General Resources Organization, Inc. v. Deadman

907 S.W.2d 22, 1995 WL 385014
CourtCourt of Appeals of Texas
DecidedSeptember 8, 1995
Docket04-93-00423-CV
StatusPublished
Cited by23 cases

This text of 907 S.W.2d 22 (General Resources Organization, Inc. v. Deadman) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
General Resources Organization, Inc. v. Deadman, 907 S.W.2d 22, 1995 WL 385014 (Tex. Ct. App. 1995).

Opinion

OPINION

HARDBERGER, Justice.

This case involves a gold scam. At the heart of the scam is a shadowy figure named Otis B. Phillips. Phillips, an ex-convict, masterminded this scheme and operated it with the assistance of an Indiana lawyer named Dollie Stafford Manns. Glen Deadman and William Adamson invested and lost $237,-086.50 in the scheme. The scam was based upon a contract to sell gold at a substantial discount in a private transaction. The buyers would put down a large security deposit subject to their meeting the qualifying procedures. Inevitably the buyers would not qualify and Mr. Phillips would spend the money. That is what happened in this ease. Specifically, the facts are as follows.

Appellee Glen Deadman, representing Westrade Commodities, Ltd., contacted Dollie Stafford Manns about making a purchase of gold. Ms. Manns sent Deadman an affidavit in which she stated that she had seen the gold and seen documents evidencing the ownership of the gold. Negotiations ensued and a contract was entered into between Wes-trade and GRO for the sale of over one million troy ounces of gold. Both Westrade and GRO were brokers in the deal. Wes-trade was purchasing the gold on behalf of Katag Corporation which was backed by the Bank of Foreign Economic Affairs of the USSR, Zurich Switzerland. GRO, along with numerous other “corporations”, appears to have been little more than a shell from which Otis B. Phillips operated. Phillips claimed to be the “mandated representative” of the owners of the gold whom he identified as D.L. Vinton and Raymond Foster. Although both Vinton and Foster’s names appear on a number of the documents in question, Phillips testified that he had never met the two men, didn’t know what they looked like, didn’t have phone numbers for them and didn’t know their addresses. Although they were sued, neither Vinton nor Foster appeared at trial. There was also evidence that Phillips had purchased a rubber signature stamp for D.L. Vinton and Raymond Foster. A comparison of Phillips’, Vinton’s, and Foster’s signatures reveals a remarkable similarity. It is also interesting to note that Phillips kept a phony brick of gold in his office which was actually lead covered by a thin layer of gold.

In compliance with the contract, Deadman deposited his $150,000 for the “Westrade” contract in the Manns & Manns law firm trust account. That money was then sent to Phillips personal account in San Antonio, Texas. That money was withdrawn by Phillips in cash within forty-eight hours and spent. Deadman and Westrade never received the gold. Phillips alleged that Wes-trade had failed to prove its financial capability to his satisfaction. This is not surprising given the fact some twenty other potential buyers of this gold had also failed to qualify, a number of them also losing their security deposits. Another contract, known as the “Sheraton Contract”, involving Deadman and Richard Jones, an Englishman, was entered into at this time and met with the same fate.

Deadman, Adamson and Westrade filed suit against Phillips, GRO, Dollie Stafford Manns, Aphonso Manns and Manns & Manns alleging various causes of action. The case was tried to a jury which made the following findings:

1. GRO breached its contract with Wes-trade and actual damages of $24,505,000.00 were awarded to Westrade.

2. Another contract between GRO and Sheraton Enterprises Trust was breached by GRO. As a result of that breach, Deadman and Adamson were damaged in the amount of $6,680,689.42.

3. Otis Phillips, GRO, Dollie Stafford Manns, Aphonso Manns and the Law Firm of Manns & Manns engaged in fraudulent conduct. For their fraudulent conduct, each party was assessed $31,185,689.42. in dam *27 ages. Each party was assessed $100,000,-000.00 in exemplary damages.

4. The plaintiffs deposited $237,086.50 in the trust account of the law firm of Manns & Manns as part of a good faith security for the contract. The Manns breached their fiduciary duty to the plaintiffs. Actual damages in the amount of $237,086.50 were assessed. The jury also imposed $100,000,000.00 in punitive damages against the Manns for breach of fiduciary duty.

5. The jury also found that GRO, Future Acceptance Corp., Red Cobra Club, Inc. were alter egos of Otis Phillips.

The trial court granted a partial remittitur and entered judgment.

Jurisdiction.

In their first point of error, appellants allege that the trial court did not have jurisdiction pursuant to 7 U.S.C. § 23, 25. The appellants argue that the federal courts have exclusive jurisdiction for any actions brought under this federal statute.

The Commodity Exchange Act (CEA), 7 U.S.C. § 1 et seq, is a comprehensive regulatory structure overseeing the “volatile and esoteric futures trading complex.” Merrill Lynch, Pierce Fenner & Smith v. Curran, 456 U.S. 353, 356, 102 S.Ct. 1825, 1828, 72 L.Ed.2d 182, 187 (1982). The CEA was intended by Congress to preempt the regulation of commodity futures trading. Paine, Webber, Jackson & Curtis, Inc. v. Conaway, 515 F.Supp. 202, 211 (N.D.Ala.1981). The legislative history of the amendments to 7 U.S.C. § 25 shows that “Congress evidently wanted to make clear that violations of the Act could be redressed only through procedures specified in the Act. It did not intend to extinguish state common law claims that do not arise from the Act.” Sall v. G.H. Miller & Co., 612 F.Supp. 1499, 1504 (D.C.Colo.1985). See e.g., Kerr v. First Commodity Corp. of Boston, 735 F.2d 281 (8th Cir.1984) (holding that the CEA does not preempt punitive damages for common law fraud in commodities cases); Kotz v. Bache Halsey Stuart, Inc., 685 F.2d 1204, 1207-08 (9th Cir.1982) (retention of common law fraud actions is not inconsistent with regulatory scheme established by the Act). The present case does not involve a futures contract within the context of a commodity exchange. Therefore, it does not appear that this contract is covered by the CEA. Even if it were, the foregoing eases make clear that a common law fraud action brought pursuant to the contract would not necessarily be preempted. See Mallen v. Merrill Lynch Futures, Inc., 623 F.Supp. 203 (D.C.Ga.1985). Therefore, we conclude that this case is not preempted by the CEA.

Appellants also complain in a very cursory manner about the trial court’s denial of its motion to dismiss on the basis that the venue selection clause in the contract fixed venue in the United States District Court, Western District of Texas. According to appellants, the state district court in this case did not have jurisdiction to proceed due to the choice of venue provision in the clause.

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Cite This Page — Counsel Stack

Bluebook (online)
907 S.W.2d 22, 1995 WL 385014, Counsel Stack Legal Research, https://law.counselstack.com/opinion/general-resources-organization-inc-v-deadman-texapp-1995.