Seimer v. James Dickinson Farm Mortgage Co.

• Decision Date: 17 April 1924
• Citation: 299 F. 651
• Parties: SEIMER v. JAMES DICKINSON FARM MORTGAGE CO. et al.
• Court: U.S. District Court — Eastern District of Illinois

299 F. 651

SEIMER v. JAMES DICKINSON FARM MORTGAGE CO. et al.

United States District Court, E.D. Illinois.

April 17, 1924

Parkinson & Parkinson, of Lafayette, Ind., and Walter T. Gunn, Fred B Penwell, and Harold F. Lindley, all of Danville, Ill., for plaintiff.

W. F Zumbrum, of Kansas City, Mo., and Rearick & Meeks, of Danville, Ill., for defendants.

LINDLEY District Judge.

This is an action of trespass on the case, wherein the declaration alleges in two counts substantially that the plaintiff in 1920 was a resident of Vermilion county, Ill., unacquainted with irrigated lands and water rights in the state of Texas and with the soil, climate, seasons, rainfall, etc., in Cameron county, Texas, and that defendants were owners of a tract of land, and conspired and combined to swindle the plaintiff by means of false representations and represented the land as worth $200 to $500 per acre, as having ample irrigation system and adequate water rights; that it would produce all crops that could be raised in Illinois, and would produce from three to five crops a year, and from $12,000 to $14,000 a year for each 40 acres; that the land was free from alkali, never had too much water, and never flooded; that every person who had bought similar land had become wealthy that purchasers advanced only a small payment, and paid for the land out of its products; that labor could be had at from 75 cents to $1.25 per day; and that lands, when cleared, were worth from $1,000 to $2,000 per acre. It is alleged that defendants prevented plaintiff from seeing any of the local residents, and represented that the persons residing on the farms were bona fide owners, whereas they were servants and employes of the defendants; that markets were good and irrigation rights were perpetual; that the lands were uniform in quality and would raise eleven crops of alfalfa a year; and that the rent of the lands would pay the notes given. The plaintiff alleges that, relying upon said representations, she purchased the land, paying therefor $300 per acre, that all the representations were untrue, and that plaintiff has been damaged as a result to the full extent of the money expended for the land. The second count also sets out the statute of Texas hereinafter set forth which awards exemplary as well as compensatory damages.

The defendants are the James Dickinson Farm Mortgage Company, a Missouri corporation, and A. D. Dickinson, a resident of the state of Texas. The defendants filed pleas of the general issue and the statute of limitations. The plaintiff replied that the fraud was not discovered within time to prevent the statute from running and that the corporate defendant was a nonresident of the state of Texas, and therefore absent within the meaning of the Texas statute. Issue was joined on these replications. Trial by jury was waived and trial had before the court. The plaintiff offered ample evidence to support her declaration and replication, and defendants rested upon the case thus presented.

From the testimony and the circumstances in evidence one is inevitably led to the conclusion that this land sale was one growing out of a scheme or plan for buying unimproved Texas land, subdividing it, laying out of roads thereon, and then selling it to colonists brought in to the Rio Grande valley from other states. In this scheme three corporations appear with various activities-- the Lone Star Immigration Company, the James Dickinson Farm Mortgage Company, a Missouri corporation, and the James Dickinson Farm Mortgage Company, a Texas corporation. The chief officers of each were one Lee James and one A. D. dickinson, who were jointly, in approximately equal parts, the owners of over 90 per cent. of the capital stock of each corporation. The Lone Star's activities were confined to selling the land. The Texas corporation owned the land, but the legal title was in one Thomas, who was bookkeeper and secretary of either the Texas or the Missouri corporation. The Missouri corporation capitalized at $1,000,000, advanced the money to the Texas corporation, capitalized at $25,000, to buy the land, and, when the Lone Star sold the tracts of land, the conveyances were made by Thomas, and the consideration was delivered in part to the Lone Star, in part to the Texas corporation, and in part to the Missouri corporation, to reimburse it for the funds it had advanced for the purchase. The amount of benefit accruing to each of said parties does not appear, and is immaterial. When the Lone Star dealt with the Texas corporation or with the Missouri corporation, and when either or both of the other companies dealt with it or with each other, Dickinson and James dealt with themselves. Being the executive officers of the three corporations, as well as the substantial owner thereof, they, in three different capacities, necessarily dealt, conversed planned, and designed with themselves, merely performing their individual activities through three different nominal legal entities, all constituting a part of a single comprehensive activity, for whom the two men were responsible and from which the same two men would lose or profit.

