bu......
  • Beck v. United States
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    • U.S. Court of Appeals — Tenth Circuit
    • June 21, 1962
    ...an established course of business, an important feature of which was systematic misrepresentation by agents." In Ridenour v. United States, 3 Cir., 14 F.2d 888, 891, the court "The proofs show that the Crager System, through its salesmen, represented to the purchasers that they were the age......
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