Stroud v. Harris

• Decision Date: 26 March 1925
• Docket Number: No. 6744.,6744.
• Parties: STROUD v. HARRIS et al.
• Court: U.S. Court of Appeals — Eighth Circuit

5 F.2d 25 (1925)

STROUD v. HARRIS et al.

No. 6744.

Circuit Court of Appeals, Eighth Circuit.

March 26, 1925.

Malcolm E. Rosser, of Muskogee, Okl., and J. B. McDonough, of Ft. Smith, Ark., for plaintiff in error.

N. F. Lamb, of Jonesboro, Ark. (Lamb & Frierson, of Jonesboro, Ark., and H. L. Pearson, of Fayetteville, Ark., on the brief), for defendants in error.

Before STONE and KENYON, Circuit Judges, and SCOTT, District Judge.

KENYON, Circuit Judge.

This is a writ of error to reverse a judgment of the District Court of the United States for the Western District of Arkansas. Plaintiff in error was plaintiff in the trial court, and defendants in error were defendants there. Parties will be designated as in the trial court. The action was against a number of defendants, viz. J. R. Harris, G. W. Culberhouse, W. Higginbotham, R. L. Muse, H. A. Stroud, H. H. McAdams, and Dan L. Jones. In the original complaint, C. E. Harris, Leroy C. Norris, and L. E. Watson were also made defendants. At the commencement of the trial the case was dismissed as to C. E. Harris and L. E. Watson. The court directed a verdict as to defendant Norris, and no exception was taken thereto. No notice was ever served on Dan L. Jones, and no appearance entered for him. At the close of plaintiff's testimony the court sustained a motion to direct a verdict in favor of defendants J. R. Harris, R. L. Muse, H. A. Stroud, and H. H. McAdams. At the close of all the testimony the court sustained a motion to direct a verdict in favor of the remaining defendants, G. W. Culberhouse and W. Higginbotham.

The action was to recover damages for alleged libel, plaintiff claiming that defendants entered into a conspiracy to injure and libel him. Briefly the facts giving rise to the action are these:

In January, 1921, plaintiff was appointed general manager of the Oklahoma Auto Manufacturing Company. He was a stockholder at the time and had been a director, and had a good deal to do with the Auto Company's acquisition of certain property of the J. B. Woods Plow Company. At the time he became general manager the company was in financial distress, being indebted in approximately the sum of $400,000. A petition in bankruptcy was filed, and plaintiff was appointed receiver March 10, 1921. He was discharged as receiver August 29, 1921. Prior to his becoming general manager, a mortgage had been executed on the property for the purpose of securing bonds which were to be issued to realize funds with which to liquidate the debts. This bond issue was to be in the sum of $150,000. Plaintiff made some composition agreement with the creditors to pay them 25 per cent. on the dollar. It was impossible to sell the bonds on the general market. Plaintiff thereupon urged the stockholders to subscribe therefor, which they did, to the extent of about $100,000, plaintiff himself taking $25,000 thereof. The deed of trust on the property to secure the payment of the bonds provided for a sinking fund beginning January 1, 1922, in the sum of $5,000 on that date, $10,000 to be paid into the sinking fund every six months. Interest on the bonds was payable January 1st and July 1st of each year. The sinking fund and the interest not having been taken care of, a number of the bondholders held a meeting at Muskogee in January, 1922, at which time it was determined that the deed of trust should be foreclosed. The suit to foreclose the same was filed shortly thereafter. Trouble arose between some of the defendants and the plaintiff, and much discontent apparently with plaintiff's management of the affairs of the company was manifest; likewise much feeling over the foreclosure proceeding. The trouble brewing between certain of the defendants and plaintiff resulted in plaintiff being relieved of his position as general manager of the Oklahoma Auto Manufacturing Company March 22, 1922.

Plaintiff claims, and it is the basis of this suit, that after the foreclosure suit was commenced a number of letters were written by the defendants, acting together, which were libelous in their nature, and which resulted in great injury to him. The first letter complained of is of date March 8, 1922, which is addressed to the stockholders of the Oklahoma Auto Manufacturing Company, signed by G. W. Culberhouse, W. Higginbotham, A. D. Anderson, Committee. The part which is claimed to be libelous, is the following: "In our opinion, if some one had been in charge of the company that really wanted to meet this payment, it would have been an easy matter to have raised this amount of money from the sale of trucks. We would only have to sell four trucks to raise that small sum. We have been told that Mr. Stroud owns about one-fifth of the bonds, so, as the old saying goes, where your money is, your heart is there also." It is claimed this charges a violation of his trust as general manager.