Plaintiff bought 20 acres. She paid for it $6,000, $3,000 in cash and $3,000 in notes, $1,500 of which went to the Missouri corporation, and a like amount to a former owner, who had a lien upon the land. The other $3,000 was received and distributed by the Lone Star Company, to whom it does not appear, except that a part of it was paid for commissions and expenses. Thus the Missouri corporation was directly benefited by the money obtained, for it was reimbursed for money advanced to the Texas Company, for the purchase of land held by Thomas and conveyed to plaintiff. If the land was worthless, as claimed, the reception of the money was manifestly to the benefit and advantage of the Missouri corporation, for there was apparently no source for reimbursement for the purchase price advanced by it, except from the resale of the land. Evidently the arrangement between the Missouri company, the Texas company, the Lone Star, and Thomas was that these lands should be bought with money advanced by the Missouri corporation, placed in Thomas' name for resale and resold by the Texas Company and the Lone Star by some arrangement between them not before the court. Dickinson and James were to all effects and purposes the owners, the officers, and the directors of all three corporations, and manipulated the three companies' activities to the common end of selling these lands and dividing the proceeds. They had a common purpose in view, a common plan, a common understanding, as to what was to be done. The interests of the three corporations were the same, so far as the people with whom they dealt are concerned, and their activities all originated in the brains and were effectuated by the efforts and supervision of two men, James and Dickinson. The three corporations, as far as this record reveals, had no purpose of existence except to carry out this common plan. Indeed, one might well conclude that there was in their existence and operation proof of sinister intent in their very organization.

Under such facts the inevitable conclusion is that what each of the corporations did, what James and Dickinson did, what any of their servants did in the pursuance of this common undertaking, would bind each and all of the others joining therein. Moreover, the Texas statute which controls here has some very pertinent provisions. That statute (Acts 1919, c. 43 (Vernon's Ann. Civ. St. Supp. 1922, arts. 3973a-3973c)) is as follows:

'Section 1. Actionable fraud in this state with regard to transactions in real estate or in stock in corporations or joint stock companies shall consist of either a false representation of a past or existing material fact, or false promise to do some act in the future which is made as a material inducement to another party to enter into a contract and but for which promise said party would not have entered into said contract, provided however that whenever a promise thus made has not been complied with by the party making it within reasonable time, it shall be presumed that it was falsely and fraudulently made, and the burden shall be on the party making it to show that it was made in good faith but was prevented from complying therewith by the act of God, the public enemy or by some equitable reason.

'Sec. 2. All persons guilty of fraud, as defined in this act, shall be liable to the person defrauded for all actual damages suffered the rule of damages being the difference between the value of the property as represented or as would have been worth, had the promise been fulfilled, and the actual value of the property in the condition it is delivered at the time of the contract.

'Sec. 3. All persons making the false representations or promises and all persons deriving the benefit of said fraud, shall be jointly and severally liable in actual damages, and in addition thereto, all persons knowingly and willfully making such false representations or promises or knowingly taking the advantage of said fraud shall be liable in exemplary damages to the person defrauded in such amount as shall be assessed by the jury, not to exceed double the amount of the actual damages suffered.'

Under such statutes, if the common undertaking of the parties was conducted in a fraudulent manner, any and all of the parties are liable, for, as we have found, the fruits of the undertaking resulted in benefit to all.

The proof is that the plaintiff, a woman residing in a village in Illinois, wholly unacquainted with land other than in her immediate vicinity, was approached by a land agent, who persuaded her and her son, some 22 or 23 years of age, to go with a party to...