Simecek v. UNITED STATES NAT. BANK OF OMAHA, NEB.
| Decision Date | 22 July 1937 |
| Docket Number | 10835.,No. 10834,10834 |
| Citation | 91 F.2d 214 |
| Parties | SIMECEK v. UNITED STATES NAT. BANK OF OMAHA, NEB. BARTELHEIM v. SAME. |
| Court | U.S. Court of Appeals — Eighth Circuit |
David A. Fitch and M. L. Donovan, both of Omaha, Neb., for appellants.
Edgar M. Morsman, Jr., and A. C. Munger, both of Omaha, Neb., for appellee.
Before WOODROUGH, THOMAS, and FARIS, Circuit Judges.
Both these cases arose out of the same general transaction; they were consolidated for trial, and are presented here on one record and bill of exceptions. At the close of appellants' evidence the court, sustaining motions by appellee for directed verdicts, entered the judgments of dismissal here complained of on the ground of want of jurisdiction.
Both appellants in their petitions claim damages for losses suffered as victims of a conspiracy to defraud them and others. The evidence in brief tends to establish the following facts: Both appellants were subscribers for capital stock of the newly organized Fred Krug Brewing Company of Omaha, Neb. (hereinafter called the company). On July 13, 1933, the company, the Fred Krug Products Company, the Associated Distributors (hereinafter called distributors) of Minneapolis, Minn., and the Omaha National Bank entered into an agreement in writing providing for the sale of 175,000 shares of the capital stock of the company by the distributors. The purpose of the company was to rehabilitate and operate an old brewery at Omaha which had been owned and operated by the members of the Krug family prior to the adoption of the Eighteenth Amendment to the Constitution, but which had not been in use while that amendment was in force. Money was needed not only to rehabilitate the old plant, but also for working capital after the brewery was restored. It was recognized that unless sufficient capital could be made available for both of these purposes, it would be useless to raise any; and that it would be difficult if not impossible to sell stock to the public unless assurance could be given subscribers that all the stock would be sold and the necessary funds raised or their money returned. Besides, it was necessary to formulate a plan that would meet the approval of and enable the company to secure a permit from the proper officers of Minnesota and Nebraska to sell stock in those states. To accomplish these ends, the agreement provided that the distributors should sell 175,000 of the 215,000 authorized shares of the company within a period of 60 days at $1.50 a share for a commission of 10 cents a share to be paid only upon complete performance of the contract. It was further provided that the stock should be placed in escrow with the Omaha National Bank and that as subscriptions were received the subscriber's money should be held in escrow by the bank until the subscriptions for the total number of shares were complete; and that the bank should issue interim certificates to the subscribers. The interim certificates were to be taken up and the subscribers' money returned at the close of the period in event of failure to sell the entire 175,000 shares before that date. If the full amount should be subscribed, then the stock was to be issued and delivered to the subscribers, and not otherwise, and the bank was to turn the money received for the stock over to the company. The time stipulation in this agreement was later extended for a period of thirty days, that is, to October 10, 1933.
Upon application of the distributors, the Commerce Commission of Minnesota registered the shares of stock on condition that "the escrow agreements as set forth in the application for registration, be strictly adhered to," namely: "* * * (b) That all the moneys derived from the sale of 175,000 * * * shares registered by this order shall be held in escrow by the Omaha National Bank until said 175,000 shares of stock shall have been sold and paid for."
Pursuant to the escrow agreement the stock specified was deposited with the National Bank and the sale of the same by the distributors was commenced. Early in September the distributors found itself with 60,000 shares unsold and became fearful that it might be unable to sell the same before the closing date. A previous attempt to borrow an amount necessary to terminate the escrow agreement having failed, negotiations were opened with the appellee United States National Bank, through Mr. Yates, its president. As an inducement to the appellee to make the loan, Drey, president of the distributors, offered to pledge all the unsold stock, together with other collateral. After extended negotiations with Yates and other officers of the bank, it was decided that the appellee would loan the distributors $90,000 for a period of one day, provided that the 60,000 shares of unsold stock would be left with the defendant bank as collateral and also provided that the company would sign the note jointly with the distributors. Arrangements were made between the officers of the appellee, the company, and the distributors, to complete the escrow agreement with the Omaha National Bank, secure possession of all the stock in escrow, and to cause the transfer of the money received for the stock from the Omaha National Bank to the account of the company in the appellee bank.
On October 10, 1933, representatives of the company and the distributors, and Mr. Maxwell, appellee's attorney, met with Mr. Monen, trust officer of the Omaha National Bank, for the purpose of completing the escrow agreement by payment of the balance due on the remainder of the unsold shares. Monen was told that sufficient funds were on hand to satisfy the escrow agreement and on inquiry was assured by those present that the proceeds on hand came from the actual sale of stock and that there was no repurchase agreement. Being so assured, Monen issued the remainder of the stock on receiving from Maxwell cashier's checks on the appellee bank totalling $90,000, which Maxwell had brought with him. In accordance with previous arrangement, the amount due the company from the Omaha National Bank, amounting to $217,000, was transferred to the appellee bank on October 11. On that date the company gave the appellee a check for $90,000 receiving therefor a so-called "counter-receipt." Interest in the amount of $15 for the day's loan was collected by the appellee. On October 13, the directors of the company authorized the purchase for its treasury of the 60,000 shares held by the appellee bank as collateral. By this circuitous arrangement, the escrow agreement designed to secure full subscription of the stock was successfully circumvented.
Simecek testified that he subscribed for 1,500 shares of stock on August 31, 1933, through Ingram, local manager for the distributors; that he received for that subscription interim certificates; that in September he subscribed for 4,000 additional shares; that he was not given interim certificates for the latter for the reason, he was told at the time, that it was too close to the end of the period for closing out the entire issue. He received his shares of stock some time after October 24.
Bartelheim subscribed for 3,000 shares of stock on August 16, 1933, thereupon receiving an interim certificate which he exchanged for a permanent certificate following the closing of the escrow agreement. He also bought, on February 17, 1934, an additional 300 shares of stock at $1.44 per share. Both appellants testified that they bought the stock relying on the escrow agreement and...
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