The second letter complained of is of date March 10, 1922, signed by defendant H. H. McAdams, who at the time was president of the First National Bank of Jonesboro, Ark. As indicative of the character of the letter, we quote the following from pages 70 and 71 of the record:

"The First National Bank, Jonesboro, Arkansas.

"March 10, 1922.

"To the Bondholders of the O. K. Truck Company:

"I am a bondholder, also a stockholder, in the O. K. Truck Company. From the best information that I am able to obtain in regard to the affairs of the company, it seems that an effort is being made by the present manager, H. L. Stroud, to turn the assets of this company over to the bondholders without any consideration of the rights of the stockholders. In fact, he made the statement before a group of stockholders that he wanted the bondholders to have the factory, and would not be willing to invest a dollar in bonds unless he felt sure that they would get it.

"I am opposed to this. In the first place it is not right. Many poor people and even widows invested every dollar they could spare in this company with the hope of making money from their investment, and are not able to stand such a loss. All who invested in stock invested for that purpose. The stockholders have not had an opportunity since the settlement was made with the creditors to meet the payments on these bonds since the gentleman who is so anxious to have the bondholders own the assets of the company has had the management of the company's affairs. The assets of the company are four or five times as great as the amount of the bonds, and it is unfair to take this amount of money from those stockholders who were not able to buy bonds and give it to the few more fortunate ones who were able to buy bonds. We bondholders are entitled to the amount invested in bonds and interest on the same, and that is all we are entitled to as bondholders. The remainder of the company assets belong to the stockholders. * * * As he is one of the largest bondholders, it is reasonable to believe that he might so manage the affairs of the new company as to make it necessary to issue bonds again, and deprive those of us who would be stockholders in this new company of our stock in it, just as he is now trying to deprive the stockholders of their present stock, and so on until he and his closest friends own the factory."

The next letter complained of is that of March 13, 1922, signed by Culberhouse, Higginbotham, and A. D. Anderson. The parts of this letter complained of are the following:

"Dr. H. A. Stroud, of Jonesboro, Ark., wants the stockholders to know that he is in no way related to H. L. Stroud, the present manager of the Company. Be careful as to who you give a proxy to. Be sure how they stand. Some of the directors have betrayed us once. So take no more chances."

The next letter is that of March 14, 1922, addressed to the stockholders of the Oklahoma Auto Manufacturing Company, and it bears the signature of Higginbotham, Culberhouse, and Anderson. (Anderson was not a party in the case.) We refer to certain portions thereof, including the parts complained of, viz.:

"Jonesboro, Ark., March 14, 1922.

"To the Stockholders of the Oklahoma Auto Mfg. Co.:

"In our letter of March 8 we told you that if there was not a meeting of the stockholders at once, and a board of directors elected that would look after the interest of the stockholders, that we would lose our entire investment in this company.

"We are sorry that we now have to inform you that H. L. Stroud and his crowd, who want to own the Oklahoma Auto Mfg. Co., have filed suit to foreclose on their bonds and take charge of the factory. If Mr. Stroud could get by with this suit and succeed in getting the company turned over to the bondholders, and in another year's time give another simple twist of the wrist and squeeze out the little bondholders, he would make more money than he could make at anything else in a thousand years. He can easily figure that if he can succeed in closing us out that he will clean up around a half million dollars. Are you willing for him to sell us out this way? * * *

"We owe the bondholders $4,000 interest that should have been paid January 1st. We have sold enough trucks in one week since January 1st to have paid three times the amount of interest due January 1st. Now, why didn't H. L. Stroud pay the bondholders their interests? He can't say that he did not have the money and tell the truth, for we know better; but instead of paying the bondholders their interests, as he should have done, we are informed that he bought a car load of engines that we did not need. Some dodging around to avoid paying this interest, isn't it?

"We are willing to put up the money to pay the bondholders the amount we justly owe and should have paid January 1st, but we will not put up a dime in H. L. Stroud's hands. He might buy some more engines with it. From the way he buys engines, you can see that he intends to stay in the truck business."

The next letter is that of March 15th, which is signed by Culberhouse, Higginbotham, and...