Vanderboom v. Sexton

• Decision Date: 24 January 1969
• Docket Number: No. FS-68-C-47.,FS-68-C-47.
• Citation: 294 F. Supp. 1178
• Parties: Ilo VANDERBOOM et al., Plaintiffs, v. Sam SEXTON, Jr., James S. Hall, Charles H. Smith, Austin Gatlin, Erma S. Gatlin, Diamond G. Ranch, Inc., an Arkansas corporation, Texas Capital Corporation, a Texas Small Business Investment Company and the City National Bank of Fort Smith, Arkansas, a national banking association, Defendants.
• Court: U.S. District Court — Western District of Arkansas

294 F. Supp. 1178

Ilo VANDERBOOM et al., Plaintiffs, v.Sam SEXTON, Jr., James S. Hall, Charles H. Smith, Austin Gatlin, Erma S. Gatlin, Diamond G. Ranch, Inc., an Arkansas corporation, Texas Capital Corporation, a Texas Small Business Investment Company and the City National Bank of Fort Smith, Arkansas, a national banking association, Defendants.

No. FS-68-C-47.

United States District Court W. D. Arkansas, Fort Smith Division.

January 24, 1969.

COPYRIGHT MATERIAL OMITTED

Bethell, Stocks, Callaway & King, Ft. Smith, Ark., for plaintiffs.

Sam Sexton, Jr.pro se.

Harper, Young, Durden & Smith, Ft. Smith, Ark., for Gatlins and Diamond G Ranch, and Texas Capital Corp., for defendants.

Wright, Lindsey & Jennings, Little Rock, Ark., for James S. Hall.

OPINION

JOHN E. MILLER, Senior District Judge.

The questions before the court arise on the motions of the defendants for summary judgment.

On December 16, 1968, the defendantSam Sexton, Jr., filed his motion for summary judgment in accordance with the provisions of Rule 56(b), (c), Fed. R.Civ.P., on the ground that "the complaint, answer of this defendant, and affidavit of this defendant attached hereto and marked Exhibit A, show that the defendant is entitled to judgment as a matter of law."

On December 20, 1968, the defendantsAustin Gatlin, Erma S. Gatlin and Diamond G Ranch, Inc., filed their motion for summary judgment containing substantially the same allegations as made by the defendant Sexton.

On December 20, 1968, the defendantTeleCom Corporation(Texas Capital Corporation) filed its motion under Rule 56 on the ground "that the complaint, answer and all other pleadings of the defendants herein and the affidavit and exhibits of the defendants herein which are incorporated by reference show that the defendant is entitled to judgment as a matter of law."

On December 23, 1968, the defendantJames S. Hall filed his motion for summary judgment to dismiss the action "on the ground that there is no genuine issue as to any material fact and that this defendant is entitled to a judgment as a matter of law.

"This motion is based upon:

1.The pleadings in the within case;

2.The affidavit of James S. Hall, to which copies of the following documents are attached as Exhibits A and B, respectively:

a. The contract of sale executed on September 9, 1965, among defendants Sexton, Hall and Smith as sellers and plaintiffInvestors Thrift Corporation as buyer;

b. The assignment of stock powers by Sexton, Hall and Smith to plaintiffInvestors Thrift Corporation that was accomplished on November 2, 1965, pursuant to the contract of sale of September 9, 1965."

Rule 56(b), Fed.R.Civ.P., provides:

"A party against whom a claim, counterclaim, or crossclaim is asserted or a declaratory judgment is sought may, at any time, move with or without supporting affidavits for a summary judgment in his favor as to all or any part thereof."

Subparagraph (c), as amended January 21, 1963, effective July 1, 1963, provides:

"The motion shall be served at least 10 days before the time fixed for the hearing.The adverse party prior to the day of hearing may serve opposing affidavits.The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.A summary judgment, interlocutory in character, may be rendered on the issue of liability alone although there is a genuine issue as to the amount of damages."

Before discussing the issues and contentions of the parties, the court is of the opinion that the present status of the case and a brief résumé of the pleadings should be set forth.

On July 18, 1968, plaintiffs commenced this action by filing their complaint containing 32 numbered paragraphs and 13 pages.The complaint contains only one count, but an analysis of the various paragraphs discloses that there are two causes of action stated.In paragraphs 14, 15, 16, 21, 22, 24, 25, 26, 27, 28 and 30the plaintiffs state a common-law action for fraud and deceit.In paragraphs 17, 18, 19, 20, 21, 23, 24, 29 and 30the plaintiffs attempt to state a federal cause of action.

In paragraph 29the plaintiffs alleged:

"By their acts, the defendants, jointly and severally, combined in an unlawful conspiracy and employed a manipulative and deceptive device with respect to the sale of stock of American Home Builders, Inc., to the plaintiffs, which operated as a fraud and deceit upon the plaintiffs.

"By their acts, therefore, Sexton, Hall, Smith and Austin Gatlin combined in an unlawful conspiracy, and were aided and abetted by The City National Bank, Texas Capital Corporation TeleCom Corp., Diamond G Ranch, Inc., and Erma S. Gatlin in employing a manipulative device and a scheme and artifice to defraud the plaintiffs, and did thereby damage the plaintiffs in violation of their rights and in violation of 15 U.S.C. 77l § 12 of the Securities Act of 1933,15 U.S. C 77q § 17 of the Securities Act of 1933,15 U.S.C. 78j § 10 of the Securities Act of 1934, andRule 10b-5 promulgated thereunder by the Securities and Exchange Commission, and 6 Ark.Stat.Ann. 67-1256(Repl.Vol. 1966)."

All the defendants except Charles H. Smith, who is in Vietnam and has not been served with process, and the City National Bank of Fort Smith filed answers, denying the allegations of the complaint, and in the amendments to their answers pleaded that "the alleged causes of action as reflected by plaintiffs' complaint are barred by limitations as they were not commenced within the period of time as allowed by the statutes of the State of Arkansas and the United States Code."

On August 1, 1968, the City National Bank filed its separate motion to dismiss the complaint and/or motion for summary judgment.On August 8, 1968, the court, upon consideration of the motion, dismissed the complaint of Investors Thrift Corporation for failure to state a claim against the movant, City National Bank, and granted the motion for summary judgment against all the other plaintiffs except abated the action of the plaintiffR. S. Miskimins until the disposition of a similar suit pending in the Sebastian Circuit Court, No. 5695.

On the date the order was entered, the plaintiffs, late in the afternoon, filed their response to the motion of the City National Bank, whereupon the court on August 12, 1968, reviewed its consideration of the motion, as well as the pleadings in Civil ActionsNos. 2103-2107, and re-examined its order of August 8, 1968, and reaffirmed the same.

On August 15, 1968, plaintiffs filed their notice of appeal from the order.

Later, on October 17, 1968, the court entered an order dismissing the complaint of plaintiffR. S. Miskimins.

On December 5, 1968, the court, sua sponte, considered whether it had jurisdiction of the common-law cause of action alleged in plaintiffs' complaint and heretofore referred to, and as a result of the investigation the court entered an order dismissing for lack of jurisdiction portions of the complaint which alleged a cause of action against the defendants under the common law.

The complaint discloses that all the plaintiffs except Investors Thrift Corporation are citizens and residents of the State of South Dakota, but that Investors Thrift Corporation was organized under the laws of the State of Arkansas and maintains its principal place of business in the Western District of Arkansas.All of the defendants are citizens of Arkansas except Texas Capital Corporation which was organized under the laws of the State of Texas with its principal office at Georgetown, Texas.Thus, there is no diversity of citizenship between all of the plaintiffs and all of the defendants.Title 28, U.S.C.A. § 1332(a)(1).

To sustain jurisdiction on grounds of diversity of citizenship, there must exist an actual, substantial controversy between citizens of different states, all of whom on one side of the controversy are citizens of different states from all parties on the other side.Rock Island Millwork Co. v. Hedges-Gough Lumber Co., (8 Cir.1964)337 F.2d 24.The court cannot, therefore, consider the plaintiffs' allegations of common-law fraud.However, if the jurisdictional requirements of 28 U.S.C.A. § 1332(a)(1) were satisfied, there would be no reason why plaintiffs could not join their common-law claim with their claims under federal statutes.The rule of "pendent jurisdiction" stated broadly is that once jurisdiction is properly assumed under federal law, the jurisdiction extends to the determination of all questions in the cause, including questions of state law, irrespective of the disposition made of the federal questions.The Supreme Court in Hurn v. Oursler, (1933)289 U.S. 238, 53 S.Ct. 586, 77L.Ed.1148, at page 589 of 53 S.Ct., stated:

"But the rule does not go so far as to permit a federal court to assume jurisdiction of a separate and distinct nonfederal cause of action because it is joined in the same complaint with a federal cause of action.The distinction to be observed is between a case where two distinct grounds in support of a single cause of action are alleged, one only of which presents a federal question, and a case where two separate and distinct causes of action are alleged, one only of which is federal in character.In the former, where the federal question averred is not plainly wanting in substance, the federal court, even though the federal ground be not established, may nevertheless retain and dispose of the case upon the nonfederal ground; in the latter it may not do so upon the nonfederal cause of action."

At page 590 of 53 S.Ct.the court said:

"The bill as amended, although badly drawn, sets forth facts alleged to be in violation of two distinct rights, namely, the right to the protection of the copyrighted play, and the right to the

